Petition for Writ of Certiorari — Kozlowski v. New York (No. 08-1260)
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No. 08- (0812 60 MAR 1722009
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OFFICE OF THE a
Supreme Court of the Maries Stakes ssa
L. DENNIS KOZLOWSKI and MARK H. SWARTZ,
Petitioners,
v.
THE PEOPLE OF THE STATE OF NEW YORK,
Respondent.
On PETITION FOR A WRiT OF CERTIORARI TO THE
Court oF APPEALS, STATE OF NEW YORK
PETITION FOR A WRIT OF CERTIORARI
NATHANIEL Z. MARMUR ALAN LEwISs
STILLMAN, FRIEDMAN Counsel of Record
& SHECHTMAN, PC. MICHAEL SHAPIRO
425 Park Avenue LauRA REEDS
New York, NY 10022 JUDITH M. WALLACE
(212) 223-0200 CARTER LEDYARD
& Mitgurn LLP
2 Wall Street
New York, NY 10005
(212) 732-3200
Counsel for Petitioner
Mark H. Swartz
Counsel for Petitioner
L. Dennis Kozlowski
22200 g 4
COUNSEL PRESS
800) 274-3321 * (S00) 359 6859
d
QUESTION PRESENTED
Whether a criminal defendant’s right to present a
defense under the Sixth and Fourteenth Amendments
is violated when the court quashes his subpoena for the
recorded, investigatory-stage statements of the key
prosecution trial witnesses — statements which were
found likely to be exculpatory — because the defendant
did not seek to interview the witnesses himself before
he had been accused of the crime for which he was tried.
il
TABLE OF CONTENTS
Page
Question Presemtel \i. 6k. viee ck cies c.e.. i
"Fable of Cae cack each a ee aees ii
Table of Appendices .......| NG hcg ls ase « % iv
Table of Cited Authorities ...\,............... V
Opinions BeigW occa ee een bwcnkw ess 1
Ate as ee ]
Constitutional Provisions Involved ........... 1
Statement of Clee GAG ga csc ae wate ek ees ees: 2
Introductaom «...:. icc see a eee 3
The Internal Investigation ................ 4
The Relationship between the Internal
Investigation and the Prosecution ...... 5
The Mistrial, Defendants’ Subpoena for
Impeachment Materials and Tyco’s
Motion to Quash the Subpoena ........ 6
The Trial Court’s Decision to Quash the
Subpewiis. . 5 cc ee ee a ek oa ce ses 9
Contents
ee SE 655 Wa eo eke ba Ka whee
The Intermediate-Level State Appeal ......
The Appeal to New York’s Highest Court ...
The Court of Appeals’ Decision ............
REASONS FOR GRANTING THE PETITION
eoeoerveeeeeteteeveeeeeeseeeeevee teers eeeeeeseeerteesees @
A. This Court Has Never Directly Addressed
C.
the Issue of How to Balance a Criminal
Defendant’s Right to Obtain Exculpatory
Evidence Against the Qualified Privilege
for Materials Prepared in Anticipation of
SF Pre ere re ere rer ere
Logicai Application of This Court’s Prior
Decisions Suggests That the New York
State Court’s Decision Violated the
Defendants’ Right to Present a Defense.
|
The Issue Merits This Court’s Attention
Because It Has Never Been Decided,
Is Likely to Recur and Is of Enormous
go et | ar ne
D. The Issue is Squarely Presented .......
CAPO: Sk dv oe 4k aw ceo bate cee ames
17
18
iv
TABLE OF APPENDICES ,
Appendix A — Opinion of the Court of Appeals
of New York, Dated October 16, 2008 .......
Appendix B — Opinion of the Supreme Court,
Appellate Division, First Department, New
York, Dated November 15, 2007 ............
Appendix C — Order of the Supreme Court of
New York, New York County Quashing
Subpoena, Dated January 14, 2005 .........
Appendix D — Order of the Court of Appeals of
New York Denying Motion for Reargument,
Dated January 13, 2009 (Appellant: Kozlowsk71)
eaeceozooeonoge@e Cease eoBpensneeanseeeecoa eee eee oes @e8 @ O99 ©
Appendix Ek — Order of the Court of Appeals of
New York Denying Motion for Reargument,
Dated January 13, 2009 (Appellant: Swartz)
Appendix F — Statute Involved ..............
6la
62a
Vv
TABLE OF CITED AUTHORITIES
Page
FEDERAL CASES
Barr v. City of Columbia,
oe BRR) rrr rre 30
Bouie v. City of Columbia,
BR | ee rrr 34
Brady v. Maryland,
Ps Ce EE 0 6 5 dnd o sswvecsneuveceas 9, 25, 33
Brinkerhoff-Faris Trust & Savings Co. v. Hill,
NE Bi TCR en vc eh ceewepevaseees 29, 34
Chambers v. Mississippi,
OW Gi BPO RUPEE) hava Kc cevsicsiseres 17, 18, 19
Christoffel v. United States,
re Wee VGA, CIT FOGG? oc ci cece secscns 32
Crane v. Kentucky,
Bek Be: ere ee arene 19
Davis v. Alaska,
415 U.S. 308 (1974)
Davis v. Wechsler,
ee ee Df ee wawcuwwecseee 31
Daye v. New York,
696 F.2d 186 (2d Cir. 1I9S2) .... 2... cccwess 32, 33
vi
Cited Authorities
Page
Delaware v. Prouse,
ETD sea ccccceccsvceceseeer 28
Delaware v. Van Arsdall,
ES ccs cccecccsseeeveseds 19
Douglas v. Alabama,
a 30
Ford v. Georgia,
UE PE OUUL) cc icc ccvccceevecaccenes 30
Green v. Georgia,
TEED ov ccc cscs avreseccceenvnce 19
Hathorn v. Lovorn,
SO PMP EUED ocb i vce cccwcensensnens 30
Henry v. Mississippi,
SU I CRIED vis cececccncveceavseses 29
Hickman v. Taylor,
re 21
Holmes v. South Carolina,
i coke cvceeseaceas ys 18, 19
James v. Kentucky,
ge Re | a rrr 29, 30, 31
Vil
Cited Authorities
Page
Jencks v. United States,
BN SI NEED bv vevciesvacvcncevenenes 23
In re Martin Marietta Corp.,
856 F.2d 619 (4th Cir. 1988) ..... ccc ceeees 32
Michigan v. Lucas,
BT Sat RUNES. 65 chee resewesevevstecne 19
Missouri Insurance Co. v. Gehner,
BE Bie UCD, ev ce venesestrcenwces’s 34
NAACP v. Alabama,
ee Se EES ss hed betwee cdcseenseeen 31
New York ex rel. Bryant v. Zimmerman,
Ue Ni A, ek Ss ta sous wecesanscssees 32
Palermo v. United States,
Be Rs CUD Bice cece e ees savecess 23
Pennsylvania v. Ritchie,
ee ee ok hws a bk buaweaee passim
Pruneyard Shopping Ctr. v. Robins,
te ee I hi oo hoc bd ea dee ccveveuaws 34
Reece v. Georgia,
OF ee ED gobs nv ce ov dwdecsacewecece 29
vili
Cited Authorities
Page
Rock v. Arkansas,
ES cc kcecbeeesesesheas Xs 19
Rovario v. United States,
Ee cep sada waewn nse cun’ 20
Saunders v. Shaw,
Be ET OORT) occ kcsieccscevusevnvewss 34
Smith v. Illinois,
RS SPEED ce ciecadeservncsouseves 19
Southern Railway Co. v. Lanham,
403 F.2d 119 (Gth Cir. 1969) .........ccceese 22
Staub v. City of Baxley,
Be ie EEN) nbc c cee sceevcccvavess 28, 31
Three Affiliated Tribes v. Wold Eng’g, PC.,
— s 2G | a a rar 27, 28
United States v. Ferguson,
No. 3:06-CR137, 2007 WL 4577308
Ca ee PE) cca s-rsnsesscceaees 26
United States v. Nixon,
ee be or arn passim
United States v. Nobles,
ee ee i caw aee esas ¥s 19, 22
ix
Cited Authorities
Page
United States v. Reyes,
239 F’R.D. 691 GYD. Ca, OG) ow ws econ 26
United States v. Scheffer,
BRS ee) ae 19
Washington v. Texas,
BEB UG. Fe ee ea ew ioe stn cae. 19
Wilson v. United States,
ek US. BR ee eee ca ceeenices. 32
Wright v. Georgia,
SID UD. Fae Ce es hp ens vnecs. 34
Xerox Corp. v. County of Harris,
460 US: 1466 Ge ea ehh evavcceeee 28
Zacchini v. Scripps-Howard Broadcasting Co.,
433 U.S. GOR Cy er eee cas cceece 28
STATE CASES
232 Broadway Corp. v. New York Prop. Ins.
Underwriting Assn.,
171 A.D.2d 861 (2d Dept T90t) ............. 31
Babcock v. Jackson,
40 Misc. 2d 757 (Sup. Ct. Monroe County 1963)
Cited Authorities
Page
Lamitite v. Emerson Electric Co.,
208 A.D.2d 1081 (8d Dep’t 1994) ............ 31
People v. Gissendanner,
45 IN. 7.60 O60 (19TS) 2... cc cene 7, 9, 11, 12, 18, 15
People v. Kozlowski,
47 A.D.3d lil (ist Dep’t 2007) 2... ccc neee 11
People v. Kozlowski,
Be Pe ED vo cvcasbcdssvceseses pass1m
Tyco Int'l Ltd. v. Swartz,
No. 5259/02, 2005 WL 6175342
(Sup. Ct. N.Y. County Jan. 14, 2005) ...... 1,9, 10
FEDERAL STATUTES
Ue. ROSE. BOONE, VE jk ccc wccves 1, 38.17,80
Eye CEG SUS FUE hc 04a 40s ded uansns i, 1, 17, 30
EB UG Be HOE ove heck veces vances 16, 25
Be UA. BUM CAM) occsscitcvwasesesaeces l
28 U.S.C. $ BAGS) (1907S) 2... ccc cece cees ]
Fed. R. Civ. PR 26(b)(3) 2, 22
xi
Cited Authorities
Page
STATE STATUTES
er re cee pebeceeeebteneve® 10
Rok PR TY. | + 4 rr passim
MISCELLANEOUS
Daniel J. Meltzer, State Court Forfeitures of
Federal Rights, 99 Harv. L. Rev. 1130 (1986)
ata ana a a on Oa 6 8 eke eRe eo ekTs 29
Justice O’Connor, Our Judicial Federalism,
35 Case W. Res. L. Rev. 1 (1984) ............ 28
Recommended Practices for Companies and
Their Counsel in Conducting Internal
Investigations, American College of Trial
Lawyers, February 2008 ..............0005. 24
]
L. Dennis Kozlowski and Mark H. Swartz respectfully
petition for a writ of certiorari to review the decision of the
New York Court of Appeals in this case.
OPINIONS BELOW
The opinion of the New York Court of Appeals is reported
at 11 N.Y.3d 223 (2008), and set forth in Appendix A. The
opinion of the Appellate Division of the Supreme Court, First
Department is reported at 47 A.D.3d 111 (1st Dep’t 2007),
and set forth in Appendix B. The opinion of the Supreme
Court, New York County, is available at 2005 WL 6175342,
and set forth in Appendix C.
JURISDICTION
The final judgments of the New York Court of Appeals,
orders denying reargument of the court’s October 16, 2008
Opinion and Order, were entered on January 13, 2009,
reported at 11 N.Y.3d 904 (2009) and 11 N.Y.3d 905 (2009),
and are set forth in Appendices D and E, respectively.
The jurisdiction of this Court is invoked under 28 U.S.C.
§ 1257 (1998). 28 U.S.C. § 2403(b) (1973) may apply,
and service is being made upon the Attorney General of
the State of New York.
CONSTITUTIONAL PROVISIONS INVOLVED
The Sixth Amendment to the U.S. Constitution provides
in relevant part: “In all criminal prosecutions, the accused
shall enjoy the right to be confronted with the witnesses
against him; to have compulsory process for obtaining
witnesses in his favor ... .” U.S. Const. AMEND. VI.
The Fourteenth Amendment to the U.S. Constitution
provides in relevant part: “No State shall... deprive
any person of life, liberty, or property, without due process
of law.” U.S. Const. AMEND. XIV.
2
STATEMENT OF THE CASE
This case merits review because it presents a direct
and increasingly frequent collision between bedrock
values — a criminal defendant’s right to obtain evidence
necessary for his defense, versus a non-governmental
third party’s interest in being able to conduct
investigations without fear of having to later divulge its
files — in a specific context that makes that collision
almost inevitable: a non-public internal investigation
followed by a public prosecution. In such cases, the first
statements by individuals who later testify for the
prosecution are made, not to law enforcement, but
instead to private lawyers or investigators retained to
conduct an internal investigation. When defendants
thereafter subpoena these statements from the private
parties who recorded them, objections to disclosure
based upon the principle that the statements are
qualifiedly protected litigation materials are often
asserted. See, e.g., Fed. R. Civ. Pro. 26(b)(3). But when,
as here, the statements sought have genuine potential
to undercut the prosecution’s case, the defendant has a
“need for production of relevant evidence in a criminal
proceeding” that is “central to the fair adjudication of a
particular criminal case in the administration of justice.”
United States v. Nixon, 418 U.S. 683, 713 (1974).
Courts thus increasingly find themselves having to
balance the competing values at stake: a private party’s
claim of qualified privilege versus a criminal defendant’s
need for relevant and potentially exculpatory material.
The constitutional standard by which these competing
values are to be weighed, and the collision between them
resolved, has never been articulated by this Court. It is
the issue that lies at the heart of this case.
3
In its opinion, the New York Court of Appeals explicitly
recognized that these values had clashed. For example, it
articulated its obligation to “strike an appropriate balance
between the rights and interests of law enforcement,
corporations and their employees, and the accused.”
People v. Kozlowski, 11 N.Y.3d 223, 243 (2008). And, in the
process of elucidating some of the factors relevant to this
balancing, the court held that the materials sought by the
Defendants were “reasonably likely to. . . contradict the
statements of key witnesses for the People.” Jd. But
nevertheless, it sustained the quashing of the Defendants’
subpoena for those materials because the Defendants had
failed to interview the witnesses before the indictment was
handed up. /d. at 245-46. In doing so, the court made
Defendants’ right to obtain exculpatory material
conditional on a procedural requirement that itself was
unconstitutional because it deprived the Defendants of
their right to obtain essential evidence based only on their
failure to anticipate and defend a criminal case before it
existed.
INTRODUCTION
The matter in which this question arose was among
the most intently watched white-collar criminal cases ever
brought in a state court — the prosecution of the former
CEO and CFO of Tyco International, Ltd. (“Tyco”), L.
Dennis Kozlowski and Mark H. Swartz. The essence of
the accusation was that the Defendants committed larceny
by taking “bonuses” that they had not earned. The key
issue at trial was whether Tyco’s directors had approved
the bonuses. After a seven-month trial that ended in a
mistrial, followed by a four-month re-trial, the Defendants
were convicted and are each serving indeterminate prison
sentences of 8 and 1/3 to 25 years.
4
The Internal Investigation
The investigation that led to the Defendants’
criminal prosecution was not begun by law enforcement
or a government agency. Rather, in April, 2002, Tyco
retained the law firm Boies, Schiller & Flexner
LLP (“Boies”) to conduct an internal investigation to
determine whether there had been improper
transactions between Tyco and any of its directors or
officers. Kozlowski, 11 N.Y.3d at 233-34. As part of this
investigation, Boies conducted various interviews, four
of which came to be the focus of the appeal. Specifically,
on June 6, 2002, Boies interviewed Tyco director and
interim CEO, John Fort. Jd. at 234. On August 12 and
13, 2002, Boies interviewed Stephen Foss, Peter Slusser
and James Pasman, who had been members of Tyco’s
Compensation Committee, as well as directors, on the
relevant dates. Jd. The interviews were memorialized
in handwritten notes and draft memoranda. /d. at n.6.
During the month after these interviews, co-
defendant Mark Swartz continued to be employed as
Tyco’s CFO. He served actively, for example, by signing
Tyco’s 10-Q as its Sarbanes-Oxley Act designated
representative and conducting investor conference calls
on the Corporation’s behalf. Jd. at 285. As Defendants
later argued when seeking to obtain copies of the
recorded director interviews, Tyco’s continued
employment of Swartz in a position of such importance
after Boies had interviewed the directors belied the
notion that the directors had told Boies that Swartz and
Kozlowski stole their bonuses. If the directors had told
Boies that the bonuses were unauthorized, it is hard to
imagine that Tyco would have permitted Swartz to
5
continue to discharge the very sensitive, high level
responsibilities that it did.
On September 11, 2002, Mr. Swartz stepped down
after the appointment of a new CFO, pursuant to a
separation agreement, negotiated in August, whose
terms included a $50 million severance payment. A1119-
22.' The next day, Messrs. Swartz and Kozlowski were
indicted. The principal charges, upon which they were
later convicted, were that they had stolen four specific
sums, claimed by the Defendants as bonuses. Kozlowski,
11 N.Y.3d at 230.
The Relationship between the Internal Investigation
and the Prosecution
Boies learned of the first “unauthorized” bonus to
the Defendants in mid-July, 2002. Swartz Appellate
Division Reply Brief at 40. During the next few months,
Tyco worked closely with the prosecution in investigating
the matter. It produced “some ten million pages of
documents,” waiving privilege - at the prosecutor’s
request - over untold numbers of documents.
Swartz Subpoena Hearing Transcript, RA216 at 37.°
Approximately 35 lawyers from the Boies firm worked
on the investigation, assisted by three forensic
accounting firms. Transcript of Trial Two, A2525, A2542.
These lawyers “consulted regularly with the District
Attorney’s Office about the proceedings” and were
1. Numbers preceded by the letter “A” refer to pages in
the Appellate Division Joint Appendix.
2. Numbers preceded by the letters “RA” refer to pages in
the Respondent's Court of Appeals Appendix.
