William F. Johnson

Can the guilty plea allocution of a corporation be admitted against an individual defendant in a criminal trial to prove the existence of a conspiracy? A recent evidentiary ruling in the Southern District of New York suggests it can, provided that “signatories” to the corporate plea agreement are available for cross-examination. This column will review the history of the admission of individual co-conspirator plea allocutions in criminal cases and discuss why the admission of a corporate guilty plea, despite the opportunity to cross-examine a corporate employee who signed the plea agreement, does not provide the type of cross-examination guaranteed by the Confrontation Clause. As a result, the Confrontation Clause should operate as a per se bar on the admission of corporate plea allocutions in the trials of individual defendants.

Second Circuit Confrontation Clause Jurisprudence

The Confrontation Clause of the Sixth Amendment to the U.S. Constitution provides that “[i]n all criminal prosecutions, the accused shall enjoy the right … to be confronted with the witnesses against him.” U.S. Const. amend. VI. The Confrontation Clause protects the right of cross-examination and “ensure[s] the reliability of the evidence against a criminal defendant by subjecting it to rigorous testing in the context of an adversary proceeding before the trier of fact.” Lilly v. Virginia, 527 U.S. 116, 123-24 (1999) (quoting Maryland v. Craig, 497 U.S. 836, 845 (1990)). Indeed, the U.S. Supreme Court has agreed that “'[c]ross-examination is the greatest legal engine ever invented for the discovery of truth.'” California v. Green, 399 U.S. 149, 158 (1970) (quoting 5 J. Wigmore, Evidence §1367 (3d ed. 1940)).

Prior to 2004, district courts in the Second Circuit routinely admitted into evidence the criminal plea allocutions of individual defendants in trials of their alleged co-conspirators, without subjecting the declarants to cross-examination. See, e.g., U.S. v. Becker, 502 F.3d 122, 129 (2d Cir. 2007) (noting that pre-2004, “we regularly approved the admission of an unavailable witness's plea allocution to prove the existence and scope of a conspiracy, and—so long as they were accompanied by particular guarantees of trustworthiness—we rejected the argument that such statements violate the Confrontation Clause”). Such allocutions consist of an admission by an individual defendant, in the course of a guilty plea under oath, of criminal conduct in which that individual directly participated. Those admissions, to properly support the guilty plea, had to encompass the defendant's personal knowledge and state of mind at the time of the criminal conduct. The evidentiary theory for allowing those admissions in a case against a co-conspirator was that the statement was against the declarant's penal interest, and therefore admissible under Federal Rule of Evidence 804(b)(3), provided it was accompanied by “particularized guarantees of trustworthiness.” This practice changed in 2004, when the Supreme Court in Crawford v. Washington, 541 U.S. 36 (2004), held that out-of-court statements by an unavailable declarant were “testimonial,” and therefore inadmissible, unless the defendant was afforded a prior opportunity to cross-examine the declarant as guaranteed by the Confrontation Clause. Id. at 68-69 (“Where testimonial statements are at issue, the only indicium of reliability sufficient to satisfy constitutional demands is the one the Constitution actually prescribes: confrontation.”). In Crawford, the defendant was denied the opportunity to cross-examine a participant-eyewitness to the crime. Following Crawford, the Second Circuit similarly held that plea allocutions of co-conspirators are “testimonial hearsay … inadmissible under the Confrontation Clause unless the co-conspirator testifies at trial, or is unavailable at trial and the defendant had a prior opportunity for cross-examination.” U.S. v. Hardwick, 523 F.3d 94, 98 (2d Cir. 2008); see also Becker, 502 F.3d at 129-30 (“[P]lea allocutions are testimonial, and are therefore subject to the requirements set forth in Crawford.”).

The 'Usher' Ruling

A current case in the Southern District has extended the Crawford rule to allow the guilty pleas of corporate co-conspirators into evidence, provided that a representative of the corporation takes the stand to submit to cross-examination. See Decision & Order, U.S. v. Usher, No. 1:17-cr-00019-RMB (S.D.N.Y. Sept. 24, 2018) (hereinafter, Order). The problem? Unlike the individual co-conspirator defendant, the representative of the corporation did not personally participate in criminal conduct—the only conduct he or she engaged in was to sign a corporate plea agreement as part of his or her lawful employment with the corporate entity. Thus, cross-examination of the representative does not cure the Crawford issue.

