Tuesday, April 25, 2006

GAO Report on the Use of Shell Companies

The Government Accountability Office (GAO) issued a report (link below) to the Senate Permanent Investigations Subcommittee on the use of shell companies to facilitate criminal activity, and assessing whether greater disclosure requirements would assist law enforcement.  Corporations and Limited Liability Companies (LLC) can be formed quite easily in all states, often on-line, and the disclosure of the owners and organizers of the entity usually is quite minimal, with no checking by the states.  The Report notes:

Law enforcement officials are concerned about the use of shell companies in the United States that enable individuals to conceal their identities and conduct criminal activity and have encountered difficulties in investigating these shell companies because they cannot determine the owners of the companies. Quantifying the magnitude of the use of shell companies used in crimes is difficult because creating a shell company is not a crime but rather can be a method for hiding criminal activity. However, law enforcement officials told us they are seeing many investigations within the United States and in other countries where individuals have used U.S. shell companies to facilitate illicit activity involving billions of dollars. Most of the law enforcement officials we interviewed said that when they need company information, they obtain some information from state Web sites and company filings, and some said they also requested information from agents. Some law enforcement officials noted that the information available from states had proven helpful because names on the documents generated additional leads. However, some officials said that the information states collected was limited in revealing who owned and controlled the company and that cases had been closed because of insufficient information. For example, an Immigration and Customs Enforcement (ICE) official provided an example of a Nevada-based corporation that received 3,774 suspicious wire transfers totaling $81 million over a period of approximately 2 years. However, the case was not prosecuted because ICE could not identify the beneficial owner of the corporation.

The Report notes that requiring greater disclosure raises potential privacy concerns, and mandating state review of the filings would be costly without preventing much of the illegal activity. 

The use, or misuse, of a business organization to engage in wrongdoing is nothing new, and the fact that a corporation or LLC can be used as a front for illegal activity does not mean there is anything wrong with the current system for creating such organizations.  Enhanced disclosure rules do not mean that truthful information will be supplied, and the large number of such entities means that ongoing monitoring costs would be significant because misconduct is not necessarily centered on the formation of the corporation or LLC but its subsequent use.  The wall hit in the ICE case discussed in the GAO Report was not just a function of the system for creating such entities, but also a reflection of the ease with which accounts can be set up and used at financial institutions to transfer funds without detection.  Pointing to the state statutes that facilitate the formation of corporations and LLCs as a cause of the problem with the use of shell companies is a bit like blaming a robbery on the jewelry or money taken.  While a bit more disclosure of the organizers might prove helpful, these entities -- like anything else -- can be used to facilitate a crime regardless of whose name is on the documents.  (ph)

Download gao_report_company_formations.pdf

April 25, 2006 in Government Reports | Permalink | Comments (0) | TrackBack (0)

Vinson & Elkins LLP and Enron

Attorneys at the law firm of Vinson & Elkins LLP are probably watching the events at the trial of Ken Lay and Jeff Skilling, as the two defendants on trial have claimed that they received advice from individuals associated with this law firm. As stated by co-blogger Peter Henning, "I would not want to be Vinson & Elkins, if Skilling and Lay are convicted." (See Wall Street Jrl here).


April 25, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

Monday, April 24, 2006

Former CEO of Computer Associates Pleads

It is not common for the CEO of a company to plead guilty, as the government often takes the pleas from the lower ranks of the company as they move up the chain.  The CEOs are usually left to stand trial with others testifying against them.  But that is not the case in the Computer Associates case with the former CEO, Sanjay Kumar, pleading guilty to obstruction of justice and securities fraud. (See Yahoo Finance AP here).  Also pleading was a top salesman at the company. All this much to the government's surprise.  (See Wall Street Journal here)

Taking responsibility may present an interesting scenario at sentencing as the defendants plead to the charge without any government deal.  This case may be a true test on how powerful the government really is when it comes to offering deals to individuals.  Will the government want these individuals to receive the low sentence they would normally provide to someone who confessed to criminal conduct?  Or does that only apply when the government agrees to the plea entered?


April 24, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

The Prosecution Side in the KPMG Defendants' Case

The government response to Judge Lewis Kaplan's Order in the KPMG Defendants' case is a nine (9) page letter. (see New York Times here)The Government was asked to provide a Bill of Particulars, specifically answering "[w]ith respect to each of the tax shelters as to which the government intends to offer proof, does the government allege that the tax shelter was fraudulent as designed and approved by KPMG and, if so, in what respects?"

