United States Court of Appeals FOR THE SECOND CIRCUIT. against

Transcription

1 cr din THE United States Court of Appeals FOR THE SECOND CIRCUIT UNITED STATES OF AMERICA, against Appellee, JAMES J. TREACY, Defendant-Appellant. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK THE HON. JED S. RAKOFF BRIEF FOR AMICUS CURIAE DOW JONES & COMPANY SLADE R. METCALF KATHERINE M. BOLGER RACHEL F. STROM HOGAN LOVELLS US LLP 875 Third Avenue New York, New York (212) Attorneys for Amicus Curiae Dow Jones & Company

2 CERTIFICATE OF INTERESTED PERSONS AND CORPORATE DISCLOSURE STATEMENT' Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, counsel for Dow Jones & Company, Inc. ("Dow Jones") (a private, non-governmental party) certifies that News Corporation, a publicly held company, is the indirect parent corporation of Dow Jones, and Ruby Newco LLC, a subsidiary of News Corporation and a non-publicly held company, is the direct parent of Dow Jones. No publicly held company owns 10% or more of Dow Jones' stock. 1 Pursuant to Rule 29.1 of the Local Rules of the Second Circuit, counsel for Dow Jones certifies that (1) this brief was authored in whole by counsel for Dow Jones, and (2) no other party or party's counsel contributed money that was intended to fund preparing or submitting the brief.

3 TABLE OF CONTENTS CERTIFICATE OF INTERESTED PERSONS AND CORPORATE DISCLOSURE STATEMENT... i... TABLE OF AUTHORITIES IDENTIFICATION OF AMICUS CURIAE AND STATEMENT OF INTEREST AND AUTHORITY TO FILE... SUMMARY OF THE ARGUMENT... 4 STATEMENT OF FACTS... 9 ARGUMENT THE TRIAL COURT ERRED BY NOT QUASHING THE SUBPOENA ON REPORTER CHARLES FORELLE A. The Policies Underlying the Journalist's Privilege Support the Protection of Unpublished Information B. This Court Should Adopt A New Rule For Government Subpoenas To Reporters In Criminal Trials The New Rule Under This Standard, The Subpoena Should Be Quashed I C. Even Under The Gonzales Test, The Subpoena Should Be Quashed CONCLUSION... 33

4 TABLE OF AUTHORITIES Baker v. F & F Inv., 470 F.2d 778 (2d Cir. 1972), cert. denied, 41 1 U.S. 966 (1 973)... 14, 15 Branzburg v. Hayes, 408 U.S. 665 (1972) Crawford v. Washington, 541 U.S. 36 (2004) Dunbar v. Harris, 6 12 F.2d 690 (2d Cir. 1979) Gonzales v. Nat '1 Broad. Co., 194 F.3d 29 (2d Cir. 1999)...p assim In re Petroleum Prods. Antitrust Litig., 680 F.2d 5 (2d Cir. 1982)... 6, 15, 23 Krase v. Graco Children Prods., Inc., 79 F.3d 346 (2d Cir. 1996) Lonegan v. Hasty, No. CV (NG)(VVP), 2008 WL (E.D.N.Y. Jan. 1,2008) New York Times Co. v. Gonzales, 459 F.3d 160 (2d Cir. 2006)... 5, 23, 27 Persky v. Yeshiva University, No. 01 Civ. 5278, 2002 WL (S.D.N.Y. Dec. 10, 2002) US. v. Burke, 700 F.2d 70 (2d Cir. 1983), cert. denied, 464 U. S. 816 (1983)... passim US. v. Cutler, 6 F.3d 67 (2d Cir. 1993)... 5,6

5 United States v. Lorenzo, 534 F.3d 153 (2d Cir. 2008)... 26, 28, 29, 30 United States v. Nusraty, 867 F.2d 759 (2d Cir. 1989) United States v. Strother, 49 F.3d 869 (2d Cir. 1995), cert. denied, 522 U.S (1 998) United States v. Treacy, 603 F. Supp. 2d 670 (S.D.N.Y. 2009) von Bulow by Auersperg v. von Bulow, 811 F.2d 136 (2d Cir.), cert. denied, 481 U.S (1987) 14, FEDERAL: STATUTES, RULES, REGULATIONS, CONSTITUTIONAL PROVISIONS 28 C.F.R. fj , 17, 18, 22 Fed. R. App. P Fed. R. App. P Fed. R. Evid U. S. Const. Amendment 1... p assim U.S. Const. Amendment V U.S. Const. Amendment V1.... passim

6 IDENTIFICATION OF AMICUS CURlAE AND STATEMENT OF INTEREST AND AUTHORITY TO FILE Amicus curiae Dow Jones & Company, Inc. ("Dow Jones") is the publisher of The Wall Street Journal (the "Journal"), the most widely circulated newspaper in the United States. The Journal has a rich history of investigative journalism. Such in-depth reporting is conducted with the benefit of this Circuit's long- recognized reporter's privilege, which facilitates the vigorous press that the First Amendment envisions and protects. One of the Journal's investigative reporters is Charles Forelle ("Forelle"), whose testimony in the trial below is one of the primary points on the appeal of James J. Treacy ("Treacy"), the former President and Chief Operating Officer at Monster Worldwide, Inc. ("Monster"). Forelle and other Journal reporters conducted a Pulitzer Prize-winning investigation into the backdating of stock options at numerous corporations, including Monster. During this investigation, Forelle interviewed Treacy regarding the granting of stock options at Monster - matters that underlay the government's criminal investigation of Monster and of Treacy himself. The Government claimed that, at the trial below, it proffered substantial evidence to prove that Treacy had knowingly participated in the backdating of Monster options. Nevertheless, the Government called Forelle to testify, only to