6
“committed” to “provid[ing] answers to questions or
documents that exist.” Transcript of Trial One, A663.
Among the documents produced by Tyco to the
prosecutor were several pages of notes and memoranda,
redacted to exclude attorneys’ opinions or mental
impressions, memorializing interviews with Mr. Swartz
and communications with Mr. Kozlowski’s attorneys.
Tyco Reply Memorandum of Law in Further Support of
Motion to Quash at 10. Two months after Boies learned
about the disputed bonuses, the prosecution obtained
a 94-page indictment setting forth, in detail, years of
financial transactions at Tyco. Swartz App. Div. Reply
Brief at 40. In its motion to quash the Defendants’
subpoena duces tecum, Tyco argued that its “common
interest” with the prosecution was so strong as to permit
it to disclose core work product to the prosecution
without waiving work product protection for what it
disclosed. Tyco Reply Memo at 17.
The Mistrial, Defendants’ Subpoena for Impeachment
Materials and Tyco’s Motion to Quash the Subpoena
The prosecution called the previously-mentioned
directors as witnesses at the Defendants’ first trial to
testify that they had not approved the disputed
bonuses. The case ended in a mistrial. Before the
commencement of the re-trial, the Defendants issued a
subpoena duces tecum to Tyco for the recorded
interviews of these director-witnesses.* Kozlowski, 11
3. The Defendants learned of these interviews when they
were listed on a privilege log produced by Tyco to the
Defendants in civil litigation. The privilege log describes the
subject of the August 12 and 13 interviews as including the
(Cont'd)
7
N.Y.3d at 235. The subjects discussed included the
interviewees’ knowledge and/or authorization of the
Defendants’ bonus compensation, a critical subject given
that the prosecution “center[ed] on the charge that
defendants’ bonuses were not approved by the
Compensation Committee or the board of directors.”
Td. at 241.
Tyco filed a motion to quash, claiming that the
Defendants had not met the standard for subpoena
enforcement enunciated in a leading New York case,
People v. Gissendanner, 48 N.Y.2d 543 (1979), which
requires a criminal defendant to demonstrate that its
subpoena is not merely a “fishing expedition,” but rather,
is “reasonably likely” to “produce relevant and exculpatory
evidence.” Tyco Memorandum of Law in Support of Motion
to Quash at 4, 6. Tyco acknowledged that materials
prepared in anticipation of litigation, as distinguished from
opinion work product, are discoverable pursuant to N.Y.
C.PL.R.3101(d)(2) upon a showing of substantial need and
inability to replicate, but claimed that the subpoenaed
materials were entitled to the higier level of protection
afforded to opinion work product. Tyco Memo at 5, 7.4
(Cont’d)
KELP and relocation loan programs, Compensation Events and
Use of Company Assets. Kozlowski, 11 N.Y.3d at 234. Although the
subpoena originally sought production of additional materials, the
Defendants thereafter narrowed the subpoena and, on appeal,
focused exclusively on the quashing of the subpoena for the notes
of these particular interviews.
4. Although Tyco initially asserted that the materials were
also protected by the attorney-clicnt privilege, the prosecution
abandoned this argument on appeal. See Kozlowski, 11 N.Y.3d at
244.
8
In response, the Defendants made explicit that they
sought only to discover facts (the directors’ statements),
not the attorneys’ opinions, and agreed that any
expression of opinion should be redacted from the
interview notes. Transcript of Hearing, RA213 at 22-—
23. The Defendants explained that they had substantial
need for the subpoenaed materials because of their
relevance and potential to be exculpatory. RA213 at 24,
216 at 36 (noting that after the interviews of the
director-witnesses, Tyco continued to treat Swartz as
though he “had [not] done anything wrong,” which went
directly to “the credibility of directors who [now] say,
we found out Mark Swartz [received] an ADT bonus,
we never approved that”); see Kozlowski, 11 N.Y.3d at
243 (finding that the subpoenaed materials, if produced,
would be reasonably likely to suyport an inference that
“the director witnesses .. . changed their tune [about
the Defendants’ innocence] after the District Attorney
obtained an indictment”). The Defendants also explained
that the subpoenaed materials could not be replicated
because the interviews were conducted during a
“window of time” that had long since closed — the period
after the investigation had been commenced but before
Defendant Swartz’s employment as CFO had been
terminated. RA213 at 24; RA214 at 26. In other words,
as the Court of Appeals later held, the statements were
the earliest recordings of the director-witnesses’
positions on the key issue in the trial, and the fact that
the directors continued to employ Swartz as CFO after
those statements were made gave rise to a high
likelihood that the statements were inconsistent with
the directors’ trial testimony. Kozlowski, 11 N.Y.3d at
242-43.
9
Moreover, the Defendants repeatedly asserted
their right to obtain the subpoenaed materials in
constitutional terms. They noted that it would be
“fundamentally unfair to the Defendants” if the
trial court were to thwart the Defendants’ right to
compulsory process by allowing Tyco “to hide behind”
the privileges it claimed. RA182; see also Trial Court
Order, Tyco Int'l Ltd. v. Swartz, No. 5259/02, 2005 WL
61753842 (Sup. Ct. N.Y. County Jan. 14, 2005)
(summarizing the Defendants’ position that regardless
of Tyco’s assertion of privileges, the subpoenaed
materials should “nevertheless [be] subject to
disclosure”). The Defendants also emphasized that the
interview notes were “material to issues at the heart of
this case,” RA182, and argued that the notes were so
likely to be exculpatory that the prosecution, if it had
obtained them, would have been under an obligation to
“provide it as Brady to us,” RA215 at 33; see Brady v.
Maryland, 373 U.S. 83 (1963).
The Trial Court’s Decision to Quash the Subpoena
The trial court’s opinion did not directly address
Tyco’s argument that the Defendants failed to meet the
Gissendanner standard. But New York’s highest court
later found that the trial court, by focusing on privilege
issues that became relevant only after a finding that
the subpoena was otherwise enforceable, “implicitly
recognized” that the Defendants had satisfied that
standard. /d. at 242.
Nevertheless, the trial court granted Tyco’s motion
to quash. The court reached this result based largely
on its interpretation of N.Y. C.PL.R. 3101(d)(2), the
state-law discovery statute compelling production of
10
materials prepared in anticipation of litigation.®
Specifically, the court held that the Defendants had failed
to seek: the “substantial equivalent” of the subpoenaed
materials because they did not seek to interview the
director-witnesses, at an “earlier time,” 7.e., before the
defendants were accused of stealing their bonuses.
Tyco Int'l, 2005 WL 6175342.
The Re-trial
At the re-trial, the director-witnesses again denied
having approved the bonuses. This time, the Defendants
were convicted.
The Intermediate-Level State Appeal
The Defendants appealed to the Appellate Division
of the Supreme Court [New York’s intermediate level
appellate court], where they challenged the quashing
of their subpoena as a deprivation of their “right to
compulsory process and... to present a defense, as
guaranteed by the United States Constitution.” Swartz
Appellate Division Brief at 90 n.47. Specifically,
Defendants explained that there was “every reason to
believe that the statements .. . were at odds with the
5. The statute makes materials “prepared in anticipation
of litigation” discoverable “upon a showing that the party
seeking discovery has substantial need of the materials in the
preparation of the case and is unable without undue hardship
to obtain the substantial equivalent of the materials by other
means.” By contrast, New York’s statute that governs requests
to obtain work product, N.Y. C.PL.R. 3101(c), states in its
entirety: “The work product of an attorney shall not be
uvbtainable.”
1]
directors’ trial testimony.” Swartz App. Div. Reply Brief
at 11-12. The prosecution defended the quashing of the
subpoena on two principal grounds. First, it contended
that Defendants’ subpoena had been a “fishing
expedition” and therefore failed to satisfy the
Gissendanner threshold for enforcement. Prosecution
App. Div. Brief at 261-62. Second, it argued that the
materials were protected from disclosure by the opinion
work-product privilege. Prosecution App. Div. Brief at
269. The Appellate Division affirmed. App. B. With
respect to the quashing of the subpoena, it said only
that the trial court had not “improvidently exercise[d]
its discretion .. . since the documents sought were not
material and exculpatory.” People v. Kozlowski, 47
A.D.3d 111, 120 (2007).
The Appeal to New York’s Highest Court
Defendants sought and received rarely granted
leave to appeal to the state’s highest court, the New
York Court of Appeals.®
On appeal, the Defendants again emphasized that
the quashing of the subpoena violated their
constitutional rights. See Swartz Court of Appeals Brief
at 35, 42-43; see also Prosecution Ct. App. Brief at 159
(“Swartz claims that he ‘has a constitutional right to
compel disclosure of material evidence from a third
6. In 2007, the year before Defendants obtained leave from
the N.Y. Court of Appeals, it granted leave in only 36 of 2,371
criminal cases, or 1.5%. N.Y. CouRT oF APPEALS, ANNUAL REPORT
OF THE CLERK OF THE Court 2007, available at http://
www.nycourts.gov/ctapps/AnnRpt2007.pdf, at 8. The 2008
annual report has not yet been released.
12
party’”).’ The Defendants focused on this Court’s
decisions in Pennsylvania v. Ritchie, 480 U.S. 39 (1987)
(holding that due process was violated by quashing a
criminal defendant’s subpoena for confidential files of a
state agency that investigates claims of child abuse), and
Davis v. Alaska, 415 U.S. 308 (1974) (holding that Sixth
Amendment right to present a defense outweighed
countervailing privacy interest). See Swartz Ct. App.
Brief at 42-43.
In response, the prosecution argued that the
Defendants’ subpoena sought only “general credibility”
evidence and therefore did not satisfy Gissendanner.
Prosecution Ct. App. Brief at 166-72. The prosecution
also argued that even if the subpoena did satisfy
the Gissendanner standard, it was nevertheless
unenforceable because the materials sought were pure
opinion work product and therefore protected from
disclosure. Jd. at 172-79.
The prosecution did not argue that the materials
were protected from disclosure by a qualified privilege.
In other words, the prosecution did not assert that the
Defendants should not receive the materials if the court
rejected the prosecution’s argument that the materials
were pure opinion work product. Thus, the prosecution
did not suggest, at any point in the appellate process,
that the Defendants failed to meet the minimal standard
7. Although the subpoena issue was discussed more
expansively in the brief of Defendant Swartz, Mr. Kozlowski’s
Brief articulated that he joined in all of Swartz’s arguments,
“including but not limited to... the trial court’s error in refusing
to enforce the subpoena issued to the Boies firm.” Kozlowski
Ct. App. Brief at 81.
13
for disclosure of materials prepared in anticipation of
litigation, or argue that Tyco’s right to qualified protection
for its litigation materials could outweigh the Defendants’
need for potentially exculpatory impeachment materials,
or that Defendants should have interviewed the directors
before the indictment was issued.
The Court of Appeals’ Decision
The New York Court of Appeals decided both of the
disputed issues in the Defendants’ favor. First, disagreeing
with the Appellate Division, it held that the Defendants
had satisfied the Gissendanner standard by proffering
facts that made it reasonably likely the subpoenaed notes
contained “material that could contradict the statements
of key witnesses for the People.” Kozlowski, 11 N.Y.3d at
243. The court explained that the subpoena sought
“specifically identified statements made by the director
witnesses regarding key issues in the case.” /d. at 241-42.
The opinion went on to explain why the subpoenaed
interview notes had genuine potential to undercut the
prosecution:
Defendants pointed to undisputed facts,
arguing that after the directors were made
aware of at least some of the defendants’
questionable activities through the Boies
Schiller investigation, they continued to permit
Swartz to exercise substantial authority as the
CFO of Tyco until September 11, 2002 — the day
before he was indicted -— and voted to pay him
$50 million in severance just one day after the
last of the relevant director interviews.
Id. at 243.
14
Second, the court held that the interview notes
were not protected by the absolute privilege for opinion
work product, but constituted only qualifiedly protected
materials prepared in anticipation of litigation,
discoverable upon a showing of substantial need and
inability to obtain their substantial equivalent. /d. at
244-45. Only then did the court affirm the quashing of
the subpoena, on a ground not argued by the prosecution
at any appellate level — that the failure of the Defendants
to seek interviews with the director-witnesses was fatal,
on the theory that such interviews would have been the
substantial equivalent of the directors’ statements to
Tyco. Id. at 245.
In a footnote, the court said it would not address
the Defendants’ constitutional argument, seeming at
first to accept the prosecution’s view that the
constitutional argument was unpreserved. /d. at 242,
n.11. But in the very same breath, the court went on to
do that which it said it would not — it clearly addressed
the Defendants’ constitutional argument. For example,
the opinion began its discussion of the subpoena issue
by citing this Court’s opinions in Pennsylvania v.
Ritchie, 480 U.S. 39 (1987), and United States v. Nixon,
418 U.S. 683 (1974), as binding authority for the
proposition that it must consider the Defendants’ “right
to a fair trial.” /d. at 242. Plainly, this is a reference to a
constitutional right, as the “fair trial” right articulated
in Ritchie and Nixon is explicitly constitutional. Indeed,
there was no reason for the New York court to cite
United States Supreme Court authority at all, other
than to address constitutional issues. Moreover, the
court made the point of citing a specific page from the
Ritchie opinion, 480 U.S. at 56, whose content and theme
15
is exclusively constitutional (e.g., it holds that criminal
defendants have a Sixth Amendment right to “put
before a jury evidence that might influence the
determination of guilt” and concludes that a defendant’s
right to subpoena confidential records is “properly . ..
considered by reference to due process”). See Kozlowski,
11 N.Y.3d at 242. The theme of the specifically cited page
of Nixon, 418 U.S. at 711, is also clearly constitutional,
as it includes such observations as “[t]he right to the
production of all evidence at a criminal trial similarly
has constitutional dimensions” and that the “Sixth
Amendment explicitly confers upon every defendant in
a criminal trial the right ... to have compulsory process.”
See Kozlowski, 11 N.Y.3d at 242. And finally, the opinion
went on to weigh the “competing considerations” that
the Ritchie decision mandates. /d. at 243."
But despite recognizing the importance of the
materials, the court held that Defendants were not
entitled to compel their production because the
Defendants had themselves not attempted to interview
the director-witnesses at an “earlier time.” /d. at 245-
8. People v. Gissendanner, repeatedly emphasized by the
Court of Appeals as the leading New York ease on the standard
for subpoena enforcement, is itself based on federal!
constitutional principles. Gissendanner holds that although
enforcement of subpoenas for “general credibility” evidence
may be left to the sound discretion of trial courts, requests for
“access ... to otherwise confidential data relevant and material
to the determination of guilt or innocence” “must” be afforded.
Id. at 548. Indeed, the Gissendanner opinion cites Davis v.
Alaska, 415 U.S. at 316, for the principle that evidence material
to “biases, prejudices or ulterior motives” falls into the category
of evidence that must be disclosed, even when “otherwise
confidential.” /d.
16
46. Although neither the Court of Appeals nor the trial
court ever explicitly defined the “earlier time” during
which the Defendants might theoretically have
attempted to interview the Tyco directors, the phrase
had to refer to the period before September 12, 2002 —
the date on which both of the Defendants were criminally
charged with stealing from the company. Indeed, given
that the directors testified in the grand jury that the
Defendants’ bonuses were unauthorized, by the date
the indictment was handed up the directors had already
“changed their tune” and adopted the prosecution’s view
of the impropriety of the bonuses. Thus, to the extent
there can ever have been a time when director
statements “substantially equivalent” to the statements
made to Boies might have been obtainable, this could
only have been before the indictment was handed up.’
In other words, the New York Court of Appeals held
that the Defendants would be deprived of compulsory
process to obtain evidence having genuine potential to
undercut the central allegation against them, because
they did not seek to investigate that allegation at a time
before it had even been made. As we argue below, to
condition the Defendants’ access to exculpatory material
on that procedural requirement is to deny Defendants
their constitutional right to present a defense.
9. Furthermore, the notion that one party’s questions to a
witness are the substantial equivalent of another, adverse
party’s questions to the same witness is inconsistent with the
premise of our judicial system that witnesses say different,
inconsistent things to different parties at different times.
Indeed, this is why our system of justice permits cross-
examination and imposes obligations such as those mandated
by the Jencks Act, 18 U.S.C. § 3500 (1957).
17
REASONS FOR GRANTING THE PETITION
The New York Court of Appeals affirmed the trial
court’s quashing of the Defendants’ subpoena for prior,
likely inconsistent, witness statements because the
Defendants had failed to satisfy a state-law requirement
that the Defendants were to have attempted to
interview those witnesses before they had been charged
with the crime. The question we ask this Court to review
is whether such a requirement violates a defendant’s
right to present a defense under the Sixth and
Fourteenth Amendments. This issue is squarely
presented, broadly consequential and has not previously
been addressed. And as explained below, the issue is
increasingly likely to recur in the context in which it
arose here — an internal corporate investigation followed
by a criminal prosecution.
A. This Court Has Never Directly Addressed the
Issue of How to Balance a Criminal Defendant’s
Right to Obtain Exculpatory Evidence Against
the Qualified Privilege for Materials Prepared in
Anticipation of Litigation.
The New York court acknowiedged that it was
required to “strike an appropriate balance” between the
fundamental right of a criminal defendant to obtain
critical impeachment evidence and the qualified
privilege that protects litigation materials. The question
of how to balance these interests is one of profound
constitutional importance, similar to, yet different from,
the questions this Court confronted in cases such as
Ritchie, 480 U.S. at 39, Nixon, 418 U.S. at 683, Chambers
v. Mississippi, 410 U.S. 284 (1973) and Davis, 415 U.S.
18
at 308. In each of those cases, this Court analyzed how
to balance a defendant’s right to present a defense
against different kinds of countervailing values, such
as the statutory confidentiality for the records of a child-
welfare agency (Ritchie), the presumptive privilege that
protects communications of the President (N2xwon), and
evidentiary rules that disallow hearsay evidence
(Chambers). But in none of those cases, or any other,
has this Court held that a Defendant waived his right
to obtain exculpatory materials because he failed to
conduct his discovery before he was charged with a
crime.
