Grand Jury Secrecy in White Collar Cases
The Fifth Amendment of the United States Constitution provides that no person can be prosecuted for a felony offense without first being indicted by a grand jury. The guarantee of a grand jury was instituted to protect the rights of the accused. Infusing a grand jury into the prosecutorial process prevents a single prosecutor or government agency from improperly using the system to go after enemies. The government must produce sufficient evidence to support the criminal action they are targeting. In that way, the grand jury serves as a gatekeeper to a fair system.
While the process is based on valid considerations, grand juries offer little protection to the average defendant. The grand jury process is driven by prosecutors, and the defendant has no right to be present. Grand juries often serve as a rubber stamp for government theories. This phenomenon has been noted by numerous Courts, including Judge Wachtner out of New York who noted the government could indict a ham sandwich if they wished.
The rationale behind removing defense participation is tied to the integrity of a criminal investigation. Prior to indictment, the government is under no obligation to disclose relevant facts. The government has a large incentive to avoid disclosing an ongoing investigation to prevent witness tampering, evidence manipulation, or flight from justice. These rationales support secrecy within the grand jury process.
The secrecy of grand jury investigations is codified at Federal Rules of Criminal Procedure Rule 6(e). The important sections of that rule are as follows:
- Under Rule 6(e)(1), all grand jury proceedings must be recorded by a court reporter; however, the government maintains control over the transcripts and other recordings.
- Under Rule 6(2)(B), grand jurors, interpreters, court reporters, an operator of a recording device, a transcriber of recorded testimony, and government attorneys are prevented from disclosing any information from the grand jury process.
- Under Rule 6(3)(A), disclosures may be made by the above listed people if made to 1) an attorney for the government for use in the attorney’s duties or 2) government personnel that is necessary to performing the duties to enforce the law.
- Under Rule 6(D), the rules allow the government attorney to disclose secret grand jury material to a host of government actors for national security and intelligence purposes.
In summation, Rule 6 prevents a official actors from delivering secret grand jury information to others. However, there is no rule that prevents a witness that is called to testify at the grand jury from discussing that testimony or any other observation with a third party. This slight tweak to the rule should be noted as we have had DOJ prosecutors improperly advise witnesses they were sworn to secrecy under the rules. Rule 6(e) has no such limitations.
The Grand Jury’s Use Beyond Indictment
The use of a grand jury to return indictments against defendants is well-known by the American population. However, this is not the sole role of a grand jury; or even the most important. Most people view the grand jury process as a mini-trial where witnesses detail criminal acts. While this is true in many cases, their role is far more expansive in the white collar world.
In white collar cases, including healthcare fraud, criminal tax, and other “paper cases”, the grand jury often serves as an investigative body that assists the government in building a case against a defendant. The grand jury may work on a particular case for months. This work is not solely tied to witness testimony, and includes the reception and review of many documents relevant to the matter.
In the criminal tax world, grand juries spearhead investigations in many cases. Their main investigative tool is the grand jury subpoena requesting various documents for review. One of the first indications that an investigation exists is often the submission of a grand jury subpoena for business or bank records. These records will later be used by the government to indict and prosecute the case. This process allows the government to compile all relevant records without the need for a search warrant at a defendant business or formal litigation post-indictment. It is the most efficient and powerful tool in the government’s arsenal when investigating complex white-collar cases.
It should be clear that grand juries possess and review copious amounts of information leading into the indictment of a defendant. A very vibrant area of the law exists between the intersection of the grand jury secrecy rules and the information possessed by the grand jury. Circuit Courts of Appeals’ must protect both the secrecy of the proceeding and the mental processes of the grand jury. But they must do so within the confines of other applicable legal mandates.
There are two areas of evidence that must be considered 1) witness testimony and 2) documents received by the grand jury.
The Secrecy of Witness Testimony
Testimony before a grand jury is a secret and thus, cannot be disclosed by the government absent very specific exceptions. If a citizen requests transcripts of any grand jury testimony, via FOIA or civil action, it will be summarily denied.
The exception to this rule lies at the intersection of Rule 6(e) and the Supreme Court’s decision in Giglio. In Giglio, The Court ruled that a defendant is entitled to all prior statements given by a witness at trial. If the government calls a witness at trial that testified in a prior grand jury proceeding, the government must provide the defendant with a copy of that testimony prior to cross examination. While the government could technically wait until just before cross examination to produce the transcript, District Court’s often frown on such behavior. This late production leads to delays in trial and a request for time to review the transcripts. Most federal prosecutors provide grand jury testimony well in advance of trial to avoid delays.
One interesting practice note. We have seen federal prosecutors strategize around the Giglio rule at the grand jury level. These workarounds often relate to protecting their case agent at trial. At the grand jury, he government will often call the secondary agent on the case to testify. That agent can deliver a summary of their investigation to the grand jury to obtain an indictment. At trial, the government will call the primary agent to the witness stand. This setup allows the government to accurately state the agent has no prior testimony on the manner. This prevents the primary agent from having issues on cross examination if their theory is tweaked leading into trial.
