Saturday, December 18, 2004
Martin Marks, the former President and COO of Cutter & Buck Inc., a Seattle sportswear company, settled charges filed by the SEC that he inflated revenue at the end of the April 2000 quarter by shipping goods to three "distributors" who in fact could not pay for the items. According to the SEC Litigation Release (No. 2154, Dec. 17 and complaint):
Cutter negotiated deals with three purported distributors under which Cutter would ship them a total of $5.7 million in products. Cutter recognized revenue for the supposed sales, which constituted over 10% of the quarter's revenue. In reality, the distributors had no obligation or ability to pay for any of the goods unless and until Cutter's sales force found actual customers to purchase the products. The distributors essentially acted as warehouses, rendering revenue recognition for the shipments improper under generally accepted accounting principles (known as "GAAP"). Marks signed Cutter's annual Commission filings falsely announcing revenue of $54.6 million for the fourth quarter and $152.5 million for the fiscal year; because these amounts included $5.7 million in bogus revenue on the distributor sales, they overstated Cutter's true quarterly and annual revenue by 12% and 4%, respectively.
Marks agreed to pay $45,777 in disgorgement and prejudgment interest.
Michael Milken was the face of 1980s greed and hubris after his guilty plea on six felony counts related to his work at the famed junk bond machine Drexel Burnham Lambert. Of course, that is now ancient history--it was almost 15 years ago--and the S&L crises and the Enron/Worldcom corporate debacles since then have taken center stage. A New York Times article (Dec. 18) discusses Milken's latest investment foray, into the world of for-profit educational enterprises that includes a substantial investment in the buy-out of KinderCare, an old Drexel junk bond client. Milken is barred from the securities industry, but the large ($1 billion+) fortune he amassed from his investment banking days can make him a major player in almost any industry, and his contacts in the financial world remain deep. His rehabilitation is viewed as a model for other white collar criminals who seek to rebuild their life after a conviction and term of imprisonment.
For-profit education companies are growing, and the University of Phoenix is the largest post-secondary educator in the country. Perhaps the Milken College of Law one day? The white collar crime class could have its first guest speaker already lined up.
Friday, December 17, 2004
A system of effectively compensating employees used by the New York Racing Association (NYRA) resulted in extensive tax evasion charges for the NYRA and a number of its employees. A press release from the U.S. Attorney for the Eastern District of New York describes the deferred prosecution agreement the NYRA entered into related to a long-running scheme to permit employees to deduct unreimbursed business expenses for which they had been reimbursed. The press release describes the practice as follows:
Mutuel employees were assigned teller boxes or dealer bags to hold the proceeds of betting transactions conducted through their assigned betting windows and terminals. All betting transactions, including cash received and cash disbursed, were tracked by a computer system, which, at the end of each day, indicated the cash balance that should be in each teller box and dealer bag. Discrepancies were referred to as "shorts." Legitimate shorts were the results of inadvertent errors by the mutuel employees in handling betting transactions; bogus shorts were the result of employees taking cash for their personal use, or by the employees reporting fictitious voucher sales, for which no cash was received.
From 1980 through December 1999, NYRA permitted its mutuel employees to report shorts in any amount, as long as they were reimbursed to NYRA by the employees, either by a cash payment or by a deduction from the employee's next paycheck. If the reported shorts were reimbursed, NYRA neither disciplined the mutuel employee nor provided any corrective or training measures in response to the reporting of excessive, consistent or bogus shorts.
According to the charges unsealed today, from January 1980 through December 1999, NYRA certified approximately $19 million in shorts reported by its mutuel employees. The indictment alleges that mutuel employees, including BOGGIANO, FASONE, KING and PONTRELLI, as well as the 17 mutuel employees who have previously pleaded guilty to tax charges in this case, routinely took cash from their teller boxes and dealer bags and falsely reported the cash as legitimate shorts. These amounts were then returned by the mutuel employees to NYRA, either by cash payments or through deductions from weekly paychecks. The employees then falsely reported the shorts as unreimbursed employee expenses on their individual income tax returns.
