White Collar Crime Prof Blog

New DOJ Discovery Policies Fall Short

In the wake of recent events that demonstrate discovery violations (see here), DOJ has issued three new policies here.  It is wonderful to see that DOJ is beefing up its discovery practices and taking a hard look at what should happen in the future.  It also sounds like a better management system is being considered.  But that said, looking at the actual guidance memo, here are a few preliminary comments -

• After telling prosecutors that they need to familiarize themselves with Brady, Giglio and other discovery rules and statutes, the paragraph ends with a statement that this new memo "provides prospective guidance only and is not intended to have the force of law or to create or confer any rights, privileges, or benefits." Yes, this is the standard language one finds throughout the DOJ manual.  But wait a minute -- although DOJ guidelines can be guidelines, these mandates are constitutional, statutory, and rules - they often do have the force of law. This fact should be emphasized to prosecutors.
• The memo states - "Prosecutors should never describe the discovery being provided as 'open file.'"  The memo explains the fears of missing something.  It seems odd that the DOJ doesn't want prosecutors to accept credit when they do the right thing and provide all discovery. Saying not to call it "open," for fear of missing something, implies that this is not a policy that recognizes the value of an "open file" system that can work well and provide efficiency. And taking this one step further -- if it is not acknowledged as an "open discovery" practice, and something is missed - will it sound any better to the accused who failed to receive their discovery material?
• The memo gives no real guidance as to when a prosecutor has to turn over Jencks material, and leaves it to the individual offices to create their individual rules.  It is ironic that DOJ wants sentencing consistency, but doesn't want discovery consistency. Should a defendant in Wyoming have different rights to witness statements than the defendant in New York?  
• It is good to see memorialization of witness statements is important.  But only turning over "material variances in a witness's statements?"  Shouldn't all variances be turned over?
• It is interesting how the memo provides an extensive review process of discovery material - will this hold up getting the materials to defense counsel?  Also will defense counsel be given an equal amount of time to review these materials and time to conduct additional investigation that may be warranted as a result of the materials provided?
• And yes, it is important to protect witnesses and national security - but should DOJ be the one deciding when they think they can withhold evidence?  Shouldn't that be for neutral parties like the judiciary?

It is good to see DOJ trying to do a better job than past administrations, but what really needs to be done is setting forth clearer rules and statutes by independent parties, as opposed to a working group made up of "senior prosecutors from throughout the Department and from United States’ Attorney Offices, law enforcement representatives, and information technology professionals," so that our system does "do justice" as desired by AG Holder.

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The Passing of Bill Olis

I could not have said it better than Tom Kirkendall at Houston Clear Thinkers here.   I, for one, will certainly miss the wonderful emails that Bill sent to me.  I never met him, but he clearly was the winner and now named for him - Collar for the Bill Olis Best Parent Award.  To Jamie and his family - my condolences. 

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Three Strikes for DOJ

Here is an interesting interview that Amy Goodman (Democracy Now) has with Scott Horton concerning the dismissal of the charges related to Blackwater (and the killing of individuals in Baghdad's Nisoor Square in 2007). 

It is difficult to proceed on a case when there's Garrity/Kastigar issues, especially a high profile one that has been openly discussed in the media.  And certainly there are unanswered questions here - like should DOJ have planned for possible problems with evidence and established a clear taint team to make certain that Kastigar issues could be avoided - it is easy to Monday morning quarterback with these questions.  But Hon. Urbina does make a few statements in the Order that are disturbing as to DOJ.  He notes the failure to abide by DOJ internal policy (see here).  He also states that:

"In their zeal to bring charges against the defendant in this case, the prosecutors and investigators aggressively sought out statements that defendants had been compelled to make to government investigators in the immediate aftermath of the shooting and in the subsequent investigation.  In so doing, the government's trial team repeatedly disregarded warnings of experienced, senior prosecutors, assigned to the case specifically to advise the trial team on Garrity and Kastigar issues, that this course of action threatened the viability of the prosecution."

One looks at this case, and then at the dismissal of the Stevens case by DOJ - In the latter the new DOJ does the right thing - it dismisses the case when discovery violations come to light.  Couple this with the recent dismissal of the Ruehle case, also involving government misconduct (see here).  That's three strikes for DOJ.   

But all three of these are high profile cases.  One has to wonder if prosecutorial misconduct may have occurred in the cases that do not get noticed.  Could there be discovery or other violations in other cases that may not receive media attention? AG Holder has made significant steps to turn around the DOJ ( see here), but perhaps an independent body needs to examine some of the past practices of DOJ.  