7 confirm that he had accurately quoted Treacy in one article published in the Journal (the "Article"), in which Treacy stated that he was not involved in the stock options granting process at Monster. Before Forelle testified, Treacy argued that if the Government was able to call Forelle to testify, Treacy must be afforded his full cross-examination rights to establish the context of the conversation between Treacy and Forelle. The Honorable Jed S. Rakoff recognized that the Government's subpoena setup a conflict between Treacy's Sixth Amendment right to cross-examine government witnesses and Forelle's First Amendment right to protect his newsgathering materials. In an attempt to resolve this conflict, the court compelled Forelle to testify, over his invocation of the reporter's privilege, but limited Treacy's cross-examination of Forelle. Treacy was later found guilty on one count of conspiracy and one count of securities fraud. Dow Jones takes no position as to whether Treacy was properly convicted. On this appeal, Dow Jones does not support the Government or Treacy. Rather, Dow Jones submits this amicus brief to focus on the significance of the reporter's privilege and to stress that the trial court, while attempting to balance Treacy's Sixth Amendment rights against Forelle's First Amendment rights, erred by requiring Forelle to testifl in the first place. Further, Dow Jones submits this brief to address the novel issue that now faces this Court. This Court has never had the opportunity to address what

8 standard a district court should apply in circumstances where the government is seeking to compel a reporter to testify at a criminal trial and where a criminal defendant's right to cross-examine a government's witness will necessarily elicit information that is protected by the reporter's privilege. This Court should take this opportunity to hold that, in these circumstances, a district court should apply a heightened standard of scrutiny to determine whether the requested information is sufficiently relevant and probative to force the journalist to testify at all and, therefore, subject the journalist to a potentially broad cross-examination in contravention of his or her First Amendment rights. This heightened standard will ensure that the journalist's and the accused's constitutional rights are adequately protected.

9 SUMMARY OF THE ARGUMENT Dow Jones submits this amicus brief to respecthlly urge this Court to hold that the District Court erred by not quashing the subpoena the Government served on Journal reporter Forelle ("Subpoena") pursuant to his reporter's privilege. Dow Jones also urges this Court to adopt a new standard to address the situation at issue here - one that it has never addressed before. That is, this Court should articulate a rule such that where the government subpoenas a reporter to testify at a criminal trial, the district court must apply a heightened standard in deciding whether to quash the subpoena. The proposed rule has its roots in this Circuit's consistent holdings that, whether it is borne from the common law or from the First Amendment, the reporter's privilege is necessary to protect a free press because the freedom of publication is of little import if journalists are restricted in their freedom to investigate and gather news due to fears of subsequent government investigations. Recognizing the importance of a vigorous press, this Court has articulated various tests for assessing whether a subpoena that calls for the production of newsgathering materials can be quashed. Specifically, this Court has articulated the test for compelling a journalist to testify about confidential materials in response to a criminal defendant's subpoena, US. v. Burke, 700 F.2d 70 (2d Cir. 1983), cert. denied, 464 U.S. 816 (1983), or about non-confidential information in

10 a civil litigation, Gonzales v. Nat '1 Broad. Co., 194 F.3d 29, 32 (2d Cir. 1999), or the burden a criminal defendant must overcome when compelling a journalist to produce newsgathering materials, U.S. v. Cutler, 6 F.3d 67 (2d Cir. 1993), and has addressed the privilege in the context of a government's grand jury subpoena, New York Times Co. v. Gonzales, 459 F.3d 160 (2d Cir. 2006). But the Court has never had the opportunity to determine what burden the government must overcome when seeking to compel a reporter to testify in a criminal trial.* That situation - the one at issue here - presents unique pressures on the constitutional rights of both the reporter and the accused because no matter how narrowly tailored the prosecutor's subpoena may be, if the government is seeking to put a journalist on the stand, the criminal defendant will have a right to cross- examine the journalist. In this circumstance, unlike the cases this Court has addressed before, it is the government - not the defendant - that is creating a direct conflict between two fundamental constitutional rights, the reporter's First Amendment right to protect newsgathering materials and the criminal defendant's Sixth Amendment rights. 2 In Cutler, the prosecution did subpoena the reporters in that case to testify. But the reporters voluntarily responded to the prosecution subpoenas. Therefore, "[nlo issue concerning the special prosecutor's subpoenas [was] presented on [that] appeal." Cutler, 6 F.3d at 70 n.3.