Unlike the heart-warming story of Seabiscuit, this tale involves an employer willing to abuse the tax system for nearly two decades. (ph)
Fidelity Investments announced that it has disciplined 16 stock traders for accepting gifts and entertainment from brokers seeking business from the large mutual fund company. Two traders, Thomas Bruderman and Robert Lewis Burns, have left the company, apparently because of their ties with Kevin Quinn, a broker with Jefferies & Co. who has been terminated by that firm (see Dec. 16 post) for improperly accounting for entertainment expenses. Bruderman and Burns appear to have been recipients of Quinn's largesse, according to a story in the New York Times (Dec. 17). In a press release, Fidelity stated:
Fidelity Investments has been cooperating with the Securities and Exchange Commission (SEC) and the National Association of Securities Dealers (NASD) in an investigation of policies and procedures regarding gifts, gratuities and business entertainment. During the course of our own investigation, we uncovered instances where there were violations of the company's policies and procedures. This has caused us deep concern because we do not tolerate wrongful behavior. We take this matter very seriously. That said, our internal review has not revealed any instance where inappropriate and unauthorized behavior on the part of any individual has resulted in any financial loss to the Fidelity mutual funds or to any shareholder by adversely affecting the quality of executions received by the Fidelity funds on their trades.
Fidelity had largely dodged the after-hours trading controversy that rocked the mutual fund industry in 2003, and this issue may be just an isolated incident. However, the number of traders who violated the firm's own policies indicates that this may well be an issue that will touch other mutual fund companies, hedge funds, and pension plans. The issue of gifts is certainly not limited to the investment business, and serious questions have been raised regarding entertainment and travel provided to doctors by the pharmaceutical companies. No telling yet whether this will this presages a wide crackdown on the industry. (ph)
Professor William H. Simon (Columbia) has an article in the December issue of The Atlantic, "The Confidentiality Fetish," that challenges what he sees as the overuse by lawyers of the protections afforded by the attorney-client privilege. Professor Simon is one of the leading academics in the field of professional responsibility. He argues that lawyers are effectively selling the privilege to protect information that society may be better served having revealed. He states:
Lawyers, in short, have carved out a role for themselves as the privileged keepers of much information that is important to the public interest. Historically, lawyers have liked to think of themselves as defenders of individual liberty against an overbearing state, primarily through traditional advocacy—that is, persuasively asserting a client's rights. Today, however, lawyers' typical efforts to mediate between clients and the state rely less on advocacy and more on information control. This is a disturbing development; lawyers have brought to their new role as information guardians a powerful predisposition toward needless secrecy that suppresses and distorts information about many matters of public importance.
The push toward confidentiality, if it can be called that, is nothing new, at least among lawyers, and the attorney-client privilege has been described by the Supreme Court as the oldest one recognized by the law (Upjohn). Nor is it necessarily a "fetish"--for which one definition is "an abnormally obsessive preoccupation or attachment; a fixation"--for lawyers to use a widely-recognized tool to a client's advantage, or at least to protect the client's current interests. There is naturally a frustration with the privilege, in much the same way that the Fifth Amendment protection against self-incrimination thwarts a search for the truth. Professor Simon's point that lawyers use the privilege to their advantage as a marketing tool--he references the tobacco industry's employment of lawyers to shield unfavorable research on the harmfulness of cigarettes--is well taken. One of the advantages of having an attorney conduct an internal investigation is the benefit of both the attorney-client privilege and the work product protection to shield certain types of information generated by the investigation, at least for a while.
Professor Simon has also published an extensive article in the California Law Review in 2003 entitled "Whom (or What) Does the Organization's Lawyer Represent.?". A working paper version of his article is available on SSRN here. His analysis of the problems with identifying the true "client" of the organization is worth considering. (ph)
Thursday, December 16, 2004
The U.S. Attorney for the Eastern District of Missouri announced today that David G. Barford, the former Chief Operating Officer of Charter Communications Inc., a large cable company controlled by Paul Allen, has pled guilty to a single count of conspiracy to commit wire fraud and will cooperate in the government's investigation. Barford admitted to participating in a "scheme to defraud Charter's stockholders by reporting to the public artificially inflated numbers of paying subscribers." Four Charter officers were indicted in July 2003 for wire fraud and conspiracy, including the former Chief Financial Officer and two senior vice presidents (indictment here). One of the senior VPs pled guilty in 2003 and is cooperating with the government. (ph)
Victor Conte, the former CEO of the Bay Area Laboratory Co-operative (BALCO) who is a defendant in the widely-noted steroids prosecution, has been sued by Marion Jones for defamation. Conte gave an extensive interview to 20/20 that aired on Dec. 3 accusing Jones, who won five medals at the 2000 Olympics (including three gold), of injecting steroids. There has been speculation about why Conte's attorney permitted him to implicate himself in the manufacture and sale of illegal steroids when the charges are pending against him, but--for whatever reason--Conte made his statements in a high-profile manner that makes his upcoming criminal trial almost anticlimactic.
