False Statements to Investigators and the Grand Jury

The Libby case has generated a great deal of commentary on the appropriateness of continuing the investigation when the identity of the leaker was known early on, an issue not addressed here. Instead, the lesson for witnesses in other investigations, high-profile or not, is that they would be mistaken to dismiss the Libby case as sui generis, concluding that it only went as far as it did because of the politics surrounding the case. Witnesses should never doubt the possibility that charges will be brought solely for misleading the investigation even if there is ultimately no provable underlying crime.

On the high-profile side, one need only look as recently as Martha Stewart's January 2006 conviction or as far back as the 1950 conviction of Alger Hiss. Stewart, of course, was convicted of lying in the course of an insider trading investigation in which she was never charged with insider trading, while Hiss was convicted of perjury before Congress without being charged with espionage (the statute of limitations had expired).

No less significant are the numerous cases that do not make headlines. In the experience of the author and many other former and current prosecutors, individuals who lie or commit perjury in the course of an investigation, while not invariably charged, often are. The reasons vary from a genuine desire to preserve the integrity of the system to a tactical need to pressure witnesses into cooperating. Such witnesses, though possessing relevant information, may not be guilty of the underlying crime. But by misleading the investigators, they put themselves in a position where it might be in their interest to cooperate, and many prosecutors are all too happy to oblige them.

Advice for Witnesses

In the face of this reality, how should white-collar defense counsel advise their clients who are about to be questioned, either by government agents or under oath before a grand jury? The easy answer, in the absence of a valid and desired assertion of the privilege against self-incrimination, is to give this familiar advice: if you are going to testify, answer the question, do not volunteer, and above all, tell the truth. Libby doubtless received this advice, but it was not enough. To save some clients from exposing themselves to prosecution for false statements, one should analyze the various motivations that might lead an individual who has committed no crime into intentional falsehood.

The reasons are varied, but tend to recur. Sometimes, the witness may believe she did something that is either wrong or may look suspicious, but does not know that it is not a crime, and therefore believes that lying is in his or her best interests. Although not charged criminally with insider trading, Martha Stewart was ultimately sued by the SEC in a civil action. In the heat of the investigation, it was difficult to predict what prosecutors would do with this conduct. With high-profile witnesses, an added pressure is that protection of their public reputation might, in practice, make assertion of the Fifth Amendment's right to remain silent in effect unavailable.

Other times, perhaps more often, the reason for being untruthful is to protect someone else, usually the subject of the investigation. Many a witness has been convicted of obstructing justice by choosing loyalty to a friend over the potential consequences of perjury. As such conduct is obviously without legal defense if it is charged in court, a strong defense lawyer will drive home the substantial risks involved and suggest from long experience that the truth will invariably surface, sometimes even from the lips of the original target.

Some untruthful witnesses may rationalize their actions by telling themselves that the questions being asked are either nobody's business or not really important. This excuse brings to mind the familiar requirement of materiality in federal perjury prosecutions. (Some states have misdemeanor versions of perjury that omit any such requirement.) The legal standard is whether the false statement 'has a natural tendency to influence, or was capable of influencing, the decision of the decision-making body to which it was addressed,' Kungys v. United States, 485 U.S. 769, 770 (1988) ' an expansive definition that makes almost anything material. As one court put it, 'materiality is the flimsiest of obstacles to a perjury conviction.' United States v. Guariglia, 757 F. Supp. 259, 266 (S.D.N.Y. 1991). Courts have upheld a wide variety of information as material, including impeachment testimony and testimony that was completely superfluous to the proceeding because others had already testified on the same topic. Testifying witnesses should not even think about whether what they have to say is important or relevant ' they should just answer the questions truthfully.

Finally, some witnesses pay very careful attention to the questions asked and, although intending to mislead, believe that they are safe from sanction if they tell the literal truth. For example, the defendant in the seminal Bronston v. United States, 409 U.S. 352, 354 (1973), when asked whether he personally had ever had any Swiss bank accounts, responded: 'The company had an account there for about six months, in Zurich.' Although Bronston had in fact once had such an account, and therefore was trying to mislead his questioners, his answer about the company, as well as his earlier denial about currently having a Swiss account, were literally true. The Supreme Court reversed his conviction on that ground.

