March 11, 2006
The Wrong Date
According to the Atlanta Journal Constitution here former Atlanta Mayor Bill Campbell's jury was focused on a date appearing on the indictment. Since the alleged bribe did not occur on that exact date, some jurors told the press that they were unable to convict. Other factors also appeared to play a part in the not guilty verdict on the RICO and bribery counts.
This case will provide many law school lessons.
March 10, 2006
It's All In the Hands of the Jury
Former Governor Ryan of Illinois now awaits the return of his jury. According to the Chicago Tribune here, the government's argument in their final closing was "about whether George Ryan breached his duty of honest services to the people of Illinois." This is a fascinating argument to make in light of the political world of today. How honest does a government official have to be? Will all dishonesty constitute criminality?
Upcoming Booker Hearings
With no major downward upheavals in sentencing, it has been pretty quiet in D.C. But next week may prove otherwise. Professor Douglas Berman reports on his sentencing blog here that there are "two big Booker-related hearings scheduled for next week."
Verdict in Campbell Case
The Atlanta Journal Constitution reports here that the jury in the trial of former Mayor Bill Campbell returned a verdict of guilty on the tax charges and not guilty on the racketeering and bribery charges. This is a big loss for the government as they spent an enormous amount of time and effort in trying to prove a case of corruption against the former mayor, a case that just wasn't there. The AJC states that the tax loss was "$147,000." It is hard to imagine that the six year investigation on Bill Campbell and the trial in this case cost less than that amount. Will this really deter people? Was this prosecution worth it?
March 9, 2006
Former Newsday Executive Pleads
One might say that everyone is attacking the press lately. (Mary Matalin, who spoke along with husband James Carville, at the Hillsborough County Bar Foundation last night, was particularly harsh on the press and press coverage.)
The Government has even had some recent indictments related to the press (see here). And the word is out (here) that the former vice president of circulation of Newsday entered a guilty plea a few weeks ago. The plea was to charges of "mail fraud and income-tax evasion" and includes cooperation on the part of the accused. One can only imagine that with cooperation there will be more to come.
Marion Barry Gets Three Years Probation
Former DC Mayor Marion Barry received a sentence of three years probation for failure to file income tax returns. (See Washington Post here)
Former AFGE Union President Gets 24 Months
Fraud Update links here to a Northern District of Texas news release that tells of the plea and sentencing of the "former president of the American Federation of Government Employees (AFGE), Local 1298, and an employee of the Federal Medical Center, Bureau of Prisons, in Fort Worth, Texas." She was sentenced to two years imprisonment and ordered to pay restitution of $32,000 after pleading guilty to a one count of a false statement charge (Sec. 1001). The press release states:
[W]hile she served as president of the AFGE she charged personal expenses to the Union’s American Express credit card, paid her government issued credit card with Union funds, and wrote numerous checks from the Union’s checking account to herself. [She] also admitted that she charged personal items to the Union, such as items from Home Depot, Victoria’s Secret, Wherehouse Music, and other vendors which did not benefit the Union in any manner and that were not associated with the Union’s business. She also admitted that she submitted travel vouchers for reimbursement of travel expenses and certified that she had not received payment or credit, when she had actually previously charged the Union’s American Express card for those costs.
March 8, 2006
House Subcommittee Hearing on Attorney-Client Privilege Waivers
The House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security conducted an oversight hearing on March 7 entitled "White Collar Enforcement (Part l): Attorney-Client Privilege and Corporate Waivers." The witnesses were Associate Attorney General Robert McCallum, Jr., former Attorney General Dick Thornburgh, Thomas Donahue, the CEO of the U.S. Chamber of Commerce, and Winston & Strawn partner William Sullivan. McCallum defended the government's policy of requesting waivers of the attorney-client privilege from corporations involved in possible wrongdoing, noting that the McCallum Memo requires local U.S. Attorney's Offices to develop policies on when a waiver will be sought and mandating approval by a superior before such a waiver is requested. (It seems to be all the rage to have an eponymous memorandum outlining DOJ policy, i.e. the Thornburgh, Thompson, and Holder Memos) McCallum's prepared statement (here) also notes that the advisory committee for the Federal Rules of Evidence is considering a proposal to limit third-party use of privileged materials supplied to the government. The use of privileged and protected information by shareholders or securities class action plaintiffs is not the sole, or even primary, reason for objections to the demand for waivers, although corporations would likely welcome some protection from having their internal investigations used in civil litigation.
