Saturday, May 20, 2006

Can the Executive Search an Office of the Legislative Branch?

Can the FBI, in investigating a member of the legislative branch, search his or her legislative office? 

This question may be real, and may depend on what the third branch of government may have said or will say with regards to this search.  According to the NYTimes here, the FBI has "raided" the office of William J. Jefferson (D. La.).

Searches used to be rare in white collar investigations.  If the government wanted documents, they would use a subpoena duces tecum to procure the documents for grand jury review. In recent years, however, there appear to be more instances of searches being used in white collar cases.  Searches have an element of surprise that can be very effective in scaring the individuals being investigated.  More importantly, searches are used when the government believes that documents or evidence might be destroyed.  The bottom line, however, is that the government has the discretion to choose when they will use a subpoena and when they will search.  This time it appears that they decided to search.

Addendum -  Searches are also public.  Whether  a witness is subpoenaed or documents produced may not necessarily make the newspapers.  In contrast, searches are open.  Searches require probable cause and thus, approval.  Subpoenas do not require judicial approval. When a subpoena is issued, the recipient has time to go to court and make a motion to quash the subpoena if they believe it is not justified.  That notice is not provided with a search and the motions come after the fact when someone is later saying that the evidence from the search should be suppressed (excluded from being used in court).  So other questions that remain are: what was the basis of this search, who approved it, and what specifically was the FBI seeking?  And yes, of course, why such a drastic step of using a search as opposed to a subpoena?

See also Washington Post here.


May 20, 2006 in Corruption, Investigations | Permalink | Comments (2) | TrackBack (1)

Internet Music Piracy Sentencing

With so many high-profile white collar indictments and trials, the ones that don't make the front page can sometimes be lost.  Yet, in the white collar world, internet crimes and particularly internet piracy remain hot topics.

The first indictments from Operation Fastlink came in July 2005 (see here) and now we are seeing the pleas and sentencing of some. (see here)  According to a DOJ Press release, the "first members of pre-release music piracy groups from Operation FastLink were sentenced . . .  for their involvement with Internet music piracy groups." Although one individual had previously received a sentence of "15 months in prison,"  the new sentences were "six months in prison/six months home confinement" and "six months home confinement."

The DOJ press release states that:

"These are the first federal criminal sentences for members of pre-release music groups from Operation FastLink, an ongoing federal crackdown against the organized piracy groups responsible for most of the initial illegal distribution of copyrighted movies, software, games and music on the Internet. Operation FastLink has resulted, to date, more than 120 search warrants executed in 12 countries; the confiscation of hundreds of computers and illegal online distribution hubs; and the removal of more than $50 million worth of illegally-copied copyrighted software, games, movies and music from illicit distribution channels. As of today, Operation FastLink has yielded felony convictions for 30 individuals."


May 20, 2006 in Computer Crime, International, Sentencing | Permalink | Comments (0) | TrackBack (0)

Trapped - By John Hasnas

Professor John Hasnas (Georgetown-Business School) has a book out called, "Trapped: When Acting Ethically is Against the Law." Published by the CATO Institute, the title says it all.  A review of the book by Erica Little can be found here.


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

Is It Fraud or Dishonesty in the Milberg Weiss Prosecution

The indictment (here) of Milberg Weiss and two of its name partners, Steven Schulman and David Bershad, strikes me as involving a basic distinction in how the two sides will approach the case.  For the government, this appears to be a case about honesty, or the lack thereof, by attorneys required to present information to the court about the fees being received in a class action and the need for representative plaintiffs to limit their compensation to that approved by the court.  The key charges are the mail fraud counts involving the right of honest services against the Milberg Weiss defendants.  The conspiracy, RICO conspiracy, and money laundering charges all revolve around proving that the payments -- or kickbacks in the government's parlance -- to the representative plaintiffs were improper and hidden from view because everyone knew that their disclosure would cost the law firm (and representative plaintiff) its lucrative role in the class action.  While the mail fraud charges also allege that the defendants obtained money or property from the victims, identified as the members of the class, that will be a very difficult theory of criminal liability to establish.  Milberg Weiss did not receive anything that was not negotiated with its opponent, who usually had no incentive to pay more money to the law firm, and a state or federal judge who, at least on the record, stated that the settlement was fair to both sides and the attorney's fees a fair reflection of the work put into the case and the risk undertaken.  Two sets of eyes scrutinized the settlement, so it is hard to say that Milberg Weiss deprived the class members of anything by sneaking something past them. 

