Canada: The Privilege Against Self-Incrimination In U.S. Criminal Proceedings: What The Decision Of The United States Court of Appeals For The Second Circuit In United States Of America v. Allen And Conti Means For Canadians

On July 19, 2017 the United States Court of Appeals for the Second Circuit ruled that the Fifth Amendment's prohibition on the use of compelled testimony in American criminal proceedings applies even when a foreign sovereign has compelled the testimony.

The US. Department of Justice (DOJ) laid criminal fraud charges against the Defendants, both former employees of the London office of a foreign based bank, after an investigation by the U.K. Financial Conduct Authority (FCA) into their role in the bank's LIBOR submissions to the British Bankers' Association.

During the FCA's investigation, both Defendants were compelled to testify under threat of imprisonment, pursuant to a grant of direct (but not derivative) use immunity. The FCA initiated an enforcement action against one of the Defendants' former co-workers, Robson, which was subsequently stayed in favor of criminal prosecution of Robson by the DOJ.  However, before the enforcement action was stayed, Robson received as disclosure from the FCA transcripts of the compelled testimony of both Allen and Conti, which he reviewed.

At their trial on various fraud offences, the DOJ alleged that the Defendants had honored requests from the bank's derivatives traders to submit higher or lower LIBOR submissions dictated by the traders' (and the bank's) interest in having LIBOR fixed at a higher or lower level on particular dates.  Key evidence against them at trial came from Robson, who had co-operated with the DOJ and pleaded guilty. Ultimately both Allen and Conti were convicted of all counts.

On appeal, Allen and Conti argued that the Government had violated their Fifth Amendment rights when it used tainted evidence from Robson, consisting of their own compelled testimony given to the FCA, against them at trial.  Citing other decisions of the Second Circuit, they submitted that in order to be admitted at trial in a U.S. criminal trial, inculpatory statements obtained overseas by foreign officials must have been made voluntarily.

The Court of Appeals for the Second Circuit agreed, stating that a violation of the Fifth Amendment occurs when a compelled statement is offered at trial in an American courtroom against a defendant, regardless of whether the statement was compelled at the instance of a foreign government, and even when the defendant's testimony was compelled by foreign officials lawfully in a manner that does not shock the conscience or violate fundamental fairness.

While the Court recognized the risk that foreign powers might inadvertently take steps that could obstruct U.S. federal prosecutions in efforts to obtain admissible evidence, it concluded that those developments need not affect the fairness of trials on American soil. The Court further highlighted the need for "intimate cooperation and coordination...between U.S. prosecutors and foreign authorities".

In this case, a violation of the Defendants' Fifth Amendment rights occurred when the DOJ tendered the evidence of Robson, whose testimony was found to have been tainted by, and indeed dramatically changed after, his exposure to the Defendants' compelled testimony.   As a result, the convictions were vacated and the indictment against them dismissed as it was also procured on the basis of tainted evidence given before the grand jury.

What does this mean for Canadians? North of the border, provincial securities legislation permits securities regulators to compel individuals to testify under oath against themselves during a securities regulatory investigation. Refusal to testify renders the witness liable to be committed for contempt of court by the superior court of the province as if in breach of an order of the Court.  Although the answers given by the witness under statutory compulsion cannot be used to incriminate the witness in a criminal or quasi-criminal prosecution in Canada, the evidence can be used against that individual in a securities regulatory enforcement proceeding to consider the imposition of sanctions which do not include imprisonment.

While the decision of the Second Circuit does not bind U.S. courts outside of the Second Circuit, it should provide some reassurance to Canadians that any testimony compelled from them under Canadian law will not be used against them in a U.S. criminal prosecution.  This may assist in addressing concerns arising from decisions like those of the Alberta courts in Alberta (Executive Director of Securities Commission) v. Brost 2008 ABQB 161  and Beaudette v. Alberta Securities Commission 2015 ABQB 57.  In both cases, the Alberta Court of Queens Bench decided that the possibility of criminal prosecution in the U.S. using information compelled by domestic securities regulators did not give rise to a violation of the Canadian Charter or Rights and Freedoms. The result in Beaudette was upheld by the Alberta Court of Appeal  2016 ABCA 9, and leave to appeal to the Supreme Court of Canada was refused [2016] S.C.C.A. 97.

Conversely, it may  make it more difficult for Canadians to argue that they should not be compelled to answer questions in Canada due to the threat or existence of a parallel investigation by the U.S. DOJ without additional "protective mechanisms", the need for which was recognized by the Ontario Superior Court  in Catalyst Fund General I Inc. v. Hollinger Inc. (2005), 255 D.L.R. (4th) 233; aff'd (2005), 79 O.R. (3d) 70 (C.A.); Nortel Networks Corp. v. Dunn [2008] O.J. No. 369; Mr. A. v. Ontario Securities Commission [2006] O.J. No. 1768.

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