11 Indeed, in the Brief of James J. Treacy ("Treacy's Brief') and the Brief for Amici Curiae National Association of Criminal Defense Lawyers and New York State Association of Criminal Defense Lawyers in Support of Appellant James J. Treacy, Treacy and the Amici defense lawyers argue that once the court decided to allow the Government to call Forelle to testify, Treacy should have been afforded wide "latitude" to cross-examine Forelle about the context of the Article, as well as Forelle's credibility, competence, character, memory and motives. They argue that by refusing Treacy an unfettered cross-examination of Forelle, the District Court violated Treacy's Sixth Amendment rights. This Court should take this opportunity to set a new standard to address this situation and hold that when a court, because of a subpoena issued by the government, is called upon to balance a reporter's right to protect his or her newsgathering materials against a criminal defendant's Sixth Amendment crossexamination rights, the government should be compelled to make "a clear and specific showing that the information is: highly material and relevant, necessary or critical to the maintenance of the claim and not obtainable from other available sources." Burke, 700 F.2d at 77 (citing In re Petroleum Prods. Antitrust Litig., 680 F.2d 5, 7 (2d Cir. 1982)).~ This standard will ensure that the government's need 3 The Burke/Petroleum test was called into question in Cutler, 6 F.3d at 73, when the Court appeared to limit the holding in Burke to its facts. However, the

12 for the reporter's testimony is sufficiently essential to its case. If the information is not critical, the government should not be allowed to force a journalist to testify in these circumstances. This standard is in accordance with the standard that the United States Department of Justice ("DOJ") imposes on itself before it is able to obtain newsgathering information from a reporter in a criminal case. See 28 C.F.R (the "Guidelines"). Under both the proposed test and the DOJ Guidelines, the government must prove that the requested information is "critical" or "essential" to its case and that the information is not available from other sources. Thus, if the government is complying with the its own Guidelines, the new rule should impose no further burden on the government. Here, under this standard, there is no question that the Subpoena should have been quashed. The information the Government sought was not highly material nor could it conceivably be considered critical to the government's case. Indeed, in the Brief for the United States of America ("U.S. Brief'), the Government concedes that in this case, the Government presented abundant evidence at trial - separate and apart from the testimony of Forelle -- that demonstrated Treacy's guilt beyond a reasonable doubt on both counts of the Indictment. This evidence included testimony from [Myron] Olesnyckyj [Monster's former General Counsel ("Olesnyckyj")], Margaretta Burke/Petroleum test was rehabilitated six (6) years later in Gonzales, which limits the holding in Cutler. Gonzales, 194 F.3d at 34, n.3. Thus, the Burke/Petroleum test is still good law.

13 Noonan [Monster's former Director of Human Resources ("Noonan")], and Scott Klein [Monster's former Vice President of Human Resources for the Americas ("Klein")], whom Treacy supervised in the backdating scheme, and documents relating to Treacy's knowledge and approval of backdated option grants at Monster. This evidence demonstrated that Treacy approved backdated stock option grants and participated in the process of selecting dates and prices with the benefit of hindsight. (U.S. Brief at 40 (emphasis added).) The Government claims that the other evidence of Treacy's guilt was "overwhelming." (Id. at 15, 40.) Therefore, the Government did not have any real need to put Forelle on the stand. Indeed, by its own claims, Forelle's testimony was merely cumulative of the "abundant" evidence the Government proffered that Treacy knowingly participated in and approved of the backdating of stock options at Monster. Finally, even if this court applied the test articulated in Gonzales v. Nat'l Broad. Co., 194 F.3d 29 (2d Cir. 1999), the Subpoena should still be quashed. Under Gonzales, the Government must make a substantial showing: The information to be disclosed must (1) be of likely relevance, (2) address a significant issue in the case, and (3) not be reasonably obtainable from other sources. Id. 194 F.3d at 36. Here, as detailed below, the information the Government sought from Forelle was cumulative of other "overwhelming" evidence it claimed it had, and it was of such minimal relevance and did not

14 address a significant issue in the case, that Forelle should not have been forced to testify. STATEMENT OF FACTS Charles Forelle has been a reporter for the Journal for nearly eight years. (JA l.)4 ~ urin~ that time, from June 2002 until July 2007, Forelle worked in the Boston bureau of the Journal. (Id. 7 3.) Since July 2007, Forelle has been on foreign assignment living and working in Brussels as a reporter for the Journal. Forelle was part of a team of Journal reporters investigating the improper backdating of executive stock options at various corporations, including Monster. (JA , 6, 9.) This series of articles, including the Article, won the Pulitzer Prize for Public Service and the George Polk Award for business reporting. (JA ) This reporting also triggered federal authorities to investigate nearly 140 companies and has contributed to at least 70 top executives losing their jobs and numerous former executives, including three executives at Monster, facing federal or state criminal charges. (Id.) As part of this investigation, Forelle spoke to Treacy, appellant herein, about the options-granting process at Monster and some of the stock options that Treacy himself received and exercised. (JA ) Following that interview, Forelle ' Citations to "JA. " are to the Joint Appendix; 'Tr." refers to the trial transcript; "GX refers to a ~Gernment exhibit at trial; "DX refers to a defense trial exhibit.

15 authored the Article (along with other Journal reporters) that was published in the June 12, 2006 issue of the Journal entitled "Monster Worldwide Gave Officials Options Ahead of Share Run Ups". (JA. 142.) In the Article, Treacy is quoted and paraphrased as saying that he was not involved in Monster's option-granting process and that he did not notice the favorable prices of the stock option grants he received. (Id.) On April 24, 2008, Treacy was indicted on two charges related to his alleged role in a scheme to commit securities fraud while he was an executive and board member of Monster (the "Indictment"). (JA.19.) Both charges were based on the theory that Treacy was involved in backdating Monster's stock option grants so that the grants were "in-the-money" grants, i.e., stock options with an exercise price lower than the fair market value of the stock grants on the date they were in fact awarded. (JA.24-36, 48-54) The Indictment further alleged that Treacy personally exercised $13.5 million from "in-the-money" stock options that he received while he was an executive at Monster. (JA.21-22,48-54) The Government served Forelle with the Subpoena ad testzficandum on November 27,2008. (JA , JA.137.) The Subpoena did not define the scope of the requested testimony. (JA.137.) Forelle moved to quash the Subpoena, relying on the reporter's privilege. (JA. 131, 164.) In opposition to Forelle's motion, the Government argued that it merely sought Forelle's testimony so that

