Tuesday, March 15, 2005
Frederick Gilliland was a fugitive living in Vancouver, BC, while fighting extradition back to the U.S. to face charges related to a ponzi scheme in which investors lost over $8 million. Gilliland responded to a 2-for-1 lunch offer at a restaurant in Point. Roberts, Wash., right over the border from Vancouver. Unfortunately for Gilliland, his desire to take advantage of a bargain led him to fall for an "offer" made by a private detective who was also one of the investors who lost money. When he arrived in the U.S., Gilliland was promptly arrested by Immigration & Customs Enforcement agents, and will be returned to Florida much more quickly than would have been the case in the Canadian extradition proceeding. There is more than a little irony in a person accused of conducting an investment scam falling for such a simple scheme. An AP story (here) discusses the arrest and charges against Gilliland. (ph)
The John M. Olin Fellows in Law program has a deadline of March 15 for applications for the three fellowships offered for aspiring academics. The website for the program (here) has the following description:
The John M. Olin Fellows in Law program will offer top young legal thinkers the opportunity to spend a year writing and developing their scholarship with the goal of entering the legal academy. Up to three fellowships will be offered for the 2005-2006 academic year.
A distinguished group of academics will select the Fellows. Criteria include:
- Dedication to teaching and scholarship
- A J.D. and extremely strong academic qualifications (such as significant clerkship or law review experience)
- Commitment to the rule of law and intellectual diversity in legal academia
- The promise of a distinguished career as a legal scholar and teacher
Stipends will include $50,000 plus benefits. While details will be worked out with the specific host school for the Fellow, in general the Fellow will be provided with an office and will be included in the life of the school.
PCWorld Magazine (story here) has a list of the Top 5 Online Scams:
- Auction Fraud
- Phishing Scams
- Nigerian 419 Letters
- Postal Forwarding/Reshipping
- "Congratulations, You've Won a . . . " [Xbox, iPod, etc.]
The number of criminal charges filed for fake Ebay auctions is growing at an alarming pace, and while it is hard to believe, otherwise intelligent people (including at least one law professor) fall for the Nigerian (or South African, even Iraqi) requests to help transfer large amounts of money for a percentage of the loot. (ph)
The jostling between the baseball players subpoenaed to testify and the House Government Reform Committee over whether they will appear is coming to a head. Jason Giambi, Frank Thomas, and Rafael Palmeiro have asked the Committee to withdraw the subpoenas, and they would most likely assert the Fifth Amendment if there is not a grant of immunity. Jose Conseco continues to ask for immunity so that he can speak freely at the hearing, despite having written a book about the use of steroids in baseball, including his own use. The Justice Department usually is reticent about granting immunity blindly, i.e. without a proffer or some other indication about the scope of the witness' testimony, so it would not be a surprise if the players did not receive any protection. The question then becomes whether the Committee will still demand that they appear and assert their Fifth Amendment privilege, something done to witnesses in the investigations of various corporate collapses. A story on ESPN.com (here) discusses the question about whether the players will testify. (ph)
Monday, March 14, 2005
Maurice Greenberg has led American International Group Inc. (AIG) since 1967, but his days as CEO may end as soon as today as the company deals with growing pressure from regulatory investigations. The company is being investigated by New York Attorney General Eliot Spitzer for bid-rigging in the insurance brokerage industry, an investigation that resulted in the resignation of his son, Jeffrey, who was CEO of Marsh & McLennan. On Feb. 14, AIG disclosed (press release here) that the SEC and Spitzer were investigating it for possible earnings manipulation related to a "non-traditional insurance contract" (how's that for a red flag) with General Re, a unit of Berkshire Hathaway; Greenberg was involved directly in the transaction. The company also settled civil and criminal charges in November 2004 by paying a $126 million fine and agreeing to a series of reforms that include a beefed-up compliance program related to more non-traditional insurance contracts that allowed companies to manipulate their earnings. According to a Wall Street Journal story (here), Greenberg has retained Robert Morvillo, who was lead trial counsel for Martha Stewart, to represent him personally in the SEC and NYAG investigations. The pressure on boards to deal quickly with CEOs (and other officers) caught up in federal and state investigations just keeps growing. (ph)
UPDATE: The answer is yes. Greenberg retired as CEO of AIG this evening (March 14), although he will stay on as Chairman of the Board. His successor is Martin Sullivan, who was the co-chief operating officer and a lifelong employee of AIG. A Wall Street Journal story (here) states that the Board was concerned about Greenberg's involvement in the General Re insurance transaction, and that e-mails indicate Greenberg's large role in the deal -- yet another instances where the e-mails provide the paper trail. (ph)
Adam Neufeld of the National Legal Aid and Defender Association forwarded the following information about a program that may be of interest to readers of this blog:
The National Legal Aid and Defender Association (NLADA) is initiating the Appellate Support Network, a project that connects criminal procedure academics with public defenders working on important federal appellate matters. The network is composed of criminal procedure professors that are available to provide assistance to public defenders on significant issues in front of the Supreme Court and U.S. Courts of Appeals. The professors provide a limited number of hours of assistance on a case, and they are considered of counsel and have the option of co-signing the brief. More information on the Appellate Support Network is available at http://www.nlada.org/TestingGround/Appellate_Network. If you are interested in participating in the Appellate Support Network, please send your contact information along with your areas of expertise to Adam Neufeld at firstname.lastname@example.org.
