Saturday, January 14, 2006

Former Mayor Bill Campbell's Trial Starts Tuesday

The trial of former Mayor Bill Campbell starts this Tuesday with jury selection.  Charges against him include racketeering.  (see post)   

Attorney Jerry Froelich, one of Campbells' counsel, spoke this past Saturday at a conference of the Georgia Association of Criminal Defense Lawyers (GACDL) Conference on the topic of "Preparing for a Federal Criminal Trial."  Although Froelich, a well respected Atlanta criminal defense attorney and member of the American Board of Criminal Lawyers, did not speak about defense strategy in Campbell's upcoming trial, he did state that the court was using a jury questionnaire with 160 questions. One has to imagine that this will be a very difficult jury to pick as the case is being heard in Atlanta and it might be hard for people not to have heard of the former mayor or have opinions about him.

Perhaps one of the most bothersome aspects of this case is the long investigation prior to an indictment.  As previously noted, a key witness for Campbell is now deceased. (see post here)

(esp)

January 14, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Not Much Has Changed In Sentencing

According to a Forbes Magazine article here, not much has changed in sentencing despite Booker's allowing court's more sentencing discretion. (See also Professor Doug Berman's Sentencing Blog here). This is not a surprising discovery, as the sentencing culture is ingrained in so many on the judiciary today that there is little likelihood of there being significant departures from the practices used by judges for a significant number of years. 

Over time some departures may become prevalent in a particular class of cases.  Whether this proves to be white collar crime or crack cases should not be seen by Congress as a need to place more restrictions on the judiciary.  Rather, if it is found that one group of cases receives more departures than another group, Congress should use this information to adjust the sentencing range to what the courts find to be reasonable. The departures can be used as an indication of when Congress has imposed draconian sentences that warrant modification downward.

(esp)( w/ a hat tip to Bill Olis for pointing out the Forbes Article).

January 14, 2006 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Friday, January 13, 2006

AIG Appears Ready to Pony Up to $1.5 Billion to Settle Fraud Investigations

The Wall Street Journal reports (here) that American International Group Inc. is close to a settlement of the federal and state investigations of its accounting for reinsurance and other transactions that it used to burnish its results, which were among the most consistent on Wall Street for years.  The Journal reports that the payment will be more than $1 billion , and perhaps as much as $1.5 billion, to resolve investigations that have ranged from its accounting for transactions with General Re that were disguised as reinsurance to its reserves for workers compensation policies.  New York Attorney General Eliot Spitzer filed a lawsuit against the company in May 2005, while the SEC and U.S. Attorney's Offices in New York and Virginia have been investigating AIG.  It is not clear how the final dollar figure will be divided between penalties, fines, and restitution, and how much New York will claim.  Expect a deferred prosecution agreement with the Department of Justice that will contain the usual terms (outside monitor, strengthened internal controls, cooperation in continuing investigations, etc.).

Importantly, the settlement will not cover former AIG CEO Maurice Greenberg and former CFO Howard Smith, both of whom were sued for fraud by Spitzer's office along with the company.  It will be interesting to see if the government pursues criminal charges against the two former executives, or will rely on the SEC to pursue civil securities fraud charges.  Greenberg has been aggressive in his attacks on the company's acknowledgment of accounting problems and assertions that the subject of the investigation concerns reasonable accounting judgments.  Greenberg (through his wife) owns approximately 1.7% of AIG, a stake that is worth billions, so he has a deep enough pocket (and powerful incentive) to fight any case the federal government decides to bring.  An AFP story (here) quotes a Greenberg spokesman: "Shareholders lose when companies choose to settle investigations motivated by political ambition, fueled by threats and settled out of fear."  (ph)

January 13, 2006 in AIG | Permalink | Comments (0) | TrackBack (0)

