February 19, 2005
Former Boeing CFO Sentenced
Former Boeing CFO Michael Sears was sentenced to four months in prison and fined $250,000. (See Jurist ) The case involved "improper job talks" with another individual who was "a former senior Air Force procurement official, while she still had sway over contracts involving the company." GOVEX.com reports:
"Druyun admitted in federal court last month to favoring Boeing in at least four contract negotiations, including the tanker deal. She said she felt indebted to the company for giving her daughter, her son-in-law and herself jobs. Druyun was sentenced to nine months in prison."
The sentencing of Michael Sears sends a clear message that fleeing the federal government doesn't pay. The four month jail sentence will act as a wake-up a wake-up call and strong deterrent for any contractor who thinking they can get away with ripping off taxpayers.
Defense procurement was a top white collar crime priority in the 90s. This case emphasizes that it still remains a concern.
Computer Crime Charges Brought by USA in California
The U.S. Attorney's Office for the Northern District of California is prosecuting a case of alleged computer criminality. According to a press release of this office, the indictment charges:
"[F]ormer Information Technology Manager of Creative Explosions, Inc., a Silicon Valley software firm, was indicted today by a federal grand jury on charges that he gained unauthorized access to the computer system of his former employer, reading email of the company's president and damaging the company's computer network. Creative Explosions, Inc., is based in Scotts Valley, California."
February 18, 2005
Head of Support Dog Group Indicted
The United States Attorneys Office for E.D. Missouri indicted the former director of Support Dogs, Inc. a service organization that trains support dogs. The allegations go to "fraud charges in connection with an alleged embezzlement of over $400,000." The press release of the U.S. Attys. Office states:
"According to the indictment, between September 1998 and January 2004, Hansen was the Executive Director of Support Dogs, Inc. As part of his responsibilities, Hansen oversaw fund raising activities at Support Dogs and regularly made presentations and passed out brochures soliciting donations for Support Dogs. Between January 1999 and January 2004, the indictment alleges that Hansen wrote checks on Support Dogs’ operating accounts and used these funds for his personal use. Hansen concealed this fraud on the books and records of Support Dogs in several ways, including using "white out"to alter cancelled checks, removing cancelled checks, and creating phony receipts in Support Dogs’ files.
As a further part of the scheme, as alleged in the indictment, in July 2002, Hansen opened a bank account in the name, "Support Dogs for the Handicapped, Inc." Hansen then allegedly intercepted donations mailed to Support Dogs and deposited them into this new account, which he used for his own benefit.
Finally, the indictment states that in May 2001, Hansen added his wife to the Support Dogs payroll, even though she was not an employee. Between May 2001 and January 2004, ADP created checks payable to Hansen’s wife drawn on Support Dogs' payroll account."
Olis Sentence-Press Can Make a Difference!
It looks like the press is starting to expose one of the worst examples of sentencing guideline inequities. In the recent issue of Christian Science Monitor, one finds a discussion of how Jamie Olis, former Dynergy executive, could have received a reasonable sentence but for the mandates of the guidelines that forced the judge to add up the amount of loss in computing the sentence. (See here). The Fifth Circuit heard appellate arguments in this case, and in light of Booker the sentence may now be subject to modification.
As pointed out here, sentences for the most part, are unlikely to change as a result of the Booker decision. Most judges will use the instruction of the Supreme Court and use the guidelines as advice. But some sentences, like the sentence of Jamie Olis, certainly merits review and reconsideration. (see also Ann Woolner of Bloomberg's article titled, "Olis's 24 Year Prison Sentence Due for a Shave." The press plays an important role in how issues are framed for the public, so it is important that the media continue to expose cases such as this one. (esp)
Ebbers, Scrushy, & Kozlowski
Ebbers - It was probably not a day that witness Scott Sullivan truly enjoyed, as defense attorney Reid Weingarten was asking the questions. This appears to be the witness that will make or break the government's case. (see more AP) And it may come down to whether the jury thinks Scott Sullivan was doing everything at the direction of Bernie Ebbers. (see more here) So far we have Sullivan admitting that he "knew it was against the law."
