White Collar Crime Prof Blog

In the News & Blogsphere

DOJ Press Release - Former Alaska State Representative Victor Kohring Sentenced On Public Corruption Charges (sentenced to 22 months in prison) ("part of an ongoing investigation into public corruption in the State of Alaska")

ABA Law Journal News - Ex-Prosecutor Acquitted at Trial Loses Bid for Attorney Fees; Paul Egan, Detroit News - Convertino Request is Denied - He Sought Attorney Fees for Case that Resulted in Acquittal on Obstruction of Justice Charges

Reuters - UBS facing subprime banking investigations: report

Bloomberg - Polaris Falls After Brokerage Searched by Prosecutors

WSJ - Kazakh Leader's Daughter Monitored U.S. Bribe Case

WSJ - Siemens Ex-Chairman faces Civil Proceedings

NYTimes - Corruption Case Taints Rising Political Star (discussing Rezko trial and presidential candidate Obama & Governor Blagojevich)

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Chiquita and 60 Minutes

60 Minutes aired a special on Chiquita Banana, The Price of Bananas, in which they reported on the issues that faced this company in trying to operate in Colombia and their self-reporting to the DOJ of violations in making illegal payments to a paramilitary group in Colombia.  Their self-reporting resulted in the company facing a significant penalty - a $ 25 million dollar fine and 5 years probation. (see Sentencing Memo here) The company also was the subject of a prosecution and plea, and not the recipient of a deferred prosecution agreement.  To a large extent, this recent report mirrored and expounded upon the work of former Wall Street Journal reporter Laurie Cohen, who back in August 2007 discussed the dilemma faced by Chiquita in trying to protect employees and also trying to comply with the law. (see Laure Cohen, Chiquita Under the Gun, WSJ)   

Some interesting points:

• 60 Minutes reported that "the Colombian government is now talking about extraditing Chiquita executives to Colombia." The extraterritorial application of U.S. laws by the DOJ may be coming back to haunt them as other countries may now think they have the right to come into the U.S. and proceed against corporate executives here.  The cost of a company operating abroad may be significantly increased if CEOs, or others within the U.S., start facing indictment in other countries. 
• The 60 Minute Special includes names of other companies that are alleged to be in violation, although the source of the allegations is in prison and charged with offenses in Colombia. One has to wonder if the DOJ has investigated these other companies, or if the only one who gets prosecuted is the one who comes forward and does the right thing by turning themselves into the government.  Based on this 60 Minute Special one might have a certain skepticism about whether the government is taking a proactive role in this investigation.  On the other hand, the effect of the WSJ article, and now 60 Minutes, may stimulate further DOJ activity. Of course, there is also the possibility that they did investigate and find no merit to the allegations that other companies were involved in illegal payments.
• The DOJ took a positive approach in not indicting individuals after Chiquita turned themselves into authorities. Perhaps this will send a message to corporate executives at other companies that they need to work with the DOJ to avoid individual liability. This could place the company against the individual when an individual may be trying to protect themselves from personal liability while the company is saying that proof is not present, so the company should not self-report.
• Why is it that Chiquita received a plea with conviction, while other companies get a deferred prosecution agreement?  Is this but another example of the enormous discretion of the DOJ?

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Thornburgh Enters Appearance in Wecht Appeal

The Third Circuit Court of Appeals entered a stay of the Cyril Wecht trial pending appeal (for background on this case see here).  The case of the 77 year old coroner charged with federal violations for alleged state conduct was set for retrial following a hung jury.

A motion to expedite the appeal was also entered.  The appellee's brief is due on or before May 15th and the appellant's reply brief has a deadline of May 20th.  On the day this order was granted, there was also an entrance of appearance by Richard L. Thornburgh, former Pennsylvania Governor and former Attorney General of the United States and now with the law firm of Kirkpatrick & Lockhart, Preston, Gates, Ellis LLP. 

Should DOJ really be spending taxpayer money on this attempt to re-prosecute this individual? 