Jones' defamation suit was filed in U.S. District Court in San Francisco and seeks $25 million in damages. According to an MSNBC story, Conte responded to it in an e-mail stating the the suit was "nothing more than a PR stunt by a desperate woman, who has regularly used drugs throughout her career. I look forward with all confidence to the court proceedings as I stand by everything I said on the '20/20' special.'' Jones' attorney offered to have Conte take a lie detector to answer the following three questions: "Did he observe Jones injecting herself with performance enhancing drugs on April 21, 2001, as he stated on national television? Has he ever leaked any grand jury testimony or other evidence related to the BALCO investigation? Has he ever observed Marion Jones illegally taking any performance-enhancing drugs?"
As if this case wasn't already a complete media circus, now a collateral proceeding will be played out in the press. It almost makes you long for a nice gag order. (ph)
The government is delving rather energetically into the conduct of brokers who act for their own personal benefit to the detriment of their clients and the market. A criminal complaint filed against a former managing director of SG Cowen (Dec. 13) alleges that he engaged in insider trading about companies about to undertake PIPE transactions, which are Private Placement in Public Equity sales that usually cause a companies stock price to drop because of the dilutive effect of the transaction. According to a release from the U.S. Attorney's Office for the Eastern District of New York, GUILLAUME POLLET, has been charged in a criminal complaint with one count of conspiracy to commit securities fraud related to short sales of three companies who were using Cowen for PIPE transactions. According to the complaint:
The complaint alleges that in furtherance of the scheme, POLLET, and others, obtained material non-public information concerning PIPE transactions that were being contemplated by Sorrento Networks, Inc., Aradigm Corp., and HealthExtras, Inc. (collectively, the "Subject PIPEs"), the securities of which were publicly-traded on the NASDAQ national market system. While SG Cowen operated as the placement agent for the Subject PIPES, POLLET obtained the material, non-public information concerning the Subject PIPEs from SG Cowen employees and from representatives of the Subject PIPE issuers. The information was disclosed to POLLET pursuant to confidentiality agreements to enable him to determine whether SG Cowen would participate as an investor in the Subject PIPEs. Notwithstanding the terms of the confidentiality agreements, POLLET caused SG Cowen to short sell the publicly-traded securities of the PIPE issuers before the Subject PIPEs were publicly announced, resulting in substantial decreases in PIPE issuers' stock prices. POLLET then covered these short positions by either purchasing discounted stock through an investment in the Subject PIPEs, or purchasing the PIPE issuers' publicly-traded securities at the deflated post-announcement market prices.
An article in the Wall Street Journal (Dec. 15) details a regulatory action by the New York Stock Exchange against a clerk for a floor broker who engaged in "front-running," which involves trading ahead of large orders to take advantage of the current price before the execution of the large order. Front-running has been an issue of continuing concern to the NYSE and the SEC, and was the subject of a large-scale undercover operation at the futures exchanges in Chicago in the 1980s that resulted in multiple convictions of brokers.
The temptation to take the "free money" available from the use (and misuse) of information is very strong, and one suspects that the number of cases is only a small fraction of transactions involving self-dealing and insider trading. A front page article in the Wall Street Journal (Dec. 15) discusses the problem of self-dealing in brokerage firms, with the following example:
When a mutual-fund company asked brokerage firm Knight Securities to get it 600,000 shares of a fiber-optic stock, traders at Knight quickly swung into action.
A half-dozen traders -- figuring the big order would push up the price of the stock -- quickly began buying some for accounts that benefited their firm and themselves, according to testimony in a National Association of Securities Dealers arbitration.
The buying may have affected the price the client ultimately had to pay for the stock, JDS Uniphase, according to people familiar with the trading records. They say the traders in some cases sold their newly bought stock to the client, Oppenheimer Funds. According to testimony, it was sold to the client at a markup, a move that may have taken money out the pockets of mutual-fund shareholders.
The NASD's regulatory arm has examined Knight's trading from the period in question, March 2001, and other periods. It and the Securities and Exchange Commission are expected to levy a penalty against Knight soon. Knight, which has since changed management, testified that the trades weren't improper, didn't disadvantage the client, and followed typical industry practice. Oppenheimer declined to comment.
The incident points to one of the hardest-to-eradicate conflicts of interest on Wall Street. Securities laws generally require brokerage firms to put the client first. But it's an open secret that they or individual traders sometimes take advantage of their role as middleman to profit, at clients' expense, from what they know about clients' investing intentions.