16 Forelle will "confirm[] the accuracy" of the following three statements (collectively, the "Statements") in the Article: "Mr. Treacy, who has since left Monster, said that, like any other employee, he had no involvement in the options-granting process, which he said was 'all in the purview' of the board's compensation committee and Andrew McKelvey, Monster's founder and chief executive." "He said he believes the dates were 'the days that the comp committee and Andy granted' the options." "Mr. Treacy said he didn't notice the favorable strike prices at the time. 'I was busy working, and there was a lot to do and a lot of moving parts and a family to get home to,' he said." (JA.196.) The District Court thereafter ordered the Government and Treacy to submit letters regarding the proper scope of cross-examination by Treacy. (JA.277, 280, 310, 316.) In its March 6, 2009 letter to the court, Treacy took the position that the Government's inquiries opened the door to "three general areas of cross-examination": (I) the specific questions that Forelle posed that led to the statements attributed to Treacy; (2) statements attributed to Monster's founder and CEO, Andy McKelvey, who took responsibility for granting Monster's stock options; and (3) the scope of Forelle's reporting, which involved other companies, and the reason for reporting on Treacy's stock options grants.

17 The District Court denied Forelle's motion to quash the Subpoena, but, recognizing that a broad direct or cross-examination would violate Forelle's reporter's privilege, limited both the Government's and Treacy's lines of questioning of Forelle. United States v. Treacy, 603 F.Supp.2d 670 (S.D.N.Y. 2009). The court concluded that, although no party was claiming that Treacy was misquoted, the Government should be permitted to ask Forelle about the Statements and the questions Forelle posed to Treacy that elicited these Statements. (JA.324.) The court reasoned that this testimony was "relevant... as statements made in furtherance of the alleged conspiracy and false exculpatory statements evidencing consciousness of guilt." (JA.327.) As to Treacy, the District Court permitted him to "ask[] about questions posed by Forelle to defendant... immediately preced[ing/ the questions referred to above.'' (Id. (emphasis added).) Although this inquiry into the "context" of the reported materials called for testimony regarding the unreported aspects of Forelle's interview with Treacy, the court stated that Forelle was only being called "solely to confirm statements that were made in a published newspaper article." (JA.326.) In forcing Forelle to take the stand, the District Court did not address what test it should apply in the novel circumstances presented below - where a government's subpoena seeking to compel a journalist to testify would trigger a

18 criminal defendant's Sixth Amendment right to cross-examine the journalist. Rather, the District Court determined that the requested information had some relevance and ordered Forelle to testify. On May 13, 2009, Treacy was convicted (over objection to the limited scope of cross-examination), and he was sentenced on September 2, (Tr , JA ) Treacy has appealed on the grounds, inter alia, that the District Court committed reversible error by "tight[ly]" limiting the scope of Treacy's cross-examination of Forelle. (Treacy's Brief at 3.) ARGUMENT THE TRIAL COURT ERRED BY NOT QUASHING THE SUBPOENA ON REPORTER CHARLES FORELLE As Judge Rakoff recognized, the Government's subpoena pitted Forelle's First Amendment rights against Treacy's Sixth Amendment rights. The District Court chose to resolve this conflict by compromise but should have simply quashed the Subpoena. This Court has never addressed the question of what standard to apply on a motion to quash a government subpoena to a reporter in a criminal trial and should take this opportunity to do so here. Specifically, to provide guidance to a district court faced with this same conflict again, this Court should create a bright line rule requiring the government to satisfy the heightened

19 standard set forth by this Court in Burke before a reporter can be compelled to A. The Policies Underlvin~ the Journalist's Privilege Support the Protection of Unpublished Information The Second Circuit "has long recognized the existence of a qualified privilege for journalistic information." Gonzales, 194 F.3d at 32. Although this Court has questioned whether the reporter's privilege has its roots in constitutional or common law, id. at 36 n.6, whatever its source, this Court has stated that the reporter's privilege reflects "a paramount public interest in the maintenance of a vigorous, aggressive and independent press capable of participating in robust, unfettered debate over controversial matters, an interest which has always been a principal concern of the First Amendment." Burke, 700 F.2d at 77 (citing New York Times Co. v. Sullivan, 376 U.S. 254 (1964)). The reporter's privilege is a natural and necessary extension of the First Amendment's prohibition against "abridging the freedom of speech, or of the press." U.S. Const. amend. I; see van Bulow by Auersperg v. von Bulow, 8 11 F.2d 136, 142 (2d Cir.) ("[Tlhe process of newsgathering is a protected right under the First Amendment"), cert. denied, 48 1 U.S (1 987). While the journalist's privilege applies in civil proceedings, "the important social interests in the free flow of information that are protected by the reporter's qualified privilege are

