Failed FCPA prosecutions highlight consequences of lack of e-discovery rules in US criminal cases

The recent setbacks of the US Justice Department in Foreign Corrupt Practices Act cases have shed light on the challenges prosecutors face when electronically stored information is involved, as it abundantly is in most financial crime cases today. Mismanagement of electronic discovery has played a role in several of the setbacks. One notable example was the collapse of the “Africa sting” prosecution in February. The cases shed light on the necessity of proper management of e-discovery in financial crimes cases, especially in FCPA actions. They also spotlight the importance of the new protocol in which the Justice Department, the US federal courts and criminal defense bar agreed to the first ground rules on e-discovery in federal criminal cases.

The ink had not dried on the landmark e-discovery protocol setting ground rules for the management of electronically stored information (ESI) in federal criminal cases when the US Department of Justice moved to dismiss charges against all the defendants in a high-impact Foreign Corrupt Practices Act case that goes by the popular name “The Africa Sting.”

What started out as an effort focused on 22 arms dealers for offering corrupt payments to an undercover FBI Special Agent who was posing as a representative of Gabon’s defense ministry ended up costing the US Department of Justice a prized prosecution.

US District Judge Richard J. Leon leveled a stern rebuke to federal prosecutors in the Washington, DC, case for conduct, including discovery practices, which he said had “no place in a federal courtroom.”

Assisting in the collapse of the case were a series of text messages between FBI agents and a key informant in the case, Richard Bistrong, which were deleted and were not able to be produced to defense attorneys, who say the agents improperly lured their clients into the alleged illegal conduct. The FCPA, generally, prohibits any person conducting business in the US from bribing foreign officials.

“Against government resistance it was a constant battle to push to get information,” Paul Calli, an attorney for a defendant in the case, told ACFCS. “The text messages and discovery of other internal documents eviscerated the government’s credibility.”

New criminal protocol provides e-discovery baseline

The Africa sting case is one of several FCPA cases that have collapsed in part due to discovery failures by federal prosecutors. In November, US District Judge Howard Matz, in Los Angeles, dismissed FCPA charges against Lindsey Manufacturing executives when prosecutors “recklessly failed to comply with… discovery obligations” and inappropriately obtained emails from the defendants. In a June 2011 hearing, Matz said the case “had a bad odor at times” and called the government’s conduct “extremely troublesome.”

The new protocol for e-discovery in criminal cases, issued on February 15 and titled “Recommendations for ESI Discovery Production in Federal Criminal Cases,” is intended to enhance predictability, efficiency and cost-savings in an area traditionally lacking in all three. It will help establish a judicial baseline for determining appropriate discovery conduct.

The protocol was developed by a working group representing the Justice Department, Administrative Office of the US Courts, which represented the federal judiciary, and the Federal Defender Organizations, including private attorneys who accept appointments to represent indigent defendants under the Criminal Justice Act. The preface to the protocol says the guidance will be useful where “the volume and/or nature of the ESI produced… significantly increases the complexity of the case.”

“The Justice Department has said it is behind the times,” says Gray Wallington, of Columbia, SC, and formerly a litigation technology specialist at the Justice Department. “This puts a system in place, and a roadmap for e-discovery which has been a long time coming.”

FCPA cases normally present large e-discovery challenges

FCPA cases are unique in that they create a strong possibility of generating several simultaneous parallel investigations. They could include regulatory inquiries by the Securities and Exchange Commission, stockholder derivative actions, grand jury investigations by the Justice Department and investigations by foreign authorities him.

FCPA cases create large-scale e-discovery issues because of their international scope, large volume of ESI, foreign language records and testimony, the involvement of multinational corporations and government agencies from various countries. With the enactment of the UK Bribery Act, the size and breadth of these issues are expanding.

The large volume of ESI is “a common theme in all [FCPA] cases,” says Calli, of Carlton Fields, in Miami. In the Africa sting case, there were thousands of pages of ESI and disagreements over the government’s e-discovery obligations, he added.

The new e-discovery protocol aims to standardize procedures and stresses the importance of educating prosecutors about their discovery obligations, meeting early with opposing counsel to address e-discovery issues, protecting sensitive ESI from unauthorized access, and “reasonably limit[ing] costs.”

The protocol includes a detailed checklist addressing formats for producing ESI and how to handle data and metadata contained in third-party productions. The protocol will be particularly useful in FCPA cases where both the prosecution and defense typically deal with ESI obtained from custodians in several countries that is in multiple formats and languages.

The protocol, which is not binding, addresses several types of ESI that civil litigators do not encounter, and on which criminal and civil rules of procedure are silent. Wiretap recordings, search warrant returns and other investigative material are addressed in 14 general ESI categories that the protocol defines. Most of the types of records mentioned in the protocol arise routinely in financial crime cases and regulatory actions.

A federal magistrate judge pleads for e-discovery rules in criminal cases

In the absence of formal e-discovery rules, federal courts have turned to federal civil law to settle e-discovery disputes in criminal cases. Recently, federal magistrate Judge Hugh Scott, of the Western District of New York, applied Rule 34 of the Federal Rules of Civil Procedure to order federal prosecutors to produce ESI in native or searchable format. The case, United States v. Briggs, highlighted the dearth of e-discovery standards in criminal cases and a similar void in case law. Rule 34 is titled “Producing Documents, Electronically Stored Information, and Tangible Things,….”

”While the rules for such ESI have been developed (and are being fleshed out) on the civil side of litigation, this case gives the example of the need for a more uniform regime on the criminal side,” Scott wrote in a September 2011 order. “It is hoped that the Advisory Committee on Criminal Rules will take note of the omission and address it at the earliest opportunity.”

Opportunities to employ protocol abound

The protocol will likely take “years not months” to take full effect, says Wallington. The Justice Department has begun conducting diverse e-discovery training programs for its thousands of prosecutors and support staff throughout the nation.