B. Logical Application of This Court’s Prior
Decisions Suggests That the New York State
Court’s Decision Violated the Defendants’ Right
to Present a Defense.
This Court has yet to define the contours of the
“appropriate balance” between a criminal defendant’s
right to obtain exculpatory evidence and a third party’s
qualified privilege for litigation materials. However, in
weighing these competing values, this Court’s decisions
involving a defendant’s right to present a defense
suggest that the need for exculpatory evidence should
be paramount.
On numerous occasions, this Court has held that,
“C(w]hether rooted directly in the Due Process Clause of
the Fourteenth Amendment or in the Compulsory
Process or Confrontation Clauses of the Sixth
Amendment, the Constitution guarantees criminal
defendants a meaningful opportunity to present a
complete defense.” Holmes v. South Carolina, 547 U.S.
19
319, 324 (2006); Crane v. Kentucky, 476 U.S. 688, 689-
90 (1986). While this constitutional principle does not
“confer the right to present testimony free from the
legitimate demands of the adversarial system,” United
States v. Nobles, 422 U.S. 225 (1975), procedural or
evidentiary rules may not be applied in such a way as to
have an “arbitrary or disproportionate” impact on a
defendant’s ability to present his or her defense,
Holmes, 547 U.S. at 324; United States v. Scheffer, 523
U.S. 303, 308 (1998); Michigan v. Lucas, 500 U.S. 145,
151 (1991); Rock v. Arkansas, 483 U.S. 44, 55-56 (1987).
Such rules are clearly outweighed by a defendant’s need
to obtain and utilize relevant, potentially exculpatory
information or materials. See, e.g., Holmes, 547 U.S. 319;
Rock, 483 U.S. 44; Ritchie, 480 U.S. at 39; Delaware v.
Van Arsdall, 475 U.S. 673 (1986); Crane, 476 U.S. at
683; Green v. Georgia, 442 U.S. 95 (1979); Davis, 415
U.S. at 308; Chambers, 410 U.S. at 284; Smith v. Illinois,
390 U.S. 129 (1968); Washington v. Texas, 388 U.S. 14
(1967).
Thus, in Ritchie, this Court held that a defendant’s
constitutional right to due process required
enforcement of a subpoena, issued to an agency that
investigates the sexual abuse of children, for “verbatim
statements” made by a prosecution witness, even
though the agency’s records were confidential under
state law. 480 U.S. at 45, 58. In reaching this conclusion,
this Court emphasized that the state statute did not
provide for “unqualified” confidentiality and, instead,
permitted disclosure in “certain circumstances.”
Id. at 57-58. Given the qualified nature of the
confidentiality interest, this Court held that the
defendant was “entitled,” as a matter of due process, to
20
trial court review of the file to determine if it contained
“information that probably would have changed the
outcome of his trial.” Jd. at 58; see also Rovario v. United
States, 353 U.S. 58, 60-61 ..957) (holding that the
confidentiality of a government’s informant must give
way to an accused’s right to defend against criminal
charges).
Similarly, in Nixon, this Court held that a
“demonstrated, specific need for evidence in a pending
criminal case” required enforcement of a subpoena
issued to the President of the United States for
recordings of conversations between the President and
his advisers that were protected by executive privilege.
418 U.S. at 718. As this Court explained, “allowance of
the privilege to withhold evidence that is demonstrably
relevant in a criminal trial would cut deeply into the
guarantee of due process of law and gravely impair the
basic function of the court.” Jd. at 712. Therefore, “when
the ground for asserting privilege as to subpoenaed
materials sought for use in a criminal case is based only
on the generalized interest in confidentiality, it cannot
prevail over the fundamental demands of due process
of law in the fair administration of criminal justice.”
Id. at 713.
These cases suggest that when a qualified privilege
is at stake —- such as that accorded to materials prepared
in anticipation of litigation - * must give way to a
defendant’s constitutional righ. to present a defense,
and that evidentiary or procedural rules intended to
safeguard such privileges cannot be applied arbitrarily
or disproportionately so as to deprive a defendant of
access to potentially exculpatory material.
21
If certiorari is granted, Defendants will argue that
the judgment of the New York Court of Appeals was
wrong, as a matter of federal law, based on the
constitutional values inherent in the precedent cited
above. The Court of Appeals applied a discovery statute
in an arbitrary and disproportionate way, allowing the
qualified privilege for materials prepared in anticipation
of litigation to trump the Defendants’ fundamental! right
to present a defense under the Sixth and Fourteenth
Amendments.'® As explained above, when the New York
court criticized the Defendants for not having sought
director-witness interviews at an “earlier time”
as a condition of subpoena enforcement, it was
unquestionably referring to the time before the
Defendants were charged with larceny. But it is
anathema to the very concept of due process that a
criminal defendant can be denied his right to obtain
exculpatory evidence, based only on his failure to mount
a defense to a criminal charge that does not yet exist
(e.g., by conducting defense interviews of potential
witnesses).
10. The Court of Appeals cited Hickman v. Taylor, 329 U.S.
495, 513 (1947), for the proposition that “production of
attorney’s account of witness statements is justified only in
‘rare’ cases and is not appropriate when ‘potential for direct
interviews with witnesses themselves’ is possible,” Kozlowski,
11 N.¥.3d at 246. Thereby, the court confused the degree of
protection given to qualifiedly privileged litigation materials
with that owed to true opinion work product. It is plain from
this Court’s opinion in Hickman that this quotation referred to
opinion work-product materials, as opposed to materials like
those at issue here, of a factual nature, prepared in anticipation
of litigation.
22
Also central to the New York court’s error was its
assumption that the interviews Defendants might
theoretically have conducted of the director-witnesses
would have been the “substantial equivalent” of the
interviews Tyco had conducted during a window of time
that had long past. In so doing, the New York court
departed from the widely held view that prior
inconsistent statements are unique, and therefore, that
a party should not be required to attempt to replicate
prior inconsistent statements as a condition for obtaining
them. As Justice White explained more than thirty years
ago:
In the main, where a party seeks to discover
a statement made to an opposing party in
order to prepare for trial, he can obtain the
‘substantial equivalent’ by other means, Fed.
Rule Civ. Proc. 26(b)(3), 7.e., by interviewing
the witness himself. A prior inconsistent
statement in the possession of his adversary,
however, when sought for evidentiary
purposes — 7.e., to impeach the witness after
he testifies — is for that purpose unique.
Nobles, 422 U.S. at 248 (White, J., concurring); see also
Southern niailway Co. v. Lanham, 403 F.2d 119 (5th Cir.
1969) (rejecting the “rigid rule” that a party secking to
subpoena recorded statements of witnesses from his
adversary “must always show that he has been unable
to obtain statements of his own” from the witnesses
whose statements he seeks to subpoena). The Court of
Appeals’ finding — that the statements at issue were
“reasonably likely to . . . contradict the statements of
key witnesses” —- was tantamount to a conclusion that
23
the Defendants could not have replicated those
statements by conducting their own interviews of the
witnesses. Indeed, the notion that particular statements
made by witnesses before trial could ever be replicable
is belied by Jencks v. United States, 353 U.S. 657, 667
(1957), which found that such statements are so relevant
to the defense of a criminal case that they must be turned
over to the defendant as a matter of course when held
by the prosecution. In articulating the values that led
to the Jencks holding, this Court explained that denial
of access to prior statements that might be used to
impeach a witness is to “deny the accused evidence
relevant and material to his defense.” Jd. at 667. And
although Jencks was not decided on explicitly
constitutional grounds, its holding plainly has
constitutional underpinnings. See Palermo v. United
States, 360 U.S. 343, 362-63 (1959) (“[I]t would be idle
to say that the commands of the Constitution were not
close to the surface of the [Jencks] decision.”) (Brennan,
J., concurring).
In sum, by quashing the Defendants’ subpoena on
the grounds that: (a) Defendants’ right to obtain prior
inconsistent witness statements was contingent on their
having attempted to interview those witnesses
themselves; and (b) that this requirement would be
imposed even though the “earlier time” at which the
Defendants might have theoretically been able to
conduct interviews was before they had been indicted,
the Court of Appeals applied a discovery statute in an
arbitrary and disproportionate way. The court’s ruling
depended upon the unreasonable assumptions that
prior inconsistent statements are reproducible and that
defendants should be expected to take action to defend
24
criminal cases that do not exist. By its ruling, the court
unconstitutionally elevated the qualified privilege for
materials prepared in anticipation of litigation above the
Defendants’ fundamental right to present a defense.
C. The Issue Merits This Court’s Attention Because
It Has Never Been Decided, Is Likely to Recur
and Is of Enormous Public Importance.
The context in which the issue at the heart of this
case arose — an internal corporate investigation — has
rapidly become an institutionalized feature of the
governance of public corporations. Since 2001, “over
2,500 public companies have retained outside counsel
to conduct internal investigations into suspected wrong-
doing by corporate executives and employees.”
Recommended Practices for Companies and Their
Counsel in Conducting Internal Investigations,
American College of Trial Lawyers, February 2008.
Recently enacted government policies, such as those
explicitly described in the Department of Justice’s
Thompson and McNulty memoranda, have given
corporations greater incentive today than ever before
to unearth wrongdoing inside the corporation and
disclose it to the authorities. As the Court of Appeals
acknowledged, corporations “consult with law
enforcement authorities to advance their corporate
client’s interest in avoiding potentially serious criminal
sanctions,” which at times “may come at the expense of
the proper safeguarding of the rights of individual
corporate employees.” Kozlowski, 11 N.Y.3d at 243.
What this meant for Messrs. Kozlowski and Swartz, and
what it will mean for hundred or thousands of other
officers and directors accused of corporate wrongdoing,
25
is that the first interviews of future witnesses for the
prosecution will have been conducted and recorded by
private actors who are not bound by discovery
obligations such as those imposed by the Jencks Act,
18 U.S.C § 3500 (1957) and the Brady doctrine. Some of
these initial interviews will include statements favorable
to those who eventually become criminal defendants, as
impeachment material or otherwise. But because, as
here, the prosecution will not have been involved in
conducting the interview and will not possess it in its
recorded form, the defendant’s only means to obtain it
will be an invocation of the right to compulsory process
— issuance of a subpoena to the private entity that
conducted and possesses the recorded interview.
Inevitably, many of the private entities that receive
such subpoenas will resist compliance, even when
(indeed, particularly when) the interviews contain
statements favorable to the former corporate insider
who has since become adverse to the corporation (and a
criminal defendant). Private actors will use the best tool
at their disposal to resist these subpoenas. Like Tyco,
they will assert that the recorded interviews are not
discoverable on the ground the interview constitutes
either opinion work product or, as here, materials
prepared for litigation. Thus, courts will have to grapple
with how to balance a criminal defendant’s right to
present a defense against a civil litigant’s qualified
protection for materials it prepared in anticipation of
litigation.
The manner in which the New York Court of Appeals
went about the constitutionally mandated balancing
conflicts with the approach recently taken by other
26
courts encountering the same issue. For example, in
United States v. Ferguson, No. 3:06-CR137, 2007 WL
4577303, at *8 (D. Conn. Dec. 26, 2007), a federal district
court held that when a criminal defendant issues a third-
party subpoena for potentially inconsistent witness
statements made in the context of an internal
investigation, the proper procedure is to require in
camera inspection, followed by disclosure to the defense
of “any non-privileged prior inconsistent statements by
the witness.” See also United States v. Reyes, 239 F.R.D.
591, 601 (N.D. Ca. 2006) (implementing same procedure).
Notably, this procedure called for a true balancing — one
which required a court’s examination of a potentially
exculpatory witness statement so that the interest of a
defendant in the statement’s disclosure could be fairly
and accurately measured. It stands in marked contrast
to the approach by the New York Court of Appeals,
permitting even a qualified privilege to trump a
defendant’s need for genuinely exculpatory materials.
As the Association of Corporate Counsel (“ACC”)
wrote in its amicus brief to the New York Court of
Appeals, one of its “primary missions” is to “provide a
voice for the in-house bar on issues of universal
importance to our members, such as those involved in
this appeal.” ACC Brief at p. 3 (emphasis added). "'
11. The ACC is a 24,000 member organization active in 81
countries. ACC Brief at p. 3. The court also received an amicus
brief from the New York Council of Defense Lawyers
(“NYCDL’). The NYCDL is an elite organization of criminal
defense lawyers. It filed its amicus brief to address “the
inherent unfairness, and serious constitutional implications, of
(Cont'd)
27
Plainly, this is a broadly consequential issue. By
granting certiorari, this Court can provide badly needed
guidance, setting legal standards for the balancing
between these competing values that will continue to
clash with increasing frequency.
D. The Issue is Squarely Presented
The determination made by the Court of Appeals in
this case ~ that the perceived failure to satisfy a
procedural requirement embodied in a discovery statute
is sufficient to support the quashing of a criminal
defendant’s subpoena for relevant, likely exculpatory
materials — was neither an independent nor an adequate
state-law ground and, as such, does not deprive this
Court of jurisdiction to grant certiorari and address
Defendants’ federal claims.
Where “a state court’s interpretation of state law
has been influenced by an accompanying interpretation
of federal law,” that decision does not rest on an
“independent” state-law ground. See Three Affiliated
Tribes v. Wold Engineering, PC., 467 U.S. 150, 152
(1984). As described above, the Court of Appeals
explicitly considered federal constitutional law in making
its decision. For example, it began discussion of the
subpoena issue by citing this Court’s opinions in Ritchie
(Cont’d)
the trial court’s order denying [the Defendants] access to the
prior witness statements of key prosecution witnesses -
evidence that they sought to obtain for the critical,
constitutionally protected, purpose of impeaching those
witnesses on relevant and material issues in the case.” NYCDL
Statement of Interest.
28
and Nixon as binding constitutional authority for the
proposition that it must consider the defendants’ “right
to a fair trial.” Kozlowski, 11 N.¥.3d at 242. Thus, in
holding that Defendants could be denied access to
potentially exculpatory materials relevant to their
defense, the court necessarily concluded that such denial
did not infringe on the federal rights established by the
precedent it cited. See Three Affiliated Tribes, 467 U.S.
at 152 (noting that where state courts “construe state
law broadly in the belief that federal law poses no barrier
to the exercise of state authority,” this Court will render
judgment on federal law); Delaware v. Prouse, 440 U.S.
648, 653 (1979) (accepting review where the state court
“felt compelled by what it understood to be federal
constitutional considerations to construe and apply its
own law in the manner it did”); Zacchini v. Scripps-
Howard Broadcasting Co., 433 U.S. 562, 568 (1977)
(same); see also Justice O’Connor, Our Judicial
Federalism, 35 Case W. Res. L. Rev. 1, 5-6 (1984)
(stating that this Court will review cases in which a state
court “upholds a particular state action on the ground
that it offends neither federal nor state law”).
For several reasons, the Court of Appeals’ decision
also does not rest on an “adequate” state-law ground.
This is so, first and foremost, because regardless of
whether the court interpreted N.Y. C.PL.R. 3101(d)(2)
correctly as a matter of state law, its application of that
statute to deny Defendants’ access to relevant, likely
exculpatory materials violated the federal Constitution.
See Xerox Corp. v. County of Harris, 459 U.S. 145, 149
(1982) (holding that state-law ground is not adequate if
law itself is unconstitutional); see also Staub v. City of
Baxley, 355 U.S. at 319 (state law that violated First
<=
29
Amendment not adequate); Reece v. Georgia, 350 U.S.
85 (1955) (state law that violated due process not
adequate); Brinkerhoff-Faris Trust & Savings Co. v.
Hill, 281 U.S. 673 (1930) (same). According to the court,
N.Y. C.PL.R. 3101(d)(2) works a forfeiture of the right
to compulsory process unless a defendant seeking pre-
trial statements made by prosecution witnesses has
previously attempted to interview those witnesses
himself. The court would have required Defendants to
interview the directors before the Defendants had been
indicted, and assumed that statements made by the
witnesses to the Defendants would have been the
substantial equivalent of those made to Tyco’s
investigators. This application of N.Y. C.PL.R. 3101(d)(2)
was arbitrary and disproportionate and violated the
Defendants’ right to present a defense under the Sixth
and Fourteenth Amendments. Therefore, it cannot
serve as an adequate state-law ground.
Likewise, a state procedural requirement is not
considered an adequate ground where it serves no
“legitimate state interest” and “heavily burden(s] the
assertion of federal rights.” Henry v. Mississippi, 379
U.S. 443, 447-48 (1965) (holding that “state procedural
rule[s] ought not be permitted to bar vindication of
important federal rights” unless those rules serve a
“legitimate state interest”); Daniel J. Meltzer, State
Court Forfeitures of Federal Rights, 99 Harv. L. Rev
1130, 1142 (1986) (noting that this Court will review cases
where state procedural rules were not followed if those
rules “heavily burden the assertion of federal] rights
without significantly advancing any important state
policy”); see also James v. Kentucky, 466 U.S. 341,
349 (1984) (accepting review where state court’s
30
interpretation of procedural rule was “an arid ritual of
meaningless form and would further no perceivable
state interest” (internal citations omitted)); Douglas v.
Alabama, 380 U.S. 415 (1965) (accepting review where
procedural rule served no legitimate state interest).
Here, no legitimate state interest was served by
burdening Defendants with a requirement to interview
the director-witnesses at a time before the Defendants
had been charged with the crimes about which the
witnesses would eventually testify. Moreover, as
explained at length above, the New York court’s
interpretation of the rule heavily burdened Defendants’
right to present a defense under the Sixth and
Fourteenth Amendments by barring them from access
to relevant, potentially exculpatory materials.
The Court of Appeals’ interpretation of N.Y. C.PL.R.
