Ex-Allianz Manager’s Legal Fight Tests DOJ White-Collar Strategy

A former Allianz SE executive’s accusations of attorney betrayal to prosecutors highlight potential pitfalls of the Justice Department’s push to convince corporations to turn in employee wrongdoers.

The particular circumstances in Gregoire Tournant’s case are rare, involving allegations of improper collusion between the government and his then-lawyers from two Big Law firms.

The attorneys were simultaneously representing Allianz and Tournant in his personal capacity, all on the same matter, according to the ex-hedge fund manager’s new counsel, who is seeking to get the fraud charges tossed due to prosecutors’ alleged reliance on unlawfully obtained evidence.

The balancing act required when private and public attorneys collaborate to investigate individuals will only get more complicated after DOJ’s Jan. 17 policy change to sweeten incentives for companies in exchange for immediate self-disclosure and “extraordinary” cooperation.

“You’re going to see both the DOJ and company counsel treading carefully,” said Blake Goebel, a partner at Boies Schiller Flexner who until January was a trial attorney at DOJ’s criminal fraud section.

The Justice Department hasn’t yet responded to Tournant’s claims, which were filed by a lawyer well respected in the white-collar bar. His lead counsel, Seth Levine, gained acclaim in 2019 when representing a former Deutsche Bank trader. His advocacy helped persuade a federal judge to issue an influential decision that warned of Fifth Amendment self-incrimination violations from the government’s “outsourcing” a LIBOR manipulation investigation to the Paul Weiss law firm.

Levine, whose Deutsche Bank client later had his conviction overturned on appeal for unrelated reasons, cited that prior case in Tournant’s motion this week. Joined by co-counsel Daniel Alonso—a former federal prosecutor who’s now a partner at Orrick, Herrington & Sutcliffe—Levine urged the judge to at least hold an evidentiary hearing, as happened in the earlier matter.

‘Scapegoat’

Under the Criminal Division’s corporate enforcement revisions, steeper penalty discounts and greater availability of decisions against prosecution are conditioned on companies’ ability to voluntarily disclose internal misconduct and provide “extraordinary cooperation"—an undefined term that could hinge on the corporation’s ability to present evidence DOJ uses to indict and convict C-suite executives.

Consequently, individuals facing charges are bound to scrutinize in court the boundaries between a corporation’s own investigation and that of federal prosecutors.

Tournant’s motion to dismiss blames the alleged breach of attorney-client privilege on DOJ’s “onerous” policy that requires companies “to build the Government’s case against employees” if they wish to receive lenience, such as avoiding a guilty plea. His lawyers argued Jan. 29 that DOJ pressured Allianz to “scapegoat” Tournant and “coerced” his former lawyers from Sullivan & Cromwell and Ropes & Gray “to turn on one client in order to save another.”

At the time Tournant alleges Allianz first double-crossed him, the Criminal Division’s newly expanded lenience toward self-disclosing companies hadn’t yet been released. Yet DOJ corporate enforcement guidelines for years have dangled incentives for companies providing evidence of executives’ crimes.

Nina Marino said that over her 30 years in practice, on the occasions she’s dually represented individuals and their companies, she’s always seen prosecutors “immediately identify the potential conflict and request all waivers.”

That’s been the case for awhile, Marino said, but those calculations could become more difficult amid DOJ dialing up the voluntary disclosure policy. “So we’ll see if the government’s heightened pressure is followed by a heightened sense of ethical obligation as well,” she said.

Separate Probes

The particulars of Tournant’s allegations won’t be present in many of the more routine complications attorneys say can arise from companies cooperating with corporate counsel.

In the more common scenarios, where employees are interviewed but not represented by their employers’ lawyers, the company retains the right to disclose communications to the government provided they informed the employee of this possibility.

It’s incumbent on the prosecutors and company attorneys to ensure sufficient separation exists between their probes, white-collar lawyers say. That’s because lawyers for individuals are increasingly making the argument that the company attorneys are an arm of the government, thereby violating the defendant’s constitutional rights.

Relying on the company’s assistance can provide significant benefits for the government as it strives to deter white-collar crime by putting more individuals in prison, rather than fining their companies.

“Private investigations—if they’re genuinely independent—are not subject to all the rules of criminal procedure that could tie the hands of a public prosecutor, including the fact that people have a right against self-incrimination when talking to a prosecutor but not when talking to the company lawyer,” said Jennifer Arlen, a New York University law professor who specializes in corporate crime enforcement.

Ensuring true independence means prosecutors can’t get overly involved in directing the company’s investigation, or else, as has happened in a few rare occasions, the court may hold that “the company’s lawyers were actually acting as an agent of the state,” Arlen said.

In practice, it can be tricky for prosecutors to keep a distance from the company’s probe, as they fear their case will get compromised depending on who represents the employees and whether the company pays for their counsel.

“That’s sort of a minefield,” said Daniel Levin, a former federal prosecutor in Los Angeles who’s now a partner at Munger, Tolles & Olson.

“It puts DOJ in a tough situation where they could see a prosecution potentially derailed over representation issues,” he said, “but they could see a prosecution collapse over them being too heavy handed in representation issues.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com