15 Sep 23

How Federal Agencies Enforce Subpoenas and Issue Fines

| by

Last Updated on: 17th September 2023, 11:21 pm

How Federal Agencies Enforce Subpoenas and Issue Fines

Federal agencies like the FBI, IRS, and SEC have the power to issue subpoenas and fines as part of their investigations. This article will explain how this process works, some key laws about it, and what it means for people and companies who receive subpoenas or fines.

What is a subpoena?

A subpoena is a written order that requires someone to testify, produce documents, or both. Subpoenas are used by federal agencies like the FBI, IRS, SEC, and others to gather evidence during investigations into potential wrongdoing.

Some key things to know about subpoenas:

  • They are issued directly by the federal agency, not through a court.
  • There are different types – a subpoena to testify, produce documents, or both.
  • They can be issued to both individuals and companies.
  • It’s mandatory to comply with a subpoena.

If someone refuses to comply with a subpoena, the agency can escalate to civil or criminal contempt of court charges.

What powers do agencies have to issue subpoenas?

Federal agencies like the FBI, IRS, and SEC have broad powers granted by Congress to issue subpoenas as part of their investigations. For example:

In most cases, agencies don’t need to get court approval before issuing subpoenas. The laws passed by Congress grant them broad authority to compel testimony and evidence.

Types of information agencies can subpoena

The types of information federal agencies can subpoena include:

  • Documents – This includes things like financial statements, transaction records, correspondence, emails, and more.
  • Testimony – Requiring someone to testify under oath during a formal investigative hearing.
  • Digital data – Information stored electronically like emails, texts, online chats, and files stored in the cloud.

In some cases, agencies may issue a “blanket subpoena” requiring a company or person to provide a broad range of documents and information. This can be burdensome for the recipient.

How to respond to a subpoena

If you or your company receives a subpoena from a federal agency, here are some key steps:

  1. Don’t ignore it – you must respond within the deadline.
  2. Notify legal counsel immediately to review your options.
  3. Negotiate the scope if it seems unreasonably broad.
  4. Begin gathering the required documents or data.
  5. For testimony, prepare with legal counsel.
  6. Comply fully by the required date, or risk contempt charges.

Working with an attorney is highly recommended so you understand your rights, obligations, and options when responding to a subpoena.

What are the penalties for not complying?

It’s mandatory to comply with a lawfully issued subpoena. If you fail to respond, the agency can pursue civil or criminal contempt of court charges. Some potential penalties include:

  • Fines up to $100,000 for individuals, or $200,000 for companies
  • Jail time
  • Having your assets frozen by court order

In addition to contempt proceedings, failing to comply can also lead to charges like obstruction of justice. It’s a serious matter with potentially heavy penalties.

Are there any protections for the recipient?

While federal agencies have broad subpoena powers, there are some protections for the recipient:

  • Agencies usually try to negotiate the scope if a subpoena seems unreasonable.
  • You can file a motion to quash the subpoena if there are legal grounds to do so.
  • Courts won’t uphold subpoenas for privileged information like communication between an attorney and client.

Overall the protections are limited, which is why working with experienced legal counsel is so important if you receive a subpoena.

What is the fines process for federal agencies?

In addition to subpoena power, many federal agencies can also issue fines and penalties when they find violations of the law. Some key aspects of the federal fines process:

  • Most fines are for regulatory or civil violations, not criminal acts.
  • They can be levied against companies or individuals.
  • Fines can range from a few thousand dollars up to hundreds of millions.
  • Agencies have procedures for proposing and appealing fines.

Some examples of large federal fines include:

    • SEC fined Goldman Sachs $550 million in 2010 over charges related to marketing flawed mortgage-backed securities leading up to the 2008 financial crisis. The charges involved Goldman improperly packaging and selling high-risk mortgage bonds while failing to disclose key information to investors[1][3][4][5][6].
    • In 2022, the SEC fined Goldman Sachs Asset Management $4 million over allegations it failed to follow its own ESG (environmental, social, and governance) investing policies with certain funds marketed as ESG. The SEC said GSAM shared information about ESG policies it later failed to implement consistently[2].
    • The SEC has aggressively fined many other major financial institutions over regulatory violations and misconduct in recent years, including:
      • JPMorgan Chase – $920 million fine in 2020 over market manipulation
      • Wells Fargo – $500 million in 2020 over fake account scandal
      • Morgan Stanley – $275 million in 2021 over unauthorized messaging and data retention practices
    • Fines and settlements with the SEC can total hundreds of millions of dollars for large banks and financial firms. The fines are an enforcement tool to punish violations and send a message to deter future misconduct.
    • Critics argue the fines are not large enough given the profits and scale of the banks. They say fines should be larger percentages of revenue to be more impactful deterrents.
    • Supporters argue the SEC’s fines show no company is above the law. They help reimburse investors who suffered losses from violations.
    • Debates continue around optimal fine sizes and the right balance of punishment versus overly burdening the financial sector.