The response speaks to the shelters, but also generally states:

"The Government alleges that these opinion letters do not reflect the transactions ‘as designed,’ but instead contain misleading information, false statements, and material omissions designed to disguise the transaction and mislead the IRS. Moreover, the Government alleges that the conspirators drafted these opinion letter so that they misrepresented not only the facts of the transaction, but also conspirators’ conclusions regarding the application of the law to the facts. Thus, while the opinions state that certain tax treatments of certain facts (falsely) described in the opinion letter are more likely than not to survive IRS challenge, the Government alleges that conspirators did not, in truth, believe that to be so."

One has to wonder if any of the government material was at one point attorney-client material. What did the company provide to the government? Did any of this material serve as the basis for the government response?


April 24, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Ken Lay Blames Others

Ken Lay blamed Fastow, short-sellers, and journalists in his opening testimony yesterday. (see Houston Chronicle here) The defense is  - "no knowledge."  The argument will be that he is a busy CEO who did not know everything of what might be going on within the company.  He called what happened a "classic run on the bank."

Ken Lay is a very different witness from Jeff Skilling. With his strong defense, his credibility will be  tested when the prosecution goes to cross-examine him.


April 24, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

Sunday, April 23, 2006

Ken Lay - Next to Bat?

Ken Lay is expected to be the witness on the stand this morning in his trial along with co-defendant Jeff Skilling. And it is anticipated that he will be a very different witness than co-defendant Jeff Skilling.  See NYTimes here, Washington Post here, Houston Chronicle here. The lessons from this witness may prove to be an education to all CEOs of what to say when your company has issues, when to take a position opposite your company with respect to the health of the company, and when to keep your mouth shut. Stay tuned.


April 23, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

Former Defense Department Employee - Scheme to Defraud

The United States Attorney for the Eastern District of Virginia issued a press release here telling of a Former Defense Department Employee being sentenced for a plea on a wire fraud charge, to "57 months imprisonment, approximately $704,000 restitution and 3 years supervised release for his participation in a fraud scheme to use a Department of Defense IMPAC charge card to make over $704,357.24 in fictitious purchases of maintenance supplies for the Pentagon."  According to the press release:

"From May 1999 until April 2002, [this individual] was assigned to the Pentagon Building Maintenance Office and was responsible for ordering and purchasing supplies for the maintenance of the Pentagon. [This individual], and two others convicted in part of this scheme, created at least 265 fictitious purchase orders, had them approved, and charged a government purchase card $409,624.61. The money obtained from the scheme was received by an outside company owned by one of the conspirators. No goods were received by the Department of Defense for the false charges."

(esp) (with thanks to Fraud Update here)

April 23, 2006 in Fraud | Permalink | Comments (0) | TrackBack (0)

Blogging Conference - This Friday at Harvard

Blogging Conference (Bloggership: How Blogs are Transforming Legal Scholarship) is set for this coming Friday at Harvard.  For details see here.  The papers are available on SSRN here. Note Professor Doug Berman's Comments on SSRN downloading here. Also a live streaming webcast of the conference will be here. There will be a readers-meet-bloggers event at the Bloggership conference in Cambridge, on Thursday the 27th from 9 to 11 P.M. 


April 23, 2006 in News | Permalink | Comments (0) | TrackBack (0)

Saturday, April 22, 2006

Upcoming NACDL White Collar Crime Day

The National Association of Criminal Defense Lawyers (here) is having a full day seminar in Philadelpha that will explore white collar crime.  It is an incredible array of speakers and promises to be an informative program.  The program description states:

“The Practice of White Collar Criminal Defense,” will have seasoned white collar lawyers and professionals share their insight on how to represent white collar defendants in a wide array of cases. This program will appeal to both seasoned white collar veterans who wants to broaden his ir her expertise as well as serve as a primer for those who are interested in starting a white collar practice. We will update you on current cases and introduce you to the relevant issues and precautions in Securities Law, Criminal Tax Enforcement, Healthcare Fraud, Mail and Wire Fraud, Sentencing in a Post-Booker World, as well as two panels on dealing with joint defense agreements, parallel proceedings, immunity agreements, and the when, where, why, and how to proffer.

