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Thomas H. Bienert, Jr. (SBN 135311) [email protected] BIENERT, MILLER, WEITZEL & KATZMAN, PLC115 Avenida MiramarSan Clemente, California 92672Phone: 949 369-3700, Fax: 949 369-3701Attorneys for Defendant, PAUL COSGROVE
Nicola T. Hanna (SBN 130694) [email protected] GIBSON DUNN & CRUTCHER LLP3161 Michelson Drive, Suite 1200Irvine, California 92612Phone: 949 451-3800, Fax: 949 451-4220Attorneys for Defendant, STUART CARSON
Kimberly A. Dunne (SBN 142721) [email protected] SIDLEY AUSTIN LLP555 W. Fifth Street, Suite 4000Los Angeles, California 90013-1010Phone: 213 896-6000, Fax: 213 896-6600Attorneys for Defendant, HONG CARSON
David W. Wiechert (SBN 94607) [email protected] LAW OFFICES OF DAVID W. WIECHERT107 Avenida Miramar, Suite ASan Clemente, California 92672Phone: 949 361-2822, Fax: 949 496-6753Attorneys for Defendant, DAVID EDMONDS
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIASOUTHERN DIVISION
UNITED STATES OF AMERICA
Plaintiff,
v.
STUART CARSON, HONG CARSON,
a/k/a Rose Carson, PAULCOSGROVE, DAVID EDMONDS,FLAVIO RICOTTI, and HAN YONGKIM,
Defendants.
CASE NO. SA CR-09-0077-JVS DEFENDANTS JOINT NOTICE OFMOTION AND MOTION TOCOMPEL DISCOVERY;[PROPOSED] ORDER
Date: September 28, 2009Time: 9:00 a.m.Ctrm: 10C [Hon. James V. Selna]
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TABLE OF CONTENTS
TABLE OF AUTHORITIES iv
MEMORANDUM OF POINTS AND AUTHORITIES . 1
I. INTRODUCTION . 1II. IMI/CCIS COOPERATION WITH THE GOVERNMENT
AND WITHHOLDING OF DISCOVERY .. 2
III. THE DOCUMENTS AND INFORMATION DEFENDANTSSEEK ARE DISCOVERABLE UNDER RULE 16, BRADY AND ITS PROGENY .. 6
A. The Government is Obligated to Produce the RequestedDocuments Under Rule 16(a)(1)(E) Because TheyAre In Its Possession, Custody or Control and AreMaterial to the Defense ... 6
1. The Documents Defendants Seek Are in theGovernments Possession, Custody or Control . 6
2. The Documents Defendants Seek are Materialto the Defense ... 9
a. CCIs Electronic Database .. 10
b. The 5.5 Million Pages of RelevantEvidence Housed in CCIs ElectronicDatabase . 15
c. The Documents Identified in CCIsPrivilege Log That CCI Disclosed tothe Government . 15
i. The Attorney-Client Privilege
Does Not Apply to theDocuments in the Privilege LogBecause They Were Prepared forthe Government 17
ii. Any Attorney-Client PrivilegeHas Been Waived 19
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iii. Work Product Protection HasBeen Waived 19
d. Documents Missing from the DiscoveryProduced by the Government . 21
e. IMI/CCIs 2007 Investigation Materials . 23
f. Documents Relating to IMI/CCIs 2004Audit 25
g. Documents Relating to Any Investigations,Audits or Inquiries Conducted by IMI/CCIinto Allegations of Wrongdoing byDefendants .......................................................... 27
h. IMI/CCIs FCPA and Travel Act TrainingMaterials . 27
i. The Set of Binders in Ms. Carsons Office,and the Binder Mr. Cosgrove Gaveto Steptoe 28
j. Defendants Personnel Files 28
k. Documents Reflecting CommunicationsBetween IMI and/or CCI and theGovernment 29
l. Documents Reflecting CommunicationsBetween IMI/CCI and Customers orThird-Party Witnesses Regarding theAllegations in the Indictment .. 31
m. Documents Relating to the InternalInvestigation Conducted by ChinaNational Offshore Oil Corporation andAny Other CCI Customers intoAllegations of Bribery by CCI 32
n. The Government is Obligated UnderRule 16(a)(1)(A) and (B) to Producethe Notes and Written Reports of Defendants Statements . 34
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B. The Court Should Compel the Government to ProduceExculpatory Evidence, Including the 2007 InvestigationMaterials, Correspondence Between IMI/CCI and theGovernment, and 2004 Audit Documents to theExtent They Contain Brady Material .. 36
C. The Court Should Compel the Government to ProduceImpeachment Evidence, Including the 2007Investigation Materials, 2004 Audit Documents, andCooperating Witnesses Computers and PersonnelFiles to the Extent They Contain Giglio Material 40
D. Defendants are Entitled to Statements of Non-TestifyingAlleged Co-conspirators .. 42
E. The Court Should Direct the Government to PreserveAgents/Investigators Notes and Continue toProduce Discovery on an Ongoing Basis 42
F. The Court Should Direct the Government to Complywith the Courts Order Regarding the Bill of Particulars . 43
IV. CONCLUSION .. 44
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TABLE OF AUTHORITIES
CASES:
Beckwith v. United States
425 U.S. 341 (1976) .36 Brady v. Maryland
373 U.S. 83 (1963) passim
Garrity v. New Jersey385 U.S. 493 (1967) .36
Giglio v. United States405 U.S. 150 (1972) .40
Hamric v. Bailey386 F.2d 390 (4 th Cir. 1967) ..40, 41
In re Columbia/HCA Healthcare Corp. Billing Practices Litigation293 F.3d 289 (6 th Cir. 2002) 20
In re Grand Jury Invest.974 F.2d 1068 (9 th Cir. 1992) ..17
In re Leslie Fay Companies, Inc. Securities Litigation226 F.R.D. 579 (N.D. Ohio 2005) ...21
In re OM Group Securities Litigation226 F.R.D. 579 (N.D. Ohio 2005) ...21
In re Qwest Communications Intl Inc.450 F.3d 1179 (10 th Cir. 2006) 19
In re Syncor Erisa Litigation229 F.R.D. 636 (C.D. Cal. 2005) 19
LaMere v. Risley827 F.2d 622 (9 th Cir. 1987) 40
Napue v. Illinois360 U.S. 264 (1959) ..40-41
Pennsylvania v. Ritchie480 U.S. 39 (1987) .43
United States v. Acosta357 F. Supp. 2d 1228 (D. Nev. 2005) 37
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TABLE OF AUTHORITIES CONTINUED:
CASES CONTD:
United States v. Agurs427 U.S. 97 (1976) ...37, 43
United States v. Bagley473 U.S. 667 (1985) ...40
United States v. Bailleaux685 F.2d 1105 (9 th Cir. 1982) ....35
United States v. Bergonzi216 F.R.D. 487 (N.D. Cal. 2003) ... passim
United States v. Black 767 F.2d 1334 (9 th Cir. 1985) ....31
United States v. Cadet 727 F.2d 1453 (9 th Cir. 1984) 40, 41, 42
United States v. Harris543 F.2d 1247 (9 th Cir. 1976) 42
United States v. Hibler 463 F.2d 455 (9 th Cir. 1972) .37
United States v. Intl Union of Petroleum & Indus. Workers, AFL-CIO870 F.2d 1450 (9 th Cir. 1989 ..6
United States v. Johnson525 F.2d 999 (2d Cir. 1975) .35
United States v. Kilroy523 F. Supp. 206 (E.D. Wis. 1981) .. 9
United States v. Layton564 F. Supp. 1391 (D. Or. 1983) 35
United States v. Liquid Sugars, Inc.158 F.R.D. 466 (E.D. Cal 1994) .10
United States v. Lloyd 992 F.2d 348 (D.C. Cir. 1993) 10, 13, 16
United States v. Mandel914 F.2d 1215 (9 th Cir. 1990) 9
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TABLE OF AUTHORITIES CONTINUED:
CASES CONTD:
United States v. Marshall132 F.3d 63 (D.C. Cir. 1998) ....27
United States v. Mass Inst. of Tech.129 F.3d 681 (1 st Cir. 1997) ..20
United States v. Miller 529 F.2d 1125 (9 th Cir. 1976) .36, 37
United States v. Morrison43 F.R.D. 516 (N.D. Ill. 1967) .35
United States v. Nicholas606 F. Supp. 2d 1109 (C.D. Cal. 2009) ..24, 36
United States v. Payden613 F. Supp. 800 (S.D.N.Y. 1983) ...42
United States v. Poindexter 727 F. Supp. 1470 (D.D.C. 1989) 35
United States v. Pollard 856 F.2d 619 (4 th Cir. 1988) 30
United States v. Price566 F.3d 900 (9 th Cir. 2009) ....37