The only other exception to the secrecy of grand jury testimony lies with the witness themselves. Rule 6(e) does not provide any limitations on a witness. That witness is free to discuss their testimony with defense counsel, prosecutors, or anyone else that will listen.
Grand Jury Secrecy and Document Production
While the secrecy of witness testimony and the investigation itself is well understood under Rule 6, a question remains whether the documents obtained by the grand jury are likewise subject to secrecy. Does a business record that is obtained under a grand jury subpoena become secret information? Does the government have a duty to hide that information under the discovery rules? How does Rule 6 apply to individual documents reviewed and relied upon by the grand jury during their investigation?
This issue was recently tackled by the Ninth Circuit in Kalbers v DOJ, No. 24-1477.
Kalbers Opinion and the Secrecy of Grand Jury Documents
In 2016, the Department of Justice launched an investigation into Volkswagen AG (hereinafter “VW”). The investigation focused on VW’s software that enabled diesel vehicles to fraudulently pass emissions testing in the United States. It is believed that VW tampered with over 585,000 vehicles sold in the United States. In response to the investigation, VW entered a plea deal with DOJ understanding their liability to regulators was over $20 billion.
During the investigation, VW sent millions of documents to DOJ in response to grand jury subpoenas. Shortly after the production was made, VW entered into the aforementioned plea agreement with the government.
A professor at Loyola Marymount University, Lawrence Kalbers, believed VW had struck a “sweetheart” plea deal considering the scope of the fraud. Kalbers filed a FOIA request asking the government to produce all documents VW produced under the grand jury subpoena. The government refused to produce the documents citing FOIA exemptions, that protect documents compiled for law enforcement purposes.
The District Court ordered DOJ to produce all documents to Kalber. DOJ filed suit in the Eastern District of Michigan stating that Rule 6(e) protected the records from disclosure; government production would violate federal law. However, the government was not clear on which records the grand jury reviewed during the investigation. The Court found that it would be impossible for the public to glean any secret grand jury processes from the documents under these circumstances and ordered DOJ to produce the records. DOJ appealed the decision.
The Ninth Circuit limited the appeal to a single question – whether FOIA required the government to produce documents it possesses solely through the grand jury process. The Court acknowledged that FOIA does not require the government to produce documents that are “specifically exempted from disclosure by statute”. However, there was no bright line rule on whether Rule 6(e) fit the exemption or otherwise created a blanket rule for all documents produced in response to a grand jury subpoena.
The Ninth Circuit adopted a test where the Court must evaluate whether releasing the information would “compromise the integrity of the grand jury’s deliberative process.” The Court ruled that the exemption under FOIA applied to any document that was solely in the government’s possession pursuant to a grand jury investigation. The Court noted that the grand jury process defers expansive powers to the grand jury to uncover documents, private or otherwise. The magnitude of these powers must be accompanied by an equally impressive protection of secrecy.
VW’s records were private and there is nothing a private party can do to force VW to make those documents available absent litigation. Without a search warrant, there is little a government agency can do to uncover private business records. However, the grand jury cuts through this reality like a knife. The grand jury has unlimited powers to seek and recover records relevant to a criminal investigation. To the Court, it seems absurd to allow a private party to access documents that are only available through that powerful process. Ruling differently would give private parties the same access to records as a grand jury with zero protections.
Takeaways from Kalbers
Grand jury secrecy questions are not often litigated in the Circuit Courts of Appeals. Kalbers serves as one of the guideposts for legal precedence in this area. Under Kalbers, the Court leaned into the sourcing of the documents and the ability of a private party to glean grand jury processes from the document production. The fact that the documents were only present in response to a grand jury subpoena would allow the private party to isolate grand jury, investigative inquiries from other areas. After all, companies only produce specific records in response to specific requests from the grand jury.
While Rule 6(e) does protect documents under these specific facts, it does not protect documents that are separately sourced. For instance, a company cannot claim a privilege for documents retained by the company that were also transmitted to a grand jury. In prior case law, the Courts have denounced a company’s ability to transform non-privileged documents into privileged ones based on their inclusion in the grand jury process.
The rationale for this distinction is found in the sourcing. If a company discloses 100% of their documents related to a discovery request, the requesting party has no idea which documents, if any, were the subject of a grand jury subpoena. There is no way to back into the grand jury thought processes or focus by looking at those documents. An interesting case would involve a civil discovery request for documents flagged as being tied to grand jury production. Under those facts, the intrusion on the mental processes of the grand jury would be the same as the facts in Kalber; a reviewer could back into the mental processes and focus of the grand jury investigation by knowing which documents they sought. It remains open whether this particular fact pattern would produce different result.