Fair enough, it may not be immediately obvious why corporate in-house counsel should care about Fifth Amendment jurisprudence. And yet, now in fact is an excellent time to take stock of the U.S. Constitution's right against self-incrimination, enshrined in the Fifth Amendment, which declares that "[n]o person … shall be compelled in any criminal case to be a witness against himself." Why is the timing for review so ripe? Because the Fifth Amendment's boundaries are being actively tested in ways that impact corporate criminal investigations, with practical consequences for in-house counsel.

• Can corporate employees "take the Fifth" to refuse to give law enforcement their phone passcode?
• Can former employees invoke the Fifth Amendment to refuse to turn over corporate records still in their possession?
• What potential Fifth Amendment violations lurk in cross-border cases, or when U.S. authorities pressure a company counsel on how to conduct its internal investigation?

These are just some of the questions percolating through U.S. courts, and unsurprisingly so. With rapid technological change in how people communicate and the increasingly multi-national nature of investigations, law enforcement strategies for investigating corporate crime have evolved—sparking increased litigation of Fifth Amendment issues. Indeed, in two recent, high-profile U.S. prosecutions relating to the LIBOR controversy, federal courts found Fifth Amendment violations—leading the U.S. Court of Appeals for the Second Circuit, in 2017, to dismiss the government's prosecution in United States v. Allen, and in May 2019, and prompting sharp criticism of the government by the chief judge of the U.S. District Court for the Southern District of New York, in United States v. Connolly. What this means is that the Fifth Amendment is on the minds of corporate crime prosecutors too.

This two-part series tackles what corporate in-house should know about the Fifth Amendment. Part I reviews the legal fundamentals governing how the Fifth Amendment applies (and does not apply) during corporate criminal investigations. Part II will then examine five cutting-edge Fifth Amendment questions that are percolating through U.S. courts and often dividing them.

Fundamentals

1. Corporations have no Fifth Amendment protection against self-incrimination.

The first thing to know is that the Fifth Amendment's right against self-incrimination applies only to natural persons. Corporations cannot "take the Fifth." As U.S. Supreme Court explained in its seminal 1988 decision in Braswell v. United States, under what's referred to as the "collective entity" doctrine, corporations are artificial creatures of the State; this means that while the State permits business operators to avail themselves of the benefits of the corporate form, in return the State reserves the right to inspect corporate books and records on demand. The size of the corporation is irrelevant. Even a one-person corporation cannot refuse a government subpoena for documents on Fifth Amendment grounds, notwithstanding that production will reveal criminal conduct by the corporation or its employees.

2. A corporation's current employees, officers and directors have no Fifth Amendment protection against producing corporate records in their possession.

Equally well established and yet seemingly less well-known is that "custodians" of corporate records also cannot invoke the Fifth Amendment to refuse to turn over corporate records they possess. Who is a "custodian"? At a minimum, that term includes each current employee, officer and director of the corporation (referred to collectively, hereafter, as "employees") who possesses corporate records. The legal rationale here is agency. Employees hold corporate records only in a representative capacity on behalf of the corporation, not a personal one, and therefore employees cannot withhold what the corporation is obligated to produce, even if self-incriminating. (As will be discussed in Part II, however, courts disagree on whether this agency rationale extends to former employees.)

In practical terms this means that, during investigations, the government need not limit itself to subpoenaing corporate records just from the corporation. The government can serve custodial subpoenas directly on employees (current and former) to compel the production of corporate records in their individual possession. Indeed, the service of custodial subpoenas appears to be on the rise, given the proliferation of work-related communications housed on electronic devices personally held by employees. In-house counsel can and should encourage employees to inform the corporation of their receipt of such subpoenas.

3. Corporate employees can invoke the Fifth Amendment to refuse to give testimony they reasonably fear could be self-incriminating.

Under U.S. law, corporate employees, like all other individuals, enjoy the Fifth Amendment right not to make compelled, self-incriminatory statements—about work matters or otherwise—that could be used against them in a future U.S. criminal proceeding. An individual must show three things to fall within the ambit of the privilege: (1) self-incrimination, (2) by way of a testimonial communication or act, through (3) government compulsion.

This right against self-incrimination has been liberally construed and extends well beyond the right not to testify at one's own criminal trial. A slew of Supreme Court and appellate cases establish that the right can be asserted in any proceeding—civil or criminal, administrative or judicial, investigatory or adjudicatory—by a party or a witness. It can be invoked by individuals who do not believe they did anything wrong, so long as they have a reasonable fear of criminal prosecution by U.S. authorities. (One limitation, however, enunciated in the Supreme Court's 1988 decision in U.S. v. Balsys, is that Fifth Amendment does not apply where the reasonable fear is only of prosecution by a foreign jurisdiction.)

