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German Prosecutor’s Raid Weakens DOJ Bargaining Power

Sally Yates, the former Deputy Attorney General, released a memorandum on September 9, 2015, known as the “Yates Memo.”1 The Yates Memorandum made fighting corporate fraud—specifically, targeting individual, executive bad actors—a top priority for the United States Department of Justice’s (DOJ) criminal division.2 As a result, large international corporations have increasingly hired third-party law firms to conduct internal investigations into alleged corporate wrongdoing to avoid stiff criminal and civil penalties in the U.S.3 In the United States, the information discovered by third-party law firms in internal investigations is largely considered privileged.4 The recent raid of Jones Day’s German offices by Munich’s prosecutor, however, challenges international corporations’ faith in the privacy of U.S. internal investigations, and, therefore, weakens the DOJ’s overall bargaining power when pursuing corporate crimes and civil infractions.

On March 17, 2017, the Munich Public Prosecutor’s office raided Jones Day’s German offices.5 Volkswagen hired Jones Day, a United States-based law firm, to investigate the automaker’s diesel emissions scandal. The Munich prosecutor gave no specific reasons for the raid, but sources allege the raid occurred due to suspicions that Jones Day and Volkswagen withheld information from the prosecutor’s office to protect VW’s senior executives and board members.6

The German prosecutor’s raid came just three months after VW pled guilty to three felonies in the U.S., agreeing to pay $4.3 Billion in criminal fines to the U.S., and after a federal grand jury indicted six VW executives and employees for their participation in the scheme.7 Volkswagen openly condemned the raid, calling it a “clear breach of the principles of the rule of law,”8 and on March 29th officially challenged the raid in a Munich Court.9 The combination of large criminal penalties paid to the U.S. and Germany’s disregard for legal privilege questions international corporations’ faith in the value of U.S. law firm-led internal investigations.10

While raids of law firm offices in the United States and Europe are uncommon,11 the German raid raises many questions. Until international corporations know whether raids like the one at VW will continue, these corporations will most likely be reluctant to undergo internal investigations outside of the U.S. Additionally, international corporations may become increasingly reticent to cooperate with the DOJ, knowing that any internal reports found in their foreign offices may be seized and used against them.

  1. Memorandum from Sally Yates, Deputy Attorney Gen., U.S. Dep’t of Justice (Sept. 9, 2015)

  2. Id. 

  3. Michael P. Kelly & Ruth E. Mandelbaum, Are the Yates Memorandum and the Federal Judiciary’s Concerns About over-Criminalization Destined to Collide?, 53 Am. Crim. L. Rev. 899, 899 (2016); Arthur F. Mathews, Defending SEC and DOJ FCPA Investigations and Conducting Related Corporate Internal Investigations: the Triton Energy/Indonesia SEC Consent Decree Settlements, 18 Nw. Int’l & Bus. 303, 455-56 (1998). 

  4. Stephen M. Ryan, Protecting Privilege in Internal Investigations, Hous. Law., March/April 2015, at 16; Matthews, supra note 2, at 456. 

  5. Nathan Bomey, German Prosecutors Search Volkswagen Probed Emissions Scandal, USA Today (Mar. 16, 2017); Aine Kervick, Internal Investigations and Legal Professional Privilege: An Increasingly Tricky Area, (Mar. 24, 2017)

  6. Bomey, supra note 4; Thomas Fox, Tom Fox: Raid on Jones Day German Office Clouds FCPA Investigations, FCPA Blog (Mar. 17, 2017)

  7. Volkswagen AG Agrees to Plead Guilty and Pay $4.3 Billion in Criminal and Civil Penalties: Six Volkswagen Executives and Employees Are Indicted in Connection with Conspiracy to Cheat U.S. Emissions Tests, Dep’t of Justice (Jan. 11, 2017)

  8. Lauren E. Briggerman, Prosecution of Corporate Execs: The Latest Developments, Law360 (Jan. 31, 2017)

  9. Andreas Cremer & Joern Poltz, VW Files Complaint Over Searches of its Dieselgate Law Firm, Reuters (Mar. 29, 2017) 

  10. Fox, supra note 5. 

  11. Id.; Brian Baxter, German Prosecutors Raid Jones Day Offices, (Mar. 16, 2017)

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