Notably, New York Attorney General Eliot Spitzer has not gotten involved in this area . . . yet. (ph)
The so-called "Detroit Terrorism Trial" that spun so badly out of control this past summer, resulting in the government's voluntary dismissal of the most serious charges involving a conspiracy to support terrorism, has entered its final stage with a new indictment that has nothing to do with national security or even possible immigration fraud. On Dec. 15, the government charged the two remaining defendants, Karim Koubriti and Ahmed Hannan, with conspiracy to commit mail fraud related to a false $2,500 insurance claim they filed for a faked auto accident in Dearborn, Michigan. While this event was mentioned in the first trial as evidence of the defendants raising money to support terrorism, but not separately charged, it is now the sole count against them. A conviction would put the defendants in the lowest range under the Federal Sentencing Guidelines--assuming they survive the Supreme Court's decision in Booker/Fanfan--but would likely trigger deportation.
An article in the Detroit News (Dec. 16) reviews the new indictment, and includes the following statement by one defense counsel questioning the government's motive:
"It's my view that the government is looking to convict these guys because they want them out of the country," said James C. Thomas, a lawyer for Hannan. "Is it face-saving or is it because they are really bad guys? I have yet to see any evidence that these guys are hardened criminals."
U.S. Attorney Craig Morford defended the indictment:
"We openly welcome people into this country, and we also insist that they comply with our laws," Morford said. "What are we supposed to do? Do you just give people a pass and ignore evidence of criminal violations?"
The government's investigation of the lead prosecutor in the first trial is continuing to determine whether his conduct in withholding evidence from the defense constitutes an obstruction of justice or whether the suborned perjury from the government's key cooperating witness, who is now largely discredited. The original defendants appear to be little more than a sideshow at this point. (ph)
An AP story discusses a new Department of Justice investigation into the leak of top-secret information about a stealth spy satellite program. According to the article:
The sources said a U.S. intelligence agency had referred the issue to the department, but did not identify the agency. The National Reconnaissance Office, which builds spy satellites, declined to comment.
The Washington Post said on Saturday the classified program was for a new generation of spy satellites designed to orbit undetected. It cited U.S. officials as saying its projected cost had almost doubled to nearly $9.5 billion from $5 billion.
The program was recently criticized, in very general terms, by Senator John Rockefeller (D-WVa) as being wasteful, and Senate Republicans are looking into making an ethics complaint against him. Leak investigations rarely result in prosecutions because it is so difficult to ever track down the ultimate source of the information, especially when it is in both the spy agencies and on Capitol Hill. Moreover, extracting information from the press about the source of a leak is quite daunting, as the current investigation of the leak of the identity of a CIA officer shows. (ph)
Wednesday, December 15, 2004
An article in the New York Times (Dec. 15) states that Time Warner is preparing to announce a settlement in a long-running SEC and Department of Justice investigation into accounting issues at its American Online unit (AOL), including a $400 million transaction between AOL and Bertelsmann in 2000. The accounting issues involve (always exciting) revenue recognition in what appear to have been round-trip transactions, something that has troubled the energy and food distribution industries, among others. According to the article:
Time Warner is expected to announce a settlement with the Justice Department in its investigation of advertising deals between America Online and smaller Internet companies that may have allowed America Online to exaggerate its growth, an official close to the case said yesterday. The announcement could come as early as today.
The company may also announce a tentative agreement with the enforcement division of the Securities and Exchange Commission, which is conducting a separate investigation into accounting irregularities at America Online, the official said. Time Warner is expected to pay $500 million to $600 million to settle all civil and criminal accusations with the two agencies.
The fine will be divided between the DOJ ($200 million) and the SEC ($300+ million). The SEC investigation has had a particularly negative effect on the company because it called into question the reliability of its financial statements, making it impossible for Time Warner to issue debt and equity securities--a must for any company hoping to engage in acquisitions, for which Time Warner is famous. Indeed, it likely still rues the day it decided to accept the AOL offer in 1999, even having dropped that moniker from its name a couple years ago. (ph)
From the Time Warner press release, here are the undertakings by the company for the DOJ and SEC settlements:
DOJ Settlement (criminal complaint, dismissed after two years if the company complies with the following):
- Accept responsibility for the conduct of certain AOL employees with respect to the PurchasePro transactions;
- Pay a penalty of $60 million and establish a $150 million fund, which the Company may use to settle any related shareholder or securities litigation;
- Cooperate fully with the DOJ or any other federal criminal law enforcement agency regarding the transactions covered by the settlement; and
- Retain and cooperate with an independent monitor, who will review the effectiveness of AOL’s internal controls, including those related to the accounting for advertising and related transactions.