20 particularly compelling in criminal cases. Reporters are to be encouraged to investigate and expose, free from unnecessary government intrusion, evidence of criminal wrongdoing." Burke, 700 F.2d at 77. Compelling testimony from a reporter is a "more subtl[e],... indirect restraint[]" on the press - but "[hlappily, the First Amendment tolerates neither" direct nor indirect restraints. Baker v. F & F Inv., 470 F.2d 778, 785 (2d Cir. l972), cert. denied, 411 U.S. 966 (1973).5 The privilege guards what this Court has recognized to be the "preferred position which the First Amendment occupies in the pantheon of freedoms." Id. at 783. As much was acknowledged by the Supreme Court in Branzburg v. Hayes, in which five votes were cast for the existence of a reporter's privilege - at least a qualified one - under the First Amendment. 408 U.S. 665, (1972) (Powell, J., concurring).6 Furthermore, this Court has unequivocally held that the privilege applies to non-confidential unpublished materials, and not just the identity of confidential sources. Gonzales, 194 F.3d at 35. "Like the compelled disclosure of confidential sources, [compelled production of a reporter's resource materials] may 5 Baker was decided five months after the Supreme Court's decision in Branzburg v. Hayes, 408 U.S. 665 (1972). Justice Powell's concurrence is the backbone of this Circuit's reporter's privilege precedent. In re Petroleum Prods. Antitrust Litig., 680 F.2d at 8 n.9 (holding that Justice Powell's concurrence was "particularly important" to understanding the reporter's privilege because he was the Justice who had "cast the deciding vote").

21 substantially undercut the public policy favoring the free flow of information to the public that is the foundation of the privilege." von Bulow, 81 1 F.2d at (quotation omitted). This Court in Gonzales reasoned that there were no fewer than four "broader concerns" underlying the reporter's privilege that were applicable regardless of whether the desired information was confidential. 194 F.3d at 35. If the reporter's privilege did not protect the reporter's non-confidential undisclosed materials, then "it would likely become standard operating procedure for those litigating against an entity that had been the subject of press attention to sift through press files in search of information supporting their claims." Id. In such an environment: Potential sources would be deterred from speaking with the press, or they would be more inclined to insist on anonymity, out of a fear they would be "sucked into litigation"; Members of the press would routinely destroy their files containing potentially valuable information - thus inhibiting the cultivation of sources and the development of more substantial, long-term investigations; The press would be burdened with the high costs of subpoena compliance; and The independent press would bear the semblance of an investigative arm of the judicial system, government, or private parties - rather than a check on governmental power. See id. See also Lonegan v. Hasty, No. CV (NG)(VVP), 2008 WL 41445, at *2 (E.D.N.Y. Jan. 1, 2008) ("[wlhere non-confidential information is involved,

22 the damage [to a free press] is... no less real. Requiring journalists... to respond to subpoenas on a regular basis, even when the requested documents and testimony concern non-confidential matters, imposes costs in time and money that would unnecessarily burden reporters and their employers"). Recognizing these concerns, the DOJ has set forth Guidelines that are intended to protect the media in the course of DOJ investigations and prosecutions. The DOJ Guidelines state that "[blecause freedom of the press can be no broader than the freedom of reporters to investigate and report the news, the prosecutorial power of the government should not be used in such a way that it impairs a reporter's responsibility to cover as broadly as possible controversial public issues." 28 C.F.R The Guidelines are "intended to provide protection for the news media from forms of compulsory process, whether civil or criminal, which might impair the news gathering function." Id. (emphasis added). The government, therefore, is required to "strike the proper balance between the public's interest in the free dissemination of ideas and information and the public's interest in effective law enforcement and the fair administration of justice." 28 C.F.R (a). Further, in criminal cases, before issuing a subpoena, "there should be reasonable grounds to believe, based on information obtained from nonmedia sources... that the information sought is essential to a successful investigation - particularly with reference to directly establishing guilt or

23 innocence. The subpoena should not be used to obtain peripheral, nonessential, or speculative information." 28 C.F.R (f)(l) (emphasis added). Further, "[tlhe government should have unsuccessfully attempted to obtain the information from alternative nonmedia sources," before issuing a subpoena to a journalist. 28 C.F.R (0(3). Here, the policies that underlie the reporter's privilege are particularly acute as they relate to Forelle. Forelle, with others at the Journal, uncovered criminal wrongdoing in numerous corporations. This is exactly the type of reporting this Circuit has claimed reporters should be "encouraged" to undertake "free from unnecessary government intrusion." Burke, 700 F.2d at 77. But, contrary to the DOJ Guidelines, as a result of his reporting, Forelle was served with a Subpoena that seeks information that is hardly "essential" to the Government's case. Cf: 28 C.F.R (0(1). Rather, Forelle was called to confirm statements in which Treacy claimed he was not involved in the stock options granting process even though the Government has claimed that it has "overwhelming" evidence of Treacy's professions of ignorance. (U.S. Brief at 40.) Forelle himself explained the impact here: "[gliven the volume of articles that I prepare, the scope of newsgathering activities that I engage in, and the breadth of topics that I cover, if I were required to give evidence in any civil or criminal matter that had any connection to any of these activities, I would cease acting as a professional