United States v. Stein488 F. Supp. 2d 350 (S.D. N.Y. 2007) .6, 7, 8, 9, 30
United States v. Sudikoff 36 F. Supp. 2d 1196 (C.D. Cal. 1999) ...17, 37
United States v. Thompson562 F.3d 387 (D.C.Cir. 2009) .20
United States v. Turkish458 F. Supp. 874 (S.D.N.Y. 1978) .42
United States v. Zuno-Arce44 F.3d 1420 (9 th Cir. 1995) 40
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TABLE OF AUTHORITIES CONTINUED:
STATUTES:
The Foreign Corruption Practices Act of 1977 ...1, 25, 27, 28
The Travel Act of 1952 ...1, 25, 27, 28
The Jencks Act ...42
18 U.S.C. 1519...1
RULES:
Fed. R. Crim. P. 16 . passim Fed. R. Evid. 801(d)(2)(E) ....42
TREATISES:
7 Moores Federal Practice 34.14[2][b] (3d ed. 2006) 6
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Thomas H. Bienert, Jr. (SBN 135311) [email protected] BIENERT, MILLER, WEITZEL & KATZMAN, PLC115 Avenida MiramarSan Clemente, California 92672Phone: 949 369-3700, Fax: 949 369-3701Attorneys for Defendant, PAUL COSGROVE
Nicola T. Hanna (SBN 130694) [email protected] GIBSON DUNN & CRUTCHER LLP3161 Michelson Drive, Suite 1200Irvine, California 92612Phone: 949 451-3800, Fax: 949 451-4220Attorneys for Defendant, STUART CARSON
Kimberly A. Dunne (SBN 142721) [email protected] SIDLEY AUSTIN LLP555 W. Fifth Street, Suite 4000Los Angeles, California 90013-1010Phone: 213 896-6000, Fax: 213 896-6600Attorneys for Defendant, HONG CARSONDavid W. Wiechert (SBN 94607) [email protected] LAW OFFICES OF DAVID W. WIECHERT107 Avenida Miramar, Suite ASan Clemente, California 92672Phone: 949 361-2822, Fax: 949 496-6753Attorneys for Defendant, DAVID EDMONDS
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIASOUTHERN DIVISION
UNITED STATES OF AMERICA
Plaintiff,
v.
STUART CARSON, HONG CARSON,
a/k/a Rose Carson, PAULCOSGROVE, DAVID EDMONDS,FLAVIO RICOTTI, and HAN YONGKIM,
Defendants.
CASE NO. SA CR-09-0077-JVS DEFENDANTS JOINT NOTICE OFMOTION AND MOTION TOCOMPEL DISCOVERY;[PROPOSED] ORDER
Date: September 28, 2009Time: 9:00 a.m.Ctrm: 10C [Hon. James V. Selna]
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TO THE HONORABLE COURT, ALL PARTIES AND THEIR
ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE that on September 28, 2009, at 9:00 a.m., in the
courtroom of the Honorable James V. Selna, or as soon thereafter as this mattermay be heard, defendants Stuart Carson, Paul Cosgrove, Hong Carson, and David
Edmonds will, and hereby do, move this Court to compel the government to
produce the following discovery:
Control Components Inc.s (CCI) Electronic Database collected
during its internal investigation;
The documents identified in CCIs privilege log that CCI disclosed to
the government;
Documents missing from the 37,000 pages of discovery produced to
date by the government;
Documents relating to the 2007-08 investigation into commission
payments conducted on behalf of CCI and/or its parent company, IMI
plc (IMI);
Documents relating to the 2004 audit of commission payments
conducted on behalf of IMI and/or CCI (IMI/CCI), including
documents reviewed by the auditors, documents reflecting results of the
audit, and any related communications of CCIs Board of Directors,
management, and/or employees;
Documents relating to any investigations, audits, or inquiries conducted
by IMI/CCI into allegations of wrongdoing by Defendants; IMI/CCIs FCPA and Travel Act training materials, including training
offered in China in or around 2006;
The set of binders in the possession of defendant Hong Carson as of
August 17, 2007, containing materials related to CCI commission
payments for projects in China, and the binder defendant Cosgrove
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gave to the law firm of Steptoe & Johnson (Steptoe) in August 2007
containing information relating to CCIs commission payments and
CCIs organizational structure;
Defendants personnel files from IMI/CCI; Documents reflecting communications and/or agreements between
IMI/CCI and the government, including the U.S. Department of Justice,
the U.S. Attorneys Office for the Central District of California, and the
Federal Bureau of Investigation;
Documents reflecting communications between IMI/CCI and
customers or third-party witnesses regarding the allegations in the
Indictment;
Documents relating to the internal investigation undertaken by CCI
customers, including, but not limited to, China National Offshore Oil
Corporation (CNOOC), Dongfang Electric (Dongfang), Guohua
Electric Power (Guohua) and the Chinese State-owned Assets
Supervision and Administration Commission (SASAC), into
allegations of bribery by CCI and/or its employees, including
communications between CCI and/or the government and CNOOC,
Dongfang, Guohua, SASAC and/or the Chinese government, and
communications between CCI and the government relating to the
alleged bribery of CNOOC, Dongfang, Guohua and/or other officials;
Notes and any written reports, memoranda or e-mail summaries of
Defendants statements made to Steptoe and/or Ernst & Young inAugust 2007;
Discovery required by Brady v. Maryland , 373 U.S. 83 (1963) and
Giglio v. United States , 405 U.S. 150 (1972);
Statements of non-testifying alleged co-conspirators; and
Supplemental Bill of Particulars.
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This motion is based on the instant Notice, the attached Memorandum of
Points and Authorities, and the exhibits attached to the Declaration of Kenneth
Miller, and is brought pursuant to Rule 16 of the Federal Rules of Criminal
Procedure, Brady v. Maryland , 373 U.S. 83 (1963), Giglio v. United States , 405U.S. 150 (1972), all other applicable constitutional, statutory, and case authority,
and such evidence and argument as may be presented at the hearing of this motion.
DATED: September 4, 2009 Respectfully submitted,
BIENERT, MILLER, WEITZEL & KATZMANPLC
By: S/Thomas H. Bienert, Jr. _________________Thomas H. Bienert, Jr.Attorneys for Defendant PAUL COSGROVE
GIBSON, DUNN & CRUTCHER LLP
By: S/Nicola T. Hanna _____________________Nicola T. Hanna
Attorneys for Defendant STUART CARSON
SIDLEY AUSTIN LLP
By: S/Kimberly A. Dunne _________________Kimberly A. DunneAttorneys for Defendant HONG CARSON
LAW OFFICES OF DAVID W. WIECHERT
By: S/David W. Wiechert _________________David W. WiechertAttorneys for Defendant DAVID EDMONDS
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MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
In a 16-count indictment returned on April 8, 2009 (the Indictment), the
government charges six former executives, including Stuart Carson, Hong RoseCarson, Paul Cosgrove and David Edmonds (collectively Defendants) of Rancho
Santa Margarita-based Control Components Inc. (CCI or the Company) with
orchestrating a wide-ranging conspiracy to violate the Foreign Corrupt Practices
Act (the FCPA) and the Travel Act. The Indictment also charges various
combinations of defendants with nine counts of substantive violations of the FCPA
and five counts of substantive violations of the Travel Act. Additionally, the
Indictment charges one defendant with obstruction of justice under 18 U.S.C.