Government's Response Arguing that a Stay is Not Necessary - Download govt. Response-Wecht.pdf

Court Order Rejecting Government's Position - Download wecht_order.pdf

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The Government is Working With Air

Two airline related cases reached agreements -

1. A plea agreement was filed in United States v. Japan Airlines International Co., Ltd. on a Sherman Antitrust Act, 15 U.S.C. § 1, matter. The criminal fine of $110 million is offered with cooperation by the company.  There are a few interesting aspects of this plea -

• It actually outlines an agreed upon payment plan -

"The United States and the defendant agree to recommend, in the interest of justice pursuant to 18 U.S.C. § 3572(d)(1) and U.S.S.G. §8C3.2(b), that the fine be paid in the following installments: within thirty (30) days of imposition of sentence -- $20 million; at the one-year anniversary of imposition of sentence ("anniversary") -- $20 million; at the two-year anniversary -- $20 million; at the three-year anniversary -- $20 million; at the four-year anniversary -- $20 million; and at the five-year anniversary -- $10 million; provided, however, that the defendant shall have the option at any time before the five-year anniversary of prepaying the remaining balance then owing on the fine."

One can't help but think if the accountants were considering tax implications here.

• It accounts for the need to secure testimony from those outside the United States -

"16. The United States agrees that when any person travels to the United States for interviews, grand jury appearances, or court appearances pursuant to this Plea Agreement, or for meetings with counsel in preparation therefor, the United States will take no action, based upon any Relevant Offense, to subject such person to arrest, detention, or service of process, or to prevent such person from departing the United States. This paragraph does not apply to an individual's commission of perjury (18 U.S.C. § 1621), making false statements (18 U.S.C. § 1001), making false statements or declarations in grand jury or court proceedings (18 U.S.C. § 1623), obstruction of justice (18 U.S.C. § 1503, et seq.), or contempt (18 U.S.C. §§ 401-402) in connection with any testimony or information provided or requested in any Federal Proceeding."

2. A DOJ/Antitrust Press Release notes that "[t]he former highest-ranking Qantas Airways Limited cargo executive employed in the United States has agreed to plead guilty, serve 8 months in jail, and pay a criminal fine for participating in a conspiracy to fix rates for international air cargo shipments."

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Hank Asbill on Representing an AOL Exec

Henry "Hank" Asbill spoke as the keynote speaker at the White Collar Crime Institute held at Stetson University College of Law. Asbill successfully represented an AOL executive in both the criminal and civil actions brought by the government. The theme of this talk:  when the government is over-aggressive it can backfire.  This is especially true when the lawyer is Hank Asbill, who calls the government's bluff and tries to proceed on the civil case that the government just assumes will be stayed. From the jury selection process in the case, to how the venue was chosen by the government, were examples of how being over-aggressive can come back to haunt the government. His inspirational talk emphasized that a defense attorney can stand up to the government.  One additional trial point he made concerned the importance of humor in the courtroom, especially in a long trial.

It was especially good to hear him mention something that has been bothering me.  I continually see the government issue press releases for indictments, pleas, and convictions.  But why is it that we never see a press release for a not guilty.  If the government is truly a minister of justice, then reporting the not-guilty verdict should be just as important.  Asbill noted how the government keeps the Indictment up on the web, but they fail to mention what happened - a not guilty and no civil finding of liability.

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Government Returns Third Superseding Indictment in Prosecution of Defense Attorney Benedict P. Kuehne

Guest Blogger Jon May, Esq. writes:

When the indictment against Miami attorney Ben Kuehne was unsealed, lawyers across the country scratched their heads. The indictment alleged that Kuehne, hired to vet legal fees paid to famed defense counsel Roy Black for his defense of Fabio Ochoa, was guilty of money laundering. The indictment, however, was almost totally devoid of any facts that explained what Ben actually did that violated the law. The government has attempted to remedy that deficiency in the second and third superseding indictments, but lawyers are still scratching their heads. The government does not contend that the source of the Colombian pesos used to pay Black’s fees were proceeds of any unlawful activity. Rather the government argues that the United States dollars exchanged for the pesos in the United States (by United States agents) were derived from drug trafficking. But the "tainted dollars" exchanged for the clean pesos were not proceeds of any illegal activity involving Fabio Ochoa. These dollars came from various sting operations run by the DEA in New York.

It is the government’s theory that all money exchange businesses operating in the United States are so polluted with tainted dollars and that Attorney Kuehne knew that the money ultimately transferred to Attorney Black was illegal proceeds. Because Kuehne’s trust account was used to temporarily hold the transfer of these funds to Black and because Kuehne drafted opinion letters attesting to the legal source of the funds, the government contends that he committed money laundering.

The government has made this same argument in a number of cases against United States banking institutions who have dealt with money exchanges involving currency from various Latin American nations, most recently Wachovia Bank. But thus far each of these investigations has resulted in deferred prosecutions. Ben Kuehne’s prosecution may be the first case where this unprecedented and peculiar theory has been employed against an individual, in this case a prominent criminal defense lawyer.

