Defense Considerations For SEC Remote Interview Requests

By Shari Brandt, Margaret Meyers and Sydney Sgambato
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Law360 (June 30, 2020, 2:17 PM EDT) --
Shari Brandt
Shari Brandt
Margaret Meyers
Margaret Meyers
Sydney Sgambato
Sydney Sgambato
As social distancing and travel restrictions continue due to the COVID-19 pandemic, requests from the government for remote testimony and interviews undoubtedly will increase.

Indeed, co-director of the U.S. Securities and Exchange Commission Division of Enforcement Steven Peikin recently noted an increased potential for fraud and manipulation due to recent market volatility and made plain that the SEC is committed to going forward with the pursuit and execution of its enforcement mission during the health crisis.[1]

With no imminent prospect for a breakthrough in the discovery, development and mass distribution of a vaccine or cure, remote testimony may be with us for some time. 

Remote testimony requires all parties — including a lawyer and her client — to participate from separate locations.

For that reason, advising a client on how to respond to a government request for such testimony requires careful consideration of many factors: Have lawyer and client already met in person and developed a rapport? Is the client primarily a fact witness, or does the client have exposure? Are there grounds for contesting a subpoena, and, if so, would raising those grounds unwisely provoke investigators? Would refusing to agree to remote testimony trigger adverse employment consequences?

The final decision likely will be fact-specific and depend on the answers to these and other questions.

Getting to Know the Client

As with any request for an interview or testimony, the decision whether to proceed turns on the client, her potential exposure to liability and her ability to prepare. This is especially true where both the preparation and the interview will proceed remotely with the lawyer and client in different locations. 

Defense counsel must develop a rapport with her client so she can understand fully the client's role in the matter under investigation. Counsel needs to ask probing questions and assess the client's credibility before advising on whether to agree to remote testimony. With a new client, this process may be hampered by counsel's inability to meet the client in person and develop a rapport.

Body language and nonverbal cues can be important in assessing a witness' credibility, and some clients require additional attention or hand-holding — all of which can be difficult to do effectively via telephone or video conference. These challenges only increase where the client herself is juggling the challenges of working from home alongside the additional stress of being called for an interview or testimony.

Before COVID-19, investigators typically would agree to a telephone or video interview only where the client has little to no risk of liability — or where travel logistics made an in-person interview impracticable. Where an individual is a potential target or her testimony is important for the case, investigators usually prefer to make in-person credibility assessments.

Ordinarily, defense counsel and her client may prefer a remote interview because the lack of formality makes it harder for the government to press the witness, and because the investigators' willingness to proceed remotely suggests that the client has little exposure. Importantly, before the pandemic, counsel would be present in the room with her client during a remote interview to lend support and provide real-time advice.[2]

Where counsel and client are in separate locations, the defense advantages of proceeding by phone evaporate. In that scenario, while the investigators may determine that the benefits of advancing their case outweigh the challenges of assessing a target or important witness remotely, counsel may conclude that remote testimony is advisable only where the client has little risk of liability.

Preparing a witness by phone or video conference can be effective when the lawyer and client have the appropriate technology, the relevant documents, and adequate time and attention. However, other aspects of remote prep may be more challenging — for instance, when the client is not comfortable with the technology or is distracted by issues at home.

To the extent possible, counsel should send relevant documents to the client ahead of any scheduled prep. And counsel should anticipate other hiccups in the process and be extra prepared to use the time with her client efficiently.

Engaging With Investigators and Exploring Potential Alternatives

As defense counsel considers the appropriate response to a request for a remote interview or testimony, she should take advantage of the opportunity to gather as many facts as possible from the government about the client's exposure. Counsel also should consider whether there are alternatives to testimony or interview conditions that can be agreed upon to make the process more suitable for her client. 

Whenever the government asks for live testimony, it is incumbent on defense counsel to ask questions about her client's status. Prepandemic, the government might be willing to impart some information, but often would not provide much detail. Due to the extraordinary nature of testimony where counsel and client are separated, however, the government now may be willing to provide more information.

For example, where the government typically would describe a client simply as a subject of the investigation, today defense counsel may be able to press for further details about the client's status. Also, the government may be willing to share in advance of the interview certain topics and documents to be covered. These additional forms of information may help the client and counsel become comfortable proceeding with the remote interview. 

As part of the dialogue with the government about the scope and conditions of the requested interview, defense counsel may wish to explore whether a full or partial attorney proffer would be a viable alternative. The government may find the preview offered by a proffer to be helpful in getting quick access to information, and the information provided might narrow the scope or obviate the need for an interview. And the government's reaction to the proffer may help counsel evaluate whether to move forward with a remote interview.

In advance of any remote interview, defense counsel should advocate for remote interview conditions that are favorable to her client. For instance, the government may be amenable to narrowing the overall interview, permitting longer breaks (so that counsel and her client can have time to confer away from the interview) or spreading the interview over multiple, shorter days to allow a break from the fatigue caused by excessive video conferencing. 

Considering the Consequences of Declining a Remote Interview Request

There may be instances where defense counsel and her client think that remote testimony is not in the client's best interest — for instance where the client faces significant exposure to criminal liability or where counsel simply cannot evaluate the client's potential liability because investigators are not forthcoming about the client's role in their investigation. In such circumstances, counsel and her client should consider the consequences of declining to participate voluntarily in a remote interview.