1519.
As this Court is aware, the allegations in the Indictment are sweeping both
in terms of the timeframe (and frequency) of the alleged wrongdoing, as well as in
the geographic diversity of the locations in which the wrongdoing allegedly
occurred. According to the Indictment, over a nine-year period (between 1998 and
2007), Defendants allegedly made and caused [CCI] employees and agents to
make corrupt payments to officers and employees of numerous state-owned and
privately-owned customers around the world for the purpose of assisting in
obtaining or retaining business for [CCI]. Indictment, 14. And the government
alleges that between 2003 and 2007, the Defendants bribed customers in over
thirty countries with approximately 236 payments totaling approximately
$6.85 million to secure a series of projects that resulted in net profits to [theiremployer, CCI] of approximately $46.5 million. Id . The government has also
alleged that, in addition to these payments, Defendants bribed customers with
overseas holidays, extravagant vacations, lavish sales events, and
expensive gifts. Id. , 19, 20, 22 & 23.
CCI, identified as Company A in the Indictment, designs and manufactures
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control valves for use in the nuclear, oil and gas, and power generation industries. 1
CCI is a subsidiary of a British firm, IMI, plc (IMI). Exh. A. CCI is a large and
diverse enterprise, with thousands of customers across the globe. CCI presently
employs individuals in over 15 countries and utilizes commissioned local salesrepresentative organizations in over 60 countries. Id .
Defendants are former CCI executives, each of whom worked at CCI for a
substantial period of time. Stuart Carson was the Chief Executive Officer of CCI
from 1989 to 2005. Indictment, 4. Rose Carson served as CCI's Manager of
Sales for China and Taiwan from 2000 to 2002 and then served as Director of
Sales for China and Taiwan from 2002 to 2007. Paul Cosgrove was CCI's
Executive Vice President from 2002 to 2007 and served as the head of CCI's
Worldwide Sales Department from 1992 to 2007. Id. , 6. Dave Edmonds was
CCI's Vice-President of Worldwide Customer Service from 2000 to 2007. Id. , 7.
II. IMI/CCIs COOPERATION WITH THE GOVERNMENT ANDWITHHOLDING OF DISCOVERY
In 2007, IMI and CCI initiated an internal investigation into alleged unlawful
payments and expenses in connection with CCI's procurement of contracts. IMIretained the law firm of Steptoe & Johnson (Steptoe) to conduct the internal
investigation and Steptoe, in turn, retained the accounting firm of Ernst & Young
(EY) to assist with the investigation. As part of the internal investigation, Steptoe,
EY and CCI personnel interviewed defendants Rose Carson, Cosgrove and
Edmonds (Interviewed Defendants) in August 2007 and took notes of the
interviews.
Further, EY collected from IMI and CCI over 5.5 million pages of relevant
documents and electronic records worldwide, including e-mail, accounting records,
1 See CCI Website Profile attached as Exhibit A to the Declaration of Kenneth Miller (Miller Declaration).
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agency agreements, and forensic images of over 200 computer hard drives, which
were compiled into a comprehensive, searchable electronic database (CCI
Electronic Database), and Steptoe conducted over 125 employee interviews in
approximately 15 countries, including the United States, the United Kingdom,Switzerland, Italy, France, Austria, Sweden, Japan, Korea, China, Malaysia,
Singapore, India, Indonesia, and the United Arab Emirates. 2
Steptoe produced to the government real time updates of its witness
interviews, presumably including oral descriptions of the Interviewed Defendants
statements made to Steptoe in August 2007. Exh. B, p. 5, lns. 19-26. At the
governments request, IMI and CCI also prepared extensive factual analyses and
summaries identifying the 236 alleged improper payments as well as alleged
improper expenses, which the government relied upon to tailor its investigation and
secure the Indictment against Defendants. Id . at p. 6, lns. 1-18.
Incredibly, of the more than 5.5 million pages of relevant documents obtained
by IMI and CCI, Steptoe selected less than 1% roughly 42,000 pages to disclose
to the government, seemingly focusing on those documents that appear to cast
blame on Defendants while protecting IMI and CCIs own interests. The
government apparently relied primarily on the 42,000 pages hand-picked by IMI and
CCI in tailoring its investigation and securing the Indictment against Defendants.
CCIs Plea Agreement confirms that the government has control over the
entire scope of the 5.5 million pages of relevant documents in this case, thereby
giving it access to what is essentially an entire warehouse of documents material to
the defense. But despite Defendants detailed requests for this discovery, and thegovernments control over and access to the documents Defendants seek, the
2 See Memorandum on Behalf of Control Components, Inc. in Support of Rule11(c)(1)(C) Plea and Agreed-Upon Sentence (CCI Sentencing Memo), p. 3, lns.11-19; 23-26, attached as Exhibit B to the Miller Declaration.
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government has produced only 37,000 pages of discovery to Defendants of the
42,000 received from CCI and disclosed only oral descriptions of the purported
statements the Interviewed Defendants made to Steptoe and EY. The government
also refuses to produce IMI/CCIs analyses and summaries documents prepared atthe governments request and disclosed to the government under the guise of the
attorney-client and attorney work product privileges asserted by CCI, and maintains
that it has otherwise complied with its discovery obligations to Defendants in this
case. The government is mistaken.
The 5.5 million pages of relevant documents contained in CCIs Electronic
Database demonstrate that the amount of evidence material to Defendants case far
exceeds the approximately 37,000 pages of discovery the government has produced
in this case. The government essentially outsourced its investigation to Steptoe and
is now trying to avoid producing documents it indisputably would have to produce if
it had the documents in its physical possession. The government should not be
permitted to use the fact that Steptoe conducted the investigation as a shield from
producing the documents Defendants seek, while it has the ability to use this
evidence as a sword against Defendants at a later time.
Given the cooperative relationship between CCI and the government, which is
both documented and mandated by contract in the CCI Plea Agreement, it is clear
that the government has control over the entire scope of material documents in this
case, and has the ability to access them with a simple request to CCI. To limit the
governments Rule 16 obligations to production of the small subset of documents
currently in the governments hands would effectively permit a cooperatingdefendant such as CCI to steer the governments investigation and craft the evidence
in a manner that furthers its own interests at the expense of others who are not privy
to the information from which the cooperating defendant cherry-picked.
Moreover, the government has failed to produce Brady material that is
indisputably in its possession, despite its assurances and the Courts standing Order.
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Despite Defendants repeated requests for Brady material in April and June 2009,
the government sat on patently exculpatory information, including a letter from
Steptoe dated June 22, 2009, wherein CCI acknowledged the possibility that some
or all of the funds in question were . . . not passed through to employees of customers or end users. The government chose to produce Steptoes letter only
after Defendants learned through media reports that CCI had informed a Chinese
customer that it had no evidence of bribes being paid to its employees (despite a
DOJ press release and CCIs representations to the Court in its Statement of Facts to
its Plea Agreement that said otherwise), and after Defendants specifically asked the
government for all information and documents related to the media report (and over
one month after the government assured Defendants that it had complied with its
Brady obligations). The governments nonchalance about complying with its
discovery obligations contravenes the Courts Order requiring forthwith production
of Brady material and stands to prejudice Defendants ability to prepare their
defense.