Scrushy- More talk about "family," although not the kind with parents and children. The defense continued to place the blame on a group referred to as the "family" with claims that this group "hid [the conduct] from Scrushy." (See more here)
Kozlowski - The jury head the testimony of Mark D. Foley, a former senior vice president of finance. (See more here)
Addendum to Ebbers- Title of Wall Street Journal article of this a.m. says it all - "Burden of Proof
Linking Ebbers to the Fraud At WorldCom Proves Difficult."
February 17, 2005
The amicus brief filed by the National Association of Criminal Defense Lawyers (NACDL), New York Association of Criminal Defense Lawyers, and California Attorneys for Criminal Justice (below), is not the usual brief filed by a criminal defense lawyers' group. But the authors of the brief admit to this in the opening passages of the brief when they "acknowledge that this brief presents an unusual subject matter for an amicus brief."
As opposed to a brief focused on a substantive legal issue, the amici argue that there was a "breakdown of the adversary process, in which there should be a prosecutor, a defense attorney, and an impartial judge acting as arbiter between them." The brief then states that "the trial court abandoned that position in favor of transparent bias against the defendant, and unprovoked antagonism toward defense counsel." Examples to support this claim are found throughout the brief.
The brief catalogs the conduct into six areas, that include an argument of "the trial court's different standard of relevance for the prosecution and defense evidence." It also presents a claim of the trial court's sua sponte interruptions of the presentation of the defense case." For example, the support for the claim of a difference in treatment to prosecution and defense counsel when discussing sua sponte interruptions by the trial court is a listing of transcript pages to show that "[e]xcluding interruptions about needing to orient or to hear better, the transcript reveals five sua sponte interruptions to government examinations . . . ., while in contrast, there were more than firty sua sponte interruptions to defense examinations. . . "
This is without doubt a highly unusual amicus brief. But it is clearly an important one in that amici are sending a strong message that trials that place defense counsel in a lesser position than the prosecution should not be tolerated.
February 17, 2005 | Permalink
Conviction in Mortgage Fraud Case
Bill Rankin of the Atlanta Journal Constitution reports on a conviction of a former lawyer in "a $20 million mortgage fraud operation called the largest of its kind in metro Atlanta." When the indictment was handed down, the U.S. Attorneys Office for the Northern District of Georgia stated that this defendant:
"owned and operated The McFarland Law Firm located first at 4820 Redan Road, Stone Mountain, Georgia, and later at 900 North Hairston Road, Stone Mountain, Georgia. She acted as agent for title insurance companies, and was the closing attorney for various lenders. MCFARLAND caused HUD-1 Settlement Statements (HUD-1s) to be signed certifying that she received and disbursed loan proceeds as reflected on the HUD-1s when she closed mortgage loans for various lenders on the properties for which she wrote title insurance, with the actual McFarland receipts and disbursements not as reflected on the Settlement Statements. The indictment alleges that McFarland paid the identity thief $10,000 per identity, the primary appraiser who inflated property values over $400,000, and other coconspirators from her escrow account without reflecting such payments on the settlement statements."
February 16, 2005
Spitzer is Not the Only One Prosecuting White Collar Cases in NY
While Attorney General Spitzer is investigating activities on a state level, the federal government is also busy with white collar cases. The trial of a former chief executive of American Tissue continued with the testimony of the former chief financial officer. Former CFO Stein pleaded guilty and is now testifying as a government witness in a trial that charges the defendant with "fraud, conspiracy to commit perjury and obstruction of justice." See Newsday for more.
In addition to criminal charges, the SEC also brought a civil action. (Complaint) (Litigation Release No. 18022). According to the New York State Society of CPA's website, the accused "has gone to extraordinary lengths to block efforts aimed at selling its network of paper mills and warehouses to pay hefty debts. He allegedly instructed employees to forge ownership documents for machinery he didn't own and the told them to lie to a Delaware bankruptcy court." The same website reports that the defendant's attorney states that, "[a]ny dispute with the bankruptcy court is really a business dispute, not a criminal dispute."
Cross- Ex in Kozlowski and Scrushy Trial
Kozlowski -The former head of human resources at Tyco has now spent four days on the stand being cross-examined. For more see the Wall Street Journal article titled, "Tyco Ex-Official Discusses LoansTo Executives, Key Panel's Moves" (see also Atlanta Journal Constitution article here).
