Fifth Amendment Strategy in Parallel Proceedings.

The Supreme Court acknowledged in United States v. Kordel that “parallel proceedings for civil and criminal penalties” are lawful. According to Kordel, individuals are entitled to assert the Fifth Amendment during SEC civil testimony if they have a “well-founded fear” that their statements could be used as evidence against them in a “civil or criminal prosecution.” However, testimony provided to the SEC can ultimately support criminal charges, and federal courts have wide discretion to stay civil proceedings during related criminal litigation.

Q: Are parallel civil and criminal investigations by the SEC and DOJ permissible?

Yes, but the SEC’s investigation must have an independent purpose, the SEC’s staff cannot investigate solely for the benefit of the DOJ. While the SEC’s office of Chief Counsel approved the SEC’s use of parallel investigations in 2008, various federal circuit courts recognized the constitutionality of such investigations as early as 1985 (e.g.Harris*).

Q: Can DOJ investigators obtain evidence from the SEC?

Yes. 15 U.S.C. § 78x(c) authorizes the SEC to “provide access, to any employee of the Department of Justice,” to “all information gathered by the Commission” during investigations for violation of securities laws. Similarly, 17 C.F.R. § 240.24c-1 governs access to nonpublic SEC records.

The provision of access under 15 U.S.C. § 78x(c) and 17 C.F.R. § 240.24c-1 allows DOJ investigators to access SEC records and evidence obtained during investigations, unless the DOJ is “unlikely to use” the SEC evidence.

Individuals who are facing parallel civil and criminal enforcement proceedings have no due process right to access to the records and evidence obtained by the SEC, even if those records and evidence support parallel civil and criminal charges.

When can I invoke the Fifth Amendment without waiving it?

Q: What evidence is protected by the Fifth Amendment in parallel proceedings?

Generally, the Fifth Amendment protects “compelled testimonial communications” rather than “every incriminating document.” When a witness receives a subpoena for documents, the witness cannot rely on the Fifth Amendment to avoid producing any document that contains “incriminating information.” The Fifth Amendment protects witnesses from having to “testify” in the face of government or prosecutor interrogation in “the case against themselves.” However, providing documents is not testifying, and there are numerous examples of cases in which individuals have been required to produce documents containing incriminating evidence. As a general rule, however, documents are not considered compelled testimonial communications.

Q: When can a witness invoke the Fifth Amendment in federal proceedings?

In most cases, a witness must invoke the Fifth Amendment separately for each question asked by federal investigators. When doing so, courts will then determine whether each answer the witness seeks to avoid giving presents a “real and appreciable hazard” of being used in a “case against the witness” in a criminal proceeding. Unless a witness can conclusively demonstrate that each and every answer a government investigator might seek will be incriminating, the witness cannot invoke the Fifth Amendment to refuse to answer any and all questions. The Supreme Court of the United States (SCOTUS) and United States Courts of Appeals have all held that witnesses cannot use a “blanket” invocation of their Fifth Amendment privilege to avoid providing all answers to a federal investigator’s questions in most civil litigation.

That said, when a witness cannot demonstrate that each answer they might give will present a “real and appreciable hazard,” the witness cannot invoke the Fifth Amendment blanketly. That said, when a witness believes that each and every answer the witness will give will present a “real and appreciable hazard,” a witness can blanketly invoke their Fifth Amendment privilege.

As a witness, you need to make informed decisions based on the specific circumstances involved in your case. As a witness, you also need to make informed decisions about whether to provide testimony. If you want to understand your best options, a federal defense attorney at Spodek Law Group can help you. We can tell you about the risks of taking testimony in your case and if there are alternative legal strategies available to you.

Q: Are there any other considerations when invoking the Fifth Amendment?

Yes, from the seminal case of Rogers v. United States, 340 U.S. 367 (1951) to Brown v. United States, 356 U.S. 148 (1958), the Supreme Court of the United States has held that witnesses cannot invoke the Fifth Amendment in federal proceedings when:

• The witness voluntarily discloses incriminating facts by testifying to an incriminating fact or fact that leads to other incriminating facts.
• The witness opens the door to a specific topic on direct examination, which then allows the questioning attorney to explore that topic during cross examination.
• The witness previously testified to an incriminating fact in a court proceeding. While a later assertion of the Fifth Amendment privilege generally only applies to future proceedings, testifying in an earlier federal proceeding makes the prior testimony admissible.