SEC Settlement (no admission or denial of liability):
- Pay a $300 million penalty, which the SEC staff will request be used for a Fair Fund, as authorized under the Sarbanes-Oxley Act;
- Adjust its accounting for the $400 million in advertising revenues recognized primarily in 2001 and 2002 in transactions with Bertelsmann, A.G. and for transactions with two other AOL customers that resulted in approximately $30 million of advertising revenue recognized in 2001;
- Adjust its accounting for the Company’s investment in and consolidation of AOL Europe, consistent with the Company’s announcement in November 2004; and
- Agree to the appointment of an independent examiner, who – within 180 days after starting work – will review the Company’s historical accounting for a limited number of transactions entered into between 1999 and 2002, principally involving online advertising revenue. Depending on the examiner’s conclusions, a further restatement might be necessary.
An AP story noted the following:
A lawyer has been convicted of using a credit card scam to pay his way through law school.
Christian Ehlers, 29, a 2001 graduate of Loyola Law School, was found guilty Tuesday of conspiracy, fraud and other federal offenses in a scam authorities said cost credit card companies $1.2 million.
Prosecutors said Ehlers and two friends obtained hundreds of cards using bogus names and Social Security numbers, rang up phony purchases on stolen store equipment, and then, posing as stores, collected reimbursement from the credit card companies.
Did he take White Collar Crime? I've always been concerned that the course can be too much of a "how to" program. Up until his conviction, he was an active member of the California State Bar, although that will change rather quickly. (ph)
An article in the Wall Street Journal (Dec. 15) discusses an investigation by the SEC and NASD into gifts given by Bank of America to Scott DeSano, who is responsible for stock trading at Fidelity Investments. According to the article, DeSano may have received a much-coveted amateur slot in the prestigious AT&T Pebble Beach Pro-Am tournament through Bank of America, which purchased a corporate sponsorship that gave it the right to have an amateur play. While DeSano reimbursed companies who paid for his expenses at golf tournaments, it does not appear that he did so for the AT&T playing slot. This investigation comes on top of a report (see Investors Business Daily) earlier this week that the SEC has subpoenaed records from Fidelity and Banc of America Securities, a subsidiary of Bank of America, regarding possible steering of securities trading by one brother who worked for Fidelity to his brother at Banc of America Securities.
The issue of gifts from securities firms to mutual fund executives has become a focus of the securities regulators, who are spending more resources on the issue of conflicts of interest that affect the costs borne by investors. Earlier this month, Kevin Quinn, a broker at Jefferies Group, was removed from his position because, among other things, he billed the firm for over $200,000 of expenses for entertaining mutual fund executives when in fact the trips were for his family and friends. According to an article in the New York Times (Dec. 15), the SEC is also looking at Quinn's entertainment of Fidelity executives:"Two Fidelity traders in particular appeared frequently on Mr. Quinn's travel and expense reports, says a person who has seen those records, and Fidelity has begun an internal investigation of the entire trading unit. In at least two instances, the Fidelity traders reimbursed Mr. Quinn for some part of the expenses incurred while Mr. Quinn had already charged Jefferies for the same expenses."
No one is surprised that brokerage firms have used tickets, trips, and other lavish entertainment to win (or keep) favor with mutual funds, which generate enormous annual trading commissions. By one estimate, Fidelity's annual brokerage commissions are in the range of $800 million to $1 billion, so there is a strong incentive to curry favor with the executives of such firms. One irony of the investigation of Mr. DeSano is that he is widely credited with substantially lowering Fidelity's brokerage costs by eliminating soft dollar arrangements and demanding lower trading fees. It may be that he (and many others) view Knicks tickets and golf outings as a perk that does not influence their business decisions, and perhaps it does not. Does your doctor's pen influence her decision on what drug to prescribe? Nevertheless, the SEC is cracking down, and brokerage firms and mutual fund firms will be in line for even more embarrassing headlines. Mr. DeSano reportedly said (boasted?) that he can hit 300 yard drives, and has a 10 handicap. Drive for show, putt for dough. (ph)
The Texas Tech University School of Law seeks to fill two new professorships, each with a substantial endowment. One of the positions is limited to criminal law and procedure, and the other is open to any field of law. As a general guideline, candidates should have ten or more years of fulltime teaching experience and a record of scholarship that clearly demonstrates the professor's potential to make a long term contribution to Texas Tech and to the legal community.