3101(d)(2) also cannot serve as an adequate state-law
ground because that interpretation had not been
“strictly or regularly followed.” See Barr v. City of
Columbia, 378 U.S. 146, 149 (1964) (“We have often
pointed out that state procedural requirements which
are not strictly or regularly followed cannot deprive us
of the right to review.”); see also Ford v. Georgia, 498
U.S. 411 (1991) (“|Aln adequate and independent state
procedural bar to the entertainment of constitutional
claims must have been firmly established and regularly
followed.”); James, 466 U.S. at 348-349 (holding that
state-court’s interpretation of procedural rule was “not
the sort of firmly established and regularly followed state
practice that can prevent implementation of federal
constitutional rights”); Hathorn v. Lovorn, 457 U.S. 255,
262 (1982) (holding state procedural rule inadequate
where not applied “evenhandedly to all similar claims”);
31
NAACP wv. Alabama, 357 U.S. 449, 457-58 (1958), 377
U.S. 228 (1964) (“Novelty in [state] procedural
requirements cannot be permitted to thwart review in
this Court applied for by those who, in justified reliance
upon prior decisions, seek vindication in state courts of
their federal constitutional rights.”); Stawb, 355 U.S. at
320 (holding state procedural rule inadequate where
state court’s interpretation was contrary to a long line
of prior state-court rulings). The Court of Appeals’
holding — that a defendant fails to satisfy N.Y. C.PL.R.
3101(d)(2) if he couid have obtained “substantially
equivalent” materials at some time in the past — is a
novel interpretation of state law because New York
courts had previously interpreted this as a present-tense
requirement. See, e.g., Lamitite v. Emerson Electric Co.,
208 A.D.2d 1081 (8d Dep’t 1994); 232 Broadway Corp. v.
New York Prop. Ins. Underwriting Ass’n, 171 A.D.2d
861 (2d Dep’t 1991); Babcock v. Jackson, 40 Misc. 2d
757 (Sup. Ct. Monroe County 1963). Even the
prosecution, as evidenced by its brief, did not have the
foresight to anticipate the Court of Appeals’ departure
from precedent.
Finally and for similar reasons, the New York court’s
Statement that the Defendants did not “raise a
constitutional argument” in the trial court cannot serve
as an adequate and independent ground for its
judgment. Whether a federal claim is adequately
presented in state court is matter of federal, not state
law. James, 466 U.S. at 349 (citing Davis v. Wechsler,
263 U.S. 22, 24 (1923)). Adequate presentation of a
federal claim requires “no particular form of words or
phrases ... [and is satisfied] if the record as a whole
32
shows either expressly or by clear intendment” that a
federal constitutional claim was raised. New York ex rel.
Bryant v. Zimmerman, 278 U.S. 63, 67 (1928) (emphasis
added). To determine “whether a claim that the
defendant has been denied a ‘fair trial’ involves a
constitutional claim, one must look to the factual
allegations supporting the claim.” Daye v. New York, 696
F:2d 186, 193 (2d Cir. 1982) (en banc). In short, “where
the claim rests on a factual matrix that is ‘well within
the mainstream of due process adjudication’... the state
courts must have been considered to have been fairly
alerted to its constitutional nature.” Jd. at 193.
Application of these principles requires the
conclusion that the Defendants adequately raised their
constitutional claims in the trial court (as well as on
appeal). First, the Defendants issued a subpoena for
evidence. By its nature, a subpoena for documents is an
invocation of the right to compulsory process. See /n re
Martin Marietta Corp., 856 F.2d 619, 621 (4th Cir. 1988)
(“Rule 17(c) implements the Sixth Amendment
guarantee that an accused have compulsory process to
secure evidence in his favor.”); Wilson v. United States,
221 U.S. 361, 372 (1911); see also Christoffel v. United
States, 200 F.2d 734 (D.C. Cir. 1952) (“The right of an
accused by appropriate means to obtain evidence
material to his defense is essential to the administration
of the criminal law. A subpoena duces tecum to one who
has custody of the evidence is an appropriate means.”).
The Court of Appeals acknowledged as much when it
noted that its determination of the subpoena issue was
constrained by federal constitutional law, as set forth in
Ritchie and Nixon.
33
Also important to the question of whether the
Defendants raised a federal constitutional claim is the
way they described the evidence and their need for it.
By describing the subpoenaed documents as material
to “the heart of the case,” RA182, supporting an
inference that key prosecution witnesses “changed their
tune” about Defendants’ guilt, RA187, having no
equivalent because they consist of statements recorded
during a “window of time,” RA213 at 24, and finally,
undercutting “the credibility of directors” as witnesses,
RA216 at 36, the Defendants made it apparent that their
legal position was ultimately founded, not on narrow
state law grounds, but on well recognized constitutional
values. Plainly, this was a “factual matrix that is ‘well
within the mainstream of due process adjudication.’”
Daye, 696 F.2d at 193. Moreover, when Tyco’s lawyer
characterized Defendants’ arguments as raising
Brady-like claims, RA216 at 37, he demonstrated that
Tyco, too, understood Defendants’ arguments to sound
in constitutional values.
Perhaps most significantly, the trial court
understood that Defendants’ claims were not limited to
state law questions about the applicability of the
privileges asserted by Tyco. As the trial court described,
apart from the questions of whether Tyco had valid
claims of privilege, Defendants “contend[ed] that they
[the subpoenaed documents] are nevertheless subject
to disclosure.” A823-24. Indeed, the only conceivable
reason that the subpoenaed documents could be
technically protected by a privilege, but nevertheless
subject to disclosure, is that constitutional values
override the privilege. In sum, there is no reasonable
basis for the New York Court of Appeals’ statement that
34
the Defendants had not raised a constitutional argument
in the trial court.
Alternatively, the novel interpretations of the New
York Court of Appeals — first, that New York’s discovery
statute requires criminal defendants to seek witness
interviews, before they become criminal defendants, as
a condition of subpoena enforcement, and second, that
there is such a thing as the “substantial equivalent” for
a prior inconsistent statement — were so unexpected
that these determinations, in and of themselves, provide
a basis for this Court’s jurisdiction. Pruneyard
Shopping Ctr. v. Robins, 447 U.S. 74, 86 n. 9 (1980)
(“This Court has held federal claims to have been
adequately presented even though not raised in lower
state courts when the highest state court renders an
unexpected interpretation of state law or reverses its
prior interpretation.”) (citing Brinkerhoff-Faris Trust
& Savings Co., 281 U.S. at 677-78); Missouri Ins. Co. v.
Gehner, 281 U.S. 313, 320 (1930); Saunders v. Shaw, 244
U.S. 317 (1917); see also Bowie v. City of Columbia, 378
U.S. 347 (1964) (finding Supreme Court review
appropriate where state court broadens application of
state law beyond a fair reading so as to deny due
process); Wrizhkt v. Georgia, 373 U.S. 284, 291 (1963)
(finding Supreme Court review appropriate where there
is no state precedent for holding). Here, the New York
court’s interpretation of N.Y. C.PL.R. 3101(d)(2) was
entirely unexpected, amounted to a violation of due
process and rested on an interpretation of the statute
that was contrary to precedent and was never argued
by the prosecution. Accordingly, we respectfully submit
that this petition presents a case for Supreme Court
review that is not merely appropriate, but compelling.
35
CONCLUSION
For all of the foregoing reasons, the writ of certiorari
should issue.
Respectfully submitted,
ALAN LEwIS
Counsel of Record
MICHAEL SHAPIRO
LAURA REEDS
JUDITH M. WALLACE
CARTER LEDYARD
& MILBURN LLP
2 Wall Street
New York, NY 10005
(212) 732-3200
Counsel for Petitioner
L. Dennis Kozlowski
NATHANIEL Z. MARMUR
STILLMAN, F'RIEDMAN
& SHECHTMAN, PC.
425 PARK AVENUE
New York, NY 10022
(212) 223-0200
Counsel for Petitioner
Mark H. Swartz
APPENDIX
la
APPENDIX A — OPINION OF THE COURT OF
APPEALS OF NEW YORK, DATED OCTOBER 16, 2008
COURT OF APPEALS OF NEW YORK
THE PEOPLE OF THE STATE OF NEW YORK,
Respondent,
Vv.
L. DENNIS KOZLOWSKI,
Appellant.
THE PEOPLE OF THE STATE OF NEW YORK,
Respondent,
V.
MARK H. SWARTZ,
Appellant.
Oct. 16, 2008
OPINION OF THE COURT
CIPARICK, J.
In this appeal relating to the convictions of two
former executives for crimes associated with corporate
wrongdoing, we are asked to determine whether the
admission of an attorney’s testimony concerning certain
facts related to a corporate internal investigation
a
Appendix A
improperly cenveyed to the jury an opinion regarding
defendants’ guilt. We conclude that this testimony—and
the prosecutor’s summation comments thereon—did not
convey such an opinion. Second, we hold that Supreme
Court did not abuse its discretion in quashing defendants’
subpoena duces tecum, which sought the factual pertions
of certain interview notes and a memorandum prepared
during the course of the internal investigation. Although
defendants satisfied the minimal threshold showirg
necessary for enforcement, the materials defendants
requested are shielded from production by the qualified
privilege covering trial preparation materials (see CPLR
3101{[d][2]). Finally, we do not reach the question whether
the fines imposed under Penal Law § 80.00 violated
Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147
L.Ed.2d 435 [2000], because we conclude that if error exists
it was harmless.
i
Defendants are the former chief executive officer
(L. Dennis Kozlowski) and chief financial officer (Mark
H. Swartz) of Tyco International Ltd., a publicly-held
diversified manufacturing company. After a nearly six-
month trial, a jury convicted defendants of 12 counts of
first degree grand larceny (Penal Law § 155.42), eight
counts of first degree falsifying business records (Penal
Law § 175.10), one count of fourth degree conspiracy
(Penal Law § 105.10[1]) and one Martin Act count of
1. This was a second trial. The initial trial ended in a
mistrial during jury deliberations.
——s
3a
Appendix A
securities fraud (General Business Law § 352-c [5]).’ The
principal charges concerned defendants’ theft of four
multimillion-dollar “bonuses” between 1999 and 2001.
Defendants’ convictions arose primarily out of their
abuse of two Tyco loan programs: the Key Employee
Loan Program (KELP) and the relocation loan program.
KELP allowed defendants and other executives to
borrow funds to pay taxes due upon the vesting of
restricted stock. The relocation loan program covered
certain moving expenses incurred when the company
transferred an employee to a new geographic area.
Defendants did not, however, utilize these programs for
permissible purposes. Instead, they incurred debts
under them that were used to finance opulent lifestyles.
For example, in 2001, Swartz assisted Kozlowski in
charging $12.75 million in purported KELP loans to
cover the cost of nine paintings, including a Monet and
a Renoir. These paintings were hung in a $30 million
Fifth Avenue apartment that Kozlowski shared with his
wife.? Kozlowski also purchased a $7.2 million Park
Avenue residence, which he later relinquished as part
of a divorce settlement, by charging it to his Tyco
relocation account as a no-interest loan. Additionally,
Kozlowski utilized KELP loans to finance millions of
dollars in jewelry purchases and an $8.3 million stake in
a New Jersey sports partnership. Swartz similarly had
millions of dollars in company loans transferred to his
2. Kozlowski characterized this residence, which was only
used by him and his wife, as a “hotel room,” albeit one that was
“larger and more elaborate.”
4a
Appendix A
personal accounts to cover the costs of personal
expenditures and investments. By August 1999,
Kozlowski and Swartz owed Tyco $52.7 million and $17.4
million, respectively. To satisfy these obligations,
defendants turned to Tyco’s “Incentive Compensation
Plan.”
Under the Plan, defendants were entitled to a base
salary regardless of the company’s performance, but
had the potential to earn “performance awards,” or
bonuses, by exceeding certain performance goals or
“hurdles.” These awards took the form of cash payments
and the vesting of restricted stock. In general, Swartz’s
potential awards were half those of Kozlowski’s.
Performance goals were established by Tyco’s four-
member Compensation Committee, under authority
delegated to it by the corporation’s board of directors.
The Incentive Compensation Plan specifically provided
that prior to any payments the Committee would certify
that the performance goals had been satisfied. Such
certification generally took place at the close of Tyco’s
fiscal year, which ended on September 30, when audited
financial results were available.* The Committee would
review information packages prepared by employees
working under the direction of defendants. In addition,
Swartz would appear before the Committee to explain
3. A 1997 amendment to the Incentive Compensation Plan
permitted the Committee to authorize payments prior to the
close of the fiscal year. No documentation or third-party
testimony was presented that this authority was exercised with
respect to any of the alleged larcenies.
Sa
Appendix A
whether that year’s performance goals had been
satisfied. Following its review, the Committee—acting
as a whole—would determine whether any bonuses were
due defendants and record its awards in the official
minutes.
These procedures were not employed with respect
to the four so-called “mega-larceny” bonus counts,
under which the jury convicted Kozlowski and Swartz
of stealing $77 million and $44.5 million, respectively.
Two of these bonuses—those paid in August 1999 and
August 2000—took the form of reductions of debts that
defendants owed Tyco. During the relevant time periods,
defendants’ loan balances were considerable. Even after
they ordered bonus payments of $25 million (Kozlowski)
and $12.5 million (Swartz) in August 1999, Kozlowski still
owed $27.7 million and Swartz owed $4.9 million. Those
amounts did not decrease over time. Indeed, in August
2000, when defendants facilitated a second round of
“loan-forgiveness” bonuses, including a “tax gross-up,”
that were valued at $32.97 million for Kozlowski and $16.6
million for Swartz, their respective loan obligations stood
at $25 million and $8.3 million.
The remaining bonus counts concerned payments
made in November 2000 and August 2001. In the first,
defendants ordered cash payments for themselves,
totaling $17.2 million (Kozlowski) and $8.65 million
(Swartz). In connection with the November 2000 bonus,
defendants also received $8.2 million (Kozlowski) and
$4.1 million (Swartz) worth of stock. The August 2001
bonus took the form of a vesting of restricted stock.
6a
Appendix A
After the bonus transaction was processed, defendants
sold that stock for $8.2 million (Kozlowski) and $4.1
million (Swartz).
Common to all four of these bonuses was the absence
of documentation in the information packets provided to
the Compensation Committee or that Committee’s minutes
authorizing the bonuses that defendants received. In
addition, every member of the Compensation Committee
who was available to testify at trial denied approving these
purported bonuses.
Defendants asserted, however, that the bonuses had
been properly authorized. As to the first three bonuses,
their claim rested primarily upon Kozlowski’s
communications with the late Philip Hampton, the
former chair of the Compensation Committee.‘
Kozlowski testified that he had explained the
justification and mechanics of these bonuses to
Hampton. According to Kozlowski, Hampton’s response
was that he was “fine with” the bonuses and that he
would “handle” the authorization of the payments by
“dealing with the issues” raised by the Compensation
Committee and by requesting additional materials from
Kozlowski and his subordinates, if necessary. Defendants
proffered no documentation from Hampton or Kozlowski
reflecting these assurances. Swartz did assert that he
made certain presentations to the Compensation
Committee and the board, but also offered no evidence
to support that claim.
4. At the time that he allegedly authorized the first bonus
payment in August 1999, Hampton was suffering from cancer
and receiving radiation treatment and chemotherapy.
7a
Appendix A
Hampton died prior to defendants’ receipt of the
August 2001 bonus. Kozlowski claims that this bonus
was approved by Stephen Foss, then-chair of the
Compensation Committee. After Kozlowski told him that
the bonus had been approved, Swartz ordered that it
be processed. Under the heading “FY 2001 Projected
Incentive Plan Projected Payments,” the Compensation
Committee’s October 2001 minutes contain a resolution
stating that the restricted stock bonus “vested on June
20, 2001.” But defendants had already sold this stock to
a Tyco subsidiary in August 2001, long before the
Compensation Committee passed this retroactive
vesting resolution. There is no documentation or third-
party testimony demonstrating that the Committee was
aware at the time of passage that such sales had
occurred.
In April 2002, Tyco retained the law firm of Boies,
Schiller & Flexner LLP (Boies Schiller) to conduct an
internal investigation into Kozlowski’s payment of a $20
million investment banking fee to a member of the
company’s board, Frank Walsh.® The May 17, 2002
5. Without informing Tyco’s board of directors or its
shareholders, defendants arranged this payment to Walsh in
exchange for his efforts in facilitating Tyco’s merger with the
CIT Group in March 2001. Because they believed that payments
of less than $15 million did not need to be disclosed in Tyco’s
proxy statement, defendants had $10 million paid to Walsh and
another $10 million paid to a charity of his choosing. Walsh
pleaded guilty to a securities fraud charge for concealing the
payment and was sentenced to a fine and a conditional discharge.
Defendants were convicted of first degree grand larceny for
having approved and facilitated the Walsh payment.
8a
Appendix A
retention letter memorializing this engagement states
that it encompassed “any litigation arising from or
relating to” a review and analysis of transactions
between the company and “certain of its directors and
officers.” Such litigation, including a federal multi-
district litigation in a federal court in New Hampshire,
did in fact eventually commence.
At least a dozen Boies Schiller attorneys assisted in
the investigation, which was headed by the firm’s
founding partner, David Boies. Although initially
confined to the circumstances surrounding the Walsh
payment, the Boies schiller investigation expanded in
June 2002, when Kozlowski resigned as CEO after being
indicted for his failure to pay sales taxes owed on
artwork that he purchased. On June 3, 2002, the Boies
Schiller attorneys began looking into whether Tyco’s
directors and officers had engaged in improper
transactions with company funds. In connection with
this assignment, they interviewed Tyco’s employees and
directors. These interviews occurred following
Kozlowski’s departure from Tyco.
On July 17, 2002, Boies interviewed Swartz
regarding the August 1999 bonus. Boies met with
Swartz alone and he did not take notes or otherwise
memorialize the interview. That same day, Boies met
w‘th director, and then-interim CEO, John Fort to report
the results of his interview with Swartz; Swartz was
present for a portion of this meeting. Subsequently,
Boies also met with Tyco’s new CEO, and Fort’s
replacement, Ed Breen, regarding Swartz’s continued
9a
Appendix A
employment and recommended that Tyco’s board of
directors accept a severance package that would pay
Swartz $50 million.