Generally, waiver of the Fifth Amendment privilege in a criminal proceeding should be confined to the proceeding in which testimony was given, and not extend to any other proceedings. However, it is not entirely clear whether a later assertion of the Fifth Amendment privilege can bar prior voluntary testimony. This area of law is extremely complex, and if you want to make informed decisions about what to do, you will need to discuss your options with an experienced federal defense attorney.

Can I Refuse to Produce Documents that May Incriminate Me?

Corporations have no Fifth Amendment privilege against self-incrimination. This means that corporations are required to respond to subpoenas with relevant documents and communications in parallel proceedings. Even if documents in the corporation’s records provide evidence of executives’ or others’ personal criminal exposure, corporate records remain producible.

Fisher v. United States also held that the contents of documents “voluntarily prepared” in the course of business are not considered “compelled testimony” for Fifth Amendment purposes when a subpoena is later issued.

Even if the Fifth Amendment is inapplicable to the documents themselves, the “act of production” can still trigger the Fifth Amendment privilege. Turning over documents that you possess can communicate that you possess them, that you know where they are, and that the documents are authentic. Each of these “testimonial communications” can potentially provide incriminating evidence.

The “foregone conclusion doctrine” is one of several exceptions to the act of production rule. Under this doctrine, the act of production is not considered testimonial when production “adds little or nothing to the government’s knowledge.” Another limit to the act of production rule is the “required-records exception” recognized in Grosso v. United States, 390 U.S. 62 (1968), which applies if the following criteria are met:

• The records were required to be kept by a regulatory provision,
• the records were kept customarily,
• the records were kept for a regulatory purpose, and
• the records are public in nature (or are not intended to be private).

An individual’s personal testimonial privilege also does not excuse that individual’s obligations with regard to litigation-hold and document-preservation requirements.

Destroying documents that may be relevant to a federal investigation is not protected by the Fifth Amendment, and it can lead to criminal charges under 18 U.S.C. § 1519, which imposes criminal penalties for “knowingly” altering or destroying documents “with the intent to impede, obstruct, or influence, or otherwise induce or induce another to interfere with or obstruct” a federal matter.

Will Taking the Fifth Make Me Lose the Civil Case?

Q: Will invoking the Fifth Amendment result in an adverse civil inference?

According to Baxter v. Palmigiano, an adverse civil inference is permissible “if, in addition to the privilege assertion, there is appropriate probative evidence that tends to support a similar inference.” The Second Circuit Court of Appeals endorsed this principle in SEC v. Colello, 139 F.3d 674 (9th Cir. 1998), which expressly approved the use of a “supported adverse inference” at the summary judgment stage. However, invoking the Fifth Amendment does not automatically establish civil liability.

Q: Can an employee’s invocation of the Fifth Amendment result in an adverse inference against their employer?

Although the Fifth Amendment applies to individuals and not entities, this means an employee’s invocation of the Fifth Amendment can sometimes support an adverse inference against a business entity or organization. For example, in LiButti v. United States, 107 F.3d 110 (2d Cir. 1997), the Second Circuit Court of Appeals adopted a test that considers four factors when determining whether an employee’s invocation of the Fifth Amendment can support an adverse inference against the employer:

• The employee’s relationship to the entity, including the entity’s control of the employee
• Whether the employee’s interests are aligned with those of the entity
• The employee’s role in the litigation
• The employee’s role in the alleged wrongdoing

Q: Can a witness’s invocation of the Fifth Amendment lead to an adverse inference in a criminal proceeding?

A criminal jury cannot infer guilt from a defendant’s silence. However, a witness’s invocation of the Fifth Amendment can lead to an adverse inference instruction when the witness was served with a subpoena and then blanketly invoked the Fifth Amendment in response. In SEC v. Jasper, for example, the jury instructions expressly permitted an adverse inference.

Spodek Law Group, led by managing partner Todd Spodek, defends clients in federal criminal and white collar matters.

How Should Counsel Coordinate Testimony, Cooperation, and Representation?

When facing parallel civil and criminal proceedings, coordination of the defense strategy is crucial.

