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United States v. Treacy

December 1, 2008

UNITED STATES OF AMERICA,
v.
JAMES J. TREACY, DEFENDANT.



The opinion of the court was delivered by: Robert L. Carter, District Judge

OPINION

Introduction

Defendant James Treacy has requested this court authorize subpoenas regarding Monster Worlwide Inc.'s ("Monster") stock option grants and option granting practices to Fulbright & Jaworski, LLP ("Fulbright"); BDO Seidman, LLP ("BDO Seidman"); Navigant Consulting Inc. ("Navigant"); three members of the Company's Compensation Committee (Michael Kaufman, Ronald Kramer, and John Gaulding) ("Compensation Committee"); and Akin Gump Strauss Haeur & Feld, LLP ("Akin Gump"). Fulbright and Akin Gump have moved to quash the subpoenas and the government has objected to the issuance of all subpoenas.

For the reasons stated below, all subpoenas are denied in their entirety.

Background*fn1

From 1998 until 2001, Treacy served as Chief Operating Officer ("COO") and Executive Vice-President of Monster, a company that provided a broad range of online recruitment services. From 2001 until 2002, Treacy served as Monster's President and COO, and was a member of if its Board of Directors from 1998 until 2003.

The government alleges that Treacy participated in a scheme to backdate stock option grants made to Monster employees. Allegedly, Treacy and others engaged in an illegal scheme to deceive by failing to record and report compensation expenses and backdated numerous stock options granted to Monster employees. The government contends that, by failing to record and report a compensation expense for the backdated options as required, Treacy and accomplices caused Monster to report materially false and misleading financial results and created false impressions about Monster's option grant practices.

In order to prepare for trial, Treacy seeks access to documents in the care, custody and control of five third parties: (1) Fulbright, Monster's outside cousel; (2) BDO Seidman, Monster's outside auditor; (3) Navigant, a consulting firm; (4) Monster's Compensation Committee, who had authority to grant option awards; and (5) Akin Gump, the law firm that conducted an internal investigation for Monster regarding options backdating allegations.

Fulbright and Akin Gump have moved for the subpoenas to be quashed, and the government opposes the issuance of all subpoenas.*fn2

Applicable Law

Rule 17(c) of the Federal Rules of Criminal Procedure governs the issuance of subpoenas in criminal proceedings.*fn3 Rule 17(c) subpoenas are intended to "expedite the trial by providing a time and place before trial for the inspection of subpoenaed materials." U.S. v. Nixon, 418 U.S. 683, 698-99 (1974) (citing Bowman Dairy Co. v. United States, 341 U.S. 214, 220 n. 5 (1951)). Moreover, the subpoenas can only be used to discover "evidentiary" material. See Bowman Dairy, 341 U.S. at 219-20. To meet the requirement for issuing a Rule 17(c) subpoena, the requesting party must demonstrate that the materials sought are (1) relevant; (2) admissible; and (3) specific. See Nixon, 418 U.S. at 700. A court may quash a subpoena "if compliance would be unreasonable or oppressive." FED. R. CRIM. P. 17(c)(2).

Treacy would have the court apply the lower standard articulated in United States v. Tucker, where the court questioned whether it made "sense to require a defendant seeking to obtain material from a non-party by means of a Rule 17(c) subpoena to meet the Nixon standard." Tucker, 249 F.R.D. 58, 63 (S.D.N.Y. 2008) (Scheindlin, J.). The court determined that the Nixon standard is inappropriate where production is requested by "(A) a criminal defendant; (B) on the eve of trial; (C) from a non-party; (D) where the defendant has an articulable suspicion that the documents may be material to his defense." Id. at 66. Upon meeting these criteria, a defendant need only show the request is "(1) reasonable, construed as 'material to the defense,' and (2) not unduly oppressive for the producing party to respond." Id. (citing United States v. Nachamie, 91 F.Supp.2d 552, 563 (S.D.N.Y. 2000) (Scheindlin, J.).

The court will not apply the Tucker standard, as the subpoenas were not requested ...


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