As part of their investigation, Boies Schiller
attorneys also interviewed Tyco’s directors. As
evidenced by Boies Schiller’s retention letter, the
purpose of these interviews was to assist the company
in preparing for potential litigation, particularly
shareholder derivative suits. Thus, on June 6, 2002, a
Boies Schiller attorney interviewed director Fort. As
summarized in privilege logs that Tyco filed in connection
with the federal multi-district litigation in New
Hampshire, this interview concerned the “Walsh
payments.” On August 12 and 13, 2002, Boies Schiller
attorneys interviewed all the surviving members of the
Compensation Committee-directors Stephen Foss,
Peter Slusser and James Pasman. The federal privilege
logs summarize these interviews as concerning the
KELP and relocation loan programs, “Compensation
Events” and “Use of Company Assets.” ®
On August 1, an agreement was reached whereby
Swartz would resign from Tyco’s board of directors
immediately, but continue as CFO until a successor was
found. The August 1 agreement also limited Swartz’s
severance, in the event that he was terminated as CFO
prior to being convicted of a felony, to $50 million. This
reduced Tyco’s severance obligation, as set forth in an
6. The relevant interviews were memorialized in
handwritten notes and a draft memorandum.
10a
Appendix A
earlier retention agreement, by $100 million. Around the
time that the August 1 agreement was entered, Tyco
publicly announced that Swartz would leave the company
when a new CFO was hired.
On August 14, Tyco’s board voted to approve the
August 1 agreement. After that date, however, Swartz
continued to serve as Tyco’s CFO until he was
terminated on September 11, 2002, one day before he
was indicted. In that capacity, he participated in investor
conference calls as one of Tyco’s spokespersons and
signed Tyco’s 10-Q as its representative under the
federal Sarbanes-Oxley Act.
The subpoena duces tecum in question, joined in by
Kozlowski, was served by Swartz’s counsel on October
13, 2004—approximately six months after the initial
mistrial in this case—in preparation for defendants’
second trial. It sought from Boies Schiller “[a]ll
memoranda and notes of {the firm’s] personnel (or
forensic accountants working on their behalf) relating
to interviews of employees, directors or auditors of
Tyco.” The relevant interviews covered a range of 19
topics, including executive compensation, the $20 million
payment to Frank Walsh and the payment or recording
in Tyco’s books and records of the bonuses.
On behalf of Tyco, Boies Schiller moved to quash
the subpoena, arguing that it was overbroad and
impermissibly sought disclosure of materials shielded
lla
“-ppendix A
by the attorney-client and work product privileges.’ In
response, defendants’ counsel submitted an affirmation,
which attached as an exhibit the federal privilege logs.
Defendants placed a check mark next to 72 privilege
log entries, which, they said, identified the documents
responsive to their subpoena.®
Defendants acknowledged that there was “little
dispute” that the requested materials were either
attorney-client or work product privileged, but claimed
that Tyco waived both privileges. According to
defendants, waiver had occurred through: (1) Tyco’s
production to the District Attorney of a large volume of
privileged documents, preda’ ig the Boies Schiller
investigation, (2) testimony by Tyco’s in-house and
corporate counsel and employees regarding privileged
conversations prior to the investigation, (3) the
introduction in evidence of privileged communications
and work product prepared by Tyco’s corporate and
litigation attorneys before the investigation, (4) Boies’s
direct testimony at the first trial, and (5) Tyco’s having
“cooperat(ed] fully” with the District Attorney’s
investigation by responding to document requests and
—.
7. Before filing their reply brief on the motion to quash
the subpoena, Tyco did provide 4 of the 72 requested documents
to defendants. These were notes and memoranda describing
interviews with Swartz, “redacted to exclude attorney’s opinions
or mental impressions,” that Boies Schiller delivered to both
defendants and the People.
8. Only three of those entrics—those that described the
June 6, August 12, and August 13 director—witness
interviews—are relevant here.
12a
Appendix A
questions from that office and preparing employees for
interviews with assistant district attorneys.
To justify their demand for the director-witness
interview notes, defendants argued that such
documents “go directly to the issues underlying this
indictment” and “likely reflect a better recollection by
those witnesses of details and facts th[a]n the witnesses
had at trial, or will have upon a retrial almost three years
after the interviews.” In sum, defendants argued that
they were entitled to these privileged documents
because they are “relevant and material” and because
they “more than adequately identified those specific
memoranda and notes th[at] .. . [are] responsive to the
subpoena.”
In response, Tyco argued that defendants had not
shown a substantial need for the Boies Schiller work
product and an inability to duplicate the same because
“Swartz and his lawyers have access to the same
witnesses Tyco does. He can interview them, he has
already cross-examined them, and he can investigate
them as well as Boies Schiller did.” In addition, Tyco
contended that disclosure of attorney-client and work
product privileged documents produced “in the ordinary
course of Tyco’s business” or for “litigations no longer
at issue,” which the company referred to as “historical
privileged communications,” could not effect a subject
matter waiver over privileged materials prepared in the
course of a subsequent internal investigation.
l3a
Appendix A
Finally, Tyco asserted that defendants’
“suppos[ition]” that it had “presented to the District
Attorney the substance of everything contained in its
attorney’s memoranda and notes [was] . . . incorrect”
(emphasis added). The company argued that it could
respond to subpoenas and document requests, answer
questions and otherwise cooperate with the District
Attorney’s Office without “presenting ... Boies
Schiller’s analysis and strategy from its investigation.”
To bolster this point, Tyco cited the statement of an
assistant district attorney during the related criminal
trial of Tyco’s former general counsel, Mark Belnick: “I
cannot agree with the representation that the Boies firm
have been reporting the results of their interviews to
the District Attorney’s Office.” At oral argument, Tyco’s
counsel stated that, with respect to “Boies Schiller’s
communications with the District Attorney’s Office...
there w[as]n’t disclosure of Boies Schiller work product”
and that “Tyco did not disclose the results of its
investigation to the District Attorney’s Office.”
On January 14, 2005, Supreme Court quashed the
subpoena. The court ruled that no waiver of the work
product privilege had occurred because “there is no
showing that Tyco has disclosed work product created
by Boies, Schiller to the District Attorney.” In addition,
the court concluded that defendants were not entitled
to the director-witness materials under CPLR 3101(d)(2)
because, although they pointed to the importance in this
case of the witnesses’ knowledge and the passage of
time since the interviews were undertaken, defendants
had not explained why they could not have sought to
l4a
Appendix A
conduct their own interviews of these witnesses at an
earlier time. e
At trial, defendants did not move to reopen the
subpoena question following the director-witnesses’
testimony. In the course of Boies’s direct, however, they
objected that they had not seen a privileged
memorandum that described how Boies Schiller had
discovered the illicit August 1999 bonus. The prosecutor
responded by reiterating Tyco’s claim that no materials
prepared by Boies Schiller during the investigation had
been shared with the People, stating: “I want to
emphasize that neither the defense nor the prosecution
has access to... materials that have been held to be
privileged.” Defense counsel further explained, however,
that “[i]t seems like that memorandum is the sole source
of information that [Boies is] relying on for his testimony,
and I think it would be inappropriate for us not to have
access to [it].” The court agreed and ordered production
of the memorandum.
Defendants were convicted and Supreme Court
imposed concurrent prison terms of 8 1/3 to 25 years on
each of the four bonus counts. In addition, the court
ordered joint restitution of $134,351,397 and that fines
of $35 million and $70 million be imposed on Swartz and
Kozlowski, respectively. With one exception—where the
amount was $3 million less—each of these fines
corresponded to the amounts set forth in the indictment
and amounts that defendants affirmatively testified to
having taken. Responding to defendants’ constitutional
argument against imposition of the fines, Supreme
lSa
Appendix A
Court held that “Apprendi applies to the terms of prison
sentences as opposed to fines.”
The Appellate Division affirmed in all respects
(see 47 A.D.3d 111, 846 N.Y.S.2d 44 [2007]). The court
concluded that Boies’s testimony and the prosecutor’s
summation comments thereon did not convey Boies’s
personal opinion as to defendants’ guilt of the crimes
charged; that defendants’ subpoena was properly
quashed because “the documents sought were not
material and exculpatory” (7d. at 120, 846 N.Y.S.2d 44);
and that there was no Apprendi violation because
defendants had “not dispute[d] the amount of their gains
from the acts in question” (7d.).
A Judge of this Court granted defendants leave to
appeal (10 N.Y.3d 767, 854 N.Y.S.2d 329, 883 N.E.2d 1264
(2008]); 10 N.Y.3d 772, 854 N.Y.S.2d 333, 883 N.E.2d 1268
[2008] and we now affirm.
Ra.
Defendants first argue that they are entitled to a
new trial because of the prejudicial effect of Boies’s
testimony and the People’s summation comments on that
testimony. Because the testimony and summation
complained of merely set forth facts enabling the jury
to draw an inference of defendants’ guilt, we disagree.
As an initial matter, the trial court did not abuse
its discretion in permitting the People to elicit
Boies’s background, a general overview of internal
l6a
Appendix A
investigations and the scope of the Tyco investigation.
Defendants assert that testimony regarding Boies’s
credentials—including his having lectured on the topic
of internal investigations—and his statement that law
firms conducting internal investigations often work both
with forensic accountants specially trained to ferret out
“wrongdoing” and with law enforcement authorities,
impermissibly cast a “patina of officialdom” over Boies
Schiller’s work on behalf of Tyco. This background
testimony was not unduly prejudicial. Indeed, such
testimony is generally admissible, especially where, as
here, it provides helpful context for the jury about
complex subject matter, such as an internal investigation.
In addition, such evidence was also admissible to allow
the jury to evaluate defendants’ contention that Boies’s
representation of Tyco in ancillary civil litigation gave
him a motive to slant his testimony in favor of the People
(see 2-401 Weinstein’s Federal Evidence § 401.04[4)][a]).
We turn then to the substance of Boies’s direct
testimony at the second trial.
The purpose of Boies’s testimony was twofold. First,
the People sought to use Boies’s account of his
conversation with Swartz to undercut defendants’ claim
that they had taken the August 1999 bonuses in good
faith (see Penal Law § 155.15). Second, in response to
Swartz’s eliciting testimony tending to show that the
board continued to employ him as CFO after it was
aware of the August 1999 bonuses, Boies’s testimony as
to his conversations with Tyco’s board and senior
management were used to establish how the company
reacted once it became aware of evidence suggesting
17a
Appendix A
that Swartz may have violated company compensation
procedures.
Boies’s testimony on these subjects was limited to a
firsthand factual account. Thus, Boies told the jury that,
on July 17, 2002, he explained to Swartz that his firm’s
investigation had uncovered “no documentation,” either
from Tyco’s board or the Compensation Committee,
authorizing the August 1999 multimillion-dollar
bonuses. Boies then explained that Swartz’s response
to this factual assertion was that a “journal entry”
authorizing those payments was “a mistake.” As Boies
further testified, never in the course of the July 17
interview did Swartz refer to the KELP loan reduction
authorized by this journal entry as “a bonus.” Rather,
said Boies, Swartz stated that he instructed Tyco’s
director of financial operations, Mark Foley, to process
the loan reductions because Kozlowski had told him to
do it.’ In addition Boies testified that Swartz agreed that
he would make good on his mistake by repaying the
money with interest.
Similarly, Boies’s testimony concerning his
interactions with Tyco’s senior management and its
board did not stray from its factual focus. Thus, Boies
9. The Appellate Division held that it was error to admit
this statement against Kozlowski under the theory that it was
made in furtherance of a conspiracy. The court concluded,
however, that the error was harmless because Kozlowski
testified that he instructed Swartz to make the entry after the
late Philip Hampton approved the bonus ( see 47 A.D.3d at 119,
846 N.Y.S8.2d 44). We agree.
18a
Appendix A
explained that during the July 17 interview he told
Swartz that in response to questioning from Boies
Schiller attorneys, Foley stated that Swartz directed him
to process the August 1999 bonuses. Boies then
recounted for the jury another July 17 meeting with
director Fort during which Swartz confirmed his
undertaking to repay the August 1999 bonus with
interest; Boies then told the jury that Swartz did
eventually discharge that obligation. Further, Boies
xpiained that he provided new CEO Breen with certain
“facts” and “information” concerning Swartz, which
carried an “inherent” recommendation regarding
Swartz’s continued employment. Indeed, said Boies,
Breen decided to terminate Swartz “as soon as a
replacement could be identified” and to reduce his role
as CFO in the interim. Boies then discussed the
mechanics of the August 1 agreement that facilitated
the removal of Swartz as a director and limited his CFO-
related severance to $50 million. He told the jury that
he had advised the board to accept the agreement at
the August 14 board meeting and that the board had,
in fact, voted in favor of approval.
It is fundamental that facts, such as those Boies
provided regarding his firm’s investigation of the 1999
bonus, his conversations with Swartz and Fort, his
recommendation to Breen and his advice to the board
“are the appropriate subject of evidence” (see People v.
Creasy, 236 N.Y. 205, 222, 140 N.E. 5638 [1923]). At
bottom, defendants’ complaint is that Boies was
permitted to rebut their testimony and theory of the
case with certain facts that may have led the jury to
19a
Appendix A
convict. This, however, is not prohibited. The line is
crossed not when a witness relates facts that may be
prejudicial, but when he or she conveys—either directly
or indirectly—a personal opinion regarding the
defendant’s criminal guilt (see id. at 209, 221-222, 140
N.E. 563; People v. Ciaccio, 47 N.Y.2d 431, 489, 418
N.Y.S.2d 371, 391 N.E.2d 1347 [1979)).
Contrary to defendants’ assertion, this case is
markedly different from Ciaccio. There, a police
detective was called to corroborate a victim’s account
of a hijacking by answering a hypothetical question that
assumed the facts set forth in the victim’s testimony.
We held that the detective’s testimony that the victim’s
account “was not unusual” constituted improper opinion
evidence because it usurped the function of the jury to
test the credibility of the victim-witness (see Ciaccio, 47
N.Y.2d at 439, 418 N.Y.S.2d 371, 391 N.E.2d 1347). What
was impermissible about the testimony was that its sole
purpose was to bolster the testimony of another witness
by explaining that his version of the events was more
“believable” (7d.). It was thus the equivalent of an
opinion that the defendant was guilty, which is
impermissible.
Here, in contrast, Boies testified to facts. This
testimony was in no sense hypothetical. Indeed,
defendants were provided with Boies Schiller’s work
product memorandum that led to the discovery of the
1999 bonuses. Boies’s testimony, when considered as a
whole, relayed to the jury his preliminary findings
during the investigation and the reaction of Tyco’s
20a
Appendix A
directors and senior management when they were
confronted with those findings. For example, Boies’s
discovery that “[t]here was no documentation” of the
bonuses does not constitute a legal conclusion of guilt—
the jury still had to determine defendants’ intent at
the time of the taking. Similarly, testimony that
Breen resolved on the basis of Boies’s “inherent”
recommendation to remove Swartz immediately or that
the board took Boies’s advice and agreed to pay Swartz
$50 million in severance to facilitate such removal are
not conclusions but facts, which—at most—support an
inference of criminal guilt. Kozlowski and Swartz
vigorously argued that they were entitled to the
bonuses and never contested receiving them. And
Swartz maintained that the board stood behind him
even after it learned of his alleged improprieties. The
People were entitled to present evidence casting doubt
on those theories. In sum, Boies recounted facts, which
the jurors, in light of their experience, could use to test
the merits of the charges levied against defendants
(see Creasy, 236 N.Y. at 222, 140 N.E. 563; Ciaccio, 47
N.Y.2d at 439, 418 N.Y.S.2d 371, 391 N.E.2d 1347).
We likewise reject defendants’ assertions that the
prosecutor’s summation of Boies’s testimony was
prejudicial. Defendants place particular emphasis on the
prosecutor’s statement—made in response to
defendants’ assertion that Tyco’s directors had branded
them as scapegoats to avoid their own civil and criminal
liability--that the board only became aware of
defendants’ illicit activities “after the forensic auditors
had come in and combed through all the tens of millions
2la
Appendix A
of pages that are the books and records of Tyco [aJnd
after the Boies lawyers ha[d] done their investigation.”
But this, as well as the prosecutor’s references to Boies’s
factual testimony, did not convey a “personal belief or
opinion” regarding the trial evidence or defendants’
guilt (see People v. Bailey, 58 N.Y.2d 272, 277, 460
N.Y.S.2d 912, 447 N.E.2d 1273 [1983]). Instead it quite
properly “concentrated, in argument, on proved facts
and circumstances and the inferences to be drawn
therefrom” (id.).
IIf.
The second issue we address is whether Supreme
Court abused its discretion in quashing defendants’
subpoena. Our standard for enforcing a third-party
subpoena duces tecum was set forth nearly 30 years ago
in People v. Gissendanner, 48 N.Y.2d 548, 550, 423
N.Y.S.2d 893, 399 N.E.2d 924 [1979]. Under it,
defendants must proffer a good faith factual predicate
sufficient for a court to draw an inference that specifically
identified materials are reasonably likely to contain
information that has the potential to be both relevant
and exculpatory.
>
Here, the People’s case centers on the charge that
defendants’ bonuses were not approved by the
Compensation Committee or the board of directors.
Defendants maintain that the bonuses were properly
approved through the efforts of either the late Philip
Hampton or Stephen Foss. Among other things, their
subpoena seeks specifically identified statements made
22a
Appendix A
by the director-witnesses regarding key issues in this
case, including, most notably, compensation events.
Although defendants have certainly not made a robust
showing under Gissendanner, we disagree with the
People’s contention that defendants were simply fishing
for “general credibility” evidence (see Gissendanner, 48
N.Y.2d at 548, 423 N.Y.S.2d 893, 399 N.E.2d 924). Indeed,
the trial court implicitly recognized as much by confining
its written opinion on the subpoena application to
questions concerning the applicability of the work
product and trial preparation privileges (cf United
States v. Nixon, 418 U.S. 683, 703, 94 S.Ct. 3090, 41
L.Ed.2d 1039 [1974] [after determining that subpoena
is otherwise enforceable court must evaluate whether
documents sought are shielded by privilege]).
