by Callie Jennings

Between 2007 and 2009, five companies hired an unnamed consulting corporation (“Corporation”) located in Pennsylvania to assist them in obtaining funds for oil and gas projects from a United Kingdom financial institution (“Bank”). For all of these projects, a single official at the Bank, (“Banker”), managed the financing processes. During that time, the president of Corporation (“Client”) had a working relationship with an independently practicing attorney (“Attorney”) who was permitted to work in Corporation’s office rent-free in exchange for periodically providing Client with advice on basic legal matters. In April 2008, Client consulted Attorney about problems arising from one of the projects. After explaining that Banker was threatening to slow down the approval process, Client expressed his intention to pay Banker to ensure the project’s timely advancement. Attorney’s preliminary research revealed that such a payment might violate the Foreign Corrupt Practices Act (“FCPA”). Attorney asked Client questions concerning the Bank and Banker’s association with the government. Although Attorney was uncertain whether the planned action was legal or illegal, he advised Client not to make the payment to the Banker. Client then told Attorney that he would make the payment anyway and continued to assert that such action was not illegal under the FCPA. Attorney provided Client with a copy of the FCPA and their working relationship ended. Corporation was ultimately successful in obtaining financing from the Bank for two of the five projects and received roughly $8 million in success-fees. Between 2008 and 2009, within months of the success-fee payments, Corporation paid a total of $3.5 million to Banker’s sister, who had no working connections with the Bank or any of the financing projects.

The Bank initiated an internal investigation of the transactions between Client, Corporation, and Banker’s sister in February 2010. The Overseas Anti-Corruption Unit soon became involved and informed the Federal Bureau of Investigation, which began its own investigation of Client and Corporation.Banker and Banker’s sister were subsequently arrested in the United Kingdom and are currently part of an ongoing prosecution. Client and Corporation became the subjects of a grand jury investigation in the Eastern District of Pennsylvania concerning alleged violations of the FCPA. The grand jury served Attorney with a subpoena in order to compel him to testify before the grand jury concerning his conversation with Client. The Government moved to enforce the subpoena on June 18, 2012, arguing that any protection under the attorney-client privilege was defeated by the crime-fraud exception. On September 4, 2012, Client and Corporation (together “Intervenors”) successfully moved to intervene.

After briefing, the United States District Court for the Eastern District of Pennsylvania determined that it would hold an in camera review on January 8, 2013, with Attorney and Attorney’s counsel to determine whether the crime-fraud exception applied to the privileged communications between Attorney and Client. The District Court allowed the Government and Intervenors to submit questions for the Attorney but precluded both parties from the review and denied Intervenors’ request for a release of the transcript of the in camera testimony. On January 18, 2013, the District Court granted the motion to compel Attorney’s testimony under the crime-fraud exception, reasoning that the Government’s ex parte affidavit, and the in camera testimony created a “reasonable basis to suspect that Intervenors intended to commit a crime when Client consulted Attorney and could have used the information gleaned from the consultation in furtherance of the crime.” On appeal, Intervenors challenged the standard the District Court used to determine whether to conduct an in camera review, the decision to hold the in camera review, the procedures it used to limit their access to the review and the final determination that the crime-fraud exception applied. The District Court granted a stay of the order compelling Attorney’s testimony until the conclusion of the appeal. On appeal to the United States Court of Appeals for the Third Circuit, the court held, affirmed. The use of in camera review and the final determination that the crime-fraud exception applies are proper because: (1) the standard in United States v. Zolin was properly applied to determine whether in camera review of live witness testimony is necessary to establish the crime-fraud exception, (2) the District Court was within its discretion in limiting Intervenors’ access to the in camera testimony, and (3) the District Court acted within its discretion in ultimately concluding that Client intended to commit a crime at the time of the consultation and used the information divulged in furtherance of the crime. In re Grand Jury Subpoena, 745 F.3d 681 (2014).

 

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