Neither Pornography Nor Naughty Words at the Enron Conspiracy Trial

With the Enron conspiracy trial of former CEOs Ken Lay and Jeffrey Skilling set to begin on Jan. 30, U.S. District Judge Sim Lake is digging through the motions related to the conduct of trial.  While a bit disappointing to those of us with our minds in the gutter, Judge Lake rejected requests by the defense to use claimed pornography found on former CFO (and likely key witness) Andrew Fastow's computer to impeach him, nor can the government use a tape laced with profanity related to the California energy crisis on which Enron made quite a bit of money.  The judge even said that references to witnesses engaging the services of prostitutes, having extra-marital affairs, or using drugs would also be largely off-limits.  This means the trial will focus on such mundane matters as fraud, disclosure, and accounting, and the cross-examination of government witnesses like Fastow and Michael Kopper will have to focus on their siphoning off millions of dollars from Enron, including deals by Fastow that occurred in 1997.  Oh well, the accounting issues will just have to keep our interest.  A Houston Chronicle story (here) discusses the judge's rulings on pre-trial motions. (ph)

January 13, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

Using High Tech to Combat Crop Insurance Fraud

An AP story (here) discusses the increasing use of satellite photographs of farms to investigate and prosecute crop insurance fraud schemes.  The satellite images can show the acreage planted, type of crops grown, and irrigation patterns that can show whether the crops were actually damaged by an event, such as a storm or drought, that would trigger payments under the federal crop insurance program.  The story discusses one case in North Carolina in which a farming couple had workers throw ice cubes on the crops and then beat them to simulate hail damage -- that must have been a nasty sight.  The husband was sentenced to a 76-month term of imprisonment and the wife to 65 months, plus an order to pay over $9 million in restitution.  Big brother is watching on the farm, on the highway, and just about everywhere else these days. (ph -- thanks to Delia Johnson for passing along the story)

January 13, 2006 in Fraud | Permalink | Comments (0) | TrackBack (0)

Thursday, January 12, 2006

Coordinated SEC and Criminal Investigations Result in Dismissal of Securities Fraud Indictment

A decision issued by the United States District Court for the District of Oregon on Jan. 9 dismissing securities fraud charges against three defendants for due process violations in the civil investigation is notable because it looks to be part of a growing trend to scrutinize how the SEC and U.S. Attorney's Offices coordinate their investigations.  The decision, United States v. Stringer (opinion below), involves an accounting fraud prosecution of three former officers of FLIR Systems Inc. in which the defendants gave depositions and supplied documents in the SEC investigation and were then indicted on criminal charges based on the information provided.  The defendants asserted that the SEC's failure to disclose the close coordination of its investigation with the U.S. Attorney's Office violated their Fifth Amendment due process right because they agreed to depositions and to provide documents that they otherwise would not have given if they had known prosecutors viewed them as targets of the investigation. 

In dismissing the indictments, U.S. District Judge Ancer Haggerty found that these were not "parallel investigations" but that the Commission essentially conducted a criminal investigation on behalf of the prosecutors to take advantage of the discovery rules available and, more importantly, by sandbagging the defendants into not asserting their Fifth Amendment rights.  The opinion states:

The court concludes that these were not parallel investigations. The USAO identified potential criminal liability and a few targets in the beginning of the investigation, and elected to gather information through the SEC instead of conducting its own investigation. The government was concerned that the presence of a criminal investigation would halt the successful discovery by the SEC, witnesses would be less cooperative and more likely to invoke their constitutional rights, and that the rules of criminal discovery would be invoked. Stringer Ex. 69, at 3 (June 6, 2001) (memorializing a telephone conversation between Echavarria and Garten wherein Garten explains that once there is an indictment "discovery is over. Criminal is totally 1 sided" and that he would then give everything and get nothing). The government was aware that there was no parallel proceeding.

The delay by the USAO was not for the purpose of reviewing evidence gathered by the SEC to make an informed decision as to whether the case warranted prosecution. From the beginning, the USAO consistently held the position that a criminal prosecution was likely. Almost a year after the SEC investigation began and two years before the USAO made its presence known, the USAO reiterated its position that the case would most likely warrant criminal prosecution, yet decided not to conduct a parallel criminal investigation. 