Scrushy- The defense cross-examined a former HealthSouth finance chief, Bill Owens. The defense continued to present testimony aimed to show that Owens was acting without approval from the accused. For more see here.
It is always fascinating how murder cases can often be over with in a very short period of time, but white collar cases can take weeks and months.
February 15, 2005
AIG - First the Subpoenas and then the Guilty Pleas
As reported here, AIG received subpoenas on 2-9-05 from the Office of the Attorney General of New York (Spitzer) and the SEC. (see Newsday for further information here) And as so often is the case following the issuance of subpoenas, plea agreements follower shortly thereafter. In a press release by Attorney General Spitzer, it is reported that today "a senior executive at Marsh and two AIG employees have pleaded guilty to criminal charges in connection with an ongoing investigation of fraud and bid rigging in the insurance industry."
In this press release, Attorney General Spitzer states:
"All three defendants admitted to participating in a scheme that allowed Marsh, the nation’s largest insurance broker, to protect incumbent insurance carriers when their business was up for renewal.
. . . . . As part of his plea today, the managing director of Marsh’s excess casualty unit described an official protocol whereby Marsh clients were given a significantly understated figure when they asked about the amount of revenue Marsh derived from Placement Service Agreements.
Two of the defendants in today’s cases pleaded guilty to the crime of Scheme to Defraud in the First, a class E felony, which carries a maximum sentence of 1 1/3 to 4 years in state prison. The third defendant pleaded guilty to the crime of Scheme to Defraud in the Second Degree, a class A misdemeanor, which carries a maximum sentence of 1 year in jail. All three defendants pleaded guilty before Justice James Yates of New York County Supreme Court.
The defendants in today’s cases are expected to testify in future cases, as are the six other insurance industry employees who entered criminal pleas. Previously, two executives at AIG, two from Zurich American, one from Marsh and one from ACE pled guilty to criminal charges."
This was probably not the valentine's gift that those associated with American International Group Inc. (AIG) were hoping to receive - a notice informing them of subpoenas from the Office of the Attorney General of New York (Spitzer) and the SEC. AIG issued a news release on 2-14 stating:
"Subsequent to the earnings conference call on Wednesday, February 9, AIG received subpoenas from the Office of the Attorney General for the State of New York and the Securities and Exchange Commission relating to investigations of non-traditional insurance products and certain assumed reinsurance transactions and AIG's accounting for such transactions. AIG will cooperate in responding to the subpoenas."
AIG has been in the news recently. (see post). What may be interesting with respect to the timing here, is that the subpoenas are arriving immediately after an internal investigation. See Wall St. Jrl for more.
February 14, 2005
Ebbers Trial On Hold
Jurist reports that the Ebbers trial has been placed on hold. (see also AP) without explanation. The government completed the direct examination of Scott Sullivan and the cross examination is set to resume on Wed.
The W.R. Grace Indictment
A close examination of this indictment raises some interesting questions. The charges themselves are not unique to white collar prosecutions as one finds wire fraud, obstruction of justice, conspiracy and clean air act violations.
The indictment itself, however, reads like a civil complaint. For example, the indictment begins with the following statement, "In the late 1800s, gold miners discovered a significant body of vermiculite ore in an area located in the mountains approximately seven miles northeast of the town of Libby, Montana (the 'Libby Mine')." Later in the indictment, specifically in paragraphs 85-88 one finds a summary of a "Hamster Study" conducted "on or about March 15, 1976." A basis for including material this far back is offered by USA William W. Mercer in an NPR report.
But does this explain the 202 paragraphs of detailed information? Compare this indictment to other federal indictments here.
Is the descriptive nature of this indictment intended for the media? Is this description necessary to provide notice to those accused of the charges against them, especially the charge requiring "knowing endangerment"? Is the government providing extensive detail to facilitate plea agreements? Or is this detail necessary because this is a white collar case involving a complex clean air act charge? The bottom line may just be that this is a case that includes alleged conduct related to asbestos!
News Across the Country
A stock analyst is Wyoming pled guilty to extortion for threatening to damage the reputation of a company. (See here). Initially the charges were wire fraud, securities fraud, and other extortion charges.