A new twist is presented by the third superseding indictment. In addition to money laundering, Ben is charged with defrauding the Government of Colombia, on the theory that these money exchanges defeat Colombian currency control laws. What this means is that the United States is now fully engaged in enforcing other nations’ laws in the courts of the United States.

As this prosecution unfolds, it becomes clearer that the government is using this case to test new theories that have broad implications for every lawyer who provides legal advice that is later argued to have impeded law enforcement efforts, even those of foreign countries. It also threatens to subject civil and corporate counsel to potential prosecution for any legal advice given that somehow violates a foreign law.

Third Superseding Indictment -

Download third_superseding_indictment.5-1-8.pdf

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In the News

Jason Cato, Pittsburgh Tribune Review - Court delays Wecht's 2nd trial

WPXI.Com - Wecht Retrial Delayed By Federal Appeals Court

Pillyburbs.com (AP) - Circuit court stays Wecht retrial over defense appeal

DOJ Press Release - McKesson Corporation Agrees to Pay More than $13 Million to Settle Claims that it Failed to Report Suspicious Sales of Prescription Medications

Mary McGuire, Georgetown University's Newspaper - the hoya.com - First U.S. Crime Museum to Open in D.C. (reported that it will include materials related to white collar crime)

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White Collar Crime Institute - It's Tough Being a Criminal Defense Attorney

The White Collar Crime Institute being held at Stetson University College of Law - Tampa today has a full day of speakers on important issues related to white collar crime.  The opening panel, U.S. v. You - Ethically Representing Your Client Without Becoming One included John Fitzgibbons and Jane Moscowitz, who each emphasized how difficult it is to be a criminal defense attorney today.  They noted the safeguards an attorney needs to take to protect themselves from being a defendant.  Jane Moscowitz, who represents Ben Kuehne (see here and here), stated "don't get in between the government and the money."

This panel couldn't have said more times the phrase- be careful. But it was also noted that lawyers just don't know how much research you have to do today to be careful? It was noted that "if you plea your client guilty there will be no questions about your fee."  But it was also stated that the essence of the problem is that the government refuses to give any guidance.  It used to be that a third party paying the fee was suspicious and today its the opposite.

This panel was moderated by Patrick Doherty (Brown and Doherty).  Other panelists included Paul I. Perez (Fidelity National Financial Inc. and former U.S. Attorney in Florida) and Rachelle D. Bedke (AUSA Middle District of Florida). 

This panel reminds one of how difficult it is to be a criminal defense attorney today.  But should it be?  Should lawyers be fearful about representing those accused of crimes?  Should there be such stumbling blocks that puts lawyers at risk - of possibly being indicted - when they handle criminal matters? DOJ needs to rethink its position on this issue - after all they have an obligation to protect the constitutional rights of individuals accused of crimes.

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In the News

DOJ Press Release - Justice Department Announces Creation of 43 New Assistant United States Attorney Positions for Project Safe Childhood

Investigating the Office of Special Counsel?

While many were glued to the television, watching the happenings in Indiana and North Carolina, a most unusual investigation occurred in Washington, D.C.  It seems that the FBI searched the Office of Special Counsel, and the home of its director. (See Washington Post here and WSJ here).

"The U.S. Office of Special Counsel (OSC) is an independent federal investigative and prosecutorial agency."  It's authority comes from "three federal statutes, the Civil Service Reform Act, the Whistleblower Protection Act, and the Hatch Act."  (see here) And yes, it is the same agency that looks at improper politicization in key government offices. Because of the supposed non-political role of the head of this office, he or she is protected from removal by an appointment for a term of five years (in this case Scott Bloch was appointed by President Bush in 2004 - see here)

This recent raid appears to surround the possible destruction of computer materials.  The problem with destroying computer material during the pendency of an investigation is that it opens one up to a possible obstruction of justice charge.  Yes, this was the very charge that was used against Arthur Andersen, Martha Stewart, Scooter Libby, and so many others.   Whether items were destroyed here, or whether an outside company was merely called to fix a computer virus may be a question of the future.  But it does appear that computer and other information were taken by authorities in this recent search.

Searches are not the usual method to secure evidence in a white collar case, although it is becoming more common in recent years.  Normally subpoenas are issued and the person is requested to produce documents for a grand jury.  Searches are used when there is a need for surprise and when there is a fear of destruction of materials.  Unlike subpoenas, searches require a showing of probable cause to a neutral and detached magistrate.