Moreover, the USAO was actively involved in the SEC investigation: meeting regularly, receiving documents, requesting interviews be conducted in Oregon to establish jurisdiction, advising what information was needed for a successful criminal prosecution, specifically instructing on how best to conduct interviews to gather evidence for false statement cases, intentionally hiding its presence from FLIR's attorneys, and repeatedly planning with the SEC as to when it would be best to surface and conduct an overt criminal investigation.

The strategy to conceal the criminal investigation from defendants was an abuse of the investigative process.

Interestingly, the court did not find that the SEC made any direct misstatements to the defendants.  It quoted from one deposition in which the Commission staff member (Echavarria)refused to confirm whether there was a criminal investigation but directed the defendant and his attorney to contact prosecutors directly:

STRINGER'S ATTORNEY: My first question is whether Mr. Stringer is the target of any aspect of the investigation being conducted by the SEC.

ECHAVARRIA: The SEC does not have targets in this investigation.

STRINGER'S ATTORNEY: The other questions I have relate to whether or not, in connection with your investigation, the SEC is working in conjunction with any other department of the United States, such as the U.S. Attorney's Office in any jurisdiction, or the Department of Justice.

ECHAVARRIA: As laid out in the 1662 form, in the "routine use of" section there are routine uses of our investigation, and it is the agency's policy not to respond to questions like that, but instead, to direct you to the other agencies you mentioned.

STRINGER'S ATTORNEY: And which U.S. Attorney's office might I inquire into?

ECHAVARRIA: That would be a matter up to your discretion.

The responses were those that I was taught to give when I was at the SEC, yet here they were insufficient to permit the criminal prosecution to go forward.  One case like this might be an aberration, but the decision in Stringer comes on top of the district court's opinion in U.S. v. Scrushy, 366 F.Supp.2d 1134 (N.D.Ala. 2005), that found a similar pattern of undisclosed SEC/U.S. Attorney coordination resulted in a due process violation and required the suppression of evidence.  In Stringer, the district court went even further by dismissing the entire case, finding that "the USAO intentionally shielded its intentions behind the guise of a civil prosecution, resorting to subterfuge to maintain the secrecy of its involvement." 

A year ago, I would have said a motion alleging a due process violation like that brought in Scrushy or Stringer was doomed because courts permitted coordinated investigations, and that the prosecutors could simply piggyback on the civil agency's inquiry.  Indeed, after Enron, the civil and criminal authorities touted their cooperation through the President's Corporate Fraud Task Force (website here) that includes "an inter-agency group that focuses on maximizing cooperation and joint regulatory and enforcement efforts throughout the federal law enforcement community."  One of the members of the Task Force is the Chairman of the SEC, and these district court decisions may call into question the government's use of coordinated civil and criminal investigations. 

I suspect the Department of Justice will appeal the district court's decision in Stringer because it may view the success of challenges like this to pose too great a threat to its ability to conduct parallel investigations.  Regardless of whether it appeals, this is a development that could have a substantial effect on how the government pursues investigations in areas as diverse as health care, securities/commodities, and environmental that involve civil regulatory agencies with substantial technical expertise not normally available in a U.S. Attorney's Office. (ph -- thanks to a reader in Oregon for sending along the opinion)

Download stringer_dismisssuppress_order.pdf

January 12, 2006 in Civil Enforcement, Fraud, Investigations, Securities | Permalink | Comments (0) | TrackBack (2)

Former Biogen General Counsel Settles SEC Insider Trading Case

Thomas Bucknum, the former general counsel for Biogen Idec Inc., settled an SEC insider trading action by agreeing to disgorge $1,938,465, pay pre-judgment interest of $102,005, and a civil penalty of $969,232, a total of a little more than $3 million (complaint here).  Bucknum's case is another in a series of transactions involving sales before negative news announcements, the same type of case that has been charged in a criminal prosecution against former Qwest CEO Joseph Nacchio.  In this instance, the transaction involved the exercise of stock options and then sale of the stock received, as described in the SEC's Litigation Release (here):