'Literal Truth'

Reliance on literal truth is perilous, however, because courts have been reluctant to follow Bronston, well, literally. For example, a conviction for perjury was upheld despite the literal truth of the answer where the defendant, who had accepted campaign contributions at a 'Preakness Party' in 1990, was asked whether he had done so in 1991, in a context where it was clear the questioner was referring to 1990. He answered with the literal truth that he had not, but was charged and convicted anyway. United States v. DeZarn, 157 F.3d 1042, 1051 (6th Cir. 1998). The Sixth Circuit distinguished Bronston on the ground that the answer there had not been responsive, just a stray statement of literal truth, but that DeZarn had fully understood the question, which, coupled with the answer, was perjurious in the court's view. Although we may quarrel with this rationale, it is plainly better to clarify a question or an answer than risk a perjury charge.

Charged Defendants

If a witness innocent of the underlying crime is charged, may she invite the jury to reject perjury for that reason? Not if courts follow Judge Miriam Goldman Cederbaum's lead in the Martha Stewart case. There, the court declined, on relevance grounds, to allow Stewart to argue about why she was charged only with perjury and not insider trading, or to argue that she was innocent of the underlying crime solely because she wasn't charged. United States v. Stewart, No. 03 CR 717, 2004 WL 113506, at *1-*2 (S.D.N.Y. Jan. 26, 2004).

Conclusion

While lawyers have presumably been advising witnesses to tell the truth for hundreds of years, perjury and false statements charges continue to be prevalent, and cases where the underlying crime is not charged are no exception. Both witnesses and lawyers should remain mindful of the varied and nuanced motivations that innocent individuals caught up in government investigations might have to shade the truth, and address them at the earliest instance.

Daniel R. Alonso ([email protected]), a member of this newsletter's Board of Editors, is a partner at Kaye Scholer LLP, where he concentrates on white-collar litigation and internal investigations. He is a former federal and New York state prosecutor.

The recent conviction of I. Lewis Libby, former Chief of Staff to Vice President Cheney, provides another opportunity for corporate executives embroiled in government investigations to consider the pitfalls involved in interviews with the government or testimony before investigative bodies. Libby's conviction, though not stemming from a business crime investigation, nevertheless should serve as a reminder to potential witnesses that even otherwise innocent individuals often make things much worse by not being truthful with government agents or the grand jury.

It has by now become common for the government to charge individuals with perjury, obstruction of justice, or lying to government agents in the absence of charges for the offense being investigated in the first place. Libby, after all, was convicted of perjury, obstruction of justice, and false statements for his lack of candor involving his knowledge that a former diplomat's wife worked for the CIA. Although the investigation was sparked by a desire to determine who, if anyone, leaked classified information to the media, the investigators determined rather quickly both who had leaked the information (not Libby) and that no crime had been committed in doing so.

What Is Appropriate?

The Libby case has generated a great deal of commentary on the appropriateness of continuing the investigation when the identity of the leaker was known early on, an issue not addressed here. Instead, the lesson for witnesses in other investigations, high-profile or not, is that they would be mistaken to dismiss the Libby case as sui generis, concluding that it only went as far as it did because of the politics surrounding the case. Witnesses should never doubt the possibility that charges will be brought solely for misleading the investigation even if there is ultimately no provable underlying crime.

On the high-profile side, one need only look as recently as Martha Stewart's January 2006 conviction or as far back as the 1950 conviction of Alger Hiss. Stewart, of course, was convicted of lying in the course of an insider trading investigation in which she was never charged with insider trading, while Hiss was convicted of perjury before Congress without being charged with espionage (the statute of limitations had expired).

No less significant are the numerous cases that do not make headlines. In the experience of the author and many other former and current prosecutors, individuals who lie or commit perjury in the course of an investigation, while not invariably charged, often are. The reasons vary from a genuine desire to preserve the integrity of the system to a tactical need to pressure witnesses into cooperating. Such witnesses, though possessing relevant information, may not be guilty of the underlying crime. But by misleading the investigators, they put themselves in a position where it might be in their interest to cooperate, and many prosecutors are all too happy to oblige them.

Advice for Witnesses

In the face of this reality, how should white-collar defense counsel advise their clients who are about to be questioned, either by government agents or under oath before a grand jury? The easy answer, in the absence of a valid and desired assertion of the privilege against self-incrimination, is to give this familiar advice: if you are going to testify, answer the question, do not volunteer, and above all, tell the truth. Libby doubtless received this advice, but it was not enough. To save some clients from exposing themselves to prosecution for false statements, one should analyze the various motivations that might lead an individual who has committed no crime into intentional falsehood.