Speakers include -

David Angeli – Portland, OR
NACDL White Collar Crime Committee Vice-Chair David Angeli focuses his practice on complex civil and criminal litigation, with an emphasis on health care, securities, financial and white-collar criminal matters. He has represented numerous individuals and business entities in state and federal courts around the country. Most recently, Angeli represented Joseph Hirko, the former CEO of Enron Broadband Services, in a 3-month federal criminal trial, winning acquittals on 14 of 27 counts and deadlocking the jury on the remaining 13. He is an adjunct professor of law at the Lewis & Clark Law School in Portland, where he teaches a federal white collar crime seminar.

Amy Baron-Evans – Boston, MA
Amy Baron-Evans is the National Sentencing Resource Counsel to the Federal Public and Community Defenders Office. She represents Defenders’ interests before the US Sentencing Commission, develops sentencing policy, and provides training in sentencing advocacy. She has authored a number of articles and lectured on a variety of criminal law issues including computer searches, the federal sentencing guidelines, mental health issues, DNA evidence, and professional ethics for criminal lawyers. Baron-Evans is a former Co-Chair of NACDL’s Federal Sentencing Guidelines Committee and Co-Chair of the Practitioners’ Advisory Group to the US Sentencing Commission.

Blair Brown – Washington, DC
NACDL Board Member and White Collar Crime Committee Co-Chair Blair Brown has a national white collar criminal defense practice. Prior to joining Zuckerman Spaeder LLP, he was a staff attorney for the Public Defender Service in the District of Columbia where he eventually became Deputy Chief of the Trial Division. Brown co-chairs the DC subcommittee of the ABA Criminal Justice Section’s White Collar Crime Committee and has served as a faculty member of the Harvard Law School Trial Advocacy Program and the National Institute of Trial Advocacy. He lectures on criminal and civil practice topics, and has served as a constitutional and criminal law commentator on television and before the District of Columbia City Council. Brown is a board member of the Innocence Project of the National Capital Region. He has published articles on grand jury investigations, federal sentencing law, and federal procurement fraud prosecutions and is listed in The Best Lawyers in America.

Gerald Feffer – Washington, DC
Gerald Feffer is a partner in the Washington, DC law firm of Williams & Connolly and has a nationwide white collar criminal defense practice. As a former Assistant Deputy Attorney General of the Tax Division in charge of criminal investigations, he has developed a national practice representing clients under investigation for criminal tax fraud and money laundering violations and has successfully represented a number of clients under investigation for health care, banking, securities, and environmental fraud. Feffer is the Chairman of the ABA’s Annual National Institute on Criminal Tax Fraud and is a former Chairman of the Association's Criminal Tax Committee. He was recently named as one of "Washington's Top Lawyers" by the Washingtonian, and ranked as one of the 20 Best Go-To Litigators in the DC area by the Legal Times. Feffer is a fellow of the American College of Trial Lawyers and the American College of Tax Counsel.

Ross Garber – Hartford, CT
Ross Garber focuses his practice on the litigation of complex criminal and civil cases. In addition to his litigation practice, he counsels clients on dealing with state and federal government agencies and conducts internal and external investigations for companies in a variety of industries where he assists in creating corporate compliance and integrity programs. Garber served as chief counsel to the Office of the Governor of Connecticut during eight days of televised legislative hearings on whether the Governor should be impeached. Garber is a faculty member at the ABA's National Institute on White Collar Crime and recently conducted a training session for the National Governors' Association on Crisis Management for Governors' Legal Counsel.

Peter Goldberger – Ardmore, PA
NACDL Federal Rules and Procedures Committee Co-Chair Peter Goldberger is the founder and principal of a three-lawyer firm, which focuses its nationwide practice on the post-conviction aspects of federal criminal cases, particularly sentencing and appeals. He has argued before the US Supreme Court and most of the federal circuits. Working for over ten years under a CJA appointment, in 2003 Goldberger was one of the attorneys who won the first DNA exoneration from Pennsylvania’s death row. Twice named one of Pennsylvania’s ‘Super Lawyers’ by the Philadelphia Magazine, Goldberger has been listed in Best Lawyers in America for more than a decade. He is the co-author of a two-volume Practice Guide for Federal Appellate Procedure in the Third Circuit (1997; now out of print), and the author of a chapter in Collier on Bankruptcy, covering immunity and Fifth Amendment privilege.