The Commission’s complaint alleges that on the morning of February 18, 2005, Bucknum told his broker that he wanted to exercise options to purchase 89,700 shares of Biogen stock and sell those shares. The broker understood from that conversation that Bucknum wanted to sell the shares at a price of $68 per share or better. Biogen’s trading policies required that Biogen’s legal department had to approve Bucknum’s trade and Bucknum’s broker therefore proceeded to contact Biogen for the necessary clearance before making the trade. Meanwhile, at approximately noon that day, Bucknum attended a meeting at which he learned material, non-public information that was likely to have a negative impact on Biogen’s stock price. Specifically, Bucknum learned that a patient participating in a clinical trial of Biogen’s multiple sclerosis drug, Tysabri, had been diagnosed with progressive multifocal leukoencephalopathy (PML), a rare and often-fatal brain disease, and that another patient participating in a Tysabri clinical trial had an unconfirmed PML diagnosis. The Commission’s complaint alleges that, after the noon meeting, at approximately 1:30 p.m., Bucknum had a second conversation with his broker’s associate during which Bucknum instructed the associate to proceed with the sale of his 89,700 shares at the market price, which was then around $67 per share. Bucknum’s shares were sold shortly thereafter.

According to the Commission’s complaint, ten days later, prior to the opening of the market on February 28, 2005, Biogen and its development partner announced that they were suspending the marketing of Tysabri because of the confirmed and unconfirmed PML diagnoses. Biogen’s stock price had closed at $67.28 per share on the previous day. On the day of the announcement, Biogen’s stock price closed at $38.65 per share. This was a decline of $28.63 per share, or more than 42%. By selling shares of Biogen stock before the stock price fell, Bucknum reaped a substantial profit.

Bucknum resigned as Biogen's general counsel in March 2005.  No criminal charges were filed, which probably indicates that the proof of intent was not strong enough.  An interesting question will be whether the case will result in a bar proceeding against Bucknum.  The conduct relates directly to his legal duties, and the company's policy requiring that all trades be cleared through the legal department shows that Bucknum knew of the importance of the insider trading policy and deliberately violated both the company's policy and Section 10(b).  A check of the Massachusetts Board of Bar Overseers website did not show that Bucknum was licensed in Massachusetts, where Biogen's headquarters is, so he may face disciplinary proceedings in the jurisdiction in which he is licensed.  (ph)

January 12, 2006 in Civil Enforcement, Insider Trading, Securities | Permalink | Comments (2) | TrackBack (0)

Home Depot Subject of SEC Informal Investigation

The Home Depot Inc. disclosed that it is the subject of an SEC informal investigation into its accounting for vendor rebates on returned goods.  The probe concerns refunds paid by suppliers for goods damaged in shipping, an area in which a retailer can inflate its returns to increase revenue and income.  Home Depot issued a statement stating "Recent media assertions regarding the Home Depot's (return-to-vendor) policies are simply not true."  Accounting for rebates has been the subject of other SEC investigations of companies, including, among others, GM and Delphi.  A Reuters story (here) discusses the reports of the investigation. (ph)

January 12, 2006 in Investigations | Permalink | Comments (0) | TrackBack (0)

We Mourn the Death of Bill Bryson

1720272sty Bill Bryson, long-time member of the National Association of Criminal Defense Lawyers (NACDL) and one of Alaska's "best known criminal defense lawyers" died on Tuesday of this week. (see here) In addition to being a former member of the Board of Directors of NACDL, a long-time NACDL activist, and Life Member of this organization, Bill was particularly active in training young lawyers at the National Criminal Defense College (NCDC). He will be missed.

(esp)

January 12, 2006 in Defense Counsel | Permalink | Comments (1) | TrackBack (0)

Wednesday, January 11, 2006

Former Legislative Assistant to Louisiana Congressman Pleads Guilty to Bribery Charges

Just to show that corruption is not limited to the Republican side of the aisle in Congress, Brent Pfeffer, a former legislative assistant to Louisiana Democratic Rep. William Jefferson, pled guilty in the U.S. District Court for the Eastern District of Virginia to bribery and conspiracy charges (criminal information here) related to secret agreements to pay Rep. Jefferson for his assistance in brokering a deal in Nigeria involving a U.S. company.  Pfeffer left  Rep. Jefferson's office in 1998, but stayed in touch with the Congressman as he worked as a consultant.  In 2004, Pfeffer worked with the president of an investment company who later began secretly cooperating in the government's investigation.  Rep. Jefferson, who is referred to as "Representative A" in the court documents, approached Pfeffer about providing assistance in putting together a deal with the investment company and a Kentucky company which was developing technology to deliver the internet through copper wires that would be sold in Nigeria. 