An interesting Fourth Circuit decision on March 11 deals with the crime-fraud exception and discusses the different standards to be applied to attorney opinion work product and fact work product. The case, In re: Grand Jury Proceedings #5 (opinion here), has few facts beyond noting that the grand jury sought to compel the production of documents and testimony from an attorney in connection with the representation of two individuals and their corporation. Typical of such cases, the government submitted grand jury information ex parte and in camera describing the alleged crime or fraud perpetrated by the clients and the use of their counsel as part of that crime or fraud -- the opinion contains no hint of what was involved, for good reason. The Fourth Circuit dealt with two issues. First, the attorney asserted the work product protection for the documents subpoenaed, and the court had to deal with the issue of how to apply the crime-fraud exception to fact v. opinion work product. Since Upjohn, courts have been highly resistant to ordering the production of attorney opinion work product, and usually demand a clear showing of attorney involvement in the client's misconduct for an application of the crime-fraud exception to opinion work product; fact work product, however, received lesser protection, essentially on a par with communications protected by the attorney-client privilege. Distinguishing the two, the Fourth Circuit held:
Because fact work product enjoys less protection than opinion work product, it may be discovered upon prima facie evidence of a crime or fraud as to the client only and thus even when the attorney is unaware of the crime or fraud. While the attorney, along with the client, holds the fact work product privilege, the discovery of facts furnished to an attorney does not implicate the same concerns as does invading the necessary privacy of an attorney’s opinion work product, an invasion only justified if the attorney himself knows of the fraud. We thus use similar standards when applying the crime-fraud exception to attorney-client and fact work product privileges.
The second issue concerned the district court's finding that the crime-fraud exception applied without ever reviewing the communications and work product, and even without a description of the contents of the documents and testimony. In effect, once the district court found sufficient evidence that the clients were engaged in an ongoing or future crime or fraud, and the attorney was in the vicinity, that was sufficient. The Fourth Circuit remanded for an actual review of the documents and testimony so that the second step in the analysis -- that the clients consulted with the attorney for the purpose of assisting in the crime or fraud -- could be determined on more than an assumption.
The crime-fraud exception is difficult for both sides, because it is based on assumptions and conclusions without a complete evidentiary basis and no real adversary testing. That courts some times just cut to the chase ignores how important the process is to protecting the attorney-client privilege and work product protection. (ph)
A sports nutritionist hired by Texas Tech University to obtain nutritional supplements for the football team -- and then for athletes in other sports at the school -- received a 33-month term of imprisonment on March 11 for defrauding the University out of almost $500,000. Aaron Shelley was hired to work at Texas Tech in 2000 as the Director of Sports Nutrition -- and you didn't think big time college sports programs cared about their athletes -- and promptly began a scheme to line his pockets. According to a press release (here) issued by the U.S. Attorney's Office for the Northern District of Texas (Lubbock):
During his employment at Texas Tech University, Shelley conspired to and carried out two schemes to defraud Texas Tech University by over-billing the athletic department for nutritional supplements provided to athletes. The first scheme involved Shelley receiving kickback payments from Muscle Tech of Lubbock, a nutritional supplement store located in Lubbock, Texas. The later scheme involved Shelley over-billing through a "shell" corporation, Performance Edge, Inc. The fraudulent, over-billed amounts from both schemes totaled $497,145.19.
That is an awful lot of nutritional supplements, but then this is for a school in the Big 12.(ph)
Sunday, March 13, 2005
The Atlanta Journal-Constitution has an interesting profile (here) of Katherine (Kit) Addleman, the new SEC Assistant Regional Administrator for Enforcement in the Atlanta office. That office has brought a number of enforcement actions in the past year, aided in part by the addition of 15 new staffers in the examinations and enforcement sections. The effects of the increased funding for the Commission after the collapse of Enron, WorldCom, etc. in 2002 is starting to be felt. The lag time for hiring and training new staff, and then employing them in investigations, is probably about two to three years, so it should not be a surprise to see the SEC starting to bring more enforcement actions, and the number should increase in the next few years. That will be especially noticeable because the agency suffered through static or even declining budgets in the 1990s. (ph)
A former insurance executive in Indiana, James Harrold, received a 78-month term of imprisonment for operating a scam in which he promised approximately 350 investors a 20% monthly return on their investment -- once again, if it sounds too good to be true . . . . The scheme involved alleged investments in English subordinated debentures when in fact Harrold used the money for personal expenses in addition to repaying some of the earlier investors (just like that old friend Mr. Ponzi). Harrold fled the country in 2002 and was finally caught in Belize working as a bookkeeper at a beach resort. Club Fed will be a little bit different, no doubt. An article in the Indianapolis Star (here) discusses he sentencing. (ph)
Richard Hatch, the winner of the $1 million reward at the end of the first season of "Survivor" has now withdrawn from a plea agreement for failing to pay taxes on the winnings and an additional $321,000 he allegedly received from a Boston radio station (earlier post here). Hatch now asserts that he is "absolutely not guilty" because he thought CBS was responsible for withholding the taxes on his winnings and that he did not have to pay. Of course, if earlier reports are correct, Hatch never declared the winnings on his income, nor reported the amount he thought CBS withheld (those pesky W-2s we're all struggling with this time of year), which makes his claim about the lack of withholding a bit less plausible. The U.S. Attorney's Office in Providence has dismissed the criminal complaint filed as part of the plea agreement, and the grand jury is likely to return an indictment to get the case moving toward a trial. Maybe the indictment will be unsealed on April 15. An AP story here describes Hatch's statements made on a AP Radio program.