DOJ Warns Adding Criminal Case Lawyer to Penalty Case an 'End Run' Around Discovery Rules

A defendant in a criminal fraud case shouldn't be allowed to add his criminal attorney to a protective order in a related civil case, DOJ argued in a Sept. 28 motion at the Court of International Trade (U.S. v. Zhe "John" Liu, CIT # 22-00215).

The case was filed against Zhe "John" Liu and GL Paper in July 2022, and alleged a scheme in which Liu, "operating through a series of companies including defendant GL Paper," imported steel wire hangers into the U.S. by falsely declaring their country of origin. Liu allegedly created the companies for a transshipment scheme that involved sending wire hangers from China subject to antidumping and countervailing duties through Malaysia, India and Thailand in a bid to disguise their origin (see 2303160050).

Liu disavowed involvement with many of the companies at issue, but evidence produced in discovery showed that Liu operated and controlled the companies, DOJ said. In June, a search warrant was executed on Liu’s residence, which DOJ said served as the business office of the companies through which Liu directed his transshipment scheme. That same day, Robert Becerra sent an e-mail to the government saying that he represented Liu and NC Supply.

In July, Liu asked the court to stay the civil matter, arguing that a stay was needed to protect his Fifth Amendment interests and because “the Government’s discovery obligations in a civil proceeding may impair or undermine its criminal investigation" (see 2305050055).

The government believed Becerra had no professional engagement with Liu prior to the date of the search warrant. On Sept. 5, Liu's civil attorney, David Craven, asked the government to add Becerra to the protective order in this case. DOJ said it became "concerned that this request was a pretext to supply Mr. Becerra improper access to the civil discovery produced by the Government." Craven said that Becerra was being retained as a "consultant" and wouldn't be appearing in the case.

DOJ said that Liu expending resources to retain another attorney as a “consultant” on a civil matter that had been stayed for two months was unlikely and that the doubt was amplified by a previous request from Craven to avoid traveling to New York, citing cost restrictions for "his small respondent with limited resources.” DOJ said it was clear that Liu "did not intend to spend resources working on this civil case while the criminal case was pending."

The attempted addition of Becerra indicated an "end run" around protections separating criminal and civil discovery procedures. "The courts have consistently recognized that a target in a criminal investigation may not “impermissibly use civil discovery to their benefit in the criminal case" and that the risk is "heightened" in cases where similar facts are at issue, DOJ said.

That threat was already recognized as a compelling justification for staying civil litigation in this case, DOJ said. Protective orders are court tools used to prevent such improper disclosures of evidence, DOJ said. Courts have been vigilant when parties have tried to circumvent rules through modifications of protective orders. "Evidence and common sense indicate that Mr. Liu is attempting such an end run."

Liu agreed to stay the case partly because the government’s discovery obligations might have impaired its criminal investigation. Liu's claims that his criminal defense needs access to the protected files makes no sense, DOJ said. "The Government provided Mr. Liu discovery in early March, but for six months ... he never once claimed to need Mr. Becerra’s help." Liu's argument would be more credible if it were made after the criminal case was resolved and the stay in this case was lifted and when the risk of undermining the criminal investigation would have ended, DOJ said. That risk was the primary reason Liu moved to stay this matter in the first place, DOJ said.