According to the Statement of Facts (here), Rep. Jefferson demanded that a relative's law firm be used for the deal, that another relative be placed on the payroll of a Nigerian company formed as part of the deal, and that the Congressman receive 5-7% of the value of the transaction for his role in facilitating it.  In August 2005, Rep. Jefferson's home was searched and, according to an AP story (here), agents removed cash that had been stored in a freezer.  In addition, the home of Vice President Atiku Abubakar of  Nigeria was also search in connection with the investigation of the transaction.

Rep. Jefferson is the second Congressman to be cited anonymously in plea documents recently, the other being Ohio Rep. Bob Ney in connection  with the Abramoff investigation.  In addition, former Rep. Randy ("Duke") Cunningham resigned his position after pleading guilty to bribery and tax evasion charges.  According to the Irish tradition, bad news comes in threes, but the way things are going on Capitol Hill these days, it may come in multiples of three. (ph)

January 11, 2006 in Corruption | Permalink | Comments (0) | TrackBack (0)

Where Did This Mink Jacket With Fox Trim Come From?

The press blog of the U.S. Attorney's Office for the District of Maryland describes the indictment  of Bryn Phillips for defrauding her employer, Old Mutual Financial Network (OMFN), and a group of banks of over $800,000 in the past three years.  The blog (here) recites two schemes allegedly perpetrated by Phillips that leaves me wondering how she could have gotten away with it for so long:

[F]rom approximately October 2, 2002 until December 30, 2004, Phillips caused Wachovia Bank and Municipal Employees Credit Union (MECU) to transfer $708,049.42 in monies, funds, and credits from OMFN corporate accounts into accounts she controlled. The indictment alleges that Phillips falsely represented to Wachovia Bank that OMFN gave her authority to cause the issuance of wires transferring monies from OMFN accounts at Wachovia Bank to Wachovia Bank and MECU accounts controlled by Phillips. She caused checks to be drawn against OMFN’s account at Wachovia Bank that were payable to entities controlled by Phillips, and/or her relatives and associates, and withdrew and wired monies from OMFN accounts which OMFN had intended to be used as payment for OMFN business expenses, to Wachovia accounts under Phillips’s control.  Phillips also allegedly used names and passwords of employees under her supervision to execute wire transfers from OMFN corporate accounts into accounts she controlled.

The indictment also alleges a second fraud scheme. OMFN issued Phillips a corporate credit card for business expenses of OMFN. Phillips initially submitted reimbursement requests to other OMFN employees and later reviewed and authorized payments for the corporate credit card herself. The indictment alleges that from September 2003 to January 20, 2005, Phillips made a number of unauthorized purchases and obtained a variety of products, services and trips through the unauthorized use of OMFN corporate credit cards including services and lodging at the Venetian Hotel in Las Vegas, Nevada; personal property including two Louis Vuitton handbags, a $4,095 pink mink jacket with fox trim, and jewelry; home improvements; and professional basketball tickets. She allegedly submitted fake credit card statements to OMFN causing her to obtain more than $150,000 from OMFN in improper reimbursements.

Phillips is 30 years old, and I suspect she is not a senior executive of OMFN, an insurance holding company whose subsidiaries have over $22 billion in assets (website here).  I can't help but wonder if anyone was looking at the credit card receipts and asked whether that mink jacket with fox trim had the company's logo on it, or maybe why the two Louis Vuitton handbags weren't in the supply cabinet.  Where are the internal auditors when you really need them? (ph)

January 11, 2006 in Fraud, Prosecutions | Permalink | Comments (1) | TrackBack (6)