(esp)(w/ a hat tip to Linda Friedman Ramirez)

In the News & Around the Blogosphere

Matthew L. Wald, NYTimes, U.S. Lawyers Knew About Legal Pitfalls in Blackwater Case

Michael Van Sickler, Tampabay.com, As mortgage fraud runs rampant, meaningful prosecutions in short supply

DOJ Press Release, Major International Hacker Pleads Guilty for Massive Attack on U.S. Retail and Banking Networks

Joe Palazzolo, Main Justice, Obama Nominates Seven More U.S. Attorneys

Andrew Ramonas, Main Justice, Senate Confirms Seven U.S. Attorneys

NYTimes (AP), T.S.A. Drops Bloggers’ Subpoenas

Katie Allen, Guardian (UK), Recession pushes white-collar crime to new highs

Steven Greenhouse, NYTimes, Shoplifters? Studies Say Keep an Eye on Workers

DOJ Press Release, Colorado-based Spectranetics Corporation to Pay $5 Million to Resolve Allegations Relating to Its Medical Devices

DNAInfo, Manhattan District Attorney Robert Morgenthau Bids Farewell After 35 Years; Noeleen G. Walder, NYLJ, law.com,New Faces to Fill Posts at Manhattan D.A.'s Office

WSJ, NYC, NY State To Split Half Of Credit Suisse's $536M Fine

Jesse Westbrook, Business Week, Schapiro Whipsawed By Wall Street, Lawmakers, Defers SEC Rules

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End of Year Deal - UTStarcom on FCPA

DOJ Press Release, UTstarcom Inc. Agrees to Pay $1.5 Million Penalty for Acts of Foreign Bribery in China states:

"UTStarcom Inc. (UTSI) has entered into an agreement with the Department of Justice, agreeing to pay a $1.5 million fine for violations of the Foreign Corrupt Practices Act (FCPA) by providing travel and other things of value to foreign officials, specifically employees at state-owned telecommunications firms in the People’s Republic of China."

...

"In a related matter, UTSI reached a settlement today with the U.S. Securities and Exchange Commission under which it agreed to pay an additional $1.5 million penalty and satisfy additional obligations for a period of four years."

See also David Barboza, NYTimes, Telecom Company to Pay $3 Million in China Bribe Case

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What's Coming this 2010?

The New Year delivers a variety of interesting cases and issues in the white collar crime field, and many unresolved issues from last year. What can we expect to see (in no particular order):   

• A decision regarding the status of "honest services" in the fraud statutes
• The aftermath of a decision on "honest services" may bring cases using habeas corpus and coram nobis (assuming the Court alters the government's use/misuse of this statute) - and some perhaps new sentences/non-sentences for individuals like Conrad Black, Jeff Skilling, George Ryan, Bruce Weyhrauch, and others - but a realization that all DOJ cases will not crumble (see here)
• The government finally thinking twice about using section 1346 - honest services and proceeding instead with classic bribery/extortion/gratuities charges
• Seeing whether the SEC is capable of redesigning itself to provide greater ability to detect Ponzi schemes
• More TARP related indictments
• More financial fraud indictments
• More defense procurement scrutiny
• UBS related cases
• An initial ruling on the use of a wiretap in the Rajaratnam case
• Scrutiny of discovery violations by the past DOJ in the aftermath of cases like Stevens (see also here)  
• Many new U.S. Attorneys
• Some deferred prosecution agreements reaching the termination points of living with government scrutiny

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Recent Scholarship

Dan Hurson, Memo to Middle Management - Download MEMO TO MIDDLE MANAGEMENT

Kevin E. Davis, Does the Globalization of Anti-Corruption Law Help Developing Countries?  (SSRN - NYU Law and Economics Research Paper No. 09-52)

Elizabeth R. Sheyn, Anything But a Racket: Why Professor Richard Epstein's Attack on the Nature and Function of Deferred and Non-Prosecution Agreements Misses the Mark

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Upcoming Conferences

Texas Public Policy - 8th Annual Policy Orientation for the Texas Legislature, U of Texas (Austin), Jan. 14-15 -  here

ABA, 24th Annual National Institute on White Collar Crime, February 24-26, 2010, Miami Beach, Fl.- here

ABA, Enforcement Trends in Securities and Commodities Actions 2010, Jan. 13, 2010, Washington, D.C.- here

Securities Regulation & Enforcement, March 22-23, 2010, NYC - here 

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Blackwater Case Tossed - Commentary

On the last day of 2009, Hon. Ricardo M. Urbina issued a 90 page order that grants the defendants' Motion to Dismiss. The decision and a wonderful discussion of the case can be found in Del Quentin Wilber's, Washington Post article titled, Judge Dismisses All Charges in Blackwater Shooting. Although the alleged crime charged here was not white collar related, the opinion provides a discussion of important issues that can arise in federal white collar decisions - issues related to Kastigar.  The defendants had argued that the "government violated their constitutional rights by utilizing statements they made to Department of State investigators, which were compelled under a threat of job loss."  The government admitted that these statements cannot be used. (Garrity v. New Jersey)  So the government was left trying to bring the case without using any of the statements. (Kastigar v. United States).

