Federal Court Narrowly Interprets “Public Statements” Clause in Corporate Plea to Avoid Conflict with Individual Defendants’ Right to Present a Defense

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Key Takeaways

  • Clauses that bar corporations from making public statements that contradict the stipulated factual basis for a plea or deferred prosecution agreement have become common. 
  • At the same time, criminal defendants have a due process right to present a defense, which includes the right to seek to present witnesses.
  • This month, a federal district court in United States v. Penn, No. 20-cr-152, accepted the government’s concession that a particular corporate “public statements” clause was not intended to prevent or discourage company employees from speaking with individual defendants.
  • As part of the litigation, the government gave a narrow interpretation to the “public statements” clause, explaining that the clause applied only to employees authorized to speak publicly on the company’s behalf and not those speaking in a personal capacity or those speaking to defense attorneys as part of an investigation, where the employees are merely providing their own factual recollections.
  • The government’s concession was significant because it cleared the way for the court to easily find that the corporate “public statements” clause did not violate the defendants’ right to present a defense by substantially interfering with potential witnesses’ decision to talk to the individual defendants.

On September 14, 2021, the United States District Court for the District of Colorado issued a notable decision in United States v. Penn, No. 20-cr-152, addressing the interpretation of so-called “public statements” clauses that bar companies from contradicting the stipulated factual bases for their plea agreements or deferred prosecution agreements (“DPAs”) with the government.1 Take for example the clause that was in a corporate plea agreement at issue in the Penn case (although it could have just as easily been included in a corporate DPA):

The defendant expressly agrees that it will not, through current or future attorneys, directors, officers, employees, agents, or any other person authorized by the defendant to speak on its behalf, make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by the defendant set forth above or the facts contained in the Factual Basis section of this Plea Agreement. Any such contradictory statement will . . . constitute a violation of this Plea Agreement. . . .  The decision whether any public statement by any such person contradicting the facts contained in the Factual Basis section of this Plea Agreement was made on behalf of the defendant for the purposes of determining whether it has violated this Plea Agreement will be at the sole discretion of the United States. . . .  This paragraph does not apply to any statement made by any current or future director, officer, employee, or agent of the defendant in the course of any criminal, regulatory, or civil case initiated against such an individual, unless such an individual is speaking on behalf of the defendant. This paragraph does not affect the obligation of any person . . . to testify truthfully as required by Paragraph 14 of this Plea Agreement.2

The inclusion of these clauses has become common when resolving criminal charges—especially at the corporate level—and particularly in the Foreign Corrupt Practices Act context. When violated, they can lead to further criminal prosecution, almost always at the complete discretion of the government.3 Indeed, a “public statements” clause made news in 2013 when the chairman of a prominent bank had to issue a public apology and recantation under threat of corporate prosecution after contradicting the factual basis of the bank’s DPA by stating that any violations of U.S. law were accidental rather than willful.4   

The individual defendants in the Penn case, an antitrust prosecution involving chicken suppliers, argued that the “public statements” clause in the corporate plea agreement of a supplier that had employed several of the defendants violated their right to present a defense. Specifically, the individual defendants claimed that the company’s “public statements” clause in its plea agreement discouraged company employees from agreeing to be interviewed or serving as defense witnesses.The ability to present witnesses in one’s defense is a core right protected by the Fifth Amendment’s Due Process clause as well as the Sixth Amendment to the United States Constitution. Government interference with a defendant’s right to present witnesses can lead to serious consequences up to and including dismissal of an indictment.6  

The Penn court concluded that the “public statements” clause in the supplier’s corporate plea agreement did not violate the individual defendants’ right to present a defense, noting that by its text the clause only barred those “authorized by [the pleading corporation] to speak on its behalf” from contradicting the factual basis for the plea.7 And even assuming that language was ambiguous, the court found it noteworthy that the government had publicly taken the positions that (i) “[t]his provision does not apply to statements made by individuals in their personal capacity” and (ii) that “when defense attorneys interview an employee as part of their investigation, if that employee merely provided his or her own factual recollections, such speech would not normally be deemed to be ‘authorized by’ [the pleading corporation] to ‘speak on its behalf.'”8 Significantly, the government did not resist these conclusions. In fact, the government’s public assurances in its court filings that corporate employees were largely free to speak with defense counsel without violating the company’s “public statements clause,” certainly was an important factor in the court finding that the prosecution could not be “actively discouraging” defense witness testimony, as is required to establish a constitutional violation.9   

To be sure, Penn involved certain case-specific facts. But it still remains that the government conceded that a corporate “public statements” clause cannot be invoked by the prosecution (or a company, for that matter), to prevent company employees from speaking to individual defendants. The government’s concession in this regard is of significant precedential value that can be used by defense counsel in pending or future cases. But, just because the government cannot interfere with the defense’s efforts to interview and procure witnesses does not mean that employees can be forced to speak to individual defendants either. Instead, they must be allowed to make the decision for themselves (frequently with the assistance of counsel, as the Penn court noted). And, given that, it is foreseeable that there would be many instances where employees would not want to speak to the defense, especially in the face of real downside risks and little upside gain. Thus, the primary point of Penn is that those types of choices are for the corporate employees to make (with or without the assistance of counsel) without interference from the government either directly or indirectly through pressure or leverage on the company.

Although Penn provides helpful precedent that white collar practitioners can cite to, it also leaves room for defense attorneys to try to take the court’s holding a step further. Specifically, Penn did not resolve (because it did not need to) the open question of whether “public statements” clauses can under certain circumstances violate the constitutional right to present a defense. Imagine a scenario, for example, where the government did not concede, as it quickly did in Penn, that the clause at issue should not be read to prevent the relevant corporate employees from cooperating with the defense. Under such circumstances, it would not be terribly surprising if a court were to reach a different result, namely, a constitutional violation based on the government’s direct or indirect interference. The same could be true if a corporate employee specifically identified a “public statements” clause as his or her reason for not talking to the defense (especially if the government sat in silence in the face of that position), a factor that was not present in the Penn case. So additional litigation on “public statements” clauses and the right to present a defense seems likely, even though the Penn court found that application of one such clause did not violate the Constitution when narrowly interpreted.

Footnotes

1) United States v. Penn, No. 20-cr-152, Dkt. # 484 (D. Colo. Sept. 14, 2021).  

2) Id. at 3.

3) FCPA Professor, “Hits And Misses” (May 15, 2012), available at https://fcpaprofessor.com/hit-and-misses/

4) Brent Kendall et al., “Standard Chartered Recants, Apologizes,” Wall Street Journal (March 21, 2013), available at https://www.wsj.com/articles/SB10001424127887324103504578374264058926442.   

5) Penn, No. 20-cr-152, Dkt. #484, at 2.

6) United States v. Linder, No. 12 CR 22, 2013 WL 812382, at *32 (N.D. Ill. March 5, 2013); see also United States v. Stein, 541 F.3d 130 (2d Cir. 2008).

7) Penn, No. 20-cr-152, Dkt. #484, at 4. 

8) Id. at 4-5. 

9) Id. at 5.

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