Lawrence Goldman – New York, NY
NACDL Past President Larry Goldman (2002-2003) has been practicing criminal law in New York City since 1972, specializing in white collar cases. From 1966 - 1971, he served as an assistant district attorney under Frank Hogan in New York County. Goldman is Co-Chair of NACDL’s White Collar Crimes Committee, Chair of the New York State Commission on Judicial Conduct, and he is on the executive committee of the Criminal Justice Section of the New York State Bar Association. He is a past president of both the New York State Association of Criminal Defense Lawyers (NYSACDL) and the New York Criminal Bar Association (NYCBA). Goldman has lectured at numerous bar associations and law school programs on various aspects of criminal law and procedure, trial tactics, and ethics. In 1998, he was honored with the Robert J. Heeney Award, NACDL’s most prestigious recognition. Goldman has also received the Outstanding Practitioner Award from the NYCBA, the Thurgood Marshall Award from the NYSACDL, and the Charles F. Crimi Award from the New York State Bar Association Criminal Justice Section.

Jan Nielsen Little – San Francisco, CA
Jan Nielsen Little has been in private practice for 18 years and previously prosecuted public corruption cases for the Department of Justice’s Public Integrity Section. Little is a partner at Keker & Van Nest in San Francisco specializing in white collar cases and fraud-related civil and SEC litigation. She and John Keker recently defended CSFB banker Frank Quattrone and Enron CFO Andrew Fastow. Little received the California Attorneys for Criminal Justice’s Significant Achievement Award for the acquittal of Patrick Hallinan, a criminal defense attorney charged with RICO offenses in connection with his defense of criminal cases.

William Mateja – Dallas, TX
William Mateja is a principal at Fish & Richardson PC. Prior to joining the firm, he served as Senior Counsel to Deputy Attorneys General Larry Thompson and James Comey. He was the point person for President Bush's Corporate Fraud Task Force, oversaw the Justice Department's corporate, civil, and criminal health care fraud efforts as well as the development of its sentencing policies post-Protect Act. Mateja is a frequent lecturer on topics ranging from corporate fraud, sentencing of white collar defendants, Sarbanes-Oxley, corporate criminal liability, corporate compliance, parallel proceedings, corporate prosecution guidelines, and Justice Department sentencing policies. He is an author of Sentencing Reform, The Federal Criminal Justice System, and Judicial and Prosecutorial Discretion (2004).

Robert Morvillo – New York, NY
Robert Morvillo was Chief Trial Assistant to the US Attorney in charge of the Frauds Unit, Southern District of New York (1970-1971) and Chief of the Criminal Division, US Attorney's Office, Southern District of New York (1971-1973). He is a past president of the New York Council of Defense Lawyers (1993-1994), served on the Board of Trustees for the Federal Bar Council (1989-1997), and was Chairman of the American College of Trial Lawyers (1998-2000). Morvillo is well-known for his defense of Martha Stewart.

Gary Naftalis – New York, NY
Gary Naftalis represents individuals and corporations in complex criminal, regulatory, and civil matters including allegations of insider trading, market manipulation, accounting irregularities, and other financial fraud. He recently defended Michael Eisner, the former CEO of The Walt Disney Company, in the shareholders derivative lawsuit relating to the hiring and termination of Michael Ovitz. During his 30 year career, Naftalis has successfully represented numerous securities industry clients, Salomon Brothers, Kidder Peabody, and Canary Capital Partners. He has been counsel for significant figures and entities in the investigations concerning corporate accounting irregularities, including the recent representation of the Chairman and Founder of Global Crossing. Naftalis is a former faculty member of Columbia and Harvard Law Schools and has authored or co-authored numerous books and articles including The Grand Jury: An Institution on Trial (with Judge Marvin E. Frankel).

Catherine Recker -- Philadelphia, PA
Catherine Recker is a partner at Welsh & Recker PC, specializing in white collar defense. She represents individuals and corporate clients in traditional criminal proceedings, as well as in civil penalty forfeiture, license revocation, and similar proceedings including SEC enforcement actions, false claims act suits, debarment and preclusion proceedings involving the HHS, DEA, FDA, and analogous state agencies, antitrust, internal investigations and parallel civil matters.

Leon Rodriguez – Washington, DC
Leon Rodriguez is a principal in the Ober Kaler law firm’s White Collar Criminal Defense Group. He counsels and defends physicians, hospitals, HMOs, PPOs, nursing homes, home health agencies, and labs against claims of Medicare and medical fraud and abuse. Rodriguez has directed numerous complex white collar criminal investigations, particularly in matters of health care and securities fraud. In 2004, he was selected by Nightingale’s Healthcare News as one of the outstanding healthcare litigators. Rodriguez is a co-author of Criminal Investigations, published in Ober Kaler’s The Nonprofit Legal Landscape (2004).

