December 11, 2004
White Collar cases often mover slower than cases involving street crime, but the case of Martin Frankel moved unusually slow. But there is a reason why...
According to an AP story in the Wall Street Journal, Martin Frankel was sentenced yesterday to 16 years imprisonment after pleading guilty to 24 charges of fraud and racketeering. Frankel had been accused of participating in "a scheme to bilk seven insurance companies out of more than $200 million." Reuters reports that "Frankel could have faced up to 150 years in prison and some $6.5 million in fines, but federal prosecutors sought a lesser sentence in exchange for his pledge to cooperate with attempts to recover the money he stole. Authorities have so far recovered at least $60 million, federal prosecutors said." And last week the IRS sold diamonds belonging to Frankel, that Reuters said "reportedly fetched around $9 million."
Frankel was extradited to the US from Germany to face these charges. The Toledo Blade has a wonderful listing of articles from 2000-2001 that tells the story of Frankel, his becoming a fugitive, and his extradition back to the United States.
Frankel's remorse at sentencing did not play well with the judge. As noted by Reuters U.S. Attorney Kevin O'Connor said that while Frankel showed remorse, he was "15 years and $200 million too late."
More Atlanta Indictments
In an article in the Atlanta Journal Constitution titled, "Top Officials Indicted in Morris Brown Fraud," we find federal prosecutors in the Northern District of Georgia busy again. Recall the Nov. 17th post discussing the indictments of former state superintendent Linda Schrenko and Former Mayor Bill Campbell. Campbell faces charges of "racketeering, accepting bribes and evading taxes."
This new "34-count indictment" accuses a former president and "former financial aid director, of defrauding the school [Morris Brown], the U.S. Department of Education and hundreds of students." Both individuals have hired top Atlanta criminal defense attorneys. And it sounds like Attorneys Drew Findling and Ed Garland have their work cut out for them as the stories of the victims of the financial aid crisis will be compelling evidence against their clients. To top it off, according to the Atlanta Journal-Constitution, Morris Brown, the school where these individuals worked, is cooperating in the government's investigation.
December 10, 2004
The Latest in the Enron Cases
114 people is quite a number for a conspiracy, but that is what the government claims as the number who are co-conspirators with Jeffrey Skilling, former Enron Corp. President and CEO. And they may add more names to the group.
According to an article in the Wall Street Journal, titled "Skilling Seeks to Name Names," Skilling's attorneys want to disclose the names and the government wants them to be keep secret. As the article notes, this is somewhat unusual as people who learn that they are included in the 114 may not want to converse with defense counsel upon learning that the government thinks they might be part of a conspiracy. But with this many people, 114 +, one has to wonder if the government is claiming that they are all part of the same conspiracy or were there several different conspiracies. If all are part of the same conspiracy this must have been quite an agreement. A large conspiracy gives the government many benefits on providing a wider range of evidence at trial. On the other hand, this may prove to be a VERY long trial.
Skilling's attorneys also moved for a change of venue from Houston, something that seems very appropriate considering the prominence of Enron and the location of so many individuals who were injured by events there.
More Blakely Delay
The Supreme Court's (much lamented) delay in issuing a decision in Booker and Fanfan regarding the effect of its Blakely decision on the Federal Sentencing Guidelines has affected the final sentencing of the two lawyer-defendants convicted of mail fraud in U.S. v. Rybicki. The lawyers were convicted in 2000 of engaging in an (alleged) honest services fraud involving a kickback scheme to settle insurance claims. The conviction is the subject of an exhaustive en banc opinion by the Second Circuit ( on a 7-4 vote with dissenting opinions) holding that the honest services form of fraud is not unconstitutionally vague (354 F.3d 124 (2d Cir. 2004). [Note: Professor Ellen Podgor wrote an amicus brief on behalf of the NACDL and appeared at the oral argument in support of the defendants' position that the statute is unconstitutionally vague.] The Supreme Court denied certiorari in the case in October of this year. With the conviction final, the government has sought to have the court order the defendants to being their one year terms of imprisonment. However, relying on its decision in U.S. v. Mincey, 380 F.3d 102 (2d Cir. 2004), to postpone all sentencings until the Supreme Court resolves the Blakely issue, the Second Circuit has refused to issue a final mandate in the case permitting the imposition of the one year sentences. According to an article in the New York Law Journal (Dec. 8), the government filed a declaration asserting that "While the defendants are within their rights to exhaust every possible avenue of appellate review, that process has now come to an end. The defendants should no longer be able to postpone serving their sentences for crimes that they committed more than a decade ago." Part of the one-year sentence, however, was an increase for the lawyers for abuse of a special skill (and you thought law was easy), a determination made by the district court under the pre-Blakely federal sentencing procedure, so it certainly appears that an extension of Blakely to federal sentencing may have an effect on the sentences. (ph)
December 9, 2004
Holiday Gift Giving
With holiday gift giving at its peak, it is important to remember who can be given a gift and when the gift may be considered improper, or in some cases illegal.