The other three witnesses protested the push toward demanding attorney-client privilege waivers from corporations. Thornburgh's prepared statement (here) asserts that while the tone of the Thompson and McCallum Memos is "moderate" and "officials representing these entities stress their intent to implement them in reasonable ways, it has by now become abundantly clear that, in actual practice, these policies pose overwhelming temptations to prosecutors seeking to save time and resources and to target organizations desperate to save their very existence. And each waiver has a 'ripple effect' that creates more demands for greater disclosures, both in individual cases, and as a matter of practice. Once a corporation discloses a certain amount of information, then the bar is raised for the next situation, and each subsequent corporation will need to provide more information to be deemed cooperative." Sullivan noted that recently he was asked for a complete privilege and work product waiver at the initial meeting with prosecutors before an internal investigation had even commenced. He called for the development of clear policies on what the government can seek from a corporation and the protection of otherwise privileged materials from use by third parties in private, civil actions (prepared statement here).
Donahue discussed the results of two surveys commissioned by the Chamber of Commerce regarding corporate waivers (prepared statement here), and noted the following results:
Almost 75% of both inside and outside counsel agree with the statement that a “culture of waiver” has evolved to the point that governmental agencies believe it is reasonable and appropriate to expect a company under investigation to broadly waive attorney-client privilege or waiver protections.
Of the respondents who confirmed that they or their clients had been subject to investigation in the last five years, approximately 30% of in-house respondents and 51% of outside respondents said that the government expected wavier in order to engage in bargaining or to be eligible to receive more favorable treatment.
From the title of the hearing, this is only the beginning. The interesting question will be whether there is any legislation proposed, or whether the fact that Congress has expressed concern with the practice may be sufficient to restrain the Department of Justice in this area. The development of an evidence rule on the issue of third-party use of internal investigation reports and the like will not be a quick process, as that process usually takes years, not months. (ph)
Scrushy Drops in on Enron Conspiracy Trial
Maybe it would be like the Beatles attending a Rolling Stones concert when former HealthSouth CEO Richard Scrushy attended part of the Enron conspiracy trial of former CEOs Ken Lay and Jeffrey Skilling. A post on the trial blog of the Houston Chronicle (here) quotes Scrushy as stating about former Enron CFO Andrew Fastow, "I see this guy as a very dishonest man . . . I wouldn't trust him if he said the building were on fire." Concerning the defendants, Scrushy said, "I don't think the CEO had any idea any of that was going on." That is certainly consistent with the "honest-but-ignorant CEO" defense offered at his trial in Alabama, and whether the jury in Houston will have the same reaction waits to be seen. No word yet whether there have been any Elvis sightings, but then the trial still has a ways to go. (ph)
Campbell Case to the Jury Today
The Atlanta Journal Constitution reports here on the powerful closing arguments of both the prosecution and defense in the trial of former Atlanta Mayor Bill Campbell. Was the government out to "Kill Bill," or if you "Follow the Money" does Campbell have a problem? These are just some of the arguments that were made.
An interesting point to note about the closing arguments is the prosecution's use of new technologies/graphics to make their points. The AJC calls it "flashy graphics."
This is certainly not the first trial that the prosecutors from the Northern District of Georgia have used what I like to think of as "smart" graphics. Remembering back to their prosecution of a lawyer named Fred Tokars, then-prosecutor Buddy Parker (now a white collar defense attorney) used incredible graphics to teach the jury the story of their case. In the Tokars federal trial, the graphics were certainly a plus to achieving the conviction. But one has to wonder if in this case these type of graphics might not be seen in the same light. This is particularly true as it shows the jury that the government is spending a lot of money on this case. Billy Martin in the closing argument for the defense was emphasizing how much time and money the government had spent in the quest to find something on Bill Campbell.
