Monday, February 21, 2005
While the criminal prosecution of Bernie Ebbers will be concluding soon, the civil securities fraud class action against WorldCom, its directors, and various banks involved in the company's finances will have to wait a little bit longer before it can begin. As discussed on Jurist, U.S. District Judge Denise Cote has postponed the trial until March 17 to give the attorneys a chance to interview the witnesses from the criminal case -- most likely, former CFO Scott Sullivan, who was the architect of the fraud and key witness in the criminal prosecution of former CEO Ebbers. Sullivan has been kept under wraps by the U.S. Attorney's Office prior to the trial, to ensure that Ebbers did not gain any "free" discovery of Sullivan's testimony through the civil case. Now that Sullivan (and others) have testified, that stricture is gone and the civil attorneys can pursue their case, which involves broader issues than just Ebbers' involvement in the fraud.
Jurist also notes that Judge Cote has said the trial will be concluded by July, less than the nine months projected by counsel. Unlike most criminal cases, the judge in a civil case can speed things along more easily. It will be interesting to see if the case even goes to trial, given the propensity for such actions to settle (the judge refused an earlier settlement negotiated by the parties as being unfair to the banks named as defendants). (ph)
The U.S. Attorney's Office for the Eastern District of Virginia issued a white paper on Feb. 18, "Combating Procurement Fraud: An Initiative to Increase Prevention and Prosecution of Fraud in the Federal Procurement Process." The district is home to the Pentagon and, more importantly, thousands of government defense consulting firms in Crystal City, Rosslyn, and Alexandria; the revolving door spins rather quickly in D.C. The recent scandal involving Boeing (see previous post here) that led to the sentencing of the company's former CFO and a senior Air Force procurement officer has led to a large-scale initiative by the U.S. Attorney's Office, which is already well-known for the Ill-Wind investigation of the 1980s. The white paper discusses the reasons for the formation of a new Procurement Fraud Working Group:
In addition to increasing DoD contracts, these contractors are expanding operations to acquire and service contracts from the State Department, DHS, and other federal agencies. For example, the President and Chief Operating Officer of one of DHS's top ten contractors recently announced the company’s intent to grow 15 per cent each year. With increased procurement, including a rise in the outsourcing of particular services, there is also the potential for an increase in procurement fraud, which includes product substitution, defective pricing or other irregularities in the pricing and formation of contracts, misuse of classified or other sensitive information, labor mischarging, accounting fraud, fraud involving foreign military sales and ethical and conflict of interest violations. This puts the United States Attorney's Office, as chief law enforcement agency for this district, in a unique position to act.
Sunday, February 20, 2005
Co-Blogger Peter Henning has a new piece in the Buffalo Criminal Law Review, now available on SSRN titled, "Sarbanes-Oxley Act Section 307 and Corporate Counsel: Who Better to Prevent Corporate Crime?" The article "argues that the SEC should adopt the withdrawal portion of the noisy withdrawal rule, and that withdrawal should be mandatory for both outside counsel and in-house lawyers when they become aware of corporate misconduct and the corporation refuses to take adequate remedial measures." The rationale for this approach is explained in detail in the article.
SSRN also reports that Professor Stuart Green has a chapter in a book titled "DEFINING CRIMES: ESSAYS ON THE CRIMINAL LAW'S SPECIAL PART R.A." Duff & Stuart P. Green, eds., Oxford University Press, 2005. He states that, "In this chapter analyzing the moral content of bribery, bribes are conceptualized as bilateral agreements between two parties (a briber and bribee) in which the briber gives or offers something of value in exchange for the bribee's agreeing to act on the briber's behalf."
Professor Elizabeth Joh has two new pieces listed on SSRN that may be of interest to people teaching white collar crime. One is titled "Conceptualizing the Private Police," and the second is "The Paradox of Private Police."
A recent Seventh Circuit decision, United States v. Cummings, highlights a key limit to the RICO statute.
For starters this is wonderful case to learn what skip tracing is and the role these individuals serve in finding debtors. The case notes that "Although skip tracing is not necessarily illegal, some skip tracers stray across the line in their efforts to track down their quarry."
The reversal here is upon a failure by the government to follow the mandates of the case of Reves v. Ernst & Young. Reves clearly holds that one must "conduct or participate" in the "operation or management" of the enterprise. The only exception provided in the case is when the "enterprise might be operated or managed by others associated with the enterprise who exert control over it as, for example, by bribery." As the accused was an "outsider," the court in the Cummings decision reversed.
For more on how this limitation to RICO operates, see White Collar Crime: Law and Practice, 2nd ed. by Israel, Podgor, Borman & Henning.
What was John Ashcroft thinking when he was meddling in the libraries? (Report) Was he thinking that the librarians might be involved in criminal activity? No way, not the librarians.
In the posts of December 6th and December 30th are reported two different incidents of librarians being charged with criminal activity. The Law Librarian Blog reports of another instance. It seems that a "Homer Township's former library director was sentenced" "to six months in the Will County jail for stealing more than $100,000 from the library district." It sounds like a case of basic embezzlement through use of two sets of books.
(esp)((With thanks to Joe Hodnicki for sending us this story)