According to the NYTimes, "Three of Mr. DeLay's associates were indicted in September on charges of illegally using corporate money to help Republicans win seats in the Texas Legislature." And the NYTimes now reports that although Mr. DeLay does not expect to be indicted, funds are being returned, and the trustee says the "gift broke rules."
In the Wall Street Journal we see the possibility of "free steaks and game tickets" being a subject of an SEC investigation. The Journal reports that the "SEC is looking into: Whether, at banks that act as custodians of stock during the trading process, some back-office workers systematically received gratuities for leaking data." Has there been gift-giving for the sale of "real-time data about big investors' stock trading?"
So, be careful with the gifts this holiday season!
The Latest on Martha Stewart - Who is being punished?
While Martha Stewart remains incarcerated, the world is continuing outside the prison grounds of "camp cupcake." The latest, according to Reuters, is that Martha Stewart will star in a new TV show upon her release. It sounds from the Wall Street Journal article like the new "cooking and crafts show" has a strong base in that she "will team with reality-show impresario Mark Burnett, creator of such hits as 'Survivor' and 'The Apprentice.'" And yes stock in "Martha Stewart Living Omnimedia, Inc." is up. So not everything that happens while in prison is a negative.
But there can be problems that present themselves to inmates, especially the white collar inmates who have financial and property interests that cannot be managed while they remain incarcerated. This is seen in another recent Reuter's article about Martha Stewart. This one tells the sad story of her missing a property tax payment while she remains incarcerated.
Sometimes the individuals who are penalized the most in white collar cases are the family and friends on the outside who need to handle all the financial and personal issues for the individual who is incarcerated. I always wonder - who is being punished?
December 8, 2004
Health Related Prosecutions in the Courts
Health care related offenses are a top DOJ priority. These prosecutions are usually considered to be in the white collar crime category as the charges often relate to healthcare fraud. There are a host of other healthcare related cases, however, that border both the white collar and drug areas. Two recent decisions, one from the Eleventh Circuit and the other the Second Circuit, provide evidence of this type of prosecution.
The Eleventh Circuit reversed and remanded for a new trial the case of United States v. Yates, a case where two individuals were charged with various white collar crime type offenses (mail fraud, conspiracy to defraud the US, conspiracy to commit money laundering) "in connection with their involvement in the Norfolk Men's Clinic, an internet pharmacy." The government's use of two-way videoconferencing for trial testimony of two witnesses was held to be a violation of the defendants' rights under the confrontation clause.
In a Second Circuit case, United States v. Singh, a physician and two others were convicted of health care fraud in addition to drug related offenses. Although the court remanded the loss calculation used in sentencing, it affirmed other aspects of the convictions. Defendant's practice was related to "the management of chronic pain." Singh unsuccessfully challenged the health care fraud counts under 18 USC 1347. This case includes an interesting discussion on forfeiture of a medical license.
InVision Settles With DOJ
InVision Technologies, Inc. (a recent acquisition of GE) and the government reached an agreement, with the company paying $800,000 in penalties and providing cooperation in "parallel investigations" with the DOJ and SEC.
The company which specializes in homeland security equipment agreed not only to pay this penalty, but according to a DOJ news release, also to "[f]ully and affirmatively disclose to the Department and the SEC activities that InVision believes may violate the FCPA (Foreign Corrupt Practices Act), and continue to cooperate with the Department and the SEC in their investigations." Both InVision and GE signed agreements including GE agreeing to "integrate the InVision business in GE's FCPA compliance program."
It seems that the FCPA is in the news a good bit lately (Check out this blog's entries of November 3, 8, and 16).
December 7, 2004
White Collar Crime Employment Opportunity
Reposting Item from Nov. 8th -
White Collar Crime Employment Opportunity
Applicants Sought for White-Collar Crime Initiative Director
The National Association of Criminal Defense Lawyers seeks a director for its new white-collar crime initiative focusing on over-criminalization, over-federalization, the gradual disappearance of mens reas as an element of a crime, and the application of criminal sanctions in enforcing economic regulations.