24 journalist and instead would become a professional witness." (JA ) He went on to state that his "ability to obtain interviews and elicit information is dependent upon the assurance that I will not be compelled to testify in court any time I research or prepare articles on a topic that pertains in any way to a civil or criminal matter." (Id.) "In order to ensure that [he] maintain[s his] objectivity, and not become an investigative arm for the government or for any private litigant," Forelle believed that "it is essential that [he is] not compelled to give testimony relating to [his] newsgathering activities." (Id.) He noted that here, "[tlhe impact on my ability to act as a professional journalist would be particularly severe [because]... the Journal's investigation into the backdating of stock options at various corporations has informed numerous investigations and criminal actions." (Id.) If Forelle were forced "to testify or divulge other information about [his] newsgathering activities in every one of these matters, the time [he] would have to devote to being a witness would be extremely detrimental to [his] duties as a professional journalist." (Id.) Further, even in the face of the District Court's limiting instruction, Forelle was forced to testify about unpublished information. Specifically, the Statements, as printed in the Article, are primarily Forelle's own paraphrasing of a conversation he had with Treacy. As such, in order "to elicit testimony about the accuracy of' the published Statements, as the government desired, it had to ask

25 Forelle to divulge information about Treacy's exact statements to Forelle, statements that were not published in the Article, and how and why Forelle characterized his conversation with Treacy the way he did. (JA ) In response to those questions, Forelle had to disclose other statements by Treacy that were never used in the Article. Clearly then, the Government did - contrary to its assurances - delve into Forelle's reportorial and editorial processes. Treacy's cross-examination required Forelle to further divulge unpublished information. (JA ) Accordingly, the very policies that led this Court to protect reporter's from compelled disclosure of their newsgathering materials are implicated here. B. This Court Should Adopt A New Rule For Government Subpoenas To Reporters In Criminal Trials 1. The New Rule For this reason, this case presents a unique opportunity to develop a new rule that balances a reporter's First Amendment rights with a defendant's Sixth Amendment cross-examination rights. As discussed above and as Judge Rakoff recognized, the District Court was not only faced with compelling Forelle to testify in the face of his reporter's privilege; it was also called upon to balance that privilege with Treacy's right to cross-examine Forelle. After all, if a witness is put on the stand by the government, the criminal defendant can argue with some justification he is entitled to least some cross-examination of the witness as to the

26 context of the witness's testimony on direct. Crawford v. Washington, 541 U.S. 36, 61 (2004). This will invariably call for the disclosure of unpublished information, which the reporter is privileged from disclosing. Gonzales, 194 F.3d at In this setting - that is, where the government's decision to subpoena a reporter creates a situation in which a cross-examination delving into the reporter's unpublished work product may be constitutionally permitted - the trial court must consider the anticipated cross-examination questions in determining whether the government has been able to meet its burden of overcoming the reporter's privilege. In the parlance of this Court's precedent, the "materials at issue" should be expected to include both the anticipated direct and cross-examination. Gonzales, 194 F.3d at 35. Here, Treacy is arguing that he should have had the right to question Forelle's credibility, competence, character, memory and motives. Treacy could have attempted to do so in a number of ways, including, potentially, questioning Forelle about his newsgathering for other articles, as he intended to do, (page 11, infra) some of which may have included reliance on confidential sources. This is the most severe infringement on the reporter's privilege. In a valiant attempt to balance Forelle's First Amendment rights with Treacy's right to cross-examine the Government's witness, the District Court attempted to uphold the reporter's privilege but also permitted Treacy to ask Forelle some questions about his unpublished conversation with Treacy. Dow

27 Jones believes this balance was struck inappropriately because it infringed Forelle's First Amendment rights. More fundamentally, however, the decision on how to balance First and Sixth Amendment rights should not be conducted without clear guidance from this Circuit. Instead, this Court should take this opportunity to set a new rule to deal with this situation. In arguing for the rule proposed below, we recognize that, in other contexts, district courts are called upon to balance the defendant's cross-examination rights with other privileges. See U.S. Brief at (citing cases). But balancing against the First Amendment is fundamentally different. Indeed, the DOJ itself has recognized the special importance of the First Amendment in creating the DOJ Guidelines. These Guidelines ensure that, in order to protect a free press, the government must meet a strict standard before issuing a subpoena to a reporter. Under the DOJ Guidelines before issuing a subpoena in a criminal case, the government must believe that the requested information "is essential to a successfbl investigation - particularly with reference to directly establishing guilt or innocence." 28 C.F.R O(f)(l) (emphasis added). Further, the government must have attempted and failed to "obtain the information from alternative nonmedia sources" before issuing any subpoena to the media. 28 C.F.R (f)(3). Thus, under the Guidelines and the proposed standard, the

28 government must prove that the requested information is "critical" or "essential" to its case and that the information is not available from other sources. As the Honorable Robert D. Sack noted, "the substantive standards that [the Guidelines] establish as Department policy are strikingly similar to the reporter's privilege as [the Second Circuit] have articulated it from time to time." Gonzales, 459 F.3d at 176 (dissenting) (citing Petroleum test). In addition, the proposed test proposes no additional burden on the government. If the government was complying with the DOJ Guidelines it should have no trouble meeting the proposed standard. When both a journalist's First Amendment rights and a criminal defendant's Sixth Amendment rights are at stake, it is imperative to hold the government to its own standards. Therefore, this Court should seize this opportunity and hold that where the government issues a subpoena that creates this constitutional conflict, the government should be forced to overcome a heightened standard before it can overcome the reporter's privilege. Specifically, as articulated in Burke, it must make a clear and specific showing that the requested newsgathering information is (I) highly material and relevant, (2) necessary or critical to the government's case, and (3) not available from other non-media sources. This standard will ensure that the district court adequately scrutinizes the government's claimed need for the