Flu season my prove to be tough one this year, at least for Chiron Corp. See the LA Times article on the company statement concerning theSEC probe. The Corp. tells of its cooperation with the SEC.(here).
And of course there are the continuing trials of Scrushy, Ebbers, and Kozlowski (see here).
Could the FBI really be investigating the Boy Scouts? Check out a story in the Atlanta-Journal Constitution.
February 13, 2005
National Association of Criminal Defense Lawyers Passes Sentencing Resolution
At National Association of Criminal Defense Lawyers (NACDL) MidWinter Board meeting, held in New Orleans, the Board of Directors passed the following resolution presented by Carman Hernandez:
RESOLVED, that, in light of the United States Supreme Court's decisions in United States v. Booker, ___U.S.___ (Jan. 12, 2005), the NACDL urges the United States Congress to take the following steps to assure that federal sentencing practices, in compliance with all constitutional requirements, are just and fair and effectuate the goals of sentencing set forth in the Sentencing Reform Act:
- Permit federal courts to sentence as provided in United States v. Booker by considering all factors set out in 18 U.S.C. section 3553(a), including consideration of the federal guidelines as provided in section 3553(a)(4) and (a)(5);
- Direct the United States Sentencing Commission to assemble and analyze all available information regarding sentences and discretionary charging decisions, including findings and conclusions of law required by 18 U.S.C. section 3553(c), and all other relevant information, and submit a Report with recommendations to the Congress within 12 months in light of that information; and
- While awaiting the Report from the Sentencing Commission, conduct hearings and solicit input from all constituents within the federal criminal justice system as well as consider information available regarding sentencing practices within the various states, regarding how post-Booker sentencing practices and procedures comply with the purposes of sentencing, conform to constitutional requirements and furthered just and wise sentencing policy; and, lastly how post-Booker sentencing practices compare to any alternative legislative options.
February 13, 2005
New Orleans, Louisiana
Measuring Departures in a post-Booker World
Counting the number of sentencing departures is not a proper method for computing sentencing changes resulting from the Booker decision. Just using numbers to compute the difference between a pre and post-Booker world does not tell the full story.
This is especially true for white collar cases.
Departures from a guideline sentence may be more appropriate in the white collar context where the punishment received by the convicted defendant is aggravated by additional punishment caused by collateral consequences. After all it should be equal punishment and not additional punishment just because the individual committed a white collar offense.
Hon. Nancy Gertner, federal district judge, recently made comments suggesting the use of a "sentencing information system." Basically this means moving away from "act of departure" reporting to a "why departing" reporting system.
This makes sense, which should be no surprise since it comes from Judge Gertner, an incredibly thoughtful member of the judiciary. After all, if everyone desires to achieve true uniformity in sentencing, it is necessary the look beyond numbers to the individual circumstances of the case. For example, an attorney sentenced on a criminal conviction might be subject to disbarment and loss of their professional livelihood, and medical personnel may face a sentence beyond jail time and fines, such as a loss of license and an inability to participate in government programs.
Attorney Irwin Schwartz, a past president of the National Association of Criminal Defense Lawyers (NACDL) recommends that defense attorneys present judges with "findings or fact and conclusions of law" on sentencing issues. This will assist judges in reciting the rationale of their decisions. It will allow for better determinations of "unreasonableness" should the case go on review and also it will assist the "departure counters" in properly examining "why" there was a departure as opposed to merely counting "acts" of departure.
What's The Latest in White Collar Sentences
If you are concerned that white collar offenders will not be receiving jail time because of the Supreme Court's ruling in Booker, check out these two recent press releases of the DOJ:
A DOJ press release (2-10-05) reports "that a West Virginia man has been sentenced to 66 months in federal prison for a scheme in which he falsely claimed that he could 'fix' a federal prosecution by bribing officials including the United States Attorney and a federal judge."
Another DOJ press release (2-11-05) states "that three key 'visa brokers' received sentences of 57, 41 and 30 months in prison for their roles in facilitating a bribery and visa fraud scheme involving the unlawful issuance of approximately 200 visas from the U.S. Embassies in Sri Lanka, Fiji and Vietnam."