Audrey Strauss – New York, NY
Audrey Strauss represents institutions and individuals in white collar criminal defense and regulatory matters. From 1975 to 1982, Strauss served in the US Attorney’s Office for the Southern District of New York as Chief Appellate Attorney, where she was responsible for the office’s criminal appeals before the US Court of Appeals for the Second Circuit. She also served as Chief of the Fraud Unit, where she supervised all securities and fraud cases prosecuted by the US Attorney’s Office. Strauss writes a regular column on corporate criminal issues for the New York Law Journal and is a Fellow of the American College of Trial Lawyers and a director of the Legal Aid Society of New York and the Office of the Appellate Defender. In 2004, Strauss was ranked by the Chambers USA among the top 10 leading white collar criminal lawyers in the country.

John "Rusty" Wing – New York, NY
A former chief of the Fraud Unit in the US Attorney’s Office for the Southern District of New York, John Wing has represented individuals and corporations in a wide variety of complex criminal matters involving allegations of securities fraud, environmental violations, RICO, money laundering, tax fraud, bribery, extortion, government contracts fraud, antitrust violations, labor law violations, customs fraud, and bank fraud. He also conducts internal investigations and engages in consulting work for clients victimized by or involved in criminal activities of others. In 2005, Wing was named one of New York’s best lawyers in New York Magazine and has been listed in The Best Lawyers in America. He has lectured extensively on jury trial work and criminal law topics and has been a faculty member at the Harvard Law School Trial Advocacy Workshop and the New York District Attorney’s Trial Advocacy Program. Wing has appeared as a television commentator for Fox 5, MSNBC, and Court TV.

William Winning -- Philadelphia, PA
William Winning concentrates his practice in the representation of individuals and corporations under investigation for, or charged with, violations of federal and state criminal law. He has significant experience representing clients in a variety of regulatory and government compliance matters. Winning Co-Chairs the White Collar Crime & Complex Criminal Defense Practice Group at the Cozen and O’Connor Law Firm. He was recently named as one of the Best Lawyers in America and was selected a ‘Pennsylvania Super Lawyer’ by his peers.

As well as others. For more details see here.


April 22, 2006 in News | Permalink | Comments (0) | TrackBack (1)

Friday, April 21, 2006

How NOT to Respond to a Subpoena

A Third Circuit opinion discusses the application of the crime-fraud exception to the attorney-client privilege in an investigation that shows how a subpoena recipient should not respond unless the person wants to move into the "target" category in a hurry.  In In re: Grand Jury Investigation (here), the court reviewed a challenge to the district court's order to an attorney to testify about his communication with his client -- Jane Doe -- about the content of a grand jury subpoena for e-mail records.  Doe was the executive director of an Organization that was affiliated with the primary target of the investigation involving possible corruption of a public official, and her attorney forwarded to her a grand jury subpoena seeking e-mail records of the Organization.  The government apparently was unsatisfied with the response, setting in motion a chain of events that led to the attorney being called to testify before the grand jury:

On February 10, 2005, pursuant to an agreement among the parties, an FBI computer technician went to the Organization’s place of business and "imaged" the hard drive on Jane Doe’s computer. The Government thus made an exact copy of the contents of the hard drive, including deleted email files. It uncovered numerous stored messages which could be construed to show a conscious effort by the Organization’s staff to destroy emails.

Concerned about the potential obstruction of justice by Jane Doe and others at the Organization, the Government issued a subpoena duces tecum to Attorney on March 1, 2005. It sought to compel grand jury testimony regarding his discussions with Jane Doe as to her compliance (or apparent non-compliance) with the prior subpoenas for production of the Organization's e-mails.

The Third Circuit held that there was sufficient evidence of a pending or future crime by Doe, namely obstruction of justice, for not preventing the deletion of the e-mails.  The court upheld the district court's order directing the attorney to testify.

Interestingly, the court cited to the Second Circuit's recent decision in United States v. Quattrone as support for the proposition that failing to stop the destruction of e-mails after learning of a subpoena for those records can constitute obstruction.  The court stated: "The Government’s position in this case is that the communication between Attorney and Jane Doe provided her with knowledge of the type of material the Government sought, comparable to the documents relating to the IPO allocation process sought in Quattrone."  While the conviction in Quattrone was overturned due to faulty jury instructions, the Second and Third Circuit decisions do show that the handling of e-mail can rise to the level of obstruction of justice, showing once again how important this type of evidence is in white collar crime investigations and prosecutions. (ph)