29 information before subjecting the journalist to the defendant's arguments over the breadth of its required cross-examination. 2. Under This Standard, The Subpoena Should Be Quashed Applying the heightened standard articulated above to this action, there can be no question that the Subpoena should be quashed because the requested information was not highly material nor was it critical and necessary to the Government's case. a. Forelle's Testimony Was Not Highly Material First, Forelle's testimony was not highly material and relevant. Indeed, it had minimal - if any - relevance. All of the theories advanced by the Government for requiring Forelle to testify sprang from the assumption that the Article needed to be verified in order for the jury to believe that Treacy did, in fact, knowingly participate in the options-granting scheme at Monster. It claimed that Forelle's testimony would establish - through circumstantial evidence - Treacy7s consciousness of guilt. But the Government has argued that it already presented "abundant" and "overwhelming" evidence demonstrating that Treacy knowingly participated in the backdating of stock options at Monster. (U.S. Brief at 40.) For example, the Government introduced the following evidence, all of which it claims is sufficient to establish, without resort to privileged information, Treacy's guilt: "testimony from Olesnyckyj, Noonan, and Klein, whom Treacy supervised in the backdating scheme, and documents relating to

30 Treacy's knowledge and approval of backdated option grants at Monster [that] demonstrated that Treacy approved backdated stock option grants and participated in the process of selecting dates and prices with the benefit of hindsight." U.S. Brief at 40 (citing JA ' 532, , , , , , , , 1564, 1568, , , , , , ). See also U.S. Brief at 1 1 That Treacy was the recipient or author of s in which Monster employees openly discussed picking - and revising - a date for an option grant that was selected in hindsight based on the closing price of Monster's stock. U.S. Brief at 4. "Treacy oversaw the accounting, finance, legal, and human resources departments, which were responsible for administering Monster's stock option program and accounting for stock option grants." U.S. Brief at 40 (citing JA , , ; GX , 5 107A-D, 5 108, ). See also Brief at ("Treacy directed and supervised others in the scheme"). "Treacy signed documents, including SEC filings and management representation letters to Monster's outside auditors, that contained materially false statements and false financial information." U.S. Brief at (citing JA ; GX , , 1657, 5005). "Treacy participated in selecting and approving backdated strike prices for two broad-based grants - dated April 4,2001, and May 6, as well as numerous one-off grants." Brief at 41 (citing JA , , , , 1564, 1568, , , , ; Tr ). Thus, accepting the Government's own arguments, the Subpoena was nothing more than an attempt at unnecessary bolstering of a fact that had already been established. Forelle's testimony, therefore, cannot be considered highly material and relevant, as the Burke standard requires.

31 Further, the Government sought to use Forelle's testimony as evidence of a "false exculpatory statementv7 - that is, an "explanation intending to show a defendant's innocence that is later shown to be false." United States v. Strother, 49 F.3d 869, 877 (2d Cir. 1999, cert. denied, 522 U.S (1998). This statement is not relevant to establish guilt. United States v. Nusraty, 867 F.2d 759, 765 (2d Cir. 1989). Rather, these statements are merely "circumstantial evidence of consciousness of guilt." United States v. Lorenzo, 534 F.3d 153, 161 (2d Cir. 2008) (quoting United States v. Johnson, 5 13 F.2d 8 19, 824 (2d Cir. 1975)). This Court has repeatedly cautioned that false exculpatory statements have minimal probative value. Id. As such, to the extent this Court concludes that Treacy's Statements could be interpreted as false exculpatory statements, Forelle's testimony was - at best - minimally relevant, which cannot meet the heightened "highly material and relevant" standard articulated in Burke. 7 The government also asserted that evidence of Treacy's statements to Forelle were necessary (a) as an admission; (b) as statements in firtherance of an alleged conspiracy; and (c) to impeach Treacy. (JA. 135, 20 1.) These contentions warrant only passing mention here. As explained in Forelle's Motion to Quash and the Reply brief, the statements are not admissions because admissions must be offered for the truth of the statement made, not as a false statement. Also, the statements were not relevant to impeach Treacy because he had not testified (and never did testify). While Judge Rakoff believed that the Statements could be relevant as statements in furtherance of the alleged conspiracy, the Government has not explained how statements denying involvement in a backdating scheme can be considered statements in furtherance of the alleged conspiracy. In any event, the Government introduced numerous other statements from Treacy that it claims are in furtherance of the alleged conspiracy.

32 This is just the sort of testimony that was proscribed by Burke. There, the defendant sought non-confidential, unpublished materials from Sports Illustrated to use to impeach the credibility of Government witness Henry Hill, whose testimony was purportedly "the sine qua non of the government's case against" Burke. 700 F.2d at 76. In quashing the subpoena, the district court observed (and this Court agreed) that Hill's testimony had already been thoroughly impeached without the aid of the privileged materials. Id. at 78. Accordingly, the evidence was not "highly material and relevant" because "any information to be gleaned from the [Sports Illustrated work papers would be merely cumulative and thus would not defeat [the reporter's] First Amendment privilege." Id. Similarly here, the point the Government seeks to make with Forelle's testimony - that Treacy knew the backdating of stock options at Monster was illegal - had already been made, it claims, by the "abundant" evidence tending to show Treacy's guilt. Under the Government's own theory then, any additional materials would, therefore, be cumulative and "would not defeat [Forelle's] First Amendment privilege." Id. Moreover, the broad scope of materials Burke requested in that case is similar to the type of questions Forelle would have been expected to entertain were he subjected to the broad cross-examination to which

