In its recent decision in United States v. Allen, 16-cr-898, the Second Circuit Court of Appeals held that testimony which is compelled pursuant to laws of foreign jurisdictions violates the Fifth Amendment right against self-incrimination when used as part of a U.S. prosecution. The ruling may have a far-reaching impact on the U.S. Department of Justice’s (DOJ) enforcement of the Foreign Corrupt Practices Act, which often rely on evidence obtained by foreign investigators.
In US v. Allen, the defendants were accused of being part of a conspiracy to manipulate the London Interbank Offered Rate (LIBOR), a benchmark interest rate underlying financial instruments around the world. The LIBOR scheme and the defendants, U.K. nationals, were originally investigated by U.K. authorities. As part of that investigation, the defendants were compelled to give testimony to the U.K.’s Financial Conduct Authority (FCA). The FCA is duly authorized to compel the testimony of those under investigation and there is no allegation that the circumstances under which the defendants’ testimony was compelled violated of U.K. law. The defendants’ testimony before the FCA became the centerpiece of charges in the United States for wire fraud and conspiracy to commit wire fraud.
The Second Circuit voiced its concern that, even though the statements were obtained in accordance with U.K. law, the statements still constituted compelled statements under the Fifth Amendment to the United States Constitution. Therefore, the Court found that the use of any such compelled statement against the defendants in a criminal matter was a facial violation of the Fifth Amendment. Accordingly, the Court overturned the defendants’ convictions and dismissed the indictment
The Court was unmoved by the DOJ’s arguments that their FCPA investigations and prosecutions, many of which rely on evidence obtained from foreign governments and compelled statements, would be undermined by an adverse ruling from the Court. While it appears clear that FCPA prosecutions cannot rely on the contents of compelled statements as the basis for a U.S. prosecution, it remains to be seen how extensively Courts may apply the fruit of the poisonous tree doctrine. Indeed, while confronting a defendant with compelled statement may run afoul of the Fifth Amendment, Court’s could question the admissibility other evidence collected by foreign authorities following or as a direct result of a defendant’s compelled statements. While Constitutional Law scholars could likely fill volumes regarding such a debate, the practical effect on FCPA may unfold quickly as prosecutors will need to sure up their ongoing cases with admissible evidence if compelled statements are no long permissible.