The proper purpose of a subpoena duces tecum, of
course, is to compel the production of specific documents
that are relevant and material to facts at issue in a
pending judicial proceeding. The relevant and material
facts in a criminal trial are those bearing upon “the
unreliability of either the criminal charge or of a witness
upon whose testimony it depends” (see Gissendanner,
48 N.Y.2d at 550, 423 N.Y.S.2d 8938, 399 N.E.2d 924).
Here, defendants seek to challenge the director-
witnesses’ testimony that they did not approve the four
charged bonuses, evidence that bears directly on the
question whether defendants took those bonuses under
a good faith claim of right (see Penal Law § 155.15{1)).
In meeting the burden for production, defendants
need not—and indeed could not—show that director-
23a
Appendix A
witness statements are “actually” relevant and
exculpatory (see Gissendanner, 48 N.Y.2d at 550, 423
N.Y.S.2d 893, 399 N.E.2d 924).'° Gissendanner does
mandate, however, that they point to specific facts
demonstrating a reasonable likelihood that such
material may be disclosed and that they are not engaged
in a fishing expedition. In applying this standard, we
must give due regard to the accused’s right to a fair
trial (Ritchie, 480 U.S. at 56, 107 S.Ct. 989; Nzxon, 418
U.S. at 711, 94 S.Ct. 3090)."!
Here, defendants were not engaged in “general
discovery” regarding the director-witness statements.
Instead, they identified the specific director-witness
interview notes and memorandum that they sought by
referring Supreme Court to Tyco’s privilege log.
Defendants pointed to undisputed facts, arguing that
after the directors were made aware of at least some of
defendants’ questionable activities through the Boies
Schiller investigation, they continued to permit Swartz
to exercise substantial authority as the CFO of Tyco until
10. The People do not urge us to adopt the Appellate
Division’s framing of the Gissendanner test, which would
require defendants to show that “the documents sought were
... material and exculpatory” (see 47 A.D.3d at 120, 846 N.Y.S.2d
44 [emphasis added]). In any event, we reject this standard, as
it is “impossible” to satisfy absent review of the relevant
documents (see Pennsylvania v. Ritchie, 480 U.S. 39, 57, 107
S.Ct. 989, 94 L.Ed.2d 40 [1987]).
11. As the People point out, defendants did not raise a
constitutional argument in support of their subpoena below,
and we therefore address none.
24a
Appendix A
September 11, 2002—the day before he was indicted—
and voted to pay him $50 million in severance just one
day after the last of the relevant director interviews.
On the basis of these facts, defendants asserted that
the “directors witnesses ... did not believe Mr. Swartz
had engaged in any wrongful conduct and only ‘changed
their tune’ after the District Attorney obtained an
indictment.” The People argue that this factual showing
was insufficient.
We conclude that defendants met their burden
under Gissendanner: they identified specific director-
witness statements and proffered facts that permitted
an inference that those statements were reasonably
likely to contain material that could contradict the
statements of key witnesses for the People. In this case,
however, there is a claim that the relevant documents
are privileged and thus not subject to production.
Additional analysis is therefore required.
IV.
As frequently occurs today, the director-witness
statements were obtained in the course of corporate
internal investigation, which inevitably implicates the
attorney-client and work product privileges (see McNeil
and Brian, Internal Corporate Investigations, at 18-19
[8d ed] [hereinafter McNeil and Brian]). In that
connection, private law firms conducting internal
investigations may consult with law enforcement
authorities to advance their corporate client’s interest
in avoiding potentially serious criminal sanctions
25a
Appendix A
(see e.g. United States v. Stein, 541 F'3d 130, 137, 142
(2d Cir.2008}). While collaboration between prosecutors
and attorney investigators may provide a public benefit
through the more efficient detection and punishment
of corporate wrongdoing, it may come at the expense of
the proper safeguarding of the rights of individual
corporate employees (see Stein, 541 F.3d at 156-157).
Courts must be sensitive to these competing
considerations and endeavor to strike an appropriate
balance between the rights and interests of law
enforcement, corporations and their employees, and the
accused. We cannot say that the balance struck by the
trial court here amounts to an abuse of discretion as a
matter of law.
This case highlights a tension in CPLR 3101’s
treatment of attorney work product (which is not
obtainable) and trial preparation materials (which may
be disclosed “only upon a showing that the party seeking
discovery has a substantial need of the materials in the
preparation of the case and is unable without undue
hardship to obtain the substantial equivalent of the
materials by other means” [CPLR 3101(c), (d)(2)]). The
separation of work product and trial preparation
materials was apparently an attempt to shield materials
protected by the attorney-client privilege from
disclosure (see 11th Ann Rep of N.Y. Jud. Conf., at 152
[1966] (“Whoever drafted the ‘work product’ provision
. was doubtless thinking of such things as private
consultations between attorney and client and
memoranda of them” ]; Connors, Practice Commentaries,
McKinney’s Cons Laws of N.Y., Book 7B, CPLR
26a
Appendix A
C3101:27, at 53-54; Siegel, N.Y. Prac. § 347 [4th ed.]).
Thus, when particular work product is generated for
litigation, courts have tended to classify it as trial
preparation material, unless it contains otherwise
privileged communications (see Connors, Practice
Commentaries, McKinney’s Cons. Laws of N.Y., Book 7B,
CPLR C3101:27, at 53-54).
Here, the director-witness interview notes and
memorandum were prepared to assist Tyco’s preparation
for civil litigations that eventually commenced. In its motion
to quash the subpoena, Tyco asserted that these materials
were shielded by the attorney-client privilege, stating at
oral argument that “[t]hose are interviews with Tyco
employees ... [who] are communicating with counsel for a
... legal purpose.” Assuming that these communications
were confidential, this assertion may well be correct. In
this Court, however, neither the People nor defendants
urge us to hold that the director-witness interview
materials are attorney-client privileged. Instead,
defendants assert that those statements are merely
conditionally-privileged trial preparation materials while
the People contend that they are absolutely privileged work
product.
12. A trial court may conduct an in camera review of
subpoenaed materials to assess an opposing party’s privilege
claims (see Matter of Subpoena Duces Tecum to Jane Doe, 99
N_.Y.2d 434, 442, 757 N.Y.S.2d 507, 787 N.FE.2d 618 [2003]; accord
Matter of Nassau County Grand Jury Subpoena Duces Tecum
Dated June 24, 2008, 4 N.Y.3d 665, 679 n. 11, 797 N.Y.S.2d 790,
830 N.E.2d 1118 (20051). Here, however, no such review was
necessary because defendants failed to meet the statutory
criteria necessary to obtain production of the director-witness
statements (see CPLR 3101[d] [2]).
27a
Appendix A
On this record, we conclude that defendants have
the better argument. This is because they have limited
their request to “the facts reported to Boies Schiller in
th[e] interviews.” Indeed, defendants expressly agreed
to permit Supreme Court to redact any material that
would reveal opinion work product, or that portion of
the interview notes reflecting the Boies Schiller
attorneys’ “mental impressions, opinions, or legal
theories” (see McNeil and Brian at 47). As we explained
(see People v. Consolazio, 40 N.Y.2d 446, 453, 387
N.Y.S.2d 62, 354 N.E.2d 801 [1976]), the mere fact that
a narrative witness statement is transcribed by an
attorney is not sufficient to render the statement “work
product” (see also Siegel, N.Y. Prac. § 347 [“The fact
that a lawyer has taken a statement from a witness does
not transmute the statement into a ‘work product’: a
lay person could have taken it”}; Weinstein-Korn-Miller,
N.Y. Civ. Prac. 7 3101.47 (“Where . . . statements of
witnesses could not reveal legal analysis or strategy by
their disclosure, and legal training might have been
used but was not required for their creation, the courts
should consider them trial preparations covered by
CPLR 3101(d)”)).
Although we agree with defendants that the
director-witness statements are trial preparation
materials and not absolutely privileged, enforcement of
their subpoena was directed to the trial court’s
discretion (see Gissendanner, 48 N.Y.2d at 550, 423
N.Y.S.2d 893, 399 N.E.2d 924; cf People v. Hodge, 53
N.Y.2d 318, 319, 441 N.Y.S.2d 231, 423 N.E.2d 1060
[1981]). In making its discretionary determination that
28a
Appendix A
defendants did not establish an inability to “obtain the
substantial equivalent” of the facts contained in the
director-witness interview notes without “undue
hardship” (see CPLR 8101[d]{2]; Weinstein-Korn-Miller,
N.Y. Civ Prac {1 3101.55), Supreme Court relied upon
defendants’ failure to “explain[ ] why the defense could
not have sought to conduct its own interviews of these
witnesses at an earlier time.” We cannot say that this
conclusion represents an abuse of the trial court’s
discretion. Defendants made no effort to show any
“undue hardship” that would have prevented them from
securing their own “substantial[ly] equivalent”
interviews with the director-witnesses (see CPLR
3101[d] [(2]). As Tyco pointed out in its reply submission
on its motion to quash, defendants “have access to the
same witnesses as Tyco does.”
Even on appeal, defendants have not proffered an
explanation for their failure to seek interviews with the
directors at an earlier time or stated whether they ever
made an independent attempt to secure the relevant
statements, a requirement for obtaining an attorney’s
trial preparation materials (see Hickman v. Taylor, 329
U.S. 495, 513, 67 S.Ct. 385, 91 L.Ed. 451 [1947]
| production of attorney’s account of witness statements
is justified only in “rare” cases and is not appropriate
when potential for “direct interviews with the witnesses
themselves” is possible]; see also In re Grand Jury
Proceedings, 219 F:3d 175, 192 [2d Cir.2000] [remanding
for a determination whether government had
“exhausted other means” for obtaining work product
and instructing prosecutor to “explain to the district
29a
Appendix A
court why it cannot obtain the information it seeks
through other witnesses” ]; United States v. Reyes, 239
F.\R.D. 591, 602 n. 2 [N.D. Cal.2006]; People v. Grady,
130 Misc.2d 677, 679, 497 N.Y.S.2d 234 (Sup. Ct., Bronx
County 1985)).
Since they failed to make the requisite showing of
“undue hardship” under CPLR 3101(d)(2), defendants
would only have been entitled to production of the
director-witness statements if Tyco had waived the
qualified privilege covering those documents (see United
States v. Nobles, 422 U.S. 225, 239, 95 S.Ct. 2160, 45
L.Ed.2d 141 [1975]}). The qualified privilege governing
trial preparation materials “is waived upon disclosure
to a third party where there is a likelihood that the
material will be revealed to an adversary, under
conditions that are inconsistent with a desire to maintain
confidentiality” (see Bluebird Partners v. First Fid.
Bank, N.J., 248 A.D.2d 219, 225, 671 N.Y.S.2d 7 [1st
Dept.1998]). In response to defendants’ specific waiver
allegations, Tyco bore the burden of establishing that
no such waiver had occurred (see Spectrum Sys. Intl.
Corp. v. Chemical Bank, 78 N.Y.2d 371, 377, 575 N.Y.S.2d
809, 581 N.E.2d 1055 [1991)).
The determination of whether and to what extent
waiver has occurred is inherently factual and turns on
case-by-case considerations of “fairness” (see John Doe
Co. v. United States, 350 F.3d 299, 302 [2d Cir.2003],
quoting /n re Grand Jury Proceedings, 219 F.3d at 183).
Although review of this discretionary determination is
“highly deferential” (John Doe Co., 350 F.3d at 306), the
30a
Appendix A
U.S. Supreme Court has indicated that a trial court
properly exercises its discretion when it orders
disclosure of “the portion” of trial preparation materials
that is directly relevant to another, previously-disclosed,
portion (see Nobles, 422 U.S. at 240, 95 S.Ct. 2160). Thus,
a party is essentially precluded from using its trial
preparation materials as both a sword and a shield. In
evaluating defendants’ waiver claims, we must confine
our analysis to those arguments they asserted before
Supreme Court (see People v. Nieves, 2 N.Y.3d 310, 315,
778 N.Y.S.2d 751, 811 N.E.2d 13 [2004]). We affirm
Supreme Court’s discretionary determination that Tyco
met its burden of establishing the absence of waiver in
this case.
Defendants first argue that waiver occurred when
Tyco produced attorney-client and work product
privileged materials to the People in response to their
grand jury subpoena. Tyco had initially declined to
vender these documents because it was conducting a
privilege review. Two days before the grand jury’s term
was to expire, however, Tyco honored the District
Attorney’s demand that it produce the documents to
prevent unnecessary delay in the grand jury’s
deliberations.'’ Defendants do not dispute that the
13. In its letter accompanying production of these
documents, Tyco referenced an agreement with the District
Attorney, whereby “production... would not constitute a waiver
of any privilege.” In light of our conclusion that these documents
were unrelated to the director-witness statements, we need not
pass upon the effect—if any—of Tyco’s “reservation” of its
privilege.
3la
Appendix A
documents produced in response to the subpoena do
not refer to the Boies Schiller investigation. As Supreme
Court found, those documents—which were prepared
by Tyco’s in-house and outside counsel—“were not
created for the current criminal case and civil
proceedings, but for past litigation, government filings
and other corporate actions.” In addition, it can hardly
be said that Tyco was wielding the qualified privilege
covering these documents as both a sword and a shield
Since it provided them to both the People and
defendants before trial.
Defendants cite no authority for the proposition that
disclosure of historical privileged documents waives the
privilege covering trial preparation materials created
in a subsequent internal investigation. We decline to so
hold. We reach this conclusion because a trial court has
discretion to limit waiver of the qualified privilege
covering trial preparation to matters actually referenced
in disclosed materials. Here, the materials produced to
the grand jury did not—and could not—refer to
director-witness interview notes and a memorandum
produced in a subsequent internal investigation."
14. Defendants also premise their documentary waiver
claims on the introduction in evidence of KELP summaries
prepared by UKW, a forensic accounting firm that assisted
Boies Schiller in its investigation, and the minutes of the board’s
August 14 meeting, which described Boies’s recommendation
that Tyco fire Swartz and summarized Tyco’s counsel’s
discussion with an assistant district attorney regarding Swartz’s
potential indictment. Having failed to present these claims to
(Cont'd)
32a
Appendix A
Next, defendants argue that waiver occurred through
Tyceo’s cooperation with the District Attorney’s
investigation. It is beyond dispute that, had Boies Schiller
provided the prosecution with the “written or recorded
statements” of the director-witnesses, or had the People
taken such notes themselves, defendants would be entitled
to those statements pursuant to the rule of People v.
Rosario, 9 N.Y.2d 286, 213 N.Y.S.2d 448, 173 N.E.2d 881
[1961]; CPL 240.45. But defendants ask us to hold that
the statements should have been provided here based upon
their conjecture that Boies Schiller attorneys shared the
substance of the director-witness statements with the
People. Two assistant district attorneys and Tyco’s counsel,
all of whom owed duties of candor to the tribunal, denied
that this occurred (see Code of Professional Responsibility
DR 7-102[a}[5] {22 NYCRR 1200.33(a)(5) J). Certainly, it is
possible for attorneys to assist prosecutors without
divulging their trial preparation materials. Absent some
other proof, we conclude that Supreme Court properly
held that defendants had not established any disclosure
of Boies Schiller work product to the People.
Defendants also urge that “testimonial” waivers
occurred at the first trial when Tyco’s lawyers and
employees testified regarding privileged communications
that occurred prior to the internal investigation. Here,
again, however, there is no showing that the jury in the
(Cont'd)
Supreme Court, defendants may not raise them here. But, we
note that like their other examples of purported waiver, neither
of these documents references or relies upon the key director-
witness interview statements.
33a
Appendix A
first trial needed the director-witness interview notes and
memorandum to properly assess the evidence.
But defendants say that “Tyco’s [testimonial] waivers
were not limited to events that occurred prior to the
investigation.” They assert that a Tyco employee’s
testimony that Boies asked her about the 1999 bonus and
instructed her to “really think about it because he was
talking about fraud” and that another Boies Schiller
attorney asked her for a relocation loan plan document
constituted waiver. This testimony certainly references
communications with the Boies Schiller attorneys, but it
does not impermissibly use the relevant director-witness
statements as both a sword and shield (see In re Grand
Jury Proceedings, 219 F.3d at 192). Indeed, the referenced
testimony does not even mention those statements.
According to defendants, the “most damaging”
testimonial waiver occurred during the testimony of David
Boies. But they point to no impermissible use of the
director-witness statements. Boies’s direct testimony was
limited to facts concerning the interview with Foley, his
July 17, 2002 conversations witii Swartz and Fort, his
recommendation to Breen regarding Swartz’s continued
employment and his recommendation that the board
approve Swartz’s severance package. At no point in his
testimony did Boies seek to bolster his statements with
the aid of the relevant director-witness statements.
Moreover, in response to defendants’ specific request,
Supreme Court ordered disclosure of a privileged
memorandum upon which a portion of Boies’s testimony
was based. At that time, defendants did not request any
34a
Appendix A
disclosure of the director-witness statements." Thus,
under these circumstances, there was no waiver and no
abuse of discretion (compare Nobles, 422 U.S. at 239-
240, 95 S.Ct. 2160 [work product privilege over portions
of investigator’s report waived where “respondent
sought to adduce the testimony of the investigator”
regarding witness statements contained in the report]).
V
Finally, defendants challenge the constitutionality
of the fines that were imposed upon them. They contend
that these fines contravened their right to a jury trial,
as guaranteed by the Sixth Amendment to the U.S.
Constitution.
Penal Law § 80.00(1) provides that
“{a] sentence to pay a fine for a felony shall be
a sentence to pay an amount, fixed by the
court, not exceeding the higher of
“a. five thousand dollars; or
“b. double the amount of the defendant’s gain
from the commission of the crime.”
15. During Boies’s testimony, defendants also specifically
requested handwritten notes taken by director Slusser at board
meetings conducted on July 2 and 17, and August 14, 2002. In
response to a claim of privilege, Supreme Court reviewed these
materials in camera and declined to order their production.