Judge George E. Killam Professor of Criminal Law
Field: Some aspect of criminal law or procedure
Governor Preston B. Smith Professor of Law
Experience 10+ years
SCHOOL OF LAW
Our relatively young School of Law was founded in 1967 and is located on the main campus of Texas Tech University. The contiguous campus also includes the Texas Tech Health Sciences Center and Medical School. Our library is spacious and supports faculty research with librarians assigned to each faculty member to aid in information retrieval and management. The library also gives unique support to our students by providing officelike student carrels, each with its own computer. All classroom seats have power connections and wired access to the Internet, and there is also a schoolwide wireless network. In 2004, the ABA ranked Texas Tech first in the nation in technology support to students. (Check our website at www.law.ttu.edu)
In the next few months, we will break ground on the 12 million dollar, 32,000 square foot Mark & Becky Lanier Professional Development Center, an addition to our building which will feature a hightechnology "courtroom of the future," additional faculty and staff office space, seminar rooms, and an auditorium for scholastic events and CLE seminars. The new Professional Development Center is fullyfunded, thanks to the generosity of an alumnus and matching funds from the university.
As our young school evolves, we are developing areas of excellence in law and science (including forensics), health law, water law, military law, international law and Biodefense Law and Policy. Students have the opportunity to study in Mexico, Spain, and France. Texas Tech is a sponsor of a consortium program in Guanajuato, Mexico, at which our professors regularly teach. Students may elect to pursue a joint degree in one of several related fields such as accounting, business administration, public administration, environmental toxicology, biotechnology, horticulture, and entomology. The Law and Science Certificate Program, with specializations in Health Law, Environmental Law, Intellectual Property, Oil and Gas Law, and Biodefense Law attracted 60 students the first year it was offered.
The Texas Tech University School of Law is fully accredited by the American Bar Association, is a full member of the Association of American Law Schools, and was granted an Order of the Coif chapter in 1974.
The School of Law's 36 fulltime faculty members are a diverse group with wide ranging interests. Our scholarship is cited by the United States Supreme Court, other courts, and scholarly books and journals. We work directly with the United Nations, state legislatures, and bar associations to shape and improve the law. Members of our faculty actively participate in the American Law Institute, the National Conference of Commissioners on Uniform State Laws, the American Bar Association, the American Association of Law Schools, the Clinical Legal Education Association, The Fulbright Programs Council for the International Exchange of Scholars, the Legal Writing Institute, The Institute for Law School Teaching, and the State Bar of Texas.
The School of Law has a student body of 650 students. Scholarships total more than $1.76 million in the current year. Approximately 41% of the current student body has a scholarship of some amount. As a state school, a majority of our students must be Texans, and they join us from all parts of Texas. Ours is the only public law school in the very large region described as north and west Texas, including DallasFort Worth. Our nonTexas students come from a variety of other states, schools, and nations. Student diversity is an area of emphasis, and our students represent a wide diversity of views and backgrounds.
Reflective of our student diversity are the 48 registered academic and special interest student organizations. Students publish and edit four publications (Texas Tech Law Review, Texas Tech Journal of Texas Administrative Law, Texas Bank Lawyer, and Texas Tech Lawyer). They actively compete in our nationallyranked advocacy teams (with ten national titles in recent years). Others participate in undergraduate alumni groups (such as the Texas Aggie Bar Association) and topical groups (such as the Intellectual Property Student Association). Multicultural groups exist to serve a variety of interests. Texas Tech's Black Law Students Association hosted the Rocky Mountain Regional BLSA Conference in February 2004. A current BLSA member is Regional Director of the Rocky Mountain Region of the National Black Law Students Association.
Students exhibit a cooperative and supportive spirit. Students recently collected items to send to fellow law students in the Armed Forces Reserve deployed in Iraq, another student group collected donations of books and magazines for a local hospital, another donated a full weekend to Habitat for Humanity, and yet another worked the weekend food line at a church soup kitchen. Students also assist with pro bono intake clinics of Legal Aid of NorthWest Texas.
TEXAS TECH UNIVERSITY
Texas Tech University is a statefunded institution located in Lubbock, Texas, a city of over 200,000 people on the South Plains of the Texas Panhandle. The Texas Tech campus has a student population of nearly 29,000, which includes more than 24,000 undergraduates and nearly 5,000 graduate students. The University is a Carnegie Doctoral/Research University with 13 constituent colleges and schools. The Texas Tech University System Lubbock campus also includes the Texas Tech University Health Sciences Center, a center for medical treatment and research in the South Plains. The Health Sciences Center is composed of five schools including medicine, nursing, allied health sciences, and pharmacy. The Texas Tech Red Raiders compete in Big XII NCAA athletics. Our championship mens and womens basketball teams are traditionally among the nations elite, and in recent years, the Texas Tech football, baseball, and track teams have been nationally ranked as well.