New FTC Website to Fight Cybercrime

The Federal Trade Commission has set up a website, OnGuardOnline (here), to help consumers in dealing with the various types of cybercrime we all run into every day.  Hardly a day goes by that I don't receive a notice from "PayPal" or some bank that my account information needs to be updated, or an urgent message asking help in transferring a large amount of money from a bank in Sierra Leone, the Ivory Coast, or the like. The FTC site has information about identity theft, phishing, spam fraud, and spyware.  In addition to links to other federal agencies, such as the Department of Homeland Security and the SEC, there is also a page that gives information and links for filing complaints with the appropriate agency. (ph)

January 11, 2006 in Fraud, Government Reports | Permalink | Comments (0) | TrackBack (0)

The Underside of Hollywood

While some claim there is nothing more vicious than faculty politics, in Hollywood they play for keeps by using some less-than-legal means to gather dirt on one another, something that is no doubt in almost endless supply.  The U.S. Attorney's Office for the Central District of California announced two plea agreements in its long-running investigation of private investigator Anthony Pellicano for using illegal wiretaps and accessing law enforcement data bases to gather information for his clients.  The case has now spread to the law firm of well-known entertainment lawyer Bert Fields, Greenberg, Glusker, Fields, Claman, Machtinger & Kinsella, which is linked to the misconduct of former Beverly Hills police officer Craig Stevens.  According to a press release (here) issued by the USAO:

Craig Stevens, 45, of Oak Park, appeared in federal court Monday afternoon and pleaded guilty to two counts of wire fraud for depriving the citizens of Beverly Hills of his honest services as a sworn police officer. Stevens also pleaded guilty to four counts of unauthorized access of protected computers to commit fraud. In pleading guilty to the unauthorized access counts, Stevens admitted that he used the Beverly Hills Police Department’s computers to obtain information about four individuals from the Department of Motor Vehicles and sold that information to Pellicano and his employees. Stevens also pleaded guilty to lying to the Federal Bureau of Investigation when he denied that he had ever provided information to, or received payments from, Pellicano, when in fact he had repeatedly sold information to Pellicano.

The second case involves Sandra Carradine, former wife of actor Keith Carradine: " [A] former client of Pellicano, Sandra Will Carradine, a 58-year-old Carpenteria resident, pleaded guilty on Friday to two counts of perjury. Carradine, who hired Pellicano in relation to her divorce proceedings, admitted that during a grand jury appearance in October 2004 she lied when she denied having any knowledge that Pellicano had wiretapped her ex-husband’s phone." 

The law firm represented clients in the underlying litigation involved in the Stevens prosecution, and Fields is being represented by well-known white collar defense attorney John Keker, who denies that Fields or his firm had any knowledge of the wrongdoing by Pellicano or the other defendants.  Pellicano is currently serving a 30-month sentence in the Taft (Calif.) Correctional Institution (a private prison that houses federal prisoners) after pleading guilty to possession of dangerous materials after a search of his office in 2002 turned up, among other things, the plastic explosive C-4.  As the "PI to the Stars" -- not to be confused with those helpful maps sold along Sunset Blvd. -- Pellicano cultivated an image of knowing the underside of Hollywood.  He may be spending more time in an FCI in the near future, and could cause Bert Fields substantial problems in the process.  An L.A. Times story (here) discusses the plea agreements and investigation. (ph)

January 11, 2006 in Corruption, Investigations, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Lobbyists Sure Can Be A Problem for Politicians

The jury in the case of former Governor Ryan of Illinois, on trial for charges of racketeering and fraud, heard from a former "girlfriend" of a lobbyist. The Chicago Tribune reports here that the lobbyist's girlfriend was recipient of the lavish expeditures of lobbyist Arthur "Ron" Swanson, but she did not know if the former governor was also receiving this lavish treatment. The article's account of the gifts given to Ryan included an "expensive porcelain figurine" for their anniversary, "a three-foot cloth Santa Claus" "as a Christmas gift," a golf game and dinner at the Ritz.  Is this what Congress envisoned when they passed the RICO statute in 1970?