The client's refusal to proceed remotely may prompt investigators to subpoena her testimony under oath. Not surprisingly, there is little precedent for moving to quash a subpoena or opposing a motion to compel on the basis that it requires remote testimony. Before COVID-19, remote testimony likely meant only that the investigators and interviewee were in separate locations; counsel had the opportunity to be present with the client for the testimony. And in the event a client objected to a remote interview, the government might oblige and conduct the interview in person.

Yet the present circumstances may require defense counsel to press this issue. Compelling remote testimony may undermine constitutional and other rights. In addition to the Sixth Amendment, which guarantees counsel in criminal proceedings, the Administrative Procedure Act and agency rules promulgated thereunder guarantee the right to counsel where an individual is compelled to provide testimony.[3]

Courts have found agency rules to infringe on this absolute right where they limited an attorney's ability to represent her client fully and adequately during testimony.[4] Accordingly, to the extent the government seeks to compel testimony where counsel and client would be separated, counsel may argue that it would infringe on the client's right to counsel. 

Similarly, counsel could seek to quash a subpoena on grounds that it is unreasonable or overly burdensome, arguing that the remote testimony sought was extraordinary and unnecessary in light of available alternatives that would not prejudice the government's investigation — including delaying the testimony until counsel and client can be in the same room. Such an argument is unlikely to succeed, however, as agencies have broad latitude in the investigative procedures they employ.[5]

Courts have tempered regulators' investigative requests on fairness and abuse-of-process grounds only in rare circumstances.[6] In response to COVID-19, even courts themselves have begun exploring remote alternatives to live trial testimony, notwithstanding objections from parties that doing so violates due process and the Federal Rules of Civil Procedure.[7] 

Even if a motion to quash the subpoena were unsuccessful, the delay caused by litigating the issue — and exacerbated by COVID-19 court interruptions — might motivate the government to postpone the interview until it can be conducted in person or at least until the witness and her client can be safely in the same room during the interview.

Declining to participate voluntarily in the government's investigation may have significant collateral consequences for the client. First, even if the government does not move to compel the witness' testimony, refusing to participate voluntarily likely would frustrate investigators.

They may regard the client's refusal as an indication that she has something to hide, and draw a negative inference about the client and her credibility. In some instances, aggressive regulators might bring additional rule violation charges for failing to comply with their testimony requests.[8]

Second, in matters where the government faces the impending expiration of a statute of limitations, counsel and client should expect a request to enter a tolling agreement. Agreeing to toll any statute of limitations will prolong the investigation, but doing so may gain back some good will that had been lost due to declining the remote interview. It also may reduce pressure on investigators to bring charges to stop the clock from running out.

Indeed, in his recent remarks, Peikin said the commission would be protecting its claims and remedies during the pandemic, either through tolling agreements or, where appropriate, by recommending that the commission authorize an action.[9] 

Finally, and perhaps most importantly given the current economic climate, declining an interview may create discord between the client and her employer if the client's unwillingness to cooperate creates additional hurdles or problems for her employer in the course of the government's investigation. Indeed, if the investigators or the employer view the employee's refusal to testify remotely as a failure to cooperate with a government investigation, it may even cost the employee her job.

Conclusion

Without a nationwide resolution to the COVID-19 pandemic in immediate sight, remote interviews are likely to become an increasing part of government investigations in the near term.

Defense counsel will need to adapt their practice so that they and their clients are prepared to navigate all aspects of remote testimony, including assessing the risks of proceeding remotely, negotiating potential alternatives or favorable interview conditions, and, in the event the client declines to participate, being prepared to mitigate the consequences of doing so.

Correction: A previous version of this article stated an incorrect date for Peikin's remarks. The error has been corrected.



Shari Brandt and Margaret Meyers are partners, and Sydney Sgambato is an associate, at Richards Kibbe & Orbe LLP.

Richards Kibbe partner Daniel Zinman and founding partner Lee Richards contributed to this article.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


[1] Steven Peikin, Co-Director, Division of Enforcement, Keynote Address: Securities Enforcement Forum West 2020 (May 12, 2020), available at https://www.sec.gov/news/speech/keynote-securities-enforcement-forum-west-2020.

[2] See Meyers, Zinman, Richards, Defending Remote Testimony in White Collar, Securities Cases, Law360 (May 27, 2020).

[3] See Administrative Procedure Act, 5 U.S.C. §555(b).

[4] See, e.g., SEC v. Whitman, 613 F. Supp. 48, 49 (D.D.C. April 15, 1985).

[5] See Hannah v. Larche , 363 U.S. 420, 443 (1960); Commercial Capital Corp. v. SEC , 360 F.2d 856, 857 (7th Cir. 1966).

[6] See SEC v. Arthur Young & Co. , 584 F.2d 1018, 1032-33 (D.C. Cir. 1978).

[7] See, e.g., Petition for Writ of Mandamus, In re: Vicinay Cadenas, S.A., Civ. No. 20-20273 (5th Cir. May 26, 2020).

[8] See, e.g., 15 U.S.C. § 78c-c; FINRA Rule 8210.

[9] See Keynote Address: Securities Enforcement Forum West 2020, supra note 1.

For a reprint of this article, please contact reprints@law360.com.

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