April 21, 2006 in Corruption, Grand Jury, Privileges | Permalink | Comments (1) | TrackBack (1)

There Are No "Perry Mason" Moments in White Collar Crime Trials

Former Enron CEO Jeffrey Skilling concluded almost two weeks on the witness stand, and next up will be his predecessor and successor, Ken Lay.  The cross-examination produced no bombshell moments, and few if any concessions by Skilling regarding the themes brought out in his direct testimony.  That is unsurprising because Skilling spent a significant amount of time preparing for his testimony, including the cross, and it is unlikely he would deviate from the plan for presenting his position that Enron was a strong, viable company when he left as CEO in August 2001.  While media reports note that Skilling maintained his position in the face of tough questioning by the prosecutor, that is hardly news.  In the same vein, questioning about his investment in a photography company run by a former girlfriend has been portrayed as irrelevant to the underlying fraud at Enron, a point raised by Skilling himself ("What does this have to do with fraud at Enron Corporation? Just out of curiosity.") (see Houston Chronicle Trial Watch blog here).  Yet, the case rests on the credibility of the witnesses for both sides, and there are clear disputes whether certain discussions took place or whether a comment by Skilling was meant to be facetious (the "Mr. Bill" response about whether "they're on to us") or serious.  Whether a witness is truthful is not limited to just the testimony on direct examination, but can include other business dealings that affect the company, in much the same way that the plea agreements of government witnesses are relevant to their credibility.  The jury's determination of which witness(es) to believe will not be based on a single line of questioning, although small moments can take on great meaning during the deliberations when the jury makes its final decision on who to believe.  Any assessment of the effectiveness of Skilling's testimony now is pure guesswork.  An AP story (here) and Reuters story (here) discuss Skilling's testimony. (ph)

April 21, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

How Prosecutors Secure Corporate Cooperation

The University of Maryland held a Roundtable yesterday called the Criminalization of Corporate Law. (see here). David B. Anders, a former Assistant United States Attorney for the Southern District of New York who handled the Ebbers and Quattrone cases was the keynote speaker.  Larry Ribstein at Ideoblog here does a wonderful job of capturing some of the comments made by this speaker. This is definitely worth reading.  Does it bother anyone that corporations have become mini-prosecutors that serve up the government its employees?


April 21, 2006 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Presidential Pardons to White Collar Offenders

President Bush announced the pardon of eleven individuals who were convicted of a variety of offenses, and as usual a substantial number of them fall into the white collar crime category (see U.S. Newswire story here).  That is not a surprise because those convicted of such offenses are normally non-violent, which makes them more appealing for a pardon, and some may have political or social connections that can be used to assist in the pardoning process.  Moreover, they (or their families) are probably more likely to be able to afford to retain counsel to assist in their applications. 

Three involved tax offenses, and a fourth was convicted of a tax crime along with mail fraud.  It is interesting that the pardons for those offenses would come so close to the annual tax filing day, amid a crackdown by the IRS and DOJ on tax evasion schemes.  One pardon recipient was convicted of misprision of a felony based on assisting her then-boyfriend in covering up evidence related to his false statements relating to gun purchases, so I will count that one as a white collar crime.  Other offenses include false statements (Sec. 1001) and conspiracy to defraud the United States.

The defendant who received the greatest punishment was Mark Hale, sentenced to three years for his role in a bank fraud involving the savings and loan at which he was CEO.  Back in the early 1990s, the so-called "S&L Crooks" were the functional equivalent of Ken Lay, Bernie Ebbers, and the like -- CEOs and senior managers accused of serious misconduct that had a substantial deleterious effect on the economy.  At that time, a three year prison term (from the Bureau of Prison records it appears he served no more than two years) was a substantial punishment, although of course no where near the sentences handed out to Ebbers, John Rigas, and others.  Hale, who is from Henderson, Texas, cannot be descirbed as a minor participant in the offense (see U.S. v. Wilder, 15 F.3d 1292 (5th Cir. 1994)).

