Tuesday, March 1, 2005

Indictment for Avoiding over $200 Million in Taxes Filed in D.C.

The Department of Justice announced the indictment of Walter Anderson, a telecom entrepreneur, for failing to pay over $200 million in taxes from over $500 million in profits he earned from various mergers of companies he owned by forming off-shore companies in the British Virgin Islands and Panama to hide the true ownership of the profits.  According to a press release issued by the Tax Division, "Anderson allegedly failed to report this income on either his federal or District of Columbia tax returns and failed to pay approximately $170 million in federal income taxes and $40 million in D.C. income taxes." (ph)

March 1, 2005 in Prosecutions, Tax | Permalink | TrackBack (0)

Monday, February 28, 2005

Corruption Prosecutions in New Jersey

The U.S. Attorney's Office in New Jersey announced last week the arrests of a number of local public officials in Monmouth County (home of Asbury Park for the Bruce fans in the crowd), including the mayors of Keyport, Hazlet, and West Long Branch, on corruption charges.  According to a press release by the USAO discusses a contractor who cooperated with the government and who "[d]uring many tape-recorded and videotaped conversations, cash in amounts of between $1,000 and $9,000 - and in one case a $5,000 home driveway repaving - was exchanged with the public officials, some of whom assured the cooperating witness that they would continue to send work his way as long as the money kept coming, according to the Complaints. In one case, a Monmouth County official took cash in exchange for assisting what he believed to be a money laundering operation."  The defendants were charged in criminal complaints with Hobbs Act violations, although it is likely that the government will add additional charges (including honest services fraud and Section 666 violations) in subsequent indictments. Corruption in New Jersey?  The press release notes that the "arrests are an outgrowth of an earlier investigation, which led to the convictions of other Monmouth County public officials, including former Asbury Park Mayor Butch Saunders and Saunders' advisor Rayfield James, former Ocean Township Mayor and Asbury Park City Manager Terrence Weldon, former Asbury Park Councilman James Condos, and former executive director of the Asbury Park Housing Authority, the late Kenneth Nixon." (ph)

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UPDATE: An article in the Asbury Park Press (Feb. 28) discusses the claim by some of the defendants charged with in the Monmouth County corruption case that they were entrapped by the FBI into accepting the cash payments (story here).  Think back to the Abscam investigation in the late 1970s for a good example of how that defense does not work very well when public officials take cash.

February 28, 2005 in Corruption, Prosecutions | Permalink | TrackBack (0)

A Possible Settlement in the SEC Insider Trading Case Against Martha Stewart

The cover of the March 7 issue of Newsweek features a smiling Martha Stewart and the headline "Martha's Last Laugh" (here).  The magazine is reporting that Stewart's attorneys (she continues to reside in an FCI in West Virginia for the rest of the week) are negotiating a settlement with the SEC regarding the civil insider trading charges related to her sale of ImClone Systems stock based on information she allegedly received from her broker, Peter Bacanovic, and indirectly from former ImClone CEO Sam Waksal (who is also residing in an FCI, for quite a bit longer).  If she settles the case, it will likely involve a bar for at least some period of time from serving as a director and officer of the company, Martha Stewart Living Omnimedia, in addition to disgorgement of the loss avoided and a civil money penalty.  The dollar figures are minute -- at least for Stewart -- because the disgorgement and penalty are unlikely to be more than $250,000 (including interest and assuming a 3x penalty, which is probably on the high side), and Stewart owns 30 million shares of the company, with a current market value of over $1 billion.  Put another way, any monetary payment will be less than .025% of the value of her stock holdings in her company, so the key is what can be negotiated regarding the D&O bar.  The case was never really about the money, as both sides would likely concede. (ph)

February 28, 2005 in Civil Enforcement, Martha Stewart, Securities | Permalink | TrackBack (0)

Martha Stewart's Return to Work

An article in the New York Times (Feb. 27) discusses Martha Stewart's imminent return to her company, Martha Stewart Living Omnimedia, upon completion of her five-month term of imprisonment.  Stewart is scheduled to return to her office on March 7.  Her sentence includes five months of home confinement, and the terms of that portion of her sentence permit her to work at the company, where plans are in the works for a new daily program and an "Apprentice" show similar to the one starring Donald Trump.  A graphic with the NY Times story notes that the strong rise of her company's stock price since the sentencing last July means that Stewart's share have nearly quadrupled and are now worth a billion dollars.  That may be a first in American penal history, and you wonder whether this will be a situation similar to the Wall Street adage of "buy on the rumor, sell on the news." (ph)

February 28, 2005 in Martha Stewart | Permalink | TrackBack (0)

Corruption Investigations May Affect Outcome of Los Angeles Mayor Race

Los Angeles Mayor James Hahn faces a primary election on Tuesday, March 8, amidst significant publicity about federal and county corruption investigations involving possible bribery and kickbacks.  Federal prosecutors have issued subpoenas for office e-mail and have called witnesses to testify before the grand jury.  An executive at a public relations firm with ties to Hahn was indicted in January for allegedly overbilling the city's Department of Water & Power $250,000 (press release here), and several city officials have resigned, although those resignations have not been linked specifically to the corruption investigations.  With the election so close, it will be interesting to see if Hahn, who denies any knowledge or involvement in the alleged corruption, can survive the publicity. An AP story here discusses the investigations. (ph)

February 28, 2005 in Corruption, Investigations | Permalink | TrackBack (0)

Enron Executives Trial Set to Start in January 2006

How time flies when you're getting ready for trial!  U.S. District Judge Sim Lake has set the start of the criminal prosecution of former Enron CEOs Ken Lay and Jeffrey Skilling, along with former chief accounting officer Richard Causey, for January 2006 to accommodate the busy schedules of the various defense lawyers.  The judge, who said he appreciated the lawyers "giving me the time of day," said that December 2005 appeared to be the earliest available trial date, and to avoid any holiday conflicts set the trial to start on Jan. 17, 2006.  Lay initially sought a "speedy trial" (motion here)and for severance from the other defendants (motion here), which the judge denied, but now professes to be comfortable with the trial date that has been set.  At least now we have something to look forward to next year. A Houston Chronicle story here discusses the judge's ruling on setting the case for trial. (ph)

February 28, 2005 in Enron, Prosecutions | Permalink | TrackBack (0)

Sunday, February 27, 2005

NACDL Files Amicus in Andersen

The National Association of Criminal Defense Lawyers (NACDL) filed an amicus brief in the Arthur Andersen , LLP case pending before the United States Supreme Court.  The brief, available here, focuses on the role of counsel and the effect of this case on attorneys.  In the Summary of the Argument it states in part:

"This case places lawyers at risk of investigation, prosecution, and imprisonment for doing their jobs. When a lawyer represents a client in connection with a potential government investigation, one of the lawyer’s goals may appropriately be to prevent the government from developing evidence against the client. Within the bounds of ethics and the law, that is what lawyers do.

By expanding the definition of "corruptly persuades" in 18 U.S.C. § 1512(b)(2) to encompass legal advice directed to that end, the Fifth Circuit’s ruling will chill zealous legal representation, create potential conflicts between counsel and client, and undermine faith in the privacy of attorney-client communications.

(esp)

February 27, 2005 in Arthur Andersen | Permalink