Philadephia Councilman's Corruption Trial Begins
The trial of Philadelphia City Councilman Rick Mariano on corruption charges began in earnest with the government calling his former chief of staff to testify regarding Mariano's admission that he would likely go to jail after a government search of his office. Mariano's former chief of staff, Walt DeTreux, testified, "He had said he's going to jail and he said, 'I'm a man and have to take responsibility for what I did.'" Mariano has been charged with accepting $28,000 from Erie Steel Co., a company that wanted to receive benefits from the city, involving disguised payments of his credit card balances. Two defendants, Joseph Pellecchia and Vincent DiPentino, entered guilty pleas and admitted helping Erie Steel hide over $17,000 in payments to Mariano, and will testify at trial. The owners of Erie Steel have also been indicted and will go on trial later. A KYW News Radio story (here) discusses DeTreux's testimony. (ph)
Steroid Accusations Against Barry Bonds May Reignite Interest in Possible Perjury Charges
A book by two San Francisco Chronicle reporters called "Game of Shadows" that is scheduled to appear in late March alleges that San Francisco Giants star Barry Bonds became a heavy steroid user beginning in 1998, including the use of some of the strongest drugs available that are injected into the body. Bonds testified before a federal grand jury in San Francisco in 2003 in the BALCO (Bay Area Laboratory Co-Operative) steroid investigation that led to guilty pleas by its founder, Victor Conte, and Bonds' personal trainer, Greg Anderson. Reports of the grand jury testimony indicate that Bonds admitted to going to BALCO's office to have his blood tested and that he used a cream provided by Anderson, but stated he did not know that it contained a designer steroid. Bonds purportedly asserted that he never knowingly took steroids, a position that would be contradicted if the claims in "Game of Shadows" are true.
Whether the book contains anything not already known to federal prosecutors will likely be the key to the possibility that Bonds could face a federal investigation for perjury or obstruction of justice. If the information in the book comes from Anderson, Conte, and others implicated in the BALCO prosecution, then it is likely federal prosecutors already know about it, although perhaps not in as much detail. A perjury case built on the testimony of convicted felons does not strike me as particularly strong, and Conte in particular has been quite erratic in his public statements. In 2005, former major leaguer Rafael Palmeiro testified before Congress that he had never used steroids and then three months later tested positive for stanozolol, one of the drugs Bonds is accused of using. The House committee, however, did not pursue perjury charges because of the lack of evidence that Palmeiro had used steroids before his testimony.
This type of case is difficult to win because the government must prove that the defendant lied, and not just that the person was less-than-forthright in the testimony. Bonds admits to using something that turned out to contain steroids, and does not deny his interactions with BALCO. Did he lie before the grand jury, or was he just perhaps just evasive? More than accusations in a book containing sensational claims of continued steroid use will be needed to pursue a criminal prosecution. A Yahoo Sports column (here) by Jeff Passan discusses the book. (ph)
Ryan's Case In Closing
Former Governor Ryan's case will be in the juror's hands soon. Dan K. Webb, attorney for Ryan gave the first part of his closing argument today and will complete the closing tomorrow. This will be followed by the closing of the co-defendant and the government rebuttal. After instructions to the jury it rests with them. (see Chicago Tribune here)
It looks like Webb took an aggressive approach in his closing argument. Attack the government for what they had done to Ryan.
Not A Good Day for Skilling
According to the press, Andrew Fastow told a good bit today about the fraud he committed at Enron. (see Houston Chronicle here), (Washington Post here). And although so far there does not appear to be direct hits on Ken Lay, this was not a stellar day for Jeffrey Skilling.
It sounds like the focus on Lay was regarding his comments after the company starting falling. (See Washington Post here). But one has to wonder, what should a CEO say and do when they see their company crumbling. On one hand they can't be dishonest to the shareholders and public. On the other hand, if something negative is said it will probably damage the company more. Was this one of the moments when "silence is golden."
