Thursday, December 4, 2008

No Interim Suspension

The rules governing bar discipline in the District of Columbia require immediate suspension when an attorney is convicted of a felony offense, with a provision that the suspension may be set aside on a showing of good cause. In a rare instance finding such a showing, the D.C. Court of Appeals decided against an interim suspension:

We conclude that respondent has shown good cause for the court to stay the interim suspension. His prior unblemished record as an attorney; his plea of guilty to what amounts to a strict liability offense involving no scienter or moral turpitude; and the fact that his violation arose from conduct outside of his normal legal practice all suggest a very low degree of risk that permitting him to practice in the interim will harm the public. For the same reasons, but subject of course to development of a factual record in the disciplinary process, we think that the likelihood that respondent will receive a significant sanction, i.e., a suspension (if at all) of more than brief duration, is very small. Stated differently, there is a reasonable possibility on this record that interim suspension might exceed the sanction that will eventually be imposed on respondent. Considering, finally, the harm to respondent’s livelihood and ability to support his family that interim suspension may entail, we conclude that respondent has met his burden to show good cause for why the court should stay its hand.

The offense at issue involved a violation of D.C. law prohibiting engaging in the business of money transmission without a license.

It has now been pointed out to me that the court had declined (with Bar Counsel's blessing) to impose interim suspension in a case involving a criminal conviction for misdemeanor theft. Under the court's rules, such an offense is deemed a "serious crime" and requires suspension absent a showing of good cause. These two cases suggest to me that the court is more inclined to let an attorney maintain a license after conviction than it had been in the past. (Mike Frisch)

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Comments

Wow. A named principal in a prestigious law firm gets a free pass. How surprising.

I especially like the court’s professed concern that the interim suspension might actually exceed the final suspension imposed. The District of Columbia regularly uses the interim suspension as a hammer to force attorneys to acquiesce to discipline. In my own case, I have now been under interim suspension for 21 months on a proceeding where Bar Counsel is seeking a six month suspension nunc pro tunc to March 2007. Mr. Zakroff was suspended for almost three years before he finally gave in and agreed to a stipulated settlement. He told me that they just wear you down.

By the way, the U.S. Supreme Court probably holds the dubious record for the longest interim suspension. See In re Powell, 389 U.S. 924 (1967) and In re Powell, 512 U.S. 1202 (1994). Ms. Powell’s 16 years in purgatory was so long that her case had to be transferred to a special docket (No. S-3).

I filed a petition for certiorari challenging the Court of Appeals’ automatic interim suspension procedure but cert. was denied. Williams v. District of Columbia Court of Appeals, 128 S.Ct. 1075, 169 L.Ed.2d 809 (2008).

Stephen

Posted by: FixedWing | Dec 4, 2008 2:18:30 PM

The original indictment really has to be read:

http://www.usdoj.gov/criminal/ceos/Press%20Releases/DC%20egold%20indictment.pdf

Attorney Downey owned 20% of Gold & Silver Reserve, Inc. He was co-founder, secretary, VP and Director of GSR and E-Gold. So much for the Court’s claim that he was only minimally involved.

The Court’s assertion that there were no claims of impropriety by either company or respondent is definitely not supported by reading the complaint. Quite the opposition in fact. For example, paragraph 34:

>>> Regularly, during the course of conducting the E-GOLD operation, the defendants and their employees recognised that certain accounts were being used for criminal purposes. On numerous occasions, the E-GOLD operation indicated in the account records contained in the “e-gold” computer database the type of criminal activity that the account-holder was engaged in, including, among other things, “child porn,” “Scammer” and “CC fraud.” The defendants nevertheless allowed transactions in these accounts to continue. <<<

Apparently, the Court was unfazed by allegations that they were knowingly facilitating sellers of kiddy porn. What will this court normally do to a lawyer who sells kiddy porn?

How on earth the Court could term this felony as “what amounts to a strict liability offense involving no scienter or moral turpitude” is absolutely beyond me. Nor does the Court provide any legal basis for this ruling.

Is it really reasonable to expect that Mr. Downey will receive a light suspension or no suspension whatsoever for this? Again, legal basis is provided for this conclusion.

This case is pretty unbelievable.

Stephen

Posted by: FixedWing | Dec 4, 2008 8:54:06 PM

Here is a little more…

DOJ’s press release announcing the indictment:

http://www.usdoj.gov/criminal/ceos/Press%20Releases/DC%20egold%20indict%20PR_042707.pdf

>>> The indictment alleges that E-Gold has been a highly favored method of payment by operators of investment scams, credit card and identity fraud, and sellers of online child pornography. The indictment alleges that the defendants conducted funds transfers on behalf of their customers, knowing that the funds involved were the proceeds of unlawful activity; namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes. The indictment further alleges that the defendants operated the E-Gold operation without a license in the District of Columbia or any other state, or registering with the federal government, and thereby violated federal and state money transmitting laws. The indictment alleges that this conduct occurred at various times from 1999 through December 2005.

“As alleged in the indictment, the E-Gold payment system has been a preferred means of payment for child pornography distributors, identity thieves, online scammers, and other criminals around the world to launder their illegal income anonymously,” said Assistant Attorney General Alice S. Fisher of the Criminal Division. <<<

Stephen

Posted by: FixedWing | Dec 5, 2008 10:17:00 AM

And more.

DOJ’s press release announcing the guilty pleas:

http://www.usdoj.gov/criminal/cybercrime/egoldPlea.pdf

>>> according to information contained in plea materials, the E-Gold operation provided digital currency services over the Internet through two sites: www.e-gold.com and www.Omnipay.com. Several characteristics of the E-Gold operation made it attractive to users engaged in criminal activity, such as not requiring users to provide their true identity, or any specific identity. The E-Gold operation continued to allow accounts to be opened without verification of user identity, despite knowing that “e-gold” was being used for criminal activity, including child exploitation, investment scams, credit card fraud and identity theft. In addition, E-Gold assigned employees with no prior relevant experience to monitor hundreds of thousands of accounts for criminal activity. They also participated in designing a system that expressly encouraged users whose criminal activity had been discovered to transfer their criminal proceeds among other “e-gold” accounts. Unlike other Internet payment systems, the E-Gold operation did not include any statement in its user agreement prohibiting the use of “e-gold” for criminal activity.

“By failing to comply with money laundering laws and regulations, the E-Gold operation created an environment ripe for exploitation by criminals seeking anonymity in conducting online transactions,” said Acting Assistant Attorney General Matthew Friedrich. “This case demonstrates that online payment systems must operate according to the applicable rules and regulations created to ensure lawful monetary transactions.”

“The operations of E-Gold Ltd. and the other defendants undermined the laws designed to maintain the integrity of our financial system and created opportunities for criminal activity,” said U.S. Attorney Taylor. <<<

“Downey … face[s] a maximum of five years in prison and a fine of $25,000.” Sentencing was meant to be 20 November but I have seen no indication that he has actually been sentenced.

So, according to the Judges Blackburne, Farrell and Pryor, “the likelihood that [a lawyer facing up to five years in prison for a felony involving money laundering for purveyors of kiddie porn and other criminals] will receive a significant sanction, i.e., a suspension (if at all) of more than brief duration, is very small.” Nice…

Stephen

Posted by: FixedWing | Dec 5, 2008 10:19:12 AM

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