The court noted that "[t]he explanations offered by the prosecutors and investigators in an attempt to justify their actions and persuade the court that they did not use the defendants' compelled testimony were all too often contradictory, unbelievable and lacking in credibility."  The bottom line, according to the court, was that the government "utterly failed to prove that it made no impermissible use of the defendants' statements or that such use was harmless beyond a reasonable doubt."

Some highlights and my commentary:

• This one is perhaps a minor point in the decision, but one that should be noted by white collar prosecutors and defense attorneys. DOJ had presented evidence to a second grand jury in this case, but they failed to present some evidence that the defense claimed was exculpatory. Although in the case U.S. v. Williams the Supreme Court did not mandate that prosecutors present exculpatory material to a grand jury, DOJ guidelines tell prosecutors to do otherwise.  This court noted, that "DOJ guidelines require prosecutors to present exculpatory evidence to the grand jury" and the court cited to the US Attorneys' Manual s 9-11.233.  The reference to the US Attorneys' Manual, even though it is an internal document, is good to see as it is important for DOJ to stick with their internal guidelines. (My article on this issue is here).
• The court stated - "The Circuit's analysis in North I suggests that although no Kastigar violation occurs when a prosecutor's fleeting exposure to immunized testimony has a merely tangential influence on his or her thoughts about a case, a Kastigar violation may result when a prosecutor has had significant exposure to immunized testimony and makes significant nonevidentiary use of that testimony" p. 29-30. The government has faced this issue before.
• In discussing "harmless error" the court stated - "the defendants' compelled statements pervaded nearly every aspect of the government's investigation and prosecution, and the government's use of those statements appears to have played a critical role in the indictment against each of the defendants."
• Publicity surrounding a case can make it difficult for the government to get around Kastigar.
• Government agencies need to work closely with DOJ in cases that could involve criminal charges.

See also NYTimes, (AP) All Charges in Blackwater Case Are Dismissed

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2009 White Collar Crime Awards

2009 White Collar Crime Awards

Each year this blog has honored individuals and organizations for their work in the white collar crime arena by bestowing "The Collar" on those who deserve praise, scorn, acknowledgment, blessing, curse, or whatever else might be appropriate. I welcome comments from readers who would like to suggest additional categories or winners (or losers?).

With the appropriate fanfare, and without further ado,

The Collars for 2009:

The Collar for Causing the Most Dominoes to Fall - To Bernie Madoff for causing more Ponzi schemes to come to light

The Collar for Missing the Boat -To the past SEC that failed to notice Madoff and other schemes

The Collar for Best U-Turn - To the new DOJ for dismissing Ben Kuehne's case and exposing discovery violations, like seen in the Stevens case

The Collar for the Most Needing a Hearing Aid - For whoever decided to use a wiretap for alleged securities violations in the Rajaratnam case

The Collar for the Latest Fashion - To the DOJ for changing the name of the corporate crime task force to, what else - the financial fraud task force

The Collar for the Hottest Freezer - To William Jefferson, convicted after a search found cash in his freezer

The Collar for Adhering to Terry MacCarthy's Rule of Threes - To the Supreme Court for accepting three mail fraud cases, all pertaining to the honest services statute's 28 words

The Collar for Least Likely to Survive -  A backdating prosecution 

The Collar for Most in Need of a Geography Lesson- Tied - 1) To the prosecutors who brought the eventually dismissed Lori Drew case in California when all the alleged cyberbullying had occurred in "nearby" Missouri; 2) And the prosecutors who brought Wesley Snipes case in Florida where he went to high school

The Collar for the Most Likely to Have its Theme Song "I Won't Back Down" - W.R. Grace

The Collar for the Best Avis - To Rod Blagojevich, for trying to be the most recognized name with a white collar charge - he'll have to try harder to beat Bernie Madoff

The Collar for US News WannaBe- To the ABA for its method of selecting best blogs

The Collar for Least Likely to be Teaching Professional Responsibility at a Law School- Marc Dreier

The Collar for Least Likely to Appear Together in "Dancing With the Stars" - AG Eric Holder and former AG Alberto Gonzalez

The Collar for Least Likely to Appear on the T.V. Show "I've Got a Secret" - UBS

The Collar for the Best Parent - retired years ago and renamed the Bill Olis Best Parent Award - unawarded this year since no one comes even close to Bill Olis.