33 Treacy contends he was constitutionally entitled.8 Thus, as in Burke, Forelle's testimony had limited probative value and was not sufficiently highly material to overcome Forelle's reporter's privilege. In the face of Forelle's reporter's privilege and Treacy's Sixth Amendment rights, the District Court should have quashed the Subpoena on this basis alone. b. The Testimony Was Not Critical To The Government's Case Next, the Subpoena should be quashed because, to the extent Forelle's testimony is highly material, it was not "critical or necessary" to the Government's case. To make such a showing, the Government must demonstrate that its case "virtually rises or falls with the admission or exclusion of the proffered evidence." Persky v. Yeshiva Universig, No. 01 Civ. 5278, 2002 WL , at *3 (S.D.N.Y. Dec. 10, 2002); United States v. Marcos, No. 87 CR 598(JFK), 1990 WL 74521, at *3 (S.D.N.Y. June 1, 1990). See also Krase v. Graco Children Prods., Inc., 79 F.3d 346, 351 (2d Cir. 1996) (interpreting "critical or necessary" under the New York State Shield law to mean "the information... virtually rises or falls with the admission or exclusion of the proffered evidence"). Here, the Government cannot meet this exacting burden. 8 In Gonzales, this Court's most recent journalist's privilege case, the Court declined to set a standard for overcoming the privilege. 459 F.3d 160. Instead the Court found that, regardless of the standard and even under the Burke test, any privilege was overcome on the facts of the case.

34 False exculpatory statements border on being "insignificant" as a matter of law. See Lorenzo, 534 F.3d at 161; Marcos, 1990 WL 74521, at $4. As explained above, this Court has recognized that they are of little probative value and cannot be considered as evidence of guilt. As such, Treacy's apparent false exculpatory statement as published in the Article cannot be considered a "significant" issue in this case. Further, as detailed above, Forelle's testimony regarding Treacy's false exculpatory statements is insignificant in that its impact pales in comparison to the "overwhelming" quantum of evidence that the Government claims it produced at trial showing that Treacy was involved in or conscious of the alleged improper backdating of stock option grants. As such, Forelle's testimony would be unduly cumulative and not relevant to a significant issue in this criminal action. In this respect, this case is like Marcos. There, CBS Inc. moved to quash a subpoena served upon it by the government that sought material CBS prepared in connection with a television interview with the defendant Imelda Marcos. Id., 1990 WL 74521, at * 1. The government argued that it was entitled to the material because the television interview contained false exculpatory statements made by Mrs. Marcos in which she denied that she was aware of her husband's financial affairs. Id. at *3. The court held that, while the defendant's false exculpatory statements were relevant to showing that the defendant was aware of and

35 participated in her husband's financial affairs, the subpoena to CBS must still be quashed. Id. The court specifically held that: The Government's argument that the subpoenaed excerpt is "necessary or critical to the maintenance of' the prosecution does not fare as well. The Government urges that the evidence is "necessary to rebut the defense claim that [Mrs.] Marcos was an unwitting partner in '9 her husband's financial crimes Acknowledging the serious import of the phrase "necessary or critical," the Court believes the appropriate inquiry to be whether the Government's claim virtually rises or falls with the admission or exclusion of the proffered evidence. The broadcast excerpt at issue here plainly is not such crucial evidence. Id. The court also recognized that, in any event, the requested information was merely cumulative because "a significant portion of the testimony given in this case controverts the defense assertion that Mrs. Marcos was not involved in or aware of financial activities." Id. at *4. And, "if the proffered evidence is merely cumulative or of limited probative value in view of already-admitted evidence, it cannot be credibly urged that the proffered evidence is necessary or critical." Id. Similarly here, the Government sought to use Forelle's testimony to establish one of Treacy's allegedly false exculpatory statements. As Marcos correctly held, false exculpatory statements, by their very nature, are not essential to the government's case. And, as in Marcos, Forelle's testimony was cumulative of the evidence that the Government believes establishes that Treacy was well aware of and participated in the options granting process at Monster. Because, by

36 its own concession, the Government believes that it has "abundant" other evidence that establishes Treacy's guilt, the Government's case did not "rise or fall" on the admission of the requested testimony. As such, under the Burke standard, this Court should quash the C. Even Under The Gonzales Test, The Subpoena Should Be Quashed Finally, even if this Court declines to adopt that a heightened standard set forth above, the Subpoena should still be quashed under the Gonzales test for nonconfidential newsgathering materials. Under that test, which the District Court failed to properly apply, the reporter's privilege is overcome only if the "materials at issue" (1) "are of likely relevance" (2) "to a significant issue in the case," and (3) "are not reasonably obtainable from other available sources." Id. at 36. Here, the requested information is not sufficiently relevant to a significant issue of the Government's case. As a preliminary matter, the requested testimony is not relevant. As explained above, the Government claims that it has "overwhelming" evidence that 9 As an aside, if this Court determines that Treacy's Sixth Amendment rights were violated, the proper remedy would be to strike Forelle's testimony in its entirety. The Court has long held that when a defendant's "cross-examination [of a witness] is restricted by" competing privileges, "it may be necessary to strike the direct testimony of that witness." Dunbar v. Harris, 612 F.2d 690, 692 (2d Cir. 1979). (witness' invocation of Fifth Amendment right during cross-examination may require striking witness' testimony altogether). Here, if the Court determines that Treacy was entitled to a broader cross-examination, which will necessarily elicit more unpublished information and further impinge on the journalist's privilege, this Court should prevent Forelle from testifying at all.