(esp)   

January 11, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 10, 2006

The Latest on Patrick Fitzgerald's Investigation

Perhaps the most noticeable thing about Special Counsel Patrick Fitzgerald's website is that the last entry was October 28, 2005 (see here).  But just when you think that nothing is happening with the investigation of who leaked the name of Valerie Plame, the Washington Post puts out an article here to remind us all that this investigation continues. It seems that Tim Russert did not want to testify before the grand jury.  It also appears that if "Scooter" Libby goes to trial, Tim Russert will likely be an important witness for the prosecution.

(esp)

January 10, 2006 in Plame Investigation | Permalink | Comments (0) | TrackBack (0)

From Abramoff to Delay

The Houston Chronicle (AP) here, discusses a connection between Former House Majority Leader Tom DeLay and lobbyist Jack Abramoff. Obviously, a key question will be whether any of the conduct between these two individuals, and others, is illegal?

There are several criminal statutes that prosecutors might consider in examining this fact situation.  Most notably prosecutors will be looking at the bribery statute, its accompanying gratuity provision, the Hobbs Act, and fraud statutes like mail and wire fraud.  Campaign contributions have provided several cases in this area, as the line between a legitimate contribution and an illegitimate one can sometimes be difficult to discern. 

Obviously, determining whether in fact there would be any illegality involved here would take scrutiny of a lot more evidence than is available.  But lets consider what the statutes require:

Bribery, under section 201, requires the government to show that 1) something of value was given, offered, or promised; 2) to a federal public official; 3)corruptly to influence an official act. The gratuity provision within the bribery statute requires less proof and likewise provides for a lesser penalty. 

The Hobbs Act provides an even greater penalty.  It can be proven when there is 1) interstate commerce, and; 2) robbery or extortion. Extortion, however, can be "the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right."  Campaign contributions have been the subject of a couple of recent Supreme Court decisions that interpret the Hobbs Act.  The Court has held that a "quid pro quo" is required (McCormick) but that passive acceptance may be sufficient (Evans).  The Court in Evans stated, an 'affirmative act of inducement by a public official, such as a demand,' is not required for extortion 'under color of official right.'" (Podgor & Israel, White Collar Crime in a Nutshell 3rd Ed  119 (Thomson/West 2004).

Mail and wire fraud may also be statutes that prosecutors might be examining.  Both the mail and wire fraud statutes have a definition statute in 18 U.S.C. sec. 1346 that provides  that a scheme or artifice to defraud includes "a scheme or  artifice to deprive another of the intangible right of honest services."

Finally, with the possibility that more than one person may be joined in the conduct, prosecutors may also be examining the conspiracy statute.  Section 371 of title 18 provides for conspiracies that involve specific acts such as mail and wire fraud, or a conspiracy to defraud the government.

As this investigation unfolds, these statutes as well as others, are likely to be guiding forces in deciding whether the alleged conduct should be considered criminal.   

(esp)

January 10, 2006 in Investigations | Permalink | Comments (1) | TrackBack (0)

Monday, January 9, 2006

The Latest Pre-Trial Events in the Lay/Skilling Case

Yesterday was not a particularly good day for Ken Lay and Jeff Skilling, that is if one uses wins and losses in pre-trial motions as the criteria.  The Houston Chronicle reports here that U.S. District Judge Sim Lake denied their motion to dismiss the charges. (See Ken Lay's Website here) The court found no evidence of prosecutorial misconduct and no evidence of government intimidation. A claim had been made that witnesses were being intimidated by the government so that they would not cooperate with defense counsel's investigation.

Jeff Skilling also has more to contend with at trial as a result of yesterday's events. This is as a result of Mark Koenig changing his plea to now state that Skilling had made a false statement that Koenig originally claimed to only be his own statement. (See Houston Chronicle here).  The Houston Chronicle states, "The change in the plea agreement facts is apparently because Koenig heard a tape of the analyst call and felt that it was Skilling and not himself who made the quoted remark."   

This is unusual to say the least.  It basically means that a key witness must have originally misstated something to the government.  In addition to a desire to present truthful testimony, why would someone want to correct this plea statement? It hurt Koenig more the way it was first stated then when it was corrected, but this in and of itself would do little to help Koenig.   The statement now, however, provides additional evidence against Skilling, evidence that might prove useful in the upcoming case to be presented by the government. Koenig is facing a possible sentence of ten years and one has to wonder if his sentence will be further reduced by his providing this additional evidence to the government, evidence that goes against Skilling?

