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Can a Civil Investigation Result in Criminal Charges?

Posted by Dmitry Gorin | Jun 18, 2024

Let's review whether a civil investigation by the federal government can result in criminal charges. Having your business dealings investigated by the federal government can be disconcerting at any level.

Can a Civil Investigation Result in Criminal Charges?
A federal civil investigation can result in criminal charges if the evidence is discovered.

In many cases, if not most, these investigations are conducted at a civil level, meaning you could face civil fines if found at fault. But what if the investigation uncovers something that makes the feds suspect criminal behavior? Could a civil investigation lead to criminal charges?

Under certain circumstances, yes. If a civil investigation uncovers evidence of criminal activity, the matter could be referred to federal prosecutors for possible criminal charges. Sometimes, the issue may be pursued civilly and criminally; sometimes, it's one or the other.

There are distinct differences between a criminal case and a civil case. In a criminal case, someone has been charged for an alleged violation of federal law. If the defendant is found guilty, they will face criminal penalties and possibly jail time.

A civil case typically involves disputes between two parties over private rights or remedies, such as contracts, torts, employment matters, debt collection, or other issues not involving imprisonment as punishment. Civil cases are about compensatory damages. If a defendant is found liable, they usually must pay monetary damages to compensate the plaintiff.

Can a Case Be Both Criminal and Civil?

A case can potentially be criminal and civil because the two proceedings apply different standards to resolve various wrongs. For the same conduct, a person can break a criminal law and commit a legal wrong against a private individual.

Federal Criminal Charges

There are some similarities between criminal and civil cases. Both involve two sides: a plaintiff (or accuser) and a defendant. Both use evidence to determine the accused's guilt or innocence. Similarly, in both cases, issues at trial can include testimony from witnesses and the introduction of physical evidence.

In criminal cases, the government charges an individual with violating criminal law. The prosecution must prove guilt beyond a reasonable doubt. A conviction might result in jail time or punishment decided by judges within sentencing guidelines.

The purpose is to punish people who violate laws. Unlike criminal cases, civil cases often arise from private disputes between parties, such as contracts. The burden of proof lies with the plaintiff, the party filing suit.

They must prove their claim against the defendant by clear and convincing evidence. However, the burden of proof has a lower threshold than in criminal court. A successful civil claim typically results in monetary rewards paid to the plaintiff through a settlement or court-ordered judgment.

Notably, a civil case can prompt a criminal investigation if evidence indicates that a law has been broken and a crime committed. However, a civil case does not turn criminal because they are two separate proceedings.

A civil claim can only order civil remedies. For someone to face criminal penalties, a new criminal case must begin. Let's examine this question more closely.

What is the Difference Between Civil and Criminal Investigations?

Let's begin by differentiating between a civil investigation and a criminal one.

Civil Investigations

Civil investigations are typically initiated to enforce regulatory compliance and can result in penalties such as fines, injunctions, or other administrative actions.

Agencies like the Securities and Exchange Commission (SEC), the Environmental Protection Agency (EPA), and the Federal Trade Commission (FTC) often conduct these investigations.

Criminal Investigations

On the other hand, criminal investigations seek to determine if individuals or entities have violated criminal statutes.

These investigations can have severe consequences, including imprisonment, heavy fines, and reputational damage. They are usually spearheaded by the United States Department of Justice (DOJ) or the Federal Bureau of Investigation (FBI).

When Might Civil Investigations Lead to Criminal Charges?

Civil investigations can potentially lead to criminal charges if the evidence uncovered indicates that a crime has been committed or that criminal intent was involved.

This evidence may be discovered during the course of a civil investigation or arise independently. In either case, the government must determine whether there is enough evidence to support a criminal prosecution. Typically, a civil matter could escalate to criminal charges under one of the following two scenarios:

  • Overlapping Jurisdictions: In some instances, civil and criminal jurisdictions overlap. For example, financial fraud might attract attention from both the SEC (civil) and the DOJ (criminal).
  • Referral Mechanisms: If evidence gathered during a civil investigation suggests criminal activity, the case may be referred to criminal authorities.

What is the Legal Basis for Criminal Charges?

Federal laws allow for certain civil violations to be pursued as criminal offenses. For example:

  • Securities Fraud: Violations of SEC regulations can lead to criminal charges if there is evidence of willful deceit or fraudulent intent.
  • Tax Evasion: The IRS may refer cases of substantial tax underpayment to criminal authorities if there is sufficient evidence of intentional evasion.
  • Antitrust Violations: The FTC may pursue criminal charges for antitrust violations if there is proof of deliberate and egregious anti-competitive behavior.

Is the Case Automatically Referred for Prosecution?

A common question is whether your case will automatically be referred to criminal prosecution if the evidence points to criminal acts. The simple answer is not necessarily.

The government does not automatically bring criminal charges if a civil investigation reveals possible criminal activity. Instead, the severity and nature of the alleged misconduct influence the decision to pursue criminal charges.

Federal Prosecution

Civil agencies such as the SEC or EPA may refer cases to the DOJ if they uncover substantial evidence of intentional wrongdoing, deceit, or actions that significantly harm the public interest. The DOJ then evaluates the evidence to determine whether it meets the threshold for criminal prosecution.

Circumstances that typically prompt this escalation include clear indications of fraud, willful violations of federal regulations, and actions that demonstrate a blatant disregard for the law.

For instance, if an agency discovers evidence of deliberate financial misstatements or intentional environmental harm, these findings are more likely to be referred for criminal prosecution. Ultimately, the transition from civil to criminal proceedings involves a careful legal assessment to ensure that the conduct in question warrants criminal sanctions.

What are the Signs Your Civil Case Might Become a Criminal Probe?

Several factors can indicate that a civil investigation might lead to criminal charges:

  • Parallel Investigations: Sometimes, civil and criminal investigations are conducted simultaneously. Federal agencies often collaborate, sharing information that can be used in both contexts.
  • Referrals to Criminal Authorities: If evidence of criminal conduct is discovered during a civil investigation, the investigating agency may refer the case to the Department of Justice (DOJ) or other criminal authorities.
  • Grand Jury Subpoenas: The issuance of grand jury subpoenas during a civil investigation strongly indicates that criminal proceedings might be on the horizon.

How Can You Reduce the Risk of Criminal Charges?

If your company is under a federal investigation of any type, you can take proactive steps to reduce the chances of criminal charges being filed:

  • Cooperate but Protect Your Rights: Cooperation with investigators is crucial, but engage legal counsel early to navigate the investigation's complexities and ensure that your rights are upheld.
  • Maintain Accurate Records: Ensure that all corporate records are accurate and up-to-date. Inaccurate or misleading records can exacerbate an investigation and provide grounds for criminal charges.
  • Establish Compliance Programs: Implement robust compliance programs to identify and correct regulatory violations (and to prevent future ones). Doing so can also demonstrate good faith with federal investigators.
  • Avoid Obstruction: Obstructing a federal investigation can lead to additional criminal charges. Be transparent and provide requested information promptly, but always under the guidance of legal counsel. Never destroy materials that are considered evidence, even if you believe they could implicate you.

For more information, contact our federal criminal defense lawyers at Eisner Gorin LLP, which has offices in Los Angeles, California.

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About the Author

Dmitry Gorin

Dmitry Gorin is a licensed attorney, who has been involved in criminal trial work and pretrial litigation since 1994. Before becoming partner in Eisner Gorin LLP, Mr. Gorin was a Senior Deputy District Attorney in Los Angeles Courts for more than ten years. As a criminal tri...

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