Qualified candidates will have a J.D and at least 3 years of relevant professional experience and also:
Excellent writing skills;
Solid research skills, including LEXIS-NEXIS, Westlaw, and the Internet;
Good public-speaking skills;
An ability to design creative projects for public education;
An ability to build and work collaboratively with diverse coalitions;
Knowledge of federal criminal justice issues, with a special emphasis on white-collar offenses; and
Proven skills in public policy issues, grassroots organizing, public relations, and legislative work a plus
Ideal candidates will also have fundraising experience, including writing grant proposals. Some travel required. Competitive salary; excellent benefits and downtown DC location. Email resume, cover letter, and writing sample to NACDL Legislative Director Kyle O’Dowd at email@example.com.
Contempt for the Press?
The privilege of the press not to reveal a source has been a problem lately, but this time the issue is a bit different. On one hand sources reveal information to the press because of this privilege, and the first amendment is therefore fostered. On the other hand the government may want the source of the information in order to pursue a thorough investigation. Usually the first amendment wins.
But what happens when the press say they are keeping a source confidential because the source does not want their name divulged, and the source comes forward and says that they agreed to have their name divulged. Who do you believe? In this case your choices are a reporter or a lawyer.
Recently, the NYTimes in an article titled, "TV Reporter Facing Jail Says Source Rejected Plea to Come Forward," tells about the problems facing Jim Taricani, a reporter in Providence who obtained a videotape and refused to disclose the source. He was sentenced to six months in jail for contempt. But then a lawyer comes forward, the lawyer representing a party in a corruption investigation and he says he gave the videotape to the reporter and according to the NYTimes he says that, "he had not requested confidentiality."
HUM- My vote is to call this one a wash. The government has its information, the reporter didn't have to reveal it, and who really cares who lied. Maybe it was just a big misunderstanding.
Lawyers, Beware of Your Clients
In this a.m.'s NYTimes is an article titled, Man Sentenced in Tax Schemes Also Releases Data on Lawyers. Several items are of interest in what the NYTimes describes as the case of "the nation's most prominent seller of offshore banks in tax evasion schemes," being "sentenced yesterday to six months in prison by a federal judge in
First is that the defendant is unhappy with the sentence, believing that the government promised him that they would argue for no jail time. His response- I won't cooperate. Obviously, one wonders if the government reneged on its promise? But one also has to wonder if the government was really flipping the person at the top with no jail time to get at his clients.
That leads to the second question - who is the government really going after in this investigation?
FInally, the article talks about a lawyer's name appearing on the documents. The young associate says first he has no knowledge, but amends his remarks when told that his name is at the bottom of the document.
December 6, 2004
When one thinks of "librarians" the words that often come to mind are "helpful," "trustworthy," and "knowledgeable." They are a "protected class" of individuals that caused John Ashcroft grief when he tried to enter their turf. (Reports indicated that Patriot Act advocates had to defend themselves when it was believed that "expanded powers" under the Act might have been used "to obtain records from libraries and businesses.")
It is, therefore, quite shocking to see a librarian being accused of fraud. According to an article in the Boston Herald titled, "Librarian Accused of Conning Bain," a librarian has been indicted for "cheating the high-powered Boston consulting firm out of $800,000" over "six years for phony research reports." The accused faces state charges, including larceny, for allegedly setting "up a post office box for a phony publisher and ask[ing] Bain to send checks there for research reports."
Maybe the individual will be found not guilty and the librarian title will remain untarnished. If not, perhaps it could be argued that this individual is more appropriately titled a research manager.
According to a recent AP story, the Swiss "have blocked bank accounts containing "$100 million in an investigation of an alleged bribery scandal tied to a subsidiary of Halliburton Co." According to the report, which can be found in several online newspapers, it is unclear which accounts were frozen, and whether the money relates to funds "paid by an international consortium to win contracts for a natural gas project in Nigeria between 1995 and 2002." According to the reports, Halliburton's internal investigation has "not found any evidence that supports claims of bribery."
Several things can be learned from this report-
1. That when it comes to investigations, whether it be in the U.S. or abroad, secrecy of the investigation makes it difficult to provide full information to the public. To some extent this is good, as it does not cause a negative influence to individuals or a company prior to the end of an investigation.
2. Despite efforts to provide secrecy, there will always be leaks that sometimes have a negative effect on a company, even though the information may be just based on speculation.
3. U.S. businesses need to be aware of the international implications of what they are doing. Investigations may not be strictly national, with other countries scrutinizing business actions that occur in the global marketplace.
December 5, 2004
Preventing White Collar Crime
How best to prevent white collar crime, has long been a concern of sociologists and criminologists. Should one use deterrence (specific of general), rehabilitation, or retribution? In an article in this a.m.'s Atlanta Journal Constitution, titled, "Lessons in staving off temptation-FBI agent, white-collar criminals give 'scared straight' ethics seminars," a description is provided of an ethics seminar designed for small businesses and students. It offers an insider's view of how the crime was committed and its consequences.