Counsel should consider:

• Cooperation Submissions, Cooperation submissions made to the SEC can sometimes be shared with criminal prosecutors at the DOJ. Counsel should take this potential sharing into account when making strategic decisions regarding the witness’s decision to offer testimony to the SEC.
• Internal Investigation Reports and Wells Submissions, Documents such as internal investigation reports and Wells submissions often contain incriminating information, especially when it is prepared by former outside counsel. These documents can be shared between DOJ prosecutors and SEC staff. Thus, these documents can create criminal exposure.
• Corporate and Executive Representation, Corporate and executive interests may not be the same in parallel civil and criminal investigations. While it may make sense to use joint representation at the start, if the corporation’s and executives’ interests diverge, this will make it necessary for the corporate and executive defense counsel to operate with different goals in mind.
• Joint Representation Issues, Even if it initially makes sense to use joint representation, potential conflicts can arise if corporate and executive interests are not aligned. If the corporate and executive defenses diverge, it will then become necessary for the executives to seek separate counsel.
• Upjohn Warnings, In internal investigations, the corporation’s outside counsel should make sure to provide employees with Upjohn warnings. These warnings are strongly recommended as a matter of professional best practice, and they explain that:

(i) counsel represents the organization, not the employee; and

(ii) the organization, and not the individual employees, controls the communications privilege.

• Concurrent Representation of Multiple Individuals, If two or more individuals who may be targets of federal investigations are represented by the same defense counsel, and these individuals’ interests are not aligned, the attorney may be unable to represent both. According to Model Rule 1.7, however, representation of multiple individuals is permitted if the attorney can reasonably provide competent and diligent representation to both clients, and all parties provide informed consent.

Q: What information can DOJ prosecutors share with SEC personnel?

While SEC staff cannot gather evidence solely for the benefit of the DOJ’s prosecutors, the DOJ and SEC will often share information and resources. DOJ personnel can share with SEC personnel information they obtained voluntarily from witnesses and sources.

Can Immunity or a Proffer Make it Safe to Talk?

Q: What is a grant of immunity?

18 U.S.C. § 6002 prohibits the direct or derivative use of testimony compelled under a grant of immunity. In Kastigar v. United States (1972), SCOTUS held that prosecutors who seek to rely on a witness’s immunized testimony must prove that the evidence they intend to use “had been lawfully derived from a wholly independent source.”

Q: What is coextensive use immunity?

Under a grant of coextensive use immunity, the government can compel a witness to answer questions that would otherwise trigger the witness’s Fifth Amendment privilege. For example, if answering a question that involves compelling disclosures is consistent with the immunity conferred, the witness must answer that question. In Kastigar v. United States, SCOTUS held that this is constitutionally permissible.

Q: What is a proffer agreement?

Unlike a grant of immunity pursuant to a court order, proffer protections are derived from the terms of the proffer agreement rather than a witness’s constitutional immunity. In a proffer agreement, a witness agrees to provide a voluntary statement to federal investigators, and the government agrees to only use the testimony for a limited purpose. Generally, this means that the testimony cannot be used to prosecute the witness or anyone else.

Q: Can witnesses decline to provide testimony during a voluntary interview?

Absent a subpoena or another form of compulsory process, witnesses are not required to appear for a voluntary interview with federal investigators. This means, as a witness, you will have the choice to decide whether you would be willing to provide testimony voluntarily.

Q: What are the factors that determine when the SEC makes a criminal referral?

The February 2026 Enforcement Manual is the first comprehensive revision to the manual since 2017. The Manual identifies the following six factors as being indicative of potential criminal referrals:

• harm to investors;
• financial gain;
• specialized knowledge of the law violated;
• awareness of the risk;
• recidivism;
• need to provide protection to investors.

Can I Pause the Civil Case While Facing a Criminal Investigation?

Q: What are the alternatives to staying a civil case?

Instead of staying an entire civil case, courts may choose to narrow discovery in the case. Additionally, a court may issue a protective order, which can offer a less-than-complete alternative to a complete stay.

Q: Are you more likely to obtain a stay after indictment?

Many federal courts find stay requests at the pre-indictment stage to be speculative, which makes it harder to secure a stay. After an indictment is issued, the defendant’s criminal exposure is much more definite. Additionally, the timeline of the defendant’s pending criminal matter is also more definite, and federal courts take this into account.