In May 2015, five major international banks (the Banks) entered into separate plea agreements to resolve multi-year investigations into trading practices in the global forex market. See Mem. of Law in Supp. of Defs. Mot. in Limine at 1, U.S. v. Usher, No. 1:17-cr-00019-RMB (S.D.N.Y. Aug. 3, 2018). The Banks admitted to violating Sherman Antitrust Act Section 1 by conspiring with others to fix and manipulate the FX spot market and agreed to pay more than $5.6 billion to settle investigations by U.S. and U.K. authorities. The Banks' guilty pleas (the Bank Pleas) cover the same conduct charged against the individual defendants in United States v. Usher, who were all, at various points in time, employees of the Banks. Id. at 1-2. The defendants in Usher asked the court to exclude any reference to the Bank Pleas at trial, arguing that the Bank Pleas are testimonial statements and that their introduction would violate the defendants' right to cross-examination under the Confrontation Clause and Crawford because the Banks themselves would not testify at trial. Id. at 1-7. The Government stated it did not intend to introduce the Bank Pleas in its case-in-chief, but announced that it would do so “if Defendants open the door at trial” as “a necessary and legally appropriate rebuttal.” U.S. Mem. of Law in Opp. to Defs.' Mot. in Limine at 1, U.S. v. Usher, No. 1:17-cr-00019-RMB (S.D.N.Y. Aug. 13, 2018).

Surprisingly, U.S. District Judge Richard M. Berman agreed with the Government, and indicated he would admit the Bank Pleas. Judge Berman found that any Confrontation Clause issues would be cured because “the Government will be required to call as witnesses signatories [of the Bank Pleas] or other witnesses competent to testify to the substance of the Bank Pleas,” adding, “Defendants will be able to cross-examine these witnesses.” Order at 4.

The Usher trial began on Oct. 9, 2018 and recently concluded with the jury acquitting the defendants of all charges on Oct. 26, 2018. In the end, the Government did not offer the Bank Pleas as evidence. But now that one judge has ruled that corporate plea allocations would be admissible, defense counsel should be on notice and prepared to challenge such evidence should the Government seek to offer it in the future.

Corporate Plea Allocution Testimony Should Be Inadmissible

The Usher ruling is troubling because, as the Supreme Court emphasized in Crawford, cross-examination is a fundamental safeguard guaranteed by the Confrontation Clause. It is impossible to cross-examine effectively an entity, such as the Banks, without access to witnesses who participated in the criminal acts that are the basis for the Bank Pleas. Thus, the Crawford issue cannot be cured merely by putting a corporate representative on the stand whose personal connection to the criminal conduct is no more substantive than that he or she signed the corporate plea agreement as a lawful act of employment after being briefed by others on some of the facts.

The signatory to a corporate plea agreement did not participate in the criminal conduct that gave rise to the corporation's criminal liability. Therefore, he or she cannot effectively be cross-examined on the existence and scope of the conspiracy based on his or her personal knowledge. As noted above, the driving principle behind the Supreme Court's reversal of the conviction in Crawford was the denial of the defendant's right to cross-examine a participant-witness in the charged conduct. The cross-examination of a signatory to the corporate plea agreement would yield no admissible evidence concerning the intent of an actual participant in the conspiracy on trial. The only witnesses competent to testify to the substance of the Bank Pleas are the employees who engaged in the charged conduct—in most cases the trial defendants—and the Fifth Amendment guarantees that they cannot be subjected to cross-examination about such conduct without immunity from prosecution. Moreover, to the extent the corporate representative is familiar with the evidence at all, it would be only through briefings prior to the plea consisting of multiple levels of hearsay, attorney-client communications, and work product. Thus, putting aside the Confrontation Clause problem, permitting cross-examination of the corporate representative will, in turn, create significant potential privilege waiver issues.

Unlike the guilty pleas of individual co-conspirators, which may have probative value in assessing defendants' criminal culpability, corporate plea allocutions have limited probative value because they are more akin to civil settlements—they are often entered into simply to achieve closure from a pending investigation or charges. Companies have no Fifth Amendment right to remain silent and suffer no potential sacrifice of liberty when “admitting” guilt. Their only possible penalty is pecuniary, making their incentive to plead guilty significantly different than that of individuals facing incarceration. In addition, they are state-law bound to act in the best interests of their shareholders, not defend the constitutional rights of individual employees. Thus, corporate plea admissions do not bear the same indicia of reliability as guilty pleas of individuals. Further, because of the different motivation behind the plea decision, the admission of a corporate guilty plea into evidence against an individual defendant is more prejudicial than probative under Federal Rule of Evidence 403 (prohibiting admission of evidence “if its probative value is substantially outweighed by a danger of … unfair prejudice”) even if there were some way to conduct meaningful cross-examination (and the proposed “signatory” solution in Usher does not suffice).

Final Thoughts

The court's ruling in Usher erroneously concluded that the Crawford issues implicated by admitting the Bank Pleas can be cured by allowing a signatory to the bank plea agreement to submit to cross-examination. Order at 4.  Rather, in this context, because there is no meaningful way to cross-examine an entity, the Confrontation Clause should operate as a per se bar on the admission of corporate plea allocutions in the trials of individual defendants. The accused has the right to confront his accuser face-to-face (see Lilly v. Virginia, 527 U.S. 116, 140-41 (1999) (Breyer, J., concurring))—and the mere signatory to the corporate plea agreement is not the correct “face.”

William F. Johnson is a partner in the Special Matters and Government Investigations Practice Group at King & Spalding. Senior Associate Nicole M. Pereira assisted in the preparation of this article.