To this point, President Bush has issued only 82 pardons, far fewer than any of his predecessors since 1945, including his father, who issued the next-lowest number, 296, and that in only a single term as President (See Office of the Pardon Attorney statistics here).  Margaret Colgate Love, who served as the Pardon Attorney in the Department of Justice before entering private practice, has an analysis of the President's rather parsimonious exercise of the pardon power that is available on Doug Berman's Sentencing Law & Policy blog (here). (ph)

April 21, 2006 in Prosecutions | Permalink | Comments (1) | TrackBack (0)

Thursday, April 20, 2006

Lying, Cheating, and Stealing: A Moral Theory of White-Collar Crime

Professor Stuart Green, the Louis B. Porterie Professor of Law at Louisiana State University, has published a new book entitled Lying, Cheating, and Stealing: A Moral Theory of White-Collar Crime with Oxford University Press.  Professor Green is one of the leading criminal law theorists in the country, and he turns his attention to white collar crime by analyzing why conduct that might appear to be otherwise legal can be punished as a crime.  This area of the law has avoided the type of theoretical analysis that other aspects of the criminal have undergone, and the book is a comprehensive analysis of the and moral intuitions about what is wrongful.  As Professor Green notes, "I argue that without a clearer understanding of the relationship between morality and white-collar criminal law, the retributive principles on which the criminal law is founded are placed in serious jeopardy."  The book is now available through Amazon (here).  For those unfamiliar with Professor Green's scholarship, his writing is clear and the analysis is thorough, and the book clearly is an important contribution to the literature on white collar crime. (ph)

April 20, 2006 in Scholarship | Permalink | Comments (0) | TrackBack (1)

Former School District IT Director Indicted for Embezzling Federal Funds

A former school district official in South Carolina was indicted on twelve counts of mail and wire fraud related to embezzling funds from the federal government through the E-Rate program, which provides funds to disadvantaged school districts to pay for communications networks and internet access for students and teachers.  Cynthia Ayer was technology director for the Bamberg County School District, and the charges arise from funneling money from the grants through a company that she set up.  According to a Department of Justice press release (here):

[F]rom April 1, 1999, until Feb. 1, 2003, Ayer used her position as the technology director of the school district to award technology contracts to her company, Go Between Communications, by submitting fraudulent applications for E-Rate funding of more than $3.5 million to the Federal Communications Commission’s (FCC) Universal Service Company (USAC) without a competitive bidding process. The indictment further charges that, as a result of her scheme to defraud the E-Rate program, Ayer fraudulently obtained $468,496 in payments from USAC.


April 20, 2006 in Corruption, Fraud, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Wednesday, April 19, 2006

Giants Trainer Subpoenaed in Bonds Perjury Investigation

The federal grand jury investigating possible perjury by San Francisco Giants slugger Barry Bonds has subpoenaed the team's head trainer to testify on April 27, in addition of Bonds' personal physician.  Bonds testified before a grand jury in 2003 about whether he used steroids from Balco (Bay Area Laboratory Co-operative), where his personal trainer worked.  Bonds denied knowingly taking steroids, and recent publications cast doubt on whether his testimony was truthful.  By seeking testimony from the personal physician and team trainer, the government likely is focusing on learning if health care professionals observed if Bonds exhibited any of the outward signs of steroid use, which can cause substantial physical changes.  The witnesses may also have spoken with Bonds about whether he was using steroids or human growth hormones.  While his physician may be able to raise a privilege claim to conversations, the team's trainer is unlikely to be able to throw up a similar roadblock to testifying. 

Whether either witness can provide the type of circumstantial evidence needed to establish that Bonds' testimony was false -- which will be necessary to meet the high standard for a perjury conviction -- is certainly an open question.  Both may well by sympathetic to Bonds, and so could provide only equivocal statements regarding his physical condition.  To this point, the government's evidence appears to be coming from those convicted in connection with the Balco operation, a jilted former girlfriend, and claims made by anonymous sources as reported in a book and in the media.  The government likely needs objective evidence of steroid use and not anecdotal claims if it wants to make a case against Bonds.  A San Francisco Chronicle story (here) discusses the grand jury investigation. (ph)

April 19, 2006 in Grand Jury, Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)

Jury Selection Begins in Corruption Trial of Scrushy and Former Gov. Siegelman

Jury selection began in the corruption trial of former HealthSouth CEO Richard Scrushy, former Alabama Governor Don Siegelman, and two former members of Siegelman's cabinet.  The judge expects to complete jury selection in two days, and then begin the trial on May 1.  Based on the government's witness list, U.S. District Judge Mark Fuller said that the trial will last from four to six weeks, which puts it perilously close to the June 6 Democratic gubernatorial primary in which Siegelman is a candidate.  Among the other candidates for the Democratic nomination is Lt. Governor Lucy Baxley, former wife of Lt. Governor Bill Baxley, who happens to be defense counsel to one of the other defendants.  According to an AP story (here), potential witnesses include a number of current and former state legislators and three former Governors: Guy Hunt, Jim Folsom Jr. and Fob James.  As if things were not political enough, the judge rejected the government's motion to prohibit Siegelman from arguing that the charges were brought based on political considerations (AP story here) because the request was untimely.  And this is just one of the defendants.

