The Federal Grand Jury Process
Federal grand juries are given great power to investigate suspected tax crimes. Many taxpayers have made a critical mistake by attempting to respond, without the benefit of counsel, to a grand jury subpoena for testimony or documents.
Here is what you need to know about federal grand juries and their all-encompassing subpoena power:
1. Introduction to the Federal Grand Jury Process.
The Structure: Federal grand juries are limited to 23 members, 16 of whom must be present to form a quorum. The votes of at least 12 members are required in order to return an indictment. Grand juries usually sit for a term of 18 months.
Role of Prosecutor: The federal prosecutor or Assistant United States Attorney (the “Prosecutor”) is the government official who will most frequently interact with the grand jury. The Prosecutor directs the grand jury sessions. However, he cannot testify or be involved in any way during grand jury deliberations. A federal grand jury will generally return an any indictment that a reputable and prepared prosecutor seeks. In short, if the federal governments wants to indict you, it will. The trick is to make it not want to indict you.
Power of the Grand Jury: In conducting investigations, a federal grand jury has wide-ranging powers. Federal grand jury subpoenas are rarely quashed on grounds that they seek irrelevant information or exceed the grand jury’s authority.
In United States v. R Enterprises, Inc. the United States Supreme Court said that federal grand jury subpoenas are presumed to be reasonable and the burden of showing unreasonableness is on the recipient. Consequently, a motion to quash a grand jury subpoena on relevancy grounds will be denied unless you can prove that “there is no reasonable possibility that the category of materials the Government seeks will produce information relevant to the general subject of the grand jury’s investigation.”
Because of the great power invested in federal grand juries you should never testify in front of or provide documents to a grand jury without first consulting an experienced criminal tax attorney.
2. Role of Counsel.
Your lawyer is not allowed to accompany you during your testimony. However, he is permitted to be present nearby and you have the right to consult with him before answering a question. You may also leave the grand jury room to confer with your lawyer about the questions being asked and your responses. In most jurisdictions, you may take notes of the questions asked during the grand jury session and share these with your attorney.
3. Pre-Grand Jury Interviews.
Your Rights: You are not required to talk to the prosecutor or an IRS special agent before the grand jury process begins. Assistant United States Attorneys sometimes will get unrepresented suspects into to speak with federal agents prior to a federal grand jury session by including in the letter accompanying the witness’ subpoena a direction that the suspect appear an hour or two before the grand jury process begins. Never talk to government agents prior to a grand jury session without first consulting an experienced criminal tax attorney.
Lying to the Grand Jury or a Special Agent: If you do give an interview, never lie. It’s a federal felony. Their are myriad instances where suspects were not indicted for the initial offense but were indicted for lying to federal agents during the investigation. (See Martha Stewart and Scooter Libby).
A pre-grand jury interview will not be recorded. Usually, two federal agents will take notes of what they think you said it will be their word against yours in the event of a dispute. And we know how that’s going to turn out.
Of course, there will be an official recording and transcript of the grand jury proceedings preserving your testimony should the government have reason to believe you lied.
4. Witness Secrecy.
Federal grand jurors, grand jury court reporters and the prosecutors running the federal grand jury are under a strict duty to keep confidential any “matter occurring before the grand jury.” This duty of secrecy can be found in Rule 6(e) of the Federal Rules of Criminal Procedure.
Violations of the secrecy rule may result in attorney sanctions or charges of criminal contempt. However, the secrecy rule does not apply to grand jury witnesses. Witnesses are free to tell the whole world about their grand jury testimony. Some prosecutors attach cover letters to their grand jury subpoenas telling the witnesses that revealing the contents, or even the existence, of the subpoena “may impede” a criminal investigation. They then “request” that the witness not disclose the subpoena or the documents requested in it and ask the witness to notify the prosecutor if he or she has any “problems” with the non-disclosure. This is at best a misstatement of the law and at worst an attempt to intimidate witnesses and it should not be tolerated.
When our clients get a letter like this we immediately contact the prosecutor in writing and politely remind them of the correct law.
5. Government Secrecy.
Again, Rule 6(e) prohibits the government from revealing “a matter occurring before the grand jury.” This prohibition covers more than mere grand jury testimony. It prevents the prosecutor from revealing the names of persons appearing before the federal grand jury or the names of persons who have been subpoenaed to do so.
Prosecutors and special agents are very lax in this regard and often reveal that a person or company has been subpoenaed. For example, some grand juries have waiting rooms where multiple witnesses assemble until they are called. This violates the secrecy rule because each witness knows that the other witnesses are there to testify before the grand jury. Worse yet, sometimes members of the press are tipped off to be at the courthouse entrance so that they can see a grand jury witness enter.
A good tax defense attorney will be alert for these abuses and warn federal prosecutors not to violate grand jury secrecy.
6. The Grand Jury Subpoena Part I.
Your attorney should arrange with the prosecutor to accept service of the federal grand jury subpoena on your behalf. This means you will avoid being personally served by IRS special agents or FBI agents in your home or place of employment.