An interesting question here may be who should have authority to investigate and prosecute, that is of course if evidence demonstrates criminal violations.  If the Office of Special Counsel were investigating matters in the Department of Justice, can the DOJ turn around and now investigate their investigators?  Would it be more appropriate here for a court to appoint a neutral party to hold and peruse the items obtained in the search to make certain that there is no disclosure of information that might compromise a pending matter. 

With politics entering branches of the government that should be immune from such activity, there have been some recent questions about whether the Office of Special Counsel was acting sufficiently to handle these matters.  But who should have authority to investigate this issue presents some problems - especially when the focus of the investigation may have criminal overtones.

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In the News

Investment News - Money Fund Scrutiny Urged  (Letter of several groups calling for "the Commission to adopt a rule requiring that money market funds make non public monthly electronic filings of their portfolios to enable the Commission to monitor more closely the fund's risk of loss of principal.")

DOJ Press Release - Former FirstEnergy Nuclear Operating Company Employee Sentenced for Lying to the Nuclear Regulatory Commission (4 months of home confinement, "three years of probation, 200 hours of community service and a $7,500 fine. During his probation,  [the defendant] is barred from working for any organization holding a license from the NRC.")

Houston Chronicle (AP) - Ex-Dynegy exec says judge not impartial

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Seventh Circuit Affirms Several White Collar Convictions

Conspiracy to Defraud - Immigration Documents - The Seventh Circuit Court of Appeals affirmed the case of United States v. Wantuch, a case in which the accused had been charged with "a four count indictment: (1) conspiracy to defraud the United States in violation of 18 U.S.C. § 371; (2) bribery of a public official in violation of 18 U.S.C. § 201(b)(1)(A) and (2); (3) fraudulent receipt of temporary alien registration stamps, in violation of 18 U.S.C. § 1546; and (4) making false statements to the INS, in violation of 18 U.S.C. § 1001 (a)(2) and (2)." 

"The government’s theory was that between March of 1999 and April of 2000, [the defendant] conspired with [another individual] and his other “clients” to defraud the government by obtaining temporary green card stamps through bribes to an INS officer and false statements on green card applications." 

This case arises from a joint investigation called "Operation Golden Schemes," "which focused on the criminal activities within Chicago’s Eastern European community, particularly the marketing of fraudulent immigration documents. The FBI opened an undercover travel agency called G.S. Golden Travel (“GSGT”), located in a small two-story building on Belmont Avenue in Chicago."

Bankruptcy Concealment - Advice of Counsel Instruction Precluded - The Seventh Circuit rejected a convicted defendant's arguments in United States v. Van Allen where the defendant was "convicted of a series of financial crimes involving the structuring of currency transactions and the concealment of assets in a bankruptcy proceeding, in violation of 18 U.S.C. §§ 152(1) and (2) and 31 U.S.C. §§ 5324(a)(3) and (d)(2)."  The defendant unsuccessfully attempted to secure an advice of counsel instruction, but the instruction was not supported by the testimony of the bankruptcy counsel.

Mail Fraud (1346) Not Vague & What is Private Gain -  In United States v. Sorich the Seventh Circuit weighed in on the honest services statute, holding that it is not unconstitutionally vague here. The court spoke about whether private gain was necessary for mail fraud using the following scenarios:

"Imagine scenario (A) in which a mayor surreptitiously channels city contracts to his cronies in the business community; they get a windfall whereas he has merelyhelped his friends and takes no money. Or imagine scenario (B) in which an attorney bribes a court in order to obtain favorable results for his clients in their lawsuits. Or scenario (C) where a union boss sells union property to a senator even though the senator did not offer the highest price, and in exchange receives the senator’s vote on a matter that concerns the union. In all three scenarios the public has been defrauded of the honest services of its public servants: the mayor, the court, and the senator. Moreover, in all three scenarios the defendant—the mayor, the attorney, and the union boss—was not the one who stood to gain financially. Certainly the defendants all received something" :in (A), the mayor received the gratitude of his friends; in (B), the attorney could boast to future clients of a high success rate, which is good for business; and in (C) the union boss curried valuable favor with the senator. But the money went to another party. All three scenarios have played out in the federal courts and have resulted in convictions for mail fraud."

The court noted that "Robin Hood may be a noble criminal, but he is still a criminal."

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No Witnesses for the Defense in Rezko

Chicago Tribune, Rezko Prosecution Rests, Defense to Call No Witnesses (for prior discussion of this case and the relation of this case to Presidential Candidate Obama see here, here and here).

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