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Holiday Plea

White Collar investigations can last for years, often with continued pressure upon the person being investigated. So seeing a holiday plea is no surprise - after all it brings a finality. See DOJ Press Release,

Ohio Attorney Charged with Tax Fraud, Obstruction of Justice for Scheme to Hide Income and Assets Through Trusts and in Foreign Bank Account - Second Ohio Attorney Agrees to Plead Guilty to Making False Statement 

 

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Upcoming Conferences

ABA, 24th Annual National Institute on White Collar Crime, February 24-26, 2010, Miami Beach, Fl.- here

ABA, Enforcement Trends in Securities and Commodities Actions 2010, Jan. 13, 2010, Washington, D.C.- here

Securities Regulation & Enforcement, March 22-23, 2010, NYC - here 

(esp)

Wishing Everyone A Happy Holiday

Wishing everyone a healthy, happy, and peaceful holiday.

(esp)

Another State Highlighting White Collar Crime

Federal prosecutions of white collar crime have been the norm for many years. And the New York Attorney General's Office under Spitzer and now Cuomo made it a part of their workload (see here).  But recently we see more and more states are making white collar investigations a priority.  We have seen it in Florida (see here) and Ohio (see here).  Indiana, now. appears to also be stepping up its white collar prosecutions. Jon Murray, Indystar.com reports on how the "4-person unit in state Securities Division has helped with 44 cases since '07." (see here) (w/ a hat tip to Ted Gest)

With a decreased media bringing to light public corruption and state white collar crimes, it is important that individual states step to the plate and provide increased prosecutions of state and local white collar crimes. 

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Catch-up on Some Recent White Collar Cases

Ninth Circuit - United States v. Berger -  Court stated:

"While we decline to extend the Dura Pharmaceuticalsprinciple to criminal securities fraud, we conclude that the district court's loss calculation approach was nevertheless flawed.  Thus, although we conclude that the district court used the correct standard of proof in determining the total loss, we vacate Berger's sentence and remand to the district court for resentencing." 

(Check out this super article on this case in the Criminal Law Reporter, authored by Hugh B. Kaplan - reprinted with permission here -  Download Berger).  The case offers an interpretation on  the applicable standard that should be used in finding sentencing facts.  It also sets the stage for a jurisdiction split on Dura's applicability.  (hat tip also to Evan Jenness).

Fifth Circuit - United States v. Whitfield (Minor & Teel) -

The "government claimed that by virtue of their judicial offices, Whitfield and Teel were agents of the Mississippi Administrative Office of the Courts (AOC)" and that the AOC received $10,000. in federal funds for a Section 666 prosecution.  The court, however, held -

"Whitfield’s and Teel’s role as presiding judges in Marks and Peoples Bank had no "connection with any business, transaction, or series of transactions" of the AOC. See 18 U.S.C. § 666(a)(1)(B), (2). Therefore, by its own plain language, section 666 applies neither to Whitfield’s and Teel’s acceptance of bribes nor to Minor’s offering of bribes in connection with those cases. The Government has cited no authority supporting a contrary conclusion. As such, we hold that the district court committed plain error when it denied appellants’ Rule 29 motions for judgment of acquittal on the section 666 counts of the indictment."

Other convictions were upheld, but the case was remanded for resentencing.

Third Circuit - United States v. McGeehan

This blog previously noted this decision and said commentary would follow.  That commentary did not follow because it seems that this case, like others will await the Supreme Court decision in the three honest services cases under review (see here). So stay tuned.

Second Circuit - United States v. John Doe (Download 08-4064-cr_so[1])

The Second Circuit appointed amici counsel - Lee G. Dunst (Gibson, Dunn & Crutcher LLP) - to argue the case as amici as the government joined the defense in arguing for permanent sealing of the sentencing transcript. The court affirmed the "district court's denial of the application for a total and permanent sealing of the sentencing transcript, but" the court did "remand the case to the district court to afford the parties an opportunity to apply for a sealing of the sentencing transcript that is partial, non-permanent, or both." 

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Recent Articles

Albert Alschuler, Two Ways to Think About the Punishment of Corporations - here

George M. Cohen, Of Coerced Waiver, Government Leverage, and Corporate Loyalty: The Holder-Thompson-McNulty Memos and Their Critics

John Humbach, Director Liability for Corporate Crimes: Lawyers as Safe Haven?