Scrushy's motion to dismiss the indictment on the grounds that the grand jury was selected in a racially biased manner still has not been decided (see earlier post here).  That is a difficult claim to establish, so it is unlikely the judge would proceed with jury selection if there were any reasonable likelihood of the indictment being dismissed.  Along with the political aspects of the case, Scrushy may try to raise issues of racial and economic bias.  This trial could make Scrushy's earlier fraud prosecution in Birmingham look like an out-of-town tryout for the main attraction. (ph)

April 19, 2006 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)

CFO Gets Sticky Fingers

The chief financial officer of a company holds one of its most trusted positions, so if that person decides to start stealing from the company there may be little that can be done to prevent it.  When it goes on for two years, however, it signals a breakdown in oversight procedures or a complete lack of internal controls.  The U.S. Attorney's Office for the Eastern District of Virginia announced the indictment of Jennifer Pleacher on charges of fraud and money laundering for embezzling over $500,000 from Vogel Lubrication, Inc., where she was CFO.  According to the press release (here): "The indictment charges that from on or about January 2, 2003, through on or about January 7, 2005, Pleacher used her CFO position to secretly embezzle approximately $518,414.33 from Vogel’s financial accounts for her own use and benefit. According to the indictment, Pleacher embezzled amounts ranging from as low as $5,000 up to $52,964.27, on each occasion." (ph)

April 19, 2006 in Fraud | Permalink | Comments (0) | TrackBack (0)

Dismissal of Conspiracy Charge Against DeLay Upheld

The Texas Third District Court of Appeals upheld the trial court's dismissal of a conspiracy charge against former House Majority Leader Tom DeLay (opinion here).  Travis Country (Austin, Texas) grand juries charged DeLay with money laundering and conspiracy to violate the state's election law related to funneling campaign contributions from corporations through third parties before distributing them to candidates in Texas in 2002.  The election law was amended in 2003 and explicitly authorizes a conspiracy charge for violating the campaign contribution rules, but that was after DeLay's alleged illegal conduct.  In upholding the decision to dismiss, the appellate court stated:

Although the legislature amended the election code in 2003 to explicitly incorporate a conspiracy offense, the State cannot rely on this amendment because DeLay is charged with conduct that took place prior to its enactment. See Tex. Elec. Code Ann. § 1.018 (West Supp. 2005). Instead, the State contends that conspiring to violate the election code has always been an offense and that the 2003 amendment merely clarified the law. Were we writing on a clean slate, the State's argument would carry considerable weight because Texas has had a generally applicable conspiracy offense since the nineteenth century. However, we are bound by controlling precedent that limits the applicability of the penal code's conspiracy provision to offenses found within the penal code. Because the conspiracy provision of the penal code did not apply to making an illegal contribution under the election code at the time of the alleged criminal conduct, we affirm the district court's order.

The money laundering indictment that includes a charge of conspiracy to commit money laundering is not affected by the earlier dismissal and can proceed to trial unless District Attorney Ronnie Earle appeals to the Texas Court of Criminal Appeals, further delaying the case (so to speak).  DeLay announced that he will resign from his seat in the near future, and will be out of Congress by the time the case goes to trial. (ph)

April 19, 2006 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Businessman Cooperating in Iraq Fraud Investigation

American businessman Philip Bloom entered into a plea agreement with prosecutors in February in connection with the ongoing investigation of fraud in the award of contracts through the Coalition Provisional Authority for work in rebuilding Iraq.  Bloom was charged in 2005, along with CPA contracting official Robert Stein, with fraud for making approximately $2 million in payments in exchange for over $8 million in contracts.  Key evidence in the case includes e-mails between Bloom and military officials discussing the cars they wanted in exchange for approving the contracts.  Among the vehicles supplied were a GMC Yukon and a Nissan 350Z.  Showing once again that people do not seem to understand that e-mails actually exist after hitting the "Send" key, one military officer sent a message to Bloom stating that "If there were any smoking guns, they would have been found months ago."  Needless to say, that e-mail pretty much qualifies as the aforesaid weapon with the white cloud around it.  A Washington Post story (here) discusses Bloom's plea agreement. (ph)

April 19, 2006 in Fraud | Permalink | Comments (0) | TrackBack (0)