35a
Appendix A
When a fine is imposed on the basis of “gain,” “the
court shall make a finding” as to that amount (see Penal
Law § 80.00[3] [emphasis added]). This finding may be
based upon facts brought out at trial, a plea allocution,
sentencing, or a factfinding hearing conducted pursuant
to CPL 400.30 (see Donnino, Practice Commentary,
McKinney’s Cons. Laws of N.Y., Book 39, Penal Law art.
80 [“Fines”], at 6). Here, Supreme Court did not hold a
CPL 400.30 hearing and instead appears to have based
defendants’ fines upon facts brought out at trial or
conceded in “sentencing letters” that defendants filed
with the court.
In Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct.
2348, 147 L.Ed.2d 435 [2000] and its progeny, the U.S.
Supreme Court has set forth three rules delineating
when judicial fact-finding in sentencing is impermissible
under the Sixth Amendment. First, the Court has
directed that “[o]ther than the fact of a prior conviction,
any fact that increases the penalty for a crime beyond
the prescribed statutory maximum must be submitted
to a jury, and proved beyond a reasonable doubt” (id.
at 490, 120 S.Ct. 2348). The Court has subsequently
referred to this as a “bright-line rule” (see Blakely v.
Washington, 542 U.S. 296, 308, 124 S.Ct. 2531, 159
L.Ed.2d 403 [2004]). Second, the “ ‘statutory maximum’
for Apprendi purposes is the maximum sentence a judge
may impose solely on the basis of the facts reflected in
the jury verdict or admitted by the defendant ” (Blakely,
542 U.S. at 303, 124 8.Ct. 2531; accord United States v.
Booker, 543 U.S. 220, 235, 125 S.Ct. 738, 160 L.Ed.2d
621 [2005] | Apprendi violation occurs when judges
36a
Appendix A
“f(ijnd facts beyond those found by the jury”]). Third,
Apprendi violations are subject to harmless-error review
(see Washington v. Recuenco, 548 U.S. 212, 220-221, 126
S.Ct. 2546, 165 L.Ed.2d 466 [2006]). We apply the third of
these rules to the present case.
Assuming without deciding that an Apprend? violation
occurred here,.we nonetheless affirm because error, if any,
was harmless. Our precedents establish that “all the
elements of an indicted crime which are not conceded by
defendant or defendant’s counsel must be charged [to the
jury]” (see People v. Flynn, 79 N.Y.2d 879, 881, 581 N.Y.S.2d
160, 589 N.E..2d 383 [1992] [emphasis added]; see also
People v. Walker, 198 N.Y. 329, 335, 91 N.E. 806 [1910]
(“(W)hen a fact, even of great importance, is admitted by
the defendant or his counsel in open court during the trial,
that fact is established by the admission, and no evidence
need be given in relation to it”]). Here, defendants’ tria!
testimony—with respect to each of those counts upon
which the trial court imposed fines—established gains that
corresponded to or exceeded the fine amounts. Thus, the
Apprendi violation here, if any, was harmless (see Recuenco,
548 U.S. at 215, 126 S.Ct. 2546).
We have considered defendants’ remaining arguments
and conclude that they are either unpreserved or without
merit. Accordingly, the order of the Appellate Division
should be affirmed.
Chief Judge KAYE and Judges GRAF FEO, READ,
SMITH, PIGOTT and JONES concur.
In each case: Order affirmed.
37a
APPENDIX B — OPINION OF THE SUPREME
COURT, APPELLATE DIVISION, FIRST
DEPARTMENT, NEW YORK,
DATED NOVEMBER 15, 2007
SUPREME COURT, APPELLATE DIVISION,
FIRST DEPARTMENT, NEW YORK
THE PEOPLE OF THE STATE OF NEW YORK,
Respondent,
v.
L. DENNIS KOZLOWSKI,
Defendant-Appellant.
THE PEOPLE OF THE STATE OF NEW YORK,
Respondent,
v.
MARK H. SWARTZ,
Defendant-Appellant.
Nov. 15, 2007
DAVID FRIEDMAN, J.P, JOSEPH P SULLIVAN,
JOHN T. BUCKLEY, BERNARD J. MALONE, JR., JJ.
38a
Appendix B
SULLIVAN, J.
The convictions at issue arise out of the prosecution
of defendants Dennis Kozlowski and Mark H. Swartz,
who were respectively the CEO and CFO of Tyco
International, a multinational public corporation, for
allegedly engaging in large-scale self-dealing and
drawing on Tyco’s treasury, as they saw fit, for their
own personal use, including investments, luxuries and
expenses. They allegedly accomplished this by abusing
corporate procedures while keeping the directors and
shareholders in the dark. Allegedly, they stole more
than $100 million in three “bonus” larcenies in 1999 and
2000 and many millions more in other thefts until their
enterprise began to unravel in January 2002, when
Tyco’s board learned that defendants had made a secret
$20 million payment to a supposedly independent
director. In June 2002, Kozlowski abruptly resigned and
left Tyco after being indicted by a New York County
grand jury. A few months later, in September, both
defendants were charged in a second indictment with
several counts of first degree grand larceny, multiple
counts of falsification of business records, securities
fraud and conspiracy, leading to a conviction after trial.!
Defendants raise a host of issues. Contrary to their
arguments, the larceny convictions relating to bonuses
were based on legally sufficient evidence and were not
against the weight of the evidence. The evidence amply
1. Ata first trial, the jury was unable to agree because of a
lone holdout, and a mistrial was declared.
39a
Appendix B
supports the conclusion that defendants took
unauthorized bonuses from Tyco in 1999 and 2000.
As neither defendant disputes, only Tyco’s
compensation committee, acting as a whole, had the
authority to grant them any compensation. Every
member of that committee, with the exception of Philip
Hampton, who had died early in 2001, before the trial,
testified to never having heard of these mid-year
payments, much less to having voted approval. As the
compensation committee minutes show, neither the
August 1999 $37.5 million reduction of defendants’
massive Key Employee Loan Program (KELP) balances,
run up during the first three quarters of that fiscal year,
nor the August 2000 TyCom IPO bonuses—$32 million
for Kozlowski and $16 million for Swartz—in the form of
a loan reduction plus tax gross-up (additional benefit to
cover taxes), nor the November 2000 ADT Automotive
bonuses—$16 million for Kozlowski and $8 million for
Swartz, was authorized.
As the record shows, there were no references to
any of these multimillion-dollar payouts in the materials
prepared for the committee, no resolutions approving
tiese bonuses in the staff minutes prepared for the
committee, and no reference to bonuses in the
committee’s reports to the board.’ Before either
2. While an exhibit to the minutes of the October 1, 2001
compensation committee meeting does certify that certain of
defendants’ shares vested on June 20, 2001 (the FLAG bonus),
the committee did not have the full facts before it when it made
this resolution, and defendants did not have the right to vest
and sell their shares prior to the resolution.
40a
Appendix B
defendant could receive a bonus, the compensation
committee had to certify that the performance goals had
been satisfied. Since Tyco’s fiscal year ended on
September 30, this certification usually occurred in early
October. Most notably, Tyco’s annual proxy “tatements,
prepared under defendants’ supervision, failed to
indicate even the most oblique reference to their
multimillion-dollar midyear bonuses. This documentary
void revealed more than a few isolated “procedural
irregularities,” as Swartz maintains, or a “failfure] to
adhere meticulously to all of the niceties of corporate
governance,” as Kozlowski would have it. Rather this
consistent pattern of documentary omission over a
period of years constituted powerful evidence of
defendants’ intentional hiding of these payments from
the directors and led inexorably to the jury’s conclusion
that defendants took these bonuses without permission
or authority. The absence of any reference to these
transactions in the chain of documentation available to
the committee clearly demonstrates defendants’ coverup
of their thievery.
Defendants’ testimonial claims of entitlement—that
the bonuses represented early payouts of money that
would otherwise have been due them or, at least, that
they believed was due them—presented a question of
fact for the jury and was, indeed, a hard sell. While the
committee could have made midyear payouts if it chose
to, such an event would have run counter to Tyco’s highly
touted pay-for-performance philosophy.
4la
Appendix B
More significantly, though, the entitlement claim was
flatly refuted by Mak Foley, the Tyco executive who
was responsible for the calcuiation of the year-end
figures on which the annual bonuses were based. In fact,
Foley’s testimony unequivocally established that
defendants received everything they were entitled to
under the end-of-the-year formula. Thus, defendants’
claims only succeeded in pitting their credibility against
that of the committee members and Foley and various
other members of their own staff. Defendants even
contradicted each other on a number of points. The
jury’s resolution of this factual issue is amply supported
by the weight of the evidence since defendants’ self-
serving testimony was illogical, internally inconsistent,
refuted by Tyco’s records and shown to be false by all
other witnesses. While defendants assert that their
entitlement and good-faith claims present a legal!
sufficiency issue, we cannot discern one except for the
1999 bonus, preserved by the motion for a trial order of
dismissal, which we reject.
We reject defendants’ argument that their conduct
with respect to the August 1999 bonuses (counts 1 and
2) did not constitute larceny, but rather, a civil wrong.
These bonuses took the form of a reduction of
defendants’ KELP balances without any tax gross-up,
i.e., money, leaving Tyco. As noted, in reaching its
verdict, the jury rejected defendants’ tale of entitlement,
raised after the fact, and accepted the evidence showing
that they took the bonuses without approval. The
argument that the bonuses awarded to defendants in
1999 and 2000—used completely in 1999 and partially
42a
Appendix B
-in 2000 to pay down their KELP loan accounts—shows
that there was no taking from another, reduces itself to
a claim that “all that transpired was the making of
certain book entries,” a claim that, as the trial court
aptly noted, “exalts form over substance.” While,
indeed, the mere failure to pay one’s debts does not
constitute larceny (see People v. Yannett, 49 N.Y.2d 296,
299, 425 N.Y.S.2d 300, 401 N.E.2d 410 [1980]; see also
People v. Jennings, 69 N.Y.2d 103, 127, 512 N.Y.S.2d
652, 504 N.E.2d 1079 [1986] ), this is not a case of
defendants’ failure to repay their debts. On the contrary,
they did repay their debts, but with money in the form
of bonuses that they unlawfully took from Tyco. In 1999,
they clearly exercised collectively dominion and control
over $37.0 million of Tyco’s money and allocated it to
their own benefit, precisely the sort of taking that
establishes larceny (see id. at 118-119, 512 N.Y.S.2d 652,
504 N.E.2d 1079).
The evidence was legally sufficient to support
Swartz’s conviction for stealing $1.2 million (count 7),
and that conviction is not against the weight of the
evidence. Tyco received nothing of value in exchange
for the $1.2 million it wired to Swartz’s personal account.
As the record shows, Swartz had contracted for the
purchase of 13 units at the Trump International Hotel
and Tower “as a personal investment” and had paid the
10% down payment of $1.2 million with his own funds.
Prior to March 1, 2001, the date the $..2 million of Tyco’s
funds were wired to Swartz, the seller of the Trump
condominium units had already infor:aed the purchaser,
a nominee of the undisclosed Swartz, that he was in
43a
Appendix B
default for his intransigent refusal to disclose the real
buyer’s identity, giving the seller the right to keep the
$1.2 million down payment. Thus, the jury properly
found Swartz guilty of stealing the $1.2 million he paid
himself as “reimbursement” for the down payment, for
which, as noted, Tyco received nothing in return.
The evidence was also legally sufficient to support
Kozlowski’s conviction for stealing $1.975 million (count
10) for the purchase of three paintings at a London
gallery, and that conviction is not against the weight of
the evidence. Kozlowski did not have authority to spend
Tyco’s money on paintings for his personal use. While
he had authority to make capital expenditures of up to
$200 million without board approval, this authority was
to make purchases for business purposes, not personal
use. There is no indication of a business purpose for the
purchase of these paintings, used to furnish the luxurious
Fifth Avenue apartment Kozlowski and his wife occupied
and title to which was in his name personally. While
Kozlowski had the paintings listed as assets on Tyco
books, the record of this purchase, claimed by Kozlowski
to be “appropriate,” failed even to mention that
paintings were involved; nor was any invoice attached
to the wire-transfer form to explain what was being
purchased. The form requested that $1.975 million be
moved from Tyco to the account of an otherwise
unidentified “Richard Green” and noted only that the
money was for “Furniture/Furnishings for N.Y.
apartment” at “950 5th Ave.,” an apartment that was
carried on Tyco’s books. Interestingly, the directors had
no idea that this supposed “Tyco facility” even existed.
44a
Appendix B
A jury could find that this mask of legitimacy, created
by Kozlowski to justify the money transfer, could not
disguise the fact that he was embezzling money from
Tyco for his personal use without any intention of ever
repaying it.
Defendants’ convictions for stealing $8.8 million in
or about December 2001 (count 11) and $3.95 million on
or about January 3, 2002 (count 12) were sufficiently
proven, and those convictions were not against the
weight of the evidence. There was no basis for Kozlowski
to take Tyco’s money in the form of KELP loans to
purchase works of art. KELP loans were to be taken to
pay taxes on the vesting of restricted stock, not to buy
paintings. Given the manner in which defendants
misused KELP one can reasonably infer that Kozlowski
did not intend to repay the loans. As for Swartz’s
involvement, he told Tyco’s senior vice president for
finance to charge the art to Kozlowski’s account.
The evidence was also sufficient to support
defendants’ conviction for stealing $20 million (count 13),
and the verdict was not against the weight of the
evidence. Tyco’s bylaws and the testimony of various
Tyco directors show that Kozlowski did not have
authority to pay an outside director an investment
banking fee in connection with Tyco’s acquisition of CIT,
when that director had advocated the transaction
without revealing his interest. This incident, which was
ultimately determined to involve criminality at the
receiving end of the transaction as well, led to the
board’s suing the director for return of the payment.
45a
Appendix B
As for Swartz’s involvement, he authorized the
director’s invoices to be paid.
Defendants’ arguments for overturning the Martin
Act conviction (count 15) are unavailing. “[|T]Jo sustain a
claim that the state’s jurisdiction has been preempted
by federal law, the defendant must show a clear and
unambiguous intent of Congress to do so” (People v.
Cohen, 9 A.D.3d 71, 87, 773 N.Y.S.2d 371 [2004], lv.
denied 2 N.Y.3d 797, 781 N.Y.S.2d 296, 814 N.E.2d 468
[2004], cert. denied 543 U.S. 927, 125 S.Ct. 316, 160
L.Ed.2d 227 [2004] ). Defendants have not shown such
a clear and unambiguous intent. On the contrary,
“Congress plainly contemplated the possibility of dual
litigation in state and federal courts relating to securities
transactions” (Matsushita Elec. Indus. Co. v. Epstein,
516 U.S. 367, 383, 116 S.Ct. 873, 134 L.Ed.2d 6 (1996];
see also 15 USC § 78bb{a]). As for defendants’ claim that
the People relied on an impermissible “management
integrity” theory of materiality, a fair reading of the
People’s opening and closing fails to support such a
claim.
We reject defendants’ arguments that their
convictions for falsifying Director and Officer
Questionnaires (DOQs) (counts 18-31) are not supported
by legally sufficient evidence and are also against the
weight of the evidence. The DOQs explicitly state that
the person signing them is not required to disclose
KELP loans and loans made in the ordinary course of
business. As the evidence showed, relocation loans were
mistakenly understood at Tyco to be in the ordinary
46a
Appendix B
course of business. To be sure, defendants misused both
KELP and relocation loans, but citing People v. D.H.
Blair & Co., 2002 N.Y. Mise. LEXIS 817, *73-77, 2002
WL 766119, *24 [accurate entry of an unauthorized
action is not false], Kozlowski argues that their answers
were accurate and the DOQs were literally true.
In fact, though, while defendants took enormous
loans that were listed as KELP or relocation loans, the
millions of dollars involved were not spent on taxes or
relocation. For example, one year Kozlowski took money
to furnish a home in New Hampshire, where he already
lived, to buy a multimillion-dollar yacht and $2 million
worth of jewelry and to make a series of large personal
investments, including an $8.3 million share in a sports
partnership. Swartz similarly took money to buy a yacht,
to finance the purchase of a second New Hampshire
home and to make various personal investments.
Defendants never listed any of these loans on their
DOQs.
Thus, defendants falsified their DOQs not by
omitting KELP and relocation loans, but by failing to
list the millions of dollars they took for purely personal
loans, which they should never have recorded as KELP
or relocation loans in the first place. An exception to
the reporting requirement for tax-related KELP loans
does not cover loans made to buy a yacht. Nor does an
exception from disclosure for relocation loans cover
loans incurred in purchasing a personal pleasure craft,
a point even Swartz conceded at trial. The fact that
defendants recorded these loans as KELP or relocation
47a
Appendix B
loans did not transform the loans—used for
unauthorized, personal purposes—into an orcinary—
course loan or a KELP loan. They were neither.
Defendants also raise several evidentiary issues.
We conclude that the challenged portion of the
testimony of a People’s witness, Tse, was not offered or
used to impeach the testimony of another People’s
witness, Prue, but rather to show, as the People argued,
Tse’s own recollection of the relevant events. Her
testimony did not fall within any of the three categories
of proscribed forms of impeachment testimony
(see Becker v. Koch, 104 N.Y. 394, 401, 10 N.E. 701 [1887];
see generally Prince, Richardson on Evidence § 6-419
[Farrell 11th ed.]).