Considering the complexity of the case, including the vast number of
witnesses located in various parts of the world and the number of transactions at
issue in the Indictment, it is imperative that all discovery to which Defendants are
entitled be produced well in advance of trial, including forthwith production of
Brady material, in order to facilitate Defendants effective preparation for trial and
avoid any delays. Because the documents Defendants seek are material to the
defense and are within the governments control, and because any applicable
privileges have been waived as a result of IMI/CCIs disclosure to the government,the government simply has no basis for failing to produce the requested discovery to
Defendants or withholding patently exculpatory information. Accordingly,
defendants Stuart Carson, Rose Carson, Paul Cosgrove and David Edmonds move
the Court for an order compelling production of the items described herein.
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III. THE DOCUMENTS AND INFORMATION DEFENDANTS SEEK AREDISCOVERABLE UNDER RULE 16, BRADY AND ITS PROGENY
A. The Government is Obligated to Produce the Requested DocumentsUnder Rule 16(a)(1)(E) Because They are in Its Possession, Custody orControl and Are Material to the Defense
1. The Documents Defendants Seek are in the GovernmentsPossession, Custody or Control
Federal Rule of Criminal Procedure 16(a)(1)(E) (Rule 16) provides that the
government must permit the defendant to inspect and to copy all documents and
other physical objects in the governments possession, custody or control that are
(i)material to preparing the defense, (ii) intended for use by the government as
evidence in its case-in-chief at trial, or (iii) obtained from or belonging to the
defendant. Fed. R. Crim. P. 16(a)(1)(E)(i)-(iii). CCIs Plea Agreement gives the
government the unqualified right to demand from CCI the production of any non-
privileged documents within CCIs control. As a result, the government is in
possession, custody or control of documents that are stored at IMI/CCI and its
agents and is obligated to produce them to the extent they are material to the
defense. Legal ownership of the requested documents or things is not
determinative, nor is actual possession necessary if the party has control of the
items. Control has been defined to include the legal right to obtain the documents
requested upon demand. The term control is broadly construed. United States
v. Stein , 488 F. Supp. 2d 350, 361 (S.D.N.Y. 2007) (quoting MOORES FEDERAL
PRACTICE 34.14[2][b], at 34-64 (3d ed. 2006) (footnotes omitted)); accord
United States v. Intl Union of Petroleum & Indus. Workers, AFL-CIO , 870 F.2d
1450, 1452 (9th Cir. 1989).As reflected in CCIs Plea Agreement:
CCI agrees to continue to cooperate fully with the Department and the
Federal Bureau of Investigation, in a manner consistent with the non-
waiver agreement between the parties, dated October 18, 2007, and
consistent with applicable law and regulations including labor, data
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protection, and privacy laws. . . . CCI shall truthfully disclose to the
Department all non-privileged information with respect to the
activities of CCI and its affiliates, its present and former directors,
officers, employees, agents, consultants, contractors andsubcontractors, concerning all matters relating to corrupt payments to
foreign public officials or to employees of private customers in
connection with their operations about which CCI has any knowledge
and about which the Department, the Federal Bureau of Investigation,
or, at the request of the Department, any foreign law enforcement
authorities and agencies, shall inquire. This obligation of truthful
disclosure includes the obligation of CCI to provide to the
Department, upon request, any non-privileged document, records, or
other tangible evidence relating to such corrupt payments to foreign
public officials or to employees of private customers about which the
aforementioned authorities and agencies shall inquire of CCI, subject
to the direction of the Department. 3
In Stein , defendants, former KPMG partners, sought from the government
production of correspondence between KPMG and the government, including draft
plea agreements and other communications, on the grounds that the government had
control over the requested documents based on the governments legal right under
KPMGs Deferred Prosecution Agreement to obtain any documents relating to the
case from KPMG. 488 F. Supp. 2d at 357. KPMG resisted production, arguing that
the government did not have Rule 16 control over the documents that were not in itsphysical possession whether or not the government may assert a claim to the
documents pursuant to the Deferred Prosecution Agreement. Id . at 360, 363. It
3 See CCI Plea Agreement, 6 attached as Exhibit C to the Miller Declaration.
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also argued the Deferred Prosecution Agreement simply vested discretion in the
government to request documents from KPMG, leaving the court unable to compel
the government to make such a request. Id . at 363.
Rejecting KPMGs first argument, the court held that Rule 16 speaks of possession, custody or control, not simply possession. Id . KPMGs arguments
would read the words custody or control out of the rule in flat contravention of the
principle that all words in a statute, rule or contract are to be given meaning
whenever possible. It therefore is not surprising that every circuit to have
considered the question has held that control under the federal rules of procedure
includes the legal right to obtain the documents in question. Id . In rejecting
KPMGs second argument, the court noted that Rule 16 requires that the
government produce all documents material to preparing the defense that are within
its possession, custody or control. Since the Deferred Prosecution Agreement gave
the government the legal right to obtain these documents subject to the limited
carve-out for privileged documents, the government had control over the documents
sought by defendants. Id . Once control is established, the obligation exists. Id .
The government also resisted production by arguing that the language
obligating entities with which the government enters into non-prosecution or
deferred prosecution agreements to produce documents upon the governments
request is standard and that the implications of holding that such language places
the documents in the governments control would be untenable. Id . at 362.
Rejecting this argument, the court noted that [t]he plain language of Rule 16 makes
clear that documents material to the defense that are within the governments controlare producible. That the government has begun making broad use of pre-indictment
cooperation agreements in recent years or that it might regard compliance with its
discovery obligations in such cases to be inconvenient warrants no different
conclusion. If the government is uncomfortable with the consequences of such
cooperation agreements, it need not insist upon them in future cases. Id . at 364.
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The court concluded that the requested documents were in the possession,
custody or control of the government subject only to the carve-out for privileged
documents. Id . The court further held that because KPMG failed to establish that
any privilege applied to the documents, all responsive documents are within thegovernments control and directed the government to produce the requested
documents that were in KPMGs physical possession pursuant to Rule 16. Id .
Like Stein , CCIs Plea Agreement reflects that the government has the legal
right to demand production by CCI of any of its non-privileged documents in
connection with the governments case. The governments 302 statement for IMIs
in-house counsel, John OShea, underscores this point as OShea agreed to provide
material documents to Steptoe, rather than to the FBI. 4 The documents Defendants
seek are plainly within the governments control and the government is obligated to
produce them. See United States v. Kilroy , 523 F. Supp. 206 (E.D. Wis. 1981)
(holding that since the defendants former employer, Standard Oil, was cooperating
with the government and making available any records which Standard Oil had, the
records were within the governments control under Rule 16). Accordingly,
Defendants respectfully request that the Court direct the government to produce the
documents Defendants seek within 30 days.
2. The Documents Defendants Seek are Material to the Defense
To obtain discovery through Rule 16, the defendant must make a prima facie
showing of materiality. United States v. Bergonzi , 216 F.R.D. 487, 501 (N.D. Cal.
2003) (citing United States v. Mandel , 914 F.2d 1215, 1219 (9th Cir. 1990)). The
materiality requirement is not a heavy burden; rather, evidence is material as long as
4 See document bates numbered CCI_357, FBI 302 statement of John JosephPatrick OShea dated May 22, 2008, attached as Exhibit D to the MillerDeclaration (OShea still maintained the training notes he used for the trainingand will provide those notes to Steptoe and Johnson.).