Further, one's ability to "take the Fifth" is not limited to answers that would support a criminal conviction, but extends to any answers "which would furnish a link in the chain of evidence needed to prosecute" the individual of a crime (per the Supreme Court's 1951 ruling in Hoffman v. U.S.). Thus, even the corporate employee who is obligated to turn over corporate records in his possession cannot be compelled by the government to answer questions about those records. And, under what is known as the "act of production privilege" of the Fifth Amendment, the Supreme Court's 2000 decision in U.S. v. Hubbell held that an individual can refuse to turn over personal (i.e., non-corporate) records to the government if the very act of production would have a testimonial, incriminating aspect, such as by confirming the records' existence, location, and authenticity. Ultimately, it is for courts to decide whether an individual has properly invoked the Fifth, if the invocation is challenged.

To be clear, the Fifth Amendment deals only with government compulsion. Employer compulsion is a separate matter. So long as a corporation is acting on its own behalf (and not behalf of the government), corporations can implement workplace policies requiring employees to cooperate fully during corporate investigations, at penalty of discipline for failing to cooperate, without violating the employees' Fifth Amendment rights. As a practical matter, such workplace rules can leave the employee who has potential criminal exposure between a rock and a hard place—Do I abide by company policy and answer company counsel's questions, thereby heightening my risk of criminal prosecution? Or do I instead refuse to cooperate with my employer and risk job termination?

4. Consequences of a Corporate Employee's Invocation of the Fifth.

So what happens when an employee who has been subpoenaed by the government for testimony invokes the Fifth? Let's briefly review the potential consequences for the employee, the corporation and the prosecutor.

First, an employee's "taking the Fifth" will require the corporation to consider how to respond (if at all) from an employment perspective. There is no state or federal law that prohibits private companies from firing employees who choose to take the Fifth (assuming the firing would not otherwise violate some state or federal law). Companies in the crosshairs of a criminal investigation typically do not look kindly on an employee who refuses to further efforts to cooperate with the government. Such an employee may thus find her employment terminated for noncooperation. However, these are fact-dependent situations that corporations should weigh with care.

For prosecutors, the employee's invocation of the Fifth Amendment presents a strategic choice: whether or not obtain a court-ordered grant of immunity. An immunity order allows the federal government to overcome the individual's invocation of the Fifth Amendment and compel the witness to testify, but with immunity—which, as set forth in the Supreme Court's 1972 decision in Kastigar v. U.S. and its progeny, means the government is prohibited from using that testimony, directly or indirectly, against that individual in a future criminal proceeding. State immunity procedures can differ from federal ones. But in practice, both federal and state prosecutors are loath to immunize the testimony of any individual believed to be a significant wrongdoer, given the hurdles immunity creates to subsequent prosecution. That said, immunity orders can be an effective tool for compelling statements from corporate employees who take the Fifth and are believed to have information important to the investigation but whom the government regards as having minimal culpability. (And for those corporate employees eventually charged with a crime, the fact of their prior invocation of the Fifth Amendment can never be used against them as proof of guilt or introduced as trial evidence.)

An important ramification for corporations is that an employee's invocation of the Fifth Amendment can lead to an adverse inference of wrongful conduct being drawn against the corporation in civil proceedings, particularly in federal court. Judges have broad discretion to permit such adverse inferences. While there is no hard and fast rule, courts generally will engage in a case-specific inquiry, evaluating whether drawing an adverse inference would be trustworthy under all the circumstances. Non-exhaustive criteria for that analysis (articulated by the Second Circuit's 1971 decision in LiButti v. U.S.) include: the nature of the relationship between the defendant and the employee, the extent of the defendant's control over the employee, the compatibility of the defendant and employee's interest in the outcome of the litigation, and the role of the employee in the litigation. An adverse inference against the company may be permitted even when a former employee invokes the Fifth Amendment in civil litigation. This is a thorny area for corporate litigants, in which an employee's desire to avoid criminal jeopardy by invoking the Fifth may run against the corporation's interest in avoiding the negative consequence of an adverse inference.

This concludes the fundamentals of what corporate in-house counsel should know about the Fifth Amendment. Part II of this article series will address cutting-edge Fifth Amendment issues relevant to corporate criminal investigations.

Lisa Zornberg is a partner in the white collar and regulatory defense group at Debevoise & Plimpton. Previously, she served as Chief of the Criminal Division for the U.S. Attorney's Office for the Southern District of New York. Scott Caravello, a Columbia University law student, assisted in the preparation of this article.