Cindy A. Schipani, The Future of the Attorney-Client Privilege in Corporate Criminal Investigations

Larry Ribstein, How Movies Created the Financial Crisis

Geraldine Szott Moohr, The Balance Among Corporate Criminal Liability, Private Civil Suits, and Regulatory Enforcement

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In the News & Around the Blogosphere

Ben Hallman, American Lawyer, law.com, Comverse to Pay $225 Million in Backdating Settlement

Michael Pollick, Herald Tribune.com, Ponzi convictions are weightier now - FRAUD CHARGES: Sarasotans will face more than a slap on the wrist if found guilty

DOJ Press Release, Three Detroit-Area Residents Plead Guilty to Health Care Fraud

DOJ Press Release, Former FBI Contract Linguist Pleads Guilty to Leaking Classified Information to Blogger

Jenny Anderson & Zachery Kouwe, NYTimes, Claims of Insider Trading From Trader’s Ex-Wife

R. Robin McDonald, Fulton County Daily Report, law.com,Acquitted of Money Laundering, Defense Attorney Sets Sights on Legal Fees - Attorney must demonstrate that the government's prosecution was frivolous, carried out in bad faith or constituted a form of harassment

Hilary Potkewitz, Crain's New York Business, After lull, financial-crime prosecutions seen set to rise

DOJ Press Release, Attorney General Appoints Gary Grindler Acting Deputy Attorney General

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In the News & Around the Blogosphere

Joel Stashenko, NYLJ, law.com, Former N.Y. Judge Sentenced to 27 Months in Jail for Attempted Bribery

DOJ Press Release, Oklahoma Man Sentenced to 12 Months in Prison for Kickback Scheme Involving Government Contract in Afghanistan

Bill Mateja, Op-ed, Dallas Morning News, Supreme Court should void 'honest services'

Mike Scarella, The National Law Journal, DOJ Urges Closed Hearing in Blackwater Criminal Case

James Barron, NYTimes, Brooke Astor’s Son Is Sentenced to Prison

Lawrence Delevingne, Business Insider, The Decade's 10 Biggest Financial Crimes

Treasury Press Release,U.S. Treasury Department Announces Settlement With Lloyds TSB Bank, PLC -Settlement Reached for Apparent Violations of Treasury Sanctions Regulations

Jenna Greene, law.com, The Decade's Biggest Stories, Accounting scandals flood the courts - Enron and WorldCom usher in wave of fraud cases targeting corporate executives

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In the News & Around the Blogosphere

DOJ Press Release, Retired Army Major Sentenced to 57 Months in Prison for Role in Bribery Scheme Involving DOD Contracts in Kuwait

Justin Blum, Bloomberg, Prosecution Drop May Embolden Bankruptcy Fraud as Filings Surge

Dan Levine, The Recorder, law.com, Feds Want Former McKesson HBOC Chairman Taken Into Custody

Michael Pollick, HeraldTribune.com, Grand jury indicts 3 on Sarasota-based Ponzi charges -Currency trader Beau Diamond

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In the News & Around the Blogosphere

Lyle Denniston, Scotus Blog, Two Argument Changes Set - Skilling Case Moved Up to March 1

David Ingram, BLT Blog, Former Office Manager in U.S. Senate Indicted

Press Release, Department of Treasury, U.S. Treasury Department Announces Joint $536 Million Settlement with Credit Suisse AG

Brad Heath, USA Today, Fraud Prosecutions Fell as Crisis Loomed

Larry Ribstein, Ideoblog, The real backdating scandal

Ray Rivera, NYTimes, Ex-Councilman Miguel Martinez Sentenced to 5 Years in Theft of $106,000

NYTimes, AP, 26 Arrested in Three States in Medicare Fraud Schemes; DOJ Press Release, Medicare Fraud Strike Force Expands Operations into Brooklyn, N.Y.; Tampa, Fla.; and Baton Rouge, La.

Tom Hays, law.com (AP), Billionaire Hedge Fund Manager Indicted in Insider Trading Case; DOJ Press Release, Hedge Fund Manager and New Castle, LLC, Employee Indicted in Galleon Insider Trading Case

Mike Koehler, FCPA Professor, Siemens...The Year After 

Erik Larson, Bloomberg, SEC Seeks Dismissal of Madoff Victims Negligence Suit

DOJ Press Release, Manhattan U.S. Attorney Charges Two Lawyers in [Alleged] $3.9 Million Mortgage Fraud Scheme

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