The portion of Swartz’s statement (as related by
David Boies) that inculpated Kozlowski, however, should
technically not have been admitted against Kozlowski
since defendants’ conspiracy to commit larceny had
ended by the date of the statement (see People v. Storrs,
207 N.Y. 147, 158, 100 N.E. 730 [1912]; People v. Van
Vleet, 256 A.D.2d 1181, 1182-1183, 683 N.Y.S.2d 362
[1998], lv. denied 93 N.Y.2d 879, 689 N.Y.S.2d 441, 711
N.E.2d 655 [1999] ), and there was no evidence that the
conspiracy continued or that Kozlowski did anything
after June 3, 2002 (the date on which he left Tyco) to
impede the recovery of Tyco’s money or property. The
People may not extend the conspiracy merely by claiming
that defendants were trying to cover up their previous
crimes (see e.g. Lutwak v. United States, 344 U.S. 604,
616-617, 73 S.Ct. 481, 97 L.Ed. 593 [1953] ). Nor was the
48a
Appendix B
statement in furtherance of the conspiracy because it
placed responsibility on Kozlowski for authorizing a 1999
journal entry that collectively reduced defendants’ loan
balance to Tyco by $37.5 million. As noted, the record
shows that the transaction had never been authorized
by Tyco’s board of directors. This reference to
Kozlowski, however, merely confirmed that Kozlowski
had authorized the transaction—as he testified—after
he had spoken to Hampton, chairman of the
remuneration committee. As already noted, however, the
committee’s approval, acting as a whole, was required
to authorize such action, and no other member of the
committee supported this assertion or had ever heard
of it. As the jury could take into account in assessing
credibility, Hampton, who had died prior to trial, could
not be offered as a witness to challenge Kozlowski’s
testimony. We therefore find the error to be harmless
(see id., 344 U.S. at 619-620, 73 S.Ct. 481).
Defendants’ other arguments relating to Boies’s
testimony are without merit. The record fails to support
their assertion that his testimony, or any summation
comments by the prosecutor, gave the jury the
impression that Boies had drawn a conclusion, based on
his investigation and expertise, that defendants were
guilty.
The court did not improvidently exercise its
discretion in quashing defendants’ subpoena directed
to the Boies Schiller firm (see e.g. People v.
Gissendanner, 48 N.Y.2d 543, 550, 423 N.Y.S.2d 893, 399
N.E.2d 924 [1979]), since the documents sought were
49a
Appendix B
not material and exculpatory (see e.g. People v. Ricketts,
38 A.D.3d 291, 831 N.Y.S.2d 395 [2007], lv. denied 8
N.Y.3d 989, 838 N.Y.S.2d 493, 869 N.E.2d 669 [2007)).
In any event, were we to find any error, we would find it
to be harmless.
Defendants failed to preserve their argument that
they were constitutionally entitled to introduce a letter
expressing an ethics opinion to the director who accepted
the undisclosed payment, which was the basis of the $20
million larceny (see People v. Angelo, 88 N.Y.2d 217, 222,
644 N.Y.S.2d 460, 666 N.E.2d 1333 [1996]; People v.
Gonzalez, 54 N.Y.2d 729, 442 N.Y.S.2d 980, 426 N.E.2d
474 [1981] ), and we decline to review it in the interest
of justice. Were we to reach the claim, we would find it
unavailing (see Crane v. Kentucky, 476 U.S. 683, 689-
690, 106 S.Ct. 2142, 90 L.Ed.2d 636 [1986]). Although
the court excluded the letter itself, it allowed various
witnesses to testify that the director told the Board he
had obtained legal advice suggesting that it was
appropriate for him to accept the investment banking
fee.
We perceive no basis for reducing either defendant’s
aggregate term of incarceration. Under the
circumstances, the fines imposed do not violate
Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348,
147 L.Ed.2d 4385 [2000]. A court may impose a sentence
above the statutory maximum based on a fact admitted
by a defendant (see Cunningham v. California, 549 U.S.
270, 127 S.Ct. 856, 860, 166 L.Ed.2d 856 [2007]). With
respect to the counts on which the court imposed fines,
50a
Appendix B
defendants did not dispute the amount of their gains
from the acts in question. To the extent defendants are
making a constitutional argument with respect to the
restitution awards, that argument is without merit ( see
People v. Horne, 97 N.Y.2d 404, 414-415, 740 N.Y.S.2d
675, 767 N.E.2d 132 [(2002)).
We have considered defendants’ other arguments
and find them without merit.
Accordingly, the judgments of the Supreme Court,
New York County (Michael J. Obus, J.), rendered
September 19, 2005, convicting defendants, after a jury
trial, of grand larceny in the first degree (12 counts),
conspiracy in the fourth degree, violation of General
Business Law § 352-c(5) and falsifying business records
in the first degree (8 counts), and sentencing them to
aggregate terms of 8 1/3 to 25 years, restitution of
$134,351,397, and fines of $70 million for Kozlowski and
$35 million for Swartz, should be affirmed.
Judgments, Supreme Court, New York County
(Michael J. Obus, J.), rendered September 19, 2005,
affirmed.
All concur.
Sla
APPENDIX C — ORDER OF THE SUPREME
COURT OF NEW YORK, NEW YORK COUNTY
QUASHING SUBPOENA,
DATED JANUARY 14, 2005
SUPREME COURT, NEW YORK.
NEW YORK COUNTY
No. 5259/02.
In the Matter of the Application of
TYCO INTERNATIONAL LTD.,
Petitioner,
V.
MARK H. SWARTZ,
Defendant/Respondent.
January 14, 2005
For an Order Pursuant to Cplr 2340 Quashing
Subpoenas Duces Tecum Issued by Mark H. Swartz
Michael J. Obus, J.
The defendant, Mark Swartz, has been indicted,
along with L. Dennis Kozlowski, on charges that include
multiple counts of grand larceny in the first degree,
Penal Law § 155.42. An initial trial ended in a mistrial
on April 2, 2004, and the defendants now await a retrial
scheduled to commence on January 18, 2005. On
52a
Appendix C
October 13, 2004, Swartz served a subpoena duces
tecum on Boise, Schiller & Flexner LLP (“Boies,
Schiller”), outside counsel to Tyco International Ltd.
(“Tyco”). After a number of informal attempts to resolve
some disputed issues, Tyco and Boies, Schiller moved
to quash the subpoena in a motion filed on November
15, 2004. Further filings ensued and ultimately, the court
heard arguments from both parties on December 21,
2004.
Tyco has brought a civil lawsuit against Swartz and
co-defendant Kozlowski. The civil claims are based in
large part on the same allegations underlying the
criminal case. Tyco also faces several stockholder suits
on related claims. Tyco contends that the Boies, Schiller
notes and memoranda that Swartz has subpoenaed are
immune from disclosure under CPLR § 3101(b),(c) and
(d) as privileged attorney-client communications,
attorney work product, and trial preparation materials.
Swartz does not dispute that the documents sought
constitute work product and trial preparation materials,
but contends that they are nevertheless subject to
disclosure.
As a first ground for denying protection, Swartz
cites the fact that Tyco has produced documents
containing work product and attorney-client
communications to the District Attorney and other
government agencies and has allowed testimony at trial
regarding attorney-client communications. Swartz
maintains that by doing so, Tyco waived any protection
for work product relating to the same subject matter.
53a
Appendix C
Work product privilege is waived upon disclosure to
a third party when there is a likelihood that the material
will be revealed to an adversary under conditions that
are inconsistent with a desire to maintain confidentiality.
Bluebird Partners, LP v Fivst Fidelity Bank, NA, 248
AD2d 219 (1% Dept 1998). A line of Federal cases has
held that in certain circumstances when a party elects
to make a substantial disclosure of work product to a
potential adversary, such as a law enforcement agency,
there may be a waiver of protection not only for the
documents produced, but for other documents on the
same subject matter. Jn re Martin Marietta Corp. 856
F.2d 619 (4" Cire. 1988); Bank of America, NA v Terra
Nova Insurance Company, 212 FRD 166 (SDNY 2002).
No reported New York case has clearly adopted the
doctrine of subject matter waiver of work product
protection. Even assuming that it is applicable her, it
would still not reach the documents that Swartz seeks.
The documents that Tyco provided to the District
Attorney, which have been made available to the
defendants, do not include Boies, Schiller memoranda
and notes. The work product and employee
communications therein were not created for the
current criminal case and civil proceedings, but for past
litigation, government filings and other corporate
actions. As Tyco contends, the fact that some documents
containing work product have been disclosed does not
mean that protection for any work product relating to
similar subjects, whenever created, is forever lost.
Whether a documents is to be protected as work product
54a
Appendix C
in general, or against a particular party, will depend at
least in part on when and for what litigation purposes it
was created. Lawrence v Cohn, 90 Civ. 2396 (SDNY 2002);
Amoco Oil Co. v Hartford Accident & Indemnity Co.,
93 Civ. 7295 (SDNY 1995).
Swartz cites Bank of America, supra, as particularly
instructive because “the facts are strikingly similar to
the case at hand.” In Bank of America, the defendant,
Terra Nova, discovered that one of its agents had issued
unauthorized insurance policies. Terra Nova’s attorneys
conducted an investigation of the matter. Terra Nova
then contacted the United States Attorney’s Office and
other law enforcement agencies. Terra Nova gave the
agencies documents generated in the investigation along
with an oral presentation, and offered to make available
all the materials and information that it had collected.
Bank of America subsequently brought suit against
Terra Nova in connection with the unauthorized policies,
and sought discovery of documents relating to the
investigation. The court held that Terra Nova had
waived work product protection by disclosing documents
to a potential adversary, the United States Attorney.
Further, because Terra Nova had offered to disclose all
its materials, the waiver applied not just to those
documents which it had actually disclosed, but to all work
product it had related to the investigation at the time
of the disclosure.
The situation here differs in key respects from that
in Bank of America. Tyco is not a party in this case. All
the documents that it produced to the District
55a
Appendix C
Attorney’s Office have been made available to the
defendants. The documents were produced at the
demand of the District Attorney, rather than provided
unsolicited. Perhaps most important, there is no
showing that ‘Tyco has disclosed work product created
_-by Boies, Schiller to the District Attorney.
A party asserting a privilege has the burden of
establishing that the privilege has not been waived.
John Blair Communications, Inc. v Reliance Capital
Group. 182 AD2d 578 (1* Dept 1992). However, Swartz
has not refuted Tyco’s affirmations that Boies, Schiller
has not provided work product directly or indirectly to
the People. Contrary to Swartz’s contention, the fact
that Boies, Schiller attorneys may have answered
questions from the District Attorney’s office and
provided requested documents does not establish that
work product has been shared. [t is noted that in the
related case of People v Mark Belnick, Indictment
Number 143/03, this court inspected in camera s large
volume of the correspondence between Boies, Schiller
and the District Attorney’s Office. None of that
correspondence disclosed any Boies, Schiller work
product directly. Nor did the inspection reveal any
attempt to use work product by offering opinions on the
case or otherwise steer the course of the criminal
investigation. Thus, there is no indication of the type of
potentially unfair selective disclosure that would form
the basis of a subject matter waiver. See John Doe v
United States, 350 F-3d 299 (2°? Cir. 2003). Most of the
trial testimony cited by Swartz refers to attorney-client
communications that took place before the current
56a
Appendix C
litigation was contemplated. None of the few instances
where testimony might be considered to be based on
Boies, Schiller work product involves any material issues
in this case.
Swartz also contends that work product protection
should not apply because the contents of the requested
memoranda and notes are material and relevant to this
case. He points specifically to interviews of Tyco
directors that might indicate when they became aware
of the defendants’ alleged wrongful conduct.
Work product protection is waived when the non-
disclosing party affirmatively acts to put otherwise
protected information at issue in a case and application
of the privilege would deny the party seeking disclosure
access to information vital to resist the non-disclosing
party’s affirmative act. JMO Industries v Anderson Kill
& Olick PC, 192 Mise.2d 605 (Sup Ct, NY County 2002);
Royal Indemnity Co. v Salomon Smith Barney, 4
Misc.3d 1006(A)(Sup Ct, NY County 2004).
In Royal Indemnity, Smith Barney claimed that
Royal, their exceas insurer, was obligated to provide
coverage for claims arising from the settlement of two
gender discrimination suits. As part of its claim, Smith
Barney had show that it has provided timely notice to
Royal after learning that the settlement amounts would
be above the level required to trigger the excess
coverage. Royal sought to discover work product
relating to the settlement negotiations from Smith
Barney’s attorneys. The court held that Royal was
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Appendix C
entitled to the documents, reasoning that because Smith
Barney was charged with knowledge of the contents of
the documents, the documents themselves could
establish when, at the latest, Smith Barney would have
known that the settlement amounts had reached the
triggering level.
Here, Swartz argues that it is significant that he
remained at Tyco for a period of time after Boies, Chiller
began its investigation on behalf of the corporation and,
indeed, that Tyco was aware of Swartz’ alleged wrongful
conduct by that time. He has not shown, however, that
Tyco’s knowledge of Swartz’ activities or lack of such
knowledge, during the time frame of the Boies, Schiller
interviews, is vital to the trial issues. Lack of such
knowledge at that point is not a necessary element of
any of the crimes charged. Thus, to the extent that
memoranda and interview notes might record witnesses’
statements as to whether and when in the past they
were aware of the alleged conduct, the “at issue”
doctrine would not apply. DeGourney v Muizac, 287
AD2d 680 (2"* Dept 2001); Bolton v Well, Gotshal &
Manges, LLP 4 Misc 3d 1029(A) Sup Ct, NY County
2004); Standard Chartered Bank PC v Ayala
International Holdings, 111 FRD 76 (SDNY 1986).
Swartz also contends that he has substantial need
pursuant to CPLR § 3102(d)(2) for the notes and
memoranda of witness statements. He points to the
importance in this case of the witnesses’ knowledge or
lack of knowledge of the charged conduct and the
passage of time since the interviews were undertaken.
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Appendix C
However, he has not explained why the defense could
not have sought to conduct its own interviews of these
witnesses at an earlier time. Moreover, the mere
possibility that a witness might have said something to
counsel that differs from the witness’ trial testimony is
not sufficient to provide substantial need. To seek
disclosure on that basis would constitute the proverbial
fishing expedition for impeachment material. Rather,
the party must establish that there is a likelihood that
the witness said something different to counsel.
DeGourney v Mulzac, supra. Swartz has not shown any
specific instance where, due to professed lack of memory
or other circumstance, there is a likelihood that a witness
made a statement to counsel inconsistent with his or
her trial testimony.
Accordingly, Swartz is not entitled to disclosure of
the requested notes and memoranda.
Swartz also seeks al! records relating to legal bills
for work done by Boies, Schiller on behalf of Tyco. As
Tyco contends, this request is overbroad and would
encompass matter covered by the attorney-client
privilege. MO industries, supra. Swartz contends that
he needs these materials to verity how much time David
Boies and other attorneys at the firm spent interviewing
Mr. Swartz and on the investigation in general. While
there was some testimony on that subject in the first
trial, it remains an extremely collateral; if not entirely
irrelevant, issue in this case. A subpoena duces tecum
cannot be used to discover impeachment material on
such an issue. People v Gissendanner, 48 NY2d 543
(1979).
59a
Appendix C
For the above-stated reasons, the motion to quash
is granted.
The foregoing opinion shall constitute the decision
and order of the court.
Enter.
Dated: January 14, 2005
60a
APPENDIX D — ORDER OF THE COURT OF
APPEALS OF NEW YORK DENYING MOTION FOR
REARGUMENT, DATED JANUARY 13, 2009
(APPELLANT: KOZLOWSKI)
COURT OF APPEALS OF NEW YORK
THE PEOPLE OF THE STATE OF NEW YORK,
Respondent,
V.
L. DENNIS KOZLOWSKI,
Appellant.
Jan. 13, 2009
Motion for reargument denied.
6la
APPENDIX E — ORDER OF THE COURT OF
APPEALS OF NEW YORK DENYING MOTION FOR
REARGUMENT, DATED JANUARY 13, 2009
(APPELLANT: SWARTZ)
COURT OF APPEALS OF NEW YORK
THE PEOPLE OF THE STATE OF NEW YORK,
Respondent,
v.
MARK H. SWARTZ,
Appellant.
Jan. 18, 2009
Motion for reargument denied.
62a
APPENDIX F — STATUTE INVOLVED
New York Civil Practice Law and Rules § 3101 (Scope
of disclosure) (c) and (d)
(c) Attorney’s work product. The work
product of an attorney shall not be obtainable.
(d) Trial preparation. 1. Experts. (i) Upon
request, each party shall identify each person
whom the party expects to call as an expert
witness at trial and shall disclose in reasonable
detail the subject matter on which each expert
is expected to testify, the substance of the
facts and opinions on which each expert is
expected to testify, the qualifications of each
expert witness and a summary of the grounds
for each expert’s opinion. However, where a
party for good cause shown retains an expert
an insufficient period of time before the
commencement of trial to give appropriate
notice thereof, the party shall not thereupon
be precluded from introducing the expert’s
testimony at the trial solely on grounds of
noncompliance with this paragraph. In that
instance, upon motion of any party, made
before or at trial, or on its own initiative, the
court may make whatever order may be just.
In an action for medical, dental or podiatric
malpractice, a party, in responding to a
request, may omit the names of medical,
dental or podiatric experts but shall be
required to disclose all other information
concerning such experts otherwise required
by this paragraph.
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Appendix F
(ii) In an action for medical, dental or
podiatric malpractice, any party may, by
written offer made to and served upon all
other parties and filed with the court, offer to
disclose the name of, and to make available
for examination upon oral deposition, any
person the party making the offer expects to
call as an expert witness at trial. Within
twenty days of service of the offer, a party
shall accept or reject the offer by serving a
written reply upon all parties and filing a copy
thereof with the court. Failure to serve a reply
within twenty days of service of the offer shall
be deemed a rejection of the offer. If all parties
accept the offer, each party shall be required
to produce his or her expert witness for
examination upon oral deposition upon
receipt of a notice to take oral deposition in
accordance with rule thirty-one hundred
seven of this chapter. If any party, having made
or accepted the offer, fails to make that party’s
expert available for oral deposition, that party
shall be precluded from offering expert
testimony at the trial of the action.
(iii) Further disclosure concerning the
expected testimony of any expert may be
obtained only by court order upon a showing
of special circumstances and subject to
restrictions as to scope and provisions
concerning fees and expenses as the court may
deem appropriate. However, a party, without
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Appendix F
court order, may take the testimony of a
person authorized to practice medicine,
dentistry or podiatry who is the party’s
treating or retained expert, as described in
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