The reasons are varied, but tend to recur. Sometimes, the witness may believe she did something that is either wrong or may look suspicious, but does not know that it is not a crime, and therefore believes that lying is in his or her best interests. Although not charged criminally with insider trading, Martha Stewart was ultimately sued by the SEC in a civil action. In the heat of the investigation, it was difficult to predict what prosecutors would do with this conduct. With high-profile witnesses, an added pressure is that protection of their public reputation might, in practice, make assertion of the Fifth Amendment's right to remain silent in effect unavailable.

Other times, perhaps more often, the reason for being untruthful is to protect someone else, usually the subject of the investigation. Many a witness has been convicted of obstructing justice by choosing loyalty to a friend over the potential consequences of perjury. As such conduct is obviously without legal defense if it is charged in court, a strong defense lawyer will drive home the substantial risks involved and suggest from long experience that the truth will invariably surface, sometimes even from the lips of the original target.

Some untruthful witnesses may rationalize their actions by telling themselves that the questions being asked are either nobody's business or not really important. This excuse brings to mind the familiar requirement of materiality in federal perjury prosecutions. (Some states have misdemeanor versions of perjury that omit any such requirement.) The legal standard is whether the false statement 'has a natural tendency to influence, or was capable of influencing, the decision of the decision-making body to which it was addressed,' Kungys v. United States , 485 U.S. 769, 770 (1988) ' an expansive definition that makes almost anything material. As one court put it, 'materiality is the flimsiest of obstacles to a perjury conviction.' United States v. Guariglia , 757 F. Supp. 259, 266 (S.D.N.Y. 1991). Courts have upheld a wide variety of information as material, including impeachment testimony and testimony that was completely superfluous to the proceeding because others had already testified on the same topic. Testifying witnesses should not even think about whether what they have to say is important or relevant ' they should just answer the questions truthfully.

Finally, some witnesses pay very careful attention to the questions asked and, although intending to mislead, believe that they are safe from sanction if they tell the literal truth. For example, the defendant in the seminal Bronston v. United States , 409 U.S. 352, 354 (1973), when asked whether he personally had ever had any Swiss bank accounts, responded: 'The company had an account there for about six months, in Zurich.' Although Bronston had in fact once had such an account, and therefore was trying to mislead his questioners, his answer about the company, as well as his earlier denial about currently having a Swiss account, were literally true. The Supreme Court reversed his conviction on that ground.

'Literal Truth'

Reliance on literal truth is perilous, however, because courts have been reluctant to follow Bronston, well, literally. For example, a conviction for perjury was upheld despite the literal truth of the answer where the defendant, who had accepted campaign contributions at a 'Preakness Party' in 1990, was asked whether he had done so in 1991, in a context where it was clear the questioner was referring to 1990. He answered with the literal truth that he had not, but was charged and convicted anyway. United States v. DeZarn , 157 F.3d 1042, 1051 (6th Cir. 1998). The Sixth Circuit distinguished Bronston on the ground that the answer there had not been responsive, just a stray statement of literal truth, but that DeZarn had fully understood the question, which, coupled with the answer, was perjurious in the court's view. Although we may quarrel with this rationale, it is plainly better to clarify a question or an answer than risk a perjury charge.

Charged Defendants

If a witness innocent of the underlying crime is charged, may she invite the jury to reject perjury for that reason? Not if courts follow Judge Miriam Goldman Cederbaum's lead in the Martha Stewart case. There, the court declined, on relevance grounds, to allow Stewart to argue about why she was charged only with perjury and not insider trading, or to argue that she was innocent of the underlying crime solely because she wasn't charged. United States v. Stewart , No. 03 CR 717, 2004 WL 113506, at *1-*2 (S.D.N.Y. Jan. 26, 2004).

Conclusion

While lawyers have presumably been advising witnesses to tell the truth for hundreds of years, perjury and false statements charges continue to be prevalent, and cases where the underlying crime is not charged are no exception. Both witnesses and lawyers should remain mindful of the varied and nuanced motivations that innocent individuals caught up in government investigations might have to shade the truth, and address them at the earliest instance.

Daniel R. Alonso ([email protected]), a member of this newsletter's Board of Editors, is a partner at Kaye Scholer LLP, where he concentrates on white-collar litigation and internal investigations. He is a former federal and New York state prosecutor.