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there is a strong indication that the evidence will play an important role in
uncovering admissible evidence, aiding witness preparation, corroborating
testimony, or assisting impeachment or rebuttal. Bergonzi , 216 F.R.D. at 501 (citing
United States v. Liquid Sugars, Inc ., 158 F.R.D. 466, 471 (E.D. Cal. 1994)); United States v. Lloyd , 992 F.2d 348, 350-51 (D.C. Cir. 1993). A defendant meets the
materiality standard by presenting facts tending to show that the government is in
possession of information helpful to the defense. Bergonzi , 216 F.R.D. at 501.
a. CCIs Electronic Database
The Indictment alleges that Defendants made and caused CCI employees and
agents to make 236 improper payments in over thirty countries between 2003 and
2007. Indictment, 14. CCIs Electronic Database, comprised of over 5.5 million
pages of relevant evidence that EY gathered from IMI/CCI in connection with the
investigation of alleged improper payments and expenses, including email,
accounting records, agency agreements and forensic images of over 200 computer
hard drives (Exh. B, p. 3, lns. 15-19), undoubtedly includes the specific documents
that Defendants have repeatedly requested from the government relating to each of
the 236 alleged improper payments referenced in the Indictment and identified in the
Bill of Particulars.
To date, however, the government has produced only 37,000 pages of
discovery, including a very small portion of Defendants e-mails spanning the
2000 to 2006 time period, expense reports and some of KPMGs annual audit
documents for the same 2000 to 2006 time period, and agency agreements and
accounting records for only some of the 236 payments identified in the Bill of Particulars. The discovery produced by the government fails to include key
documents relating to each of the alleged improper payments identified in the Bill
of Particulars, including the contracts for each project, accounting records
reflecting each of the alleged improper payments, e-mails and correspondence
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relating to the projects and alleged improper payments, and the project files CCI
kept for each project. 5
Notably, of the documents that have been produced, many reflect
irregularities and/or fail to include the documents in their entirety. For example,document bates numbered CR0833-0834 consists of an April 28, 2004 e-mail from
CCI employee Sara Peng to defendant Paul Cosgrove, with a cc to defendant
Rose Carson, containing six paragraphs of information, including two paragraphs
identifying Beneficiary information. Document number 0000212 (which is bates
numbered 127 on the actual document) contains the same April 28, 2004 e-mail
from Sara Peng, but includes only three paragraphs of information, omitting three
paragraphs of information found in the e-mail bates numbered CR0833-0834,
including those identifying the Beneficiary information. 6
Similarly, a document bates numbered CS2002 consists of an e-mail dated
April 21, 2004 from Mahesh Shah to Steven Har, with a response e-mail on
the same page dated August 25, 2007, almost three and one-half years after the
initial e-mail was sent, and in or around the time that IMI/CCI commenced its
investigation. 7 The August 25, 2007 e-mail response contains no From
information in the header of the e-mail, leaving Defendants to guess at the actual
author of the e-mail without explanation for the three-year gap in response time.
The fact that some of the governments discovery plainly includes altered
5 For example, payment number 47 in the Bill of Particulars lists an allegedpayment of $7,612 to Fu Xiangwei. However, Defendants are unable to find anydocuments in the discovery showing or discussing a payment of $7,612 for thatproject, let alone to Fu Xiangwei.
6 See documents bates numbered CR0833-0834 and document number0000212 (bates numbered 127) attached as Exhibit E to the Miller Declaration.
7 See document bates numbered CS2002 attached as Exhibit F to the MillerDeclaration.
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documents underscores Defendants need for CCIs Electronic Database.
The governments discovery produced to date fails to include a vast amount
of relevant evidence in the governments control that is material to the defense.
Because each of the key documents material to the alleged improper payments andfacts at issue in the Indictment appear to be contained in CCIs Electronic
Database, Defendants are entitled to CCIs Electronic Database under Rule 16.
Emails : E-mails relating to the 236 payments will likely specify the
individuals who negotiated and participated in the calculation and approval of the
payment of commissions under the project contracts. Further, e-mails to and from
Defendants, including those on which they were copied, are necessary to
demonstrate Defendants understanding of the transactions, including the cultivation
and use of friends-in-camp (FICs) as a legitimate sales model, rather than a
vehicle created for paying bribes, and knowledge concerning the identity of the third
parties receiving commissions. 8 Demonstrating the sheer volume of e-mails
Defendants received and the number of projects they were working on at the time of
the allegedly improper payments will further shed light on Defendants
understanding and state of mind with respect to the transactions at issue in this case.
Project Files : CCI kept files for each of its projects. The project files
relating to each of the 236 alleged improper payments, as well as documents relating
to the travel and entertainment referenced in the Indictment, are material to the
defense because they are vital in uncovering admissible evidence concerning the
facts at issue in the Indictment. The project files contain information concerning the
persons involved in the procurement of each of the contracts relating to the allegedimproper payments, as well as communications between CCI employees on the one
8 To the extent the Database does not contain all of Defendants e-mailscovering the time period alleged in the Indictment, Defendants seek these e-mailsfor the reasons stated herein.
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hand, and customer employees and third party agents on the other, regarding
procurement of the contracts at issue.
Further, the project files will likely uncover information relating to the
amount of commissions to be paid under the contracts and the intended recipients of the commissions, as well as the nature and extent of the third-party agents
involvement in the procurement of the contracts at issue. Documents relating to the
alleged improper travel and entertainment will similarly uncover evidence
concerning the circumstances and persons involved in the alleged improper travel
and entertainment, including the nature and extent of Defendants involvement in
the same.
Agency Agreements/Accounting Records : The agency agreements
contained in CCIs Electronic Database, pursuant to which the commission
payments were made, are necessary to establish the terms and conditions under
which representatives and consultants were paid under the contracts and to
demonstrate whether such payments were legitimate. Accounting records will
uncover evidence as to what payments were actually made, and will presumably
reveal the identity of the recipients and, importantly, whether the recipient of each
alleged improper payment was a foreign official or an employee of a private
company.
Defendants Computers : The forensic images of Defendants hard drives
and laptop computers (presumably contained in the Electronic Database) are
expected to contain at least some information concerning Defendants cultivation
and use of FICs and knowledge concerning the identity of third parties receivingcommissions. Thus, the Database is material to the defense as it contains
information central to each of the facts at issue concerning the alleged corrupt
payments, and will undoubtedly aid in identifying witnesses, corroborating
testimony, and aiding in preparation for trial. Lloyd , 992 F.2d at 351.
Significantly, the documents contained in CCIs Electronic Database served
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as the basis for Steptoes determinations concerning Defendants purported
culpability in this case with respect to the 236 payments referenced in the
Indictment. Based on the Database, Steptoe allegedly determined that:
CCIs former President, Stuart Carson . . . was the prime architect of a sales model in which employees and agents cultivated relationships
with employees of state-owned and private customers that frequently
involved corrupt payments to the customer employees to help CCI
obtain or retain business. At the direction of Mr. Carson and other
senior managers, approximately 236 corrupt payments were made to
officers and employees of state-owned and private companies in
thirty-six countries from approximately 2003 through August 2007.
The corrupt payments totaled approximately $6.85 million, and the
related sales generated approximately $46.5 million in net profits.
In addition, the independent investigation found that CCIs former
managers arranged for overseas holidays for employees of state-
owned and private customers under the guise of training and
inspection trips. Stuart Carson and his wife, Hong Rose Carson,
also arranged extravagant vacations for themselves and executives of
state-owned and private customers including first-class airfare and
five-star accommodations. These holidays and vacations were
intended to reward customer employees for causing their employer to
purchase CCI products and to obtain new business or retain currentbusiness for CCI.