The interplay of these two motions present an interesting contrast.  Could it be that perhaps the government does not directly intimidate witnesses, but that the benefits it offers to those who cooperate are so strong that it results in a desire for these individuals not to assist the defense, but rather to assist the government.   

(esp)

Addendum - Check out Houston ClearThinkers here.

January 9, 2006 in Enron | Permalink | Comments (2) | TrackBack (0)

Supreme Court Rejects "Honest Services" Case

The United States Supreme Court denied certiorari in a racketeering case involving mail fraud's honest services provision. (See Chicago Tribune here).

Betty Loren-Maltese was the President of the Town of Cicero, Illinois, appointed upon the death of husband, who died from cancer. She was charged with RICO conspiracy and five counts of mail and wire fraud. Despite the fact that the government failed to show any money going to her, she was convicted of these crimes. One of the arguments she made in her Petition for Certiorari was that the Court needed "to decide whether the ‘honest services’ statute is unconstitutionally vague and to resolve a conflict in the circuits over how to interpret the statute so that it complies with due process."

This is not the first time that the Supreme Court has denied certiorari on a claim involving 18 U.S.C. sec. 1346, the section that allows for mail and wire fraud to be premised on a "right to honest services."  This denial reminds one of the many cases that had a similar argument rejected prior to the Supreme Court's acceptance of the case of McNally v. United States, a case that reversed the government's use of an "intangible rights" doctrine and destroyed many of the convictions that had been obtained by the government. 

Will it take a long line of cases being denied cert. before the Supreme Court eventually takes a case to resolve whether a statute premised on the clause "honest services" is too vague to be constitutionally sound?

(esp) 

January 9, 2006 in Fraud, Judicial Opinions, Prosecutions, RICO, Sentencing | Permalink | Comments (0) | TrackBack (0)

New York Giants and the Baltimore Ravens Game

A link to sports is not new to white collar crime. There have been a fair number of cases that bring in sporting events. (e.g.horse-racing - Operation BOPTROT).  So it is not surprising to see a count of the Abramoff Plea discussing a game, in this case the New York Giants and the Baltimore Ravens Superbowl game in 2001.  The St Pete Times here provides coverage of this event from the corporate jet, to the gambling cruise, to how this all leads back to Abramoff.

(esp)

January 9, 2006 in Corruption | Permalink | Comments (0) | TrackBack (0)

The Collateral Consequences of the Abramoff Plea

The consequences of the Abramoff Plea are felt not only in the political community, but also in the legal sphere.  The NYTimes reports here on the impact of this plea on the law firm of Greenberg Traurig. Although one can find no mention of Jack Abramoff on the website of the law firm here, the past association will certainly be an issue for the firm. Likewise, the firm is not mentioned in the Information filed against Abramoff (here), with the references only being to Firm A and Firm B, and the firm referred to in the Information is not accused of any wrongdoing.

But even without any wrongdoing, there can be a collateral consequence from the firm's mere association with Jack Abramoff.  Even when a law firm knows nothing, takes immediate action upon learning of a problem, does an internal investigation, and cooperates with the government, the association can be problematic.  The question will always be whether they should or could have known sooner, even when there is no evidence that this would be possible.

Many law firms, whether or not they engage in lobbying, will start scrutinizing their partners in more detail to make sure that none of these individuals have connections or engage in illegal activities. Future partners will also be looking at law firms from a new perspective.  Will this firm quickly abandon you if there is an allegation that you have engaged in wrongdoing?  And will they be cooperating with the government against you?  Obviously when no one does anything wrong this is not problem.  And the illegalities in the Jack Abramoff case are clear as set forth in his plea. But in some cases, the fine line between acceptable business practices and  illegality may be difficult to discern.

(esp) 

January 9, 2006 in Prosecutors | Permalink | Comments (0) | TrackBack (0)