Lubbock, known as the Hub City of the South Plains, is the medical, financial, and educational center of a large region encompassing most of West Texas and Eastern New Mexico. The public school system is ranked as one of the best in Texas and the medical facilities are excellent. Our citizens are polite, friendly, and familyoriented. They appreciate the great weather (an average of 277 days of sunshine per year), low cost of living, and an easy commute. Lubbock is a unique university community that enjoys excellent towngown relations.
If you are interested in one or both of these positionsor would like to nominate another potential candidateplease contact Allison Professor of Law William Casto, Chair of the Search Committee, at:
Allison Professor of Law
Texas Tech University School of Law
1802 Hartford Avenue
Mail Stop 0004
Lubbock, Texas 794090004
Electronic applications are also welcome via email at firstname.lastname@example.org.
Walter B. Huffman
Dean & Professor of Law
Tuesday, December 14, 2004
Our Nov. 3 and Dec. 8th entries discussed the ongoing investigation into steroid distribution. The Wall Street Journal today reports in an article titled "Elite Users of Steroids Rarely Face Criminal Prosecution," that despite criminal laws in existence, they do not seem to be applied "to elite professional or Olympic athletes." There are several issues that merit consideration here:
1. Is the government using its prosecutorial discretion improperly and targeting the easier cases, the ones without high powered attorneys? Taking the front page cases is more likely to get the government press and more likely to have a deterrent effect. It seems that this is the path that the government usually takes. Could it be possible that sports prosecutions are different?
2. Is it just plain happenstance that prosecutorial discretion has played out so that the government indictments have been against those working out in the local gyms?
3. Or is this just not a top priority of the government because there are more important issues like identity theft, corporate crime, and terrorism?
Or maybe all of the above?
Louisiana's Times Picayune reports in a story titled, "Judge Clears Way for Edwards' Appeal," that "[a] federal judge has approved a motion that will allow former Gov. Edwin Edwards to appeal his conviction on corruption charges to the 5th U.S. Circuit Court of Appeals in New Orleans."
This not the first time that Edwards will be appealing to the Fifth Circuit. His case initially went up on appeal in 2002 and the court affirmed the conviction. As a matter of fact, Edwards is now serving time in a federal prison. In this new appeal, as reported by the Times Picayune, "Edwards is challenging his conviction on claims that prosecutors denied the former governor pertinent information to defend himself." The district judge hearing the allegation denied Edwards' motion.
For details on the basis of the defense motion, checkout Louisiana's WAFB News Channel that states that "Attorneys for Edwin Edwards say government prosecutors knew a key witness was lying on the stand and did nothing to stop it."
So it looks like the 5th Circuit will now be looking at the Edwards matter for a second time.
According to today's Wall Street Journal article titled, Rigas Cable Assets Run By Adelphia May Be Seized, we see the government taking a first step to obtaining assets in a case. The government has asked a federal court "to enter a judgment of $2.53 billion against two members of Adelphia's founding Rigas family, who were convicted in July on fraud and conspiracy counts." To make matters worse, "the Securities and Exchange Commission has filed a lawsuit against Adelphia and the Rigases, charging fraud and self-dealing and seeking to recover 'all ill-gotten gains.'" But as the Wall Street Journal article notes, the government may wait to see if the assets are sold at an auction. It is easier for the government if they obtain cash then a business, so as not to be placed in the position of having to run or maintain the business.
What is happening in this case stresses the need for defense counsel to approach white collar crime cases from a global perspective. One has to consider all the collateral consequences to a client and their company throughout the representation. In the Rigas cases we see the possibly of assets being seized. This is only a small segment of what can occur in a white collar case. Other factors that one may be dealing with, in addition to criminal charges, are license forfeiture or debarment from doing future business with the government. Additionally, one may be dealing with several different government agencies such as the SEC and IRS, in addition to handling the criminal matter.
Monday, December 13, 2004
The post of December 10th talked about a motion filed by Skilling's lawyers to divulge the names of alleged co-conspirators on a list provided to lawyers by the government. The Court denied Skilling's motion - so the attorneys cannot divulge the names on the list. The Wall Street Journal reports in an article titled, "Enron's Skilling Is Denied Request to Expose Names," that "Skilling and his co-defendants, former Enron Chairman Kenneth Lay and former Chief Accounting Officer Richard Causey, could disclose only the names of people who already have been publicly identified as alleged co-conspirators in other Enron prosecutions or who have been convicted or charged with Enron-related crimes."