Exh. B, p. 4, lns. 1-18. The Indictment plainly reflects that this information, in turn,
served as the basis for the charges against Defendants as it recites almost verbatim
Steptoes determinations concerning Defendants alleged culpability. See
Indictment, 14 ([A]pproximately $6.85 million in total improper payments were
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made in approximately 236 payments in over thirty countries and resulted in net
profits to [CCI] of approximately $46.5 million from the sales related to those
corrupt payments.). The documents contained in CCIs Electronic Database,
particularly those relating to the 236 payments Steptoe identified for the governmentthat are now referenced in the Indictment, will undoubtedly uncover admissible
evidence and aid in Defendants trial preparation. Accordingly, Defendants are
entitled to this discovery under Rule 16(a)(1)(E), and the government should be
compelled to produce it. 9
b. The 5.5 Million Pages of Relevant Evidence Housed inCCIs Electronic Database
While Defendants are entitled to CCIs Electronic Database under Rule16(a)(1)(E), Defendants alternatively request the 5.5 million pages of documents
contained therein for the reasons stated in section III.A.2.a. above. Each of the more
than 5.5 million pages of documents is material to the defense as they relate directly
to each of the 236 payments referenced in the Indictment and identified in the Bill of
Particulars.
c.
The Documents Identified in CCIs Privilege Log That CCIDisclosed to the Government
Defendants are entitled to the eight documents identified in CCIs privilege
log that were disclosed to the government, and any underlying documents, because
they are material to the defense and any privileges attaching to these documents
have been waived. These documents include analyses and charts of potentially
improper payments, analyses and charts of allegedly improper meals, travel and
entertainment expenses, and an analysis of IMIs and CCIs profits from 2003-
9 To the extent CCIs Electronic Database does not contain the documentsidentified herein relating to each of the alleged improper payments, including thosefrom CCIs foreign offices, Defendants respectfully request these documents aswell for the reasons stated herein.
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2007. 10
These documents are patently material to the defense because they relate
precisely to the facts at issue in the Indictment concerning alleged improper
payments and expenses. Their materiality is underscored by CCIs assertions in itsSentencing Memorandum concerning the role these documents played in the
governments prosecution of Defendants. According to CCI:
Perhaps most significantly, at the Departments request IMI and CCI
prepared an extensive factual analysis and summary of the improper
payments at issue. The analysis was accompanied by supporting
email records, correspondence, agent invoices, wire transfer and bank
records, and other accounting documentation. . . . IMI and CCI
provided similar analyses to the Department relating to gifts, travel
and entertainment of state-owned customers. These analyses provided
a roadmap for the prosecution of individuals and also formed the
basis of [CCIs] Plea Agreement. Without them, the Department
would have faced substantial difficulty identifying all of the improper
payments at issue.
Exh. B, p.6, lns. 7-17. Because these documents served as a roadmap for the
governments prosecution of Defendants and were central in identifying the alleged
improper payments and expenses that now form the basis of the Indictment,
Defendants are entitled to these documents under Rule 16(a)(1)(E) because they
undoubtedly will play an important role in uncovering admissible evidence and
aiding Defendants preparation for trial. Lloyd , 992 F.2d at 351.The government refuses to produce these documents to Defendants on the
grounds that CCI has reserved its right to assert certain privileges over the
10 See CCI Privilege Log attached as Exhibit G to the Miller Declaration.
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documents. The privilege log indicates that CCI asserts the attorney-client privilege
as to seven of the eight documents, and CCI asserts the attorney work product
doctrine as to all eight. Exh. G. But neither privilege applies here.
i. The Attorney-Client Privilege Does Not Apply to theDocuments in the Privilege Log Because They WerePrepared for the Government
In order for the attorney-client privilege to apply, the communication sought
to be protected must, among other things, be made in confidence. Bergonzi , 216
F.R.D. at 493 (citing In re Grand Jury Invest ., 974 F.2d 1068, 1071 (9th Cir. 1992)).
Communications between a client and attorney made for the purpose of relaying
communications to a third party are not confidential and not protected by the
attorney-client privilege. Bergonzi, 216 F.R.D. at 493 (citing United States v.
Sudikoff , 36 F. Supp. 2d 1196, 1204-05 (C.D. Cal. 1999)).
In Bergonzi , defendants, former McKesson Corporation executives, sought
production of McKessons internal investigation report and underlying materials,
including interview memoranda, prepared by the companys outside counsel,
Skadden, Arps, Slate, Meagher & Flom (Skadden), in connection with
McKessons internal investigation into accounting irregularities. 216 F.R.D. at 490.
The defendants argued that the attorney-client privilege did not apply to the
documents sought and that they were entitled to them under Rule 16 and Brady
because, inter alia , the materials at issue were prepared for the government to obtain
leniency and not for the purpose of assisting in providing legal advice, and the
company waived any claim of privilege by voluntarily producing the materials to the
government. Id . at 492.In analyzing the privilege issues, the district court noted that it was
undisputed that McKesson retained Skadden to gather relevant facts and to develop
an effective legal strategy for responding to potential securities fraud claims as a
result of the accounting regularities, and that prior to preparation of the documents,
Skadden, acting on behalf of the company, had agreed to turn them over to the SEC
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and United States Attorneys Office pursuant to confidentiality agreements. Id . at
493. Although the confidentiality agreements stated that (i) the documents were
created solely for the purposes of providing legal advice to the Company and the
Audit Committee, (ii) communications were protected by the work-productdoctrine and attorney-client privilege, and (iii) the company did not want to or
intend to waive the protection from further disclosure, the confidentiality
agreements made clear that prior to preparation of the Report and Back-up
Materials, the Company agreed to disclose the documents to the Government. Id .
Further, the confidentiality agreements authorized the SEC to, in its
discretion, determine that disclosure is otherwise required by federal law or in
furtherance of [either entities] discharge of its duties and responsibilities, and the
company consented to the disclosure of the documents to a federal grand jury as
the [USAO] deems appropriate, and in any criminal prosecution that may result
from the [USAOs] investigation. Id . at 494. For these reasons, the district court
rejected the companys argument that it intended the communications at issue to
remain confidential. Id . at 493-94. The court concluded that because Skadden made
the investigation report and back-up materials with the intent to relay them to the
government, the attorney-client privilege did not apply. Id . at 493-94. It is
difficult for the Court to imagine how the communication between the company and
Skadden were confidential communications between attorney and client when
Skadden prepared the Report and Back-up Material after the company agreed to
disclose the same to the Government. Id . at 494 n.7. As the court noted, [s]uch a
disclosure conflicts with the underlying rationale behind the privilege, namely thatthe privilege encourages frank discussions between an attorney and his client. Id .
As in Bergonzi , the attorney-client privilege does not apply to the documents
listed in CCIs privilege log if as appears to be the case - they were created with
the intent to relay them to the government. Thus, to the extent that the extensive
factual analysis and summary of the improper payments at issue and similar
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analyses . . . relating to gifts, travel and entertainment expenses and improper
training trips identified in CCIs Sentencing Memorandum are the seven of eight
Analyses and Supplemental Version[s] identified in CCIs privilege log, the
attorney-client privilege does not apply because the documents were admittedlymade for the purpose of relaying the communication to a third party, indeed, the
documents were created at the governments request .
ii. Any Attorney-Client Privilege Has Been Waived
Even if the attorney-client privilege applied to the documents listed in CCIs
privilege log, CCI waived the privilege (both as to these documents and all
documents related to the same subject matter) as a result of its disclosure of the
documents to the government. See Bergonzi , 216 F.R.D. at 494 n.8, 497-98
(holding that even if the attorney-client privilege attached to documents at issue,
privilege was waived as a result of, inter alia , the corporations disclosure of the
documents to the government); In re Qwest Communications Intl Inc., 450 F.3d
1179, 1185 (10th Cir. 2006) ([T]he attorney-client privilege is lost if the client
discloses the substance of an otherwise privileged communication to a third party.)
(citation omitted); In re Syncor Erisa Litig ., 229 F.R.D. 636, 645 (C.D. Cal. 2005)
(Generally, the voluntary disclosure of a privileged attorney-client communication
to a third party waives the privilege.). Accordingly, Defendants are entitled to
these documents under Rule 16(a)(1)(E), and the government should be compelled
to produce them.
iii. Any Work Product Protection Has Been Waived
The attorney work product doctrine protects from disclosure documentsprepared in anticipation of litigation by or for an attorney, but work product
protection is waived where disclosure of the otherwise privileged documents is
made to a third party and that disclosure enables an adversary to access the
information. See In re Syncor Erisa Litig. , 229 F.R.D. at 645 (citing Bergonzi, 216
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F.R.D. at 497); United States v. Mass. Inst. Of Tech. , 129 F.3d 681, 687 (1st Cir.
