United States v. Henke

Chan Desaigoudar and Steven Henke (defendants) were executives at California Micro Devices, Inc. (Cal Micro). After financial struggles, certain Cal Micro executives began falsely reporting revenue to make it appear that Cal Micro was a worthwhile investment. Desaigoudar and Henke were indicted on federal charges of conspiracy, making false statements, securities fraud, and insider trading. The president of Cal Micro during the scheme, Surendra Gupta, was also indicted. Before trial, Desaigoudar, Henke, and Gupta engaged in joint-defense meetings protected by a joint-defense-privilege agreement, which assured all communications between the three executives and their counsel would be kept confidential. Gupta entered a plea before trial and agreed to testify for the government (plaintiff) against Desaigoudar and Henke. Desaigoudar’s and Henke’s attorneys both expressed concern that the confidentiality requirements of the joint-defense-privilege agreement prevented them from adequately representing their clients. The attorneys did not cross-examine Gupta at all, fearing it would lead to a violation of the joint-defense agreement, even though Gupta’s trial testimony was contradicted by statements he made in the confidential meetings. Gupta’s attorney threatened legal action if the joint-defense-privilege agreement were violated. Desaigoudar and Henke were convicted by the jury and appealed the convictions, arguing for a new trial because the joint-defense-privilege agreement between their attorneys and Gupta created an actual conflict of interest that prevented their attorneys from cross-examining an important witness against them.