There was probably a sigh of relief by those who were afraid that their names might become public. On the other hand, some people must now be wondering, am I on the government's list? And no one (but the government) can talk to let them know.
An exhaustive article in the New York Times (Dec. 12) details accounts maintained by former Chilean dictator General Augusto Pinochet at Riggs National Bank in Washington DC, during the 1980s. According to the article, Pinochet amassed approximately $15 million in his accounts, although as a life-long military officer his highest annual salary was $40,000. The extent to which Riggs went to assist General Pinochet in hiding his accounts included the following:
In the United States, federal investigations of Riggs's management of the general's funds suggests that the bank was more interested in masking the existence of his accounts than in producing high-octane financial returns. Riggs, according to American investigators, did not inform regulators, as required, about the existence of the accounts when asked about them four years ago. Moreover, the bank, in a maneuver that it has conceded was improper, changed the names on the accounts of the general and his wife from "Augusto Pinochet Ugarte & Lucia Hiriart de Pinochet" to "L. Hiriart &/or A. Ugarte," ensuring that computer searches for Riggs accounts with the name "Pinochet" would not find them. While banking at Riggs, the general also went by the names Ramon Ugarte and Daniel Lopez, two of the aliases that General Pinochet's financial and legal advisers said he used.
Riggs paid a $25 million fine in May 2004 for what the government termed "willful, systemic violations of the anti-money laundering program and suspicious activity and currency transaction reporting requirements of the [Bank Secrecy Act]." (FinCEN news release here). In July 2004, Riggs announced that it would be acquired by PNC Financial Services Group, Inc., ending its long history as the bank to Washington D.C.'s elite.
The government has shown a hightened concern with money laundering by foreign nationals, and the USA PATRIOT Act imposes greater reporting duties on a wide variety of businesses (including lawyers). After the problems at Riggs came to light, the government tried to reassure banks (and foreign diplomats) that they can continue to bank in the United States. This past June, the Department of the Treasury issued a press release that stated, "Financial institutions can provide appropriate banking services to the embassies and interests sections of foreign governments and their staffs in a manner that fulfills the needs of those foreign governments while satisfying the provisions of the Bank Secrecy Act." This is a touchy subject for U.S. banks, and money laundering problems seem to erupt with alarming regularity. (ph)
Sunday, December 12, 2004
The November 5th entry talked about the Petition for Certiorari filed by the defense in Arthur Andersen LLP v. United States. The government has since filed a brief in opposition, breaking down the defense's one issue into five separate issues and claiming that two of the five issues were not raised by the defense in the court below.
The Court, if they accept this case, will have to determine what is the appropriate line between a valid document retention policy and corrupt behavior that merits obstruction of justice charges, and the instructions of law that should accompany charges of obstruction of justice.
The statute involved in this case is 1512 (b), but the statute has been amended since this decision and section 1519 has been added to the obstruction statutes, allowing document destruction cases to be prosecuted without proof of corrupt persuasion. Prosecutors in the Andersen case did not have the benefit of the new language in the existing statute and as such were forced to bring this action claiming that individuals "corruptly persuaded" others to destroy documents. The government in its response to the Petition for Certiorari filed by Andersen argues that because of the addition of section 1519 to the obstruction statutes, the case is one "of little continuing practical importance." Whether this response by the government will be successful considering the high profile nature of the Andersen indictment and trial, remains to be seen.
This is not the first time the term "corruptly" as used in an obstruction statute is a key issue in a case. In the case of United States v. Poindexter, the D.C. Cir. found the phrase "corruptly influences" to be unconstitutionally vague and reversed the conviction. Congress responded to this decision by adding a definition section to section 1515, the definitions statute for the obstruction statutes, that defined "corruptly" for purposes of section 1505. But the Andersen case proceeded under section 1512 and not section 1505. The government in its response to Anderson's Petition for Certiorari states that "to the extent it is relevant at all, Poindexter and the ensuing events provide further evidence of Congress's intent that, in the context of the obstruction of justice statutes, corruptly should mean acting with an improper purpose."
Addendum - Thanks to Mike for letting us know that there is a copy of the brief available at this site - http://www.usdoj.gov/osg/briefs/2004/0responses/2004-0368.resp.html