1997).
In Bergonzi , for example, the court found that the documents prepared by
Skadden were protected from disclosure by the work product doctrine but concludedthat work product protection was waived as a result of, inter alia , the companys
disclosure of the documents to the government. 216 F.R.D. at 495-497. Once a
party has disclosed work product to one adversary, it waives work product
protection as to all other adversaries. Id . at 498. Because McKesson disclosed the
documents at issue to an adversary, the government, the disclosure constituted a
waiver of the attorney work product doctrine, and any work product protection
claimed against production to the defendants was also waived. Id .
As the court reasoned, [i]n the final analysis, the ability to prepare ones case
in confidence, which is the chief reason articulated in Hickman for the work product
protections, has little to do with talking to the Government. Id . at 497 (citing In re
Columbia/HCA Healthcare Corp. Billing Practices Litigation , 293 F.3d 289, 306-07
(6 th Cir. 2002)); see also United States v. Thompson , 562 F.3d 387, 394 (D.C.Cir.
2009) ([D]isclosure of work product materials can waive the privilege for those
materials if such disclosure, under the circumstances, is inconsistent with the
maintenance of secrecy from the disclosing partys adversary.) (citation and
internal quotation marks omitted).
As in Bergonzi , any privileges attaching to the documents listed in the
privilege log here have been waived as a result of IMI/CCIs disclosure of these
materials to the government. CCIs Sentencing Memorandum highlights the extentof IMI/CCIs disclosure of the otherwise privileged documents:
Throughout its investigation, Steptoe, at the direction of [IMIs]
Special Committee, made rolling productions of documents and
provided real time updates about witness interviews to the
Department, pursuant to a non-waiver agreement. Steptoe gave the
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Department detailed summaries of the employee interviews and
binders of key documents organized by witness. In total, Steptoe gave
the Department more than a dozen such interview downloads, each
covering numerous employees, and produced more than 42,000 pagesof documents in hard copy and electronic, searchable format. 11
Exh. B, p. 5, lns. 19-28; p. 6, lns. 1-6. Because CCI disclosed the documents
identified in the privilege log to the government, such disclosure constituted a
waiver of the attorney work product privilege, and any work product protection
claimed against production to the Defendants was also waived. Bergonzi , 216
F.R.D. at 498.
CCIs waiver also applies to the materials underlying the analyses and charts
identified in the privilege log, and the government should be required to produce
those documents as well. See In re Leslie Fay, Inc. Sec. Litig. , 161 F.R.D. 274, 281
(S.D.N.Y. 1995) (holding that waiver of attorney work product and attorney-client
privileges applied to documents underlying report to the extent report referenced or
concerned the underlying documents); In re OM Group Securities Litigation , 226
F.R.D. 579 (N.D. Ohio 2005) (holding that disclosure of presentation materials to
adverse party waived attorney-client privilege with regard to presentation materials
and underlying documents referred to by presentation materials). Accordingly,
Defendants are entitled to these documents under Rule 16(a)(1)(E), and the
government should be compelled to produce them.
11 Defendants have asked the government about the provisions of the non-waiver agreement referenced in CCIs Sentencing Memo, but the government hasfailed to provide this information.
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d. Documents Missing from the Discovery Produced by theGovernment
CCI confirms in its Sentencing Memorandum that Steptoe gave the
Department detailed summaries of the employee interviews and binders of key
documents organized by witness. In total, Steptoe gave the Department more than
a dozen such interview downloads, each covering numerous employees, and
produced more than 42,000 pages of documents in hard copy and electronic,
searchable format. Exhibit B, p. 5, lns. 22-26. To date, however, the government
has produced only 37,000 pages of documents. Thus, Defendants appear to be
missing 5,000 pages of discovery material to the case. To the extent any of the
5,000 outstanding pages of discovery are not covered by those documents listed inCCIs privilege log, discussed in Section III.A.2.c, above, Defendants respectfully
request that the Court direct the government to produce this outstanding discovery
forthwith.
Additionally, several of the documents in the governments discovery refer to
notes or other documents but fail to include those notes or documents. For example,
the document bates numbered CHART0345 has a paperclip photocopied in thecorner, and a handwritten notation which reads see RC notes, but there are no
notes attached to the document. 12 Similarly, documents consecutively bates
numbered CHART 1203 through 1206 indicate at the top right corner of each page
that they are part of an eight-page e-mail, but pages two, four and seven are not
included in the e-mail string. Exh. H. The same is true for document bates
numbered CHART 1207, which indicates at the top right corner that it is Page 1 of
2, but page two is not included in the discovery. Id .
12 See documents bates numbered CHART0345, CHART 1203 1206, andCHART 1207 attached as Exhibit H to the Miller Declaration.
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As each of the documents contained or referenced in the governments
discovery are material to the defense, Defendants necessarily need the documents in
their entirety, rather than portions or incomplete e-mail strings for which context
and key information is lacking, in order to make meaningful use of the informationand adequately prepare for trial. Accordingly, Defendants respectfully request that
the Court direct the government to produce the missing pages of discovery identified
herein by Defendants, as well as any missing documents Defendants may discover
in the future in the course of reviewing the discovery.
e. IMI/CCIs 2007 Investigation Materials
Defendants seek the investigation materials Steptoe prepared on behalf of
IMI/CCI in connection with the internal investigation in 2007 and 2008, including
Steptoes report and supporting documentation (2007 Investigation Materials)
reflecting its determinations referenced in CCIs Sentencing Memoranda, as these
documents are material to the defense. The 2007 Investigation Materials identify
the basis for Steptoes determinations concerning Defendants culpability and will
therefore reveal other admissible evidence, such as the identification of third-parties
involved in or responsible for the alleged unlawful payments and documents
providing context and insight to these transactions and the FICs at issue, largely
unidentified by the government to date.
Additionally, the 2007 Investigation Materials will likely identify relevant
witnesses, such as the 125 witnesses referenced in CCIs Sentencing Memo who
were interviewed by Steptoe, EY or any other investigator in connection with
IMI/CCIs internal investigation. In short, this information is anticipated tostrengthen defenses and provide a basis for impeaching the governments theories
regarding Defendants culpability. See Bergonzi , 216 F.R.D. at 502 n.17 (noting
materiality of internal investigation report under Rule 16 because such information
may shed light on the issue of relative culpability of third parties and provide a
basis for impeaching the Governments theories of culpability with respect to these
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defendants).
To the extent the 2007 Investigation Materials include Steptoes, EYs or any
other investigators interview memoranda or underlying notes of the 125 CCI
employee interviews, Defendants are entitled to this information under Rule 16.The interview memoranda reflect statements by CCI employees and third parties
interviewed in the course of CCIs internal investigation of the alleged improper
payments that now form the basis of the charges against Defendants. The interview
memoranda likely provide facts concerning the alleged improper payments and, as
reflected in the governments 302s, appear to include exculpatory information
concerning the facts at issue in the Indictment. For example, the 302 statement of
cooperating witness Mario Covino states that during his first interview with Steptoe
attorneys, he did not tell the Steptoe attorneys all that he knew [and] attempted to
explain the emails as being benign. 13 To the extent Covinos statements to Steptoe
denied allegations of improper payments or provided alternative explanations
regarding the nature of the transactions at issue in this case, such information is
patently material to the defense (and, as discussed in section III.B., infra , is
exculpatory and discoverable under Brady ).