If you are personally served, however, you should politely accept service and firmly tell the agents that you have an attorney. Do not answer any substantive questions about the case. You are under no obligation to do anything other than accept service of the subpoena . Anything you say to federal agents or prosecutors can and will be used against you at trial.
7. The Grand Jury Subpoena Part II.
Federal grand jury subpoenas can be for (a) testimony ( ad testificandum ); (b) documents or objects ( duces tecum ); or (c) both. The face of a federal grand jury subpoena reveals which of these types you have received. You should be subpoenaed either as an individual or as a custodian of records for a business entity. In many instances, individuals have the right to refuse to answer grand jury questions by invoking the Fifth Amendment’s Privilege Against Self-Incrimination. Corporations and other business entities, however, cannot invoke this privilege. But since a corporation operates through human agents, it must designate a custodian of records when subpoenaed by the federal grand jury. Under Supreme Court case law the corporate custodian is only required to answer a narrow category of questions, related to how the subpoenaed documents were gathered . If you are properly subpoenaed as a business custodian, it is very important that you limit your answers to this narrow category of questions. Prosecutors love to get corporate custodians into the grand jury room and ask extra questions. These questions might seem innocuous, but they are often very dangerous. You need to have your white collar criminal lawyer with you for consultation, right outside of the grand jury room, to insure that you are not tricked into answering one question too many. Some federal prosecutors have recently started the practice of issuing one subpoena to a person in that person’s individual capacity and his corporate custodial capacity. This tactic is dangerous, confusing, and, in my view, unauthorized. It is tantamount to issuing one subpoena to two persons or companies. In such situations, your attorney should insist on two separate subpoenas—one for you as an individual and one to the company’s custodian of records.
8. Pleading the Fifth.
As mentioned above, if you are subpoenaed for testimony in your individual capacity, you may be able to avoid answering substantive questions by invoking the Fifth Amendment’s Privilege Against Self-Incrimination. The right to invoke this privilege is much broader than most witnesses and attorneys realize. If a truthful answer to a grand jury question would even tend to incriminate you, you can invoke the privilege and refuse to answer . How can an answer tend to incriminate you? If it furnishes a link in the chain that might lead to your conviction. Can a person who is totally innocent of wrongdoing invoke the privilege? Absolutely! The Supreme Court has ruled that the privilege protects the innocent as well as the guilty . Why would an innocent person want to invoke the privilege? To keep from being ensnared by a mistaken, incompetent, or unscrupulous prosecutor. Take the following example. The federal grand jury is investigating a corporation for accounting fraud. You work in the corporation’s accounting department. The prosecutor believes that any accounting department employee who reviewed Document X and later booked entries related to Document X is guilty of fraud. You booked entries related to Document X. You also briefly reviewed Document X before you booked the entries, but nobody is aware of this and no record establishes that you reviewed Document X. Even though you don’t believe you defrauded or intended to defraud anyone, if you testify at the grand jury and truthfully admit that you reviewed Document X, you will tend to incriminate yourself, because you will furnish a link in the chain that the prosecutor may use to indict and convict you. You are therefore entitled to invoke the privilege against self-incrimination and refuse to answer questions about your conduct.
9. Reviewing Your Grand Jury Testimony.
Some federal prosecutors like to call witnesses back to the grand jury to testify on multiple occasions. This is dangerous, because it can cause you to inadvertently give inconsistent testimony under oath. Under §1623(c) of the federal criminal code, the government can prosecute you for testifying to two irreconcilably contradictory statements under oath, and the government does not even have to prove that either of the statements in question was false. When you are called back to the federal grand jury to testify for a second time, your attorney should insist on your right to review ahead of time the official transcript of your first session . In this way, you can refresh your recollection as to your earlier testimony, correct any mistakes, and prepare yourself for the upcoming session. The United States Court of Appeals for the District of Columbia Circuit recently ruled that federal grand jury witnesses, even if they have not been called back to testify for a second time, have an inherent right to review a transcript of their earlier testimony.
10. Shadow Grand Juries.
If you have the money, your attorney can often conduct what is known as a shadow grand jury. Friendly witnesses will sometimes inform you if they have been subpoenaed to the federal grand jury and you and your defense team can often figure out who else the government may call . Grand jury witnesses are then interviewed, before or after they testify, giving you valuable information on where the investigation is heading. Of course, federal grand jury witnesses are under no obligation to cooperate with your defense team, and the use of shadow grand juries often infuriates prosecutors. You should proceed with great caution and make sure that all interviews are carefully documented so that your defense team is not accused of witness tampering or obstructing justice. And it should go without saying that your attorney and his staff should conduct and arrange all interviews—not you.
There are many dangers involved in dealing with federal grand juries. If you have received a federal grand jury subpoena you should not proceed without consulting an experienced criminal tax attorney.