March 7, 2006
Down the Wire in the Campbell Case
Although the initial prediction was that Campbell would testify (here). But after former Mayor Andrew Young testified for Campbell (here), and the defense started to present their case - the prediction was that maybe Campbell would not have to testify (see here). The turning point was probably the testimony of Steve Labovitz (here). The truth - now known- is that Campbell did not take the witness stand and the closing arguments will be tomorrow. It will soon be in the hands of the jury.
March 6, 2006
Abramoff - Will He Publically Name Names
Jack Abramoff had asked for a delay in his sentencing and it looks like the most he will be getting is a delay from March 16th to March 29th. (see AP here). The response by one of his attorney's Abbe Lowell is - we'll have to name names to show the need for a delay. The question becomes whether anyone wants to have the public see the full extent of Abramoff's cooperation.
Secrecy during grand jury proceedings is a benefit to the government. They can call witnesses without individuals knowing the reason for the inquiry. It also allows for possible actions by individuals under investigation that might provide short-cut prosecutions (cases premised on false statements, perjury, or obstruction of justice).
Does the government want their future possible cases exposed to the world prior to them making the cases? And does Abramoff want to have to be sentenced prior to his having given so much to the government that they are ready to say - "here is a man that provided extraordinary cooperation to us and therefore deserves a lesser sentence."
Ahold Trial - Sentence Difference
If the defendants in the Ahold related trial are convicted, their sentences will not come close to what we have been seeing recently in the United States. According to CNN here the Dutch trial charges four defendants. The case results from alleged accounting issues coming from matters related to Ahold. If convicted, CNN notes that one of the charges "carries a maximum sentence of six years whereas fraud carries three years at most." A far cry from what we have been seeing in the United States.
According to a Washington Post story here of October 2004, the SEC did not pursue action against some of the individuals because of fear of double jeopardy problems with Dutch law. But the SEC did settle charges with Ahold's former chief executive, Cees van der Hoeven- and Cees van der Hoeven is presently being prosecuted under Dutch law.
Ahold has not been charged. Ahold did not pay a fine to the SEC. (see here)
It's corporate governance statement is here.
"They're on to us"
Everyone is talking about the comment, "[t]hey're on to us." Did Jeff Skilling make this statement, and if so, what did he mean by it? See Washington Post here, Wall Street Journal here, Houston Chronicle here.
This Week in Enronville
This coming week in the trial of Ken Lay and Jeff Skilling there will likely be a larger than usual courtroom crowd as Tuesday Andrew Fastow is scheduled to testify. (see Houston Chronicle here, Washington Post here). Continuing Monday will be witness Kevin Hannon, former chief of Enron broadband who is scheduled for cross-examination. For a wonderful play by play audio and transcript of the trial, check out Carrie Johnson's reports on the Washington Post here.
Fastow has faced the blame in much of the Enron fall, and taking the witness stand as a government witness will provide him a forum to speak back. The key here is likely to be cross-examination. Will he be able to show knowledge on the part of Skilling and Lay? And what will be the effect of the "deal" he received from the government.
As the trial continues, there has been talk of Ken Lay's funds dwindling. (see here) Some bloggers on the Houston Chronicle are not convinced,and it sounds like they will not be convinced until they see him living in a trailer. (see here) This may be the sentiment in Houston, a tough crowd for this trial.
March 5, 2006
Paper Dump by KPMG Individuals
Criminal defense attorneys have been complaining in some cases that the government has engaged in a document dump when it comes time for discovery. That is the government provides discovery by giving defense an unorganized mess of boxes that counsel is supposed to wade through in usually a short period of time. When the prosecution has been investigating someone for several years, the documents can be voluminous.
It is, therefore, ironic to see the government complaining that the defense is providing too much paper in the KPMG case. This time it is not discovery, but rather motions to dismiss the case being filed by the 19 individuals accused of criminality. The Wall Street Jrl reports here, of the " 28 briefs totaling 950 pages" filed by the defense asking for a dismissal.
The issue that is the focus is whether KPMG caved in because of the necessity to reach a deferred prosecution agreement to avoid prosecution. According to the Wall Street Journal,(here) "[t]he defendants have argued that the tax shelters at issue have never been declared illegal or improper by any court, and were thus legal."