Additionally, the interview memoranda of Defendants interviews, in
particular, are relevant to determine the sufficiency of Steptoes warnings to
Defendants and whether Defendants statements should be suppressed. See United
v. Nicholas , 606 F. Supp. 2d 1109, 1116, 1121 (C.D Cal. 2009) (suppressing all
evidence reflecting the defendants statements made to company attorneys as a
result of attorneys ethical violations due, in part, to attorneys failure to provideUpjohn warnings). Unless the government demonstrates that the interviewees are
13 See document bates numbered CCI_226, FBI 302 statement of MarioCovino dated February 25, 2008, attached as Exhibit I to the Miller Declaration.
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prospective or actual government witnesses and those witnesses created the
memoranda or adopted and approved the memoranda, such materials are
discoverable under Rule 16 and should be produced. See Bergonzi , 216 F.R.D. at
500 (holding that interview memoranda are not covered by Jencks Act and arediscoverable under Rule 16 because government failed to demonstrate that witnesses
were prospective or actual witnesses who created the memoranda or, at least,
adopted and approved the memoranda as their statements).
The 2007 Investigation Materials, including Steptoes interview memoranda,
unquestionably influenced the governments decision-making in this case by
focusing the investigation on certain payments and providing facts and evidence
concerning the companys and third-parties relative culpability. Accordingly, this
discovery is clearly material to Defendants case and the government should be
compelled to produce it.
f. Documents Relating to IMI/CCIs 2004 Audit
In 2004, IMI/CCI conducted an internal audit of commission payments for
contracts procured in foreign countries including China and Korea. The Indictment
alleges a conspiracy to violate the FCPA and Travel Act dating back to 1998 and
charges substantive violations of the FCPA in Counts 2 through 4, and the Travel
Act in Count 11 for payments specifically made in 2004 relating to contracts in
China and Korea. Indictment, 14, 33, 35.
While the government has produced some documents relating to the 2004
Audit, such as consulting agreements, e-mails, correspondence, and minutes of IMI
board meetings, there are certain documents referenced in this discovery that do notappear to be included in the documents produced to date. For example, the
document bates numbered IMI0001 states that [a] report on the issues arising in
relation to the US audit and action taken in response would be made to the [Audit]
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Committee in December. 14 However, the report is not included in the documents
the government has produced to date. As some documents relating to the 2004
Audit appear to be missing from the governments production, Defendants seek all
documents relating to IMI/CCIs 2004 Audit of commission payments, includingreports and underlying materials, because these documents are material to the
defense.
The 2004 Audit specifically looked into the alleged improper payment of
commissions and expenses by CCI employees in countries including China and
Korea, which presumably included payments relating to the contracts now identified
in the Indictment, and at least 53 payments identified in the Bill of Particulars for
contracts involving China and Korea in 2004. As such, this information is patently
discoverable under Rule 16(a)(1)(E), as it will uncover admissible evidence and
identify witnesses that are germane to the charges in the Indictment and at least 53
payments identified in the Bill of Particulars. 15 Significantly, the 2004 Audit
apparently determined that no improper payments were made. Accordingly, these
documents will strengthen defenses and provide a basis for impeaching the
governments theories of culpability with respect to Defendants conduct relating to
contracts in China and Korea that are charged in the Indictment.
Further, these documents are material because they bear directly on
allegations in the Indictment that defendant Stuart Carson attempted to halt the 2004
Audit (Indictment, 24), defendants Rose Carson and Edmonds provided false
information to internal auditors during the 2004 Audit ( id ., 25), and defendant
Edmonds created false invoices in an attempt to mislead CCI auditors regardingcertain commission payments. Id ., 26. The 2004 Audit documents also bear
14 See document bates numbered IMI0001 attached as Exhibit J to the MillerDeclaration.
15 See Bill of Particulars attached as Exhibit K to the Miller Declaration.
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directly on allegations in CCIs Plea Agreement that defendant Cosgrove instructed
CCI employees to withhold information from auditors during the 2004 Audit. 16 The
2004 Audit documents will undoubtedly uncover admissible evidence concerning
these allegations, will corroborate testimony, and will aid in Defendants preparationfor trial. See United States v. Marshall , 132 F.3d 63, 67 (D.C. Cir. 1998) (holding
that inculpatory evidence is just as likely to assist in the preparation of the
defendants defense as exculpatory evidence).
g. Documents Relating to Any Investigations, Audits orInquiries Conducted by IMI/CCI into Allegations of Wrongdoing by Defendants
Defendants seek all documents relating to any investigations, audits or
inquiries (Inquiries) conducted by IMI/CCI into allegations of wrongdoing by
Defendants because such documents are material to the defense. To the extent
documents exist relating to such Inquiries - other than the 2007 Investigation and
2004 Audit - they likely contain information relating to IMI/CCIs findings
concerning Defendants alleged wrongdoing with respect to their conduct while
employed at CCI and, specifically, likely contain information demonstrating that the
Inquiries uncovered no wrongdoing by Defendants. As such, this information is
discoverable under Rule 16(a)(1)(E) because it will play an important role in
uncovering admissible evidence and, to the extent it contains exculpatory
information, will strengthen possible defenses.
h. IMI/CCIs FCPA and Travel Act Training Materials
Defendants seek IMI/CCIs training materials relating to FCPA and Travel
Act compliance provided to Defendants during the time period covered by theIndictment because they are material to the defense. FCPA and Travel Act training
materials will play an important role in uncovering admissible evidence and
16 See Statement of Facts 20, attached as Exhibit 1 to CCI Plea Agreement,attached as Exhibit C to the Miller Declaration.
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strengthening defenses, including that IMI/CCI failed to provide requisite training to
Defendants and that Defendants lacked the requisite scienter to commit FCPA and
Travel Act offenses. Accordingly, Defendants are entitled to this discovery under
Rule 16(a)(1)(E), and the government should be compelled to produce it.i. The Set of Binders in Ms. Carsons Office, and the Binder
Mr. Cosgrove Gave to Steptoe
Defendants seek the set of binders in Ms. Carsons possession at CCI as of
August 17, 2007, which contain documents relating to commission payments in
China, and the binder Mr. Cosgrove prepared and gave to Steptoe during his
interview in August 2007 because they are material to the defense. Ms. Carsons
binders contain evidence relating to CCIs commission payments for China projects,and Mr. Cosgroves binder contains information from Mr. Cosgrove concerning
CCIs policies and procedures relating to the procurement of contracts and payment
of commissions. This discovery may shed light on Ms. Carsons and Mr.
Cosgroves conduct relating to the alleged improper payments and will play an
important role in uncovering admissible evidence relating to the facts at issue in the
Indictment. Accordingly, Defendants are entitled to this discovery under Rule16(a)(1)(E), and the government should be compelled to produce it.
j. Defendants Personnel Files
Defendants seek their IMI and CCI personnel files because these documents
are material to the defense. The government produced only portions of Defendants
CCI personnel files, and failed to include key documents relating to Defendants
employment with IMI and CCI, including Defendants performance reviews. In
addition to the performance reviews, the personnel files likely contain other
documents relating to Defendants employment with IMI/CCI, including documents
reflecting the scope of Defendants job responsibilities, defined and sanctioned by
IMI/CCI, as well as information relating to any allegations of wrongdoing by
Defendants or IMI and CCIs recognition of Defendants performance. Such
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discovery will play an important role in uncovering admissible evidence regarding
allegations of the alleged misconduct and will strengthen defenses. To the extent
Defendants performance reviews or other documents in the personnel files indicate
that Defendants were cleared of any allegations of misconduct, such information ispatently material to allegations in the Indictment and is discoverable under Brady .
k. Documents Reflecting Communications Between IMI and/orCCI and the Government
Defendants seek documents reflecting correspondence and communications
between IMI/CCI and the government relating to the investigation into the alleged
improper pa