Q: What criteria do federal courts apply when deciding a motion for a stay in parallel proceedings?

When deciding motions to stay parallel proceedings, different federal courts apply their own multifactor tests. For example, the Second Circuit uses these factors:

• The extent to which a stay would disrupt the civil proceedings;
• Whether a stay would allow for an efficient use of resources;
• Whether there is a risk that evidence presented during the civil proceedings could interfere with a criminal prosecution;
• Whether a stay would violate the plaintiff’s right to timely resolve their civil dispute.

When arguing for a stay, a movant cannot argue that there is a “general danger” of criminal exposure. The movant must instead identify specific and concrete conflicts with respect to the Fifth Amendment and the burden of discovery in the civil case. The more specific the Fifth Amendment conflicts the movant is able to identify, the more likely the court will grant a stay in the civil case.

Q: What are the limitations to securing a stay?

Federal courts generally disfavor indefinite stays, and a stay will either include a specific deadline for a defendant to notify the court of a pending matter, or it will require a periodic status report from the defendant regarding their status in the criminal case.

Q: Can I appeal an order denying a stay in parallel proceedings?

In most cases, an order denying a stay of proceedings is considered interlocutory, which means it is not immediately appealable. An interlocutory appeal may be possible in extraordinary circumstances, but that requires a defendant to certify to the district court that an interlocutory appeal should proceed.

Q: When can a defendant secure a stay when facing parallel proceedings?

In SEC v. Dresser Industries, Inc., 628 F.2d 1368 (D.C. Cir. 1980) (en banc), the Second Circuit rejected the principle that parallel proceedings should lead to an automatic stay of a civil case. Instead, the trial judge has wide discretion to decide when to grant a stay. In many cases, the Fifth Amendment is not present, and defendants must persuade the court that a stay is warranted.

Will the Criminal Outcome Decide the SEC Civil Case?

Q: What is issue preclusion, and what is required to invoke issue preclusion in a federal civil proceeding?

Issue preclusion prevents the relitigation of a matter that was decided on the merits in a prior proceeding. This means that parties cannot argue a matter that a court previously decided in a related civil or criminal proceeding. For issue preclusion to apply in a federal civil proceeding, the issue to be precluded must be the “identical” issue to the issue litigated and decided in the prior proceeding, and the prior proceeding must have resulted in a “valid final judgment.”

Q: When are SEC claims not precluded after a criminal trial in a parallel proceeding?

The SEC and DOJ can pursue claims with overlapping but differing statutory elements. In some cases, an outcome in a criminal case will necessarily preclude an identical SEC claim in a parallel civil proceeding. However, when there are differences in the statutory elements or required evidence in order to support a specific charge, the outcome of a criminal proceeding will not preclude an SEC claim in a parallel civil proceeding.

Q: Does a criminal acquittal preclude civil liability in an SEC enforcement proceeding?

A criminal acquittal does not preclude civil liability in an SEC enforcement proceeding. While both proceedings may involve similar facts, they will involve different statutory elements and will apply a different standard of proof. Consequently, a defendant in a criminal case may not be criminally liable, yet that defendant could still be civilly liable in the SEC case.

Q: Does a criminal guilty plea preclude civil liability in an SEC enforcement proceeding?

A criminal guilty plea is considered an evidentiary admission. This means a guilty plea can establish some elements of the SEC’s civil claim, but not necessarily all of them. As a result, if a defendant pleads guilty to criminal charges, it is still necessary to establish all elements of the civil claim, but that guilty plea can significantly impact a defendant’s ability to contest liability in the civil case.

Q: Does a criminal conviction preclude civil liability in an SEC enforcement proceeding?

A criminal conviction can preclude civil liability in an SEC enforcement proceeding if the conviction has substantial overlap with a claim in a parallel civil proceeding.

Q: Does a pending appeal eliminate a criminal conviction’s preclusive effect?

Under federal law, a pending appeal generally does not eliminate a criminal conviction’s preclusive effect in a parallel civil proceeding. However, there are various circumstances in which the preclusive effect of a prior judgment may be eliminated.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 212-300-5196 to speak with our team.