For honest services, however, the issue focuses more on the role of the fiduciary, and the fulfillment of the obligation of trust to ensure that the client's interests are put first and all procedures are scrupulously followed.  For the government, its allegations of secret payments and disguised transactions are not grounded on a theory of theft from the victims, but instead that the law firm and three identified representative plaintiffs colluded to keep their double-dealing secret.  Each received a benefit from the collusion, and the class members lost the benefit of its counsel and lead plaintiff protecting their interests.  As a case about honesty, the prosecution may have some traction.

For Milberg Weiss, the issue (and challenge) will be to make this a case about loss, and whether there was any ill-gotten gain to the law firm.  The crime of fraud evolved from larceny, and in the English common law the crime was known as larceny by trick.  For a larceny, the defendant must take and carry away the property of the victim, so that the gain and loss are congruent.  For Milberg Weiss, the question is probably quite simple: prove what we took from the victim.  The answer is that the class members are probably no worse off than if the alleged secret payments had never been made, at least in the sense that any settlement would have involved a payment to a law firm.  What the firm chooses to do with its money is not the business of the class members, or perhaps even the court, for that matter. 

So, which one is it?  The mail fraud statute permits the government to charge a scheme to deprive of the right of honest services, a notoriously slippery concept, particularly in private fraud prosecutions.  For public corruption cases, the loss is easily identified because the public and its representative government lose the benefit of the honest services of its servants, elected or appointed.  In the private relationship context, it becomes harder to identify whether there has been a violation when the case involves something other than a diversion of assets or other type of naked self-indulgence at a cost to the victim.  The mail fraud charges, and the related offenses that build off of them, likely will survive a motion to dismiss, although the defendants will take their best shot.  At trial, the question may well come down to one of whose viewpoint the jury adopts: is this a case of dishonesty, or is it a case of theft in which the victim really never lost anything and the defendants didn't get more than what a judge and opponent said they deserved.  It should prove to be a very interesting case. (ph)

May 20, 2006 in Fraud, Legal Ethics, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Trying the Lay Bank Fraud Case Like You're Double-Parked

While I suspect federal judges have particularly nice reserved spaces in most courthouse garages, U.S. District Judge Sim Lake seems to be hearing the evidence of the alleged bank fraud and false filings with a financial institution of Ken Lay as if he were double-parked in front of a fire hydrant.  As recounted by the Houston Chronicle TrialWatch blog (here), the judge has commented favorably on the unavailability of a government witness due to recent surgery, urged both sides to skip detailed questioning, listened to a scant 15 minutes of opening argument from each party, and bemoaned the fact that a more long-winded prosecutor would be questioning a witness.  Has the judge already made up his mind? 

The charges involve some rather technical disclosure regulations related to extensions of credit involving the application of Reg U, and the issues are not nearly as explosive as the conspiracy and securities fraud charges in the recently concluded trial that is now with the jury.  I think it is very unlikely that Lay will testify, not just because of the rather negative experience in the first trial but also because his defense is largely a technical one that these forms were so complicated and unimportant to the bank that he did not have the requisite intent.  That's certainly not something one would want to testify about.  One sideshow has been the focus on the use of an autopen to sign "Kenneth L. Lay" to at least some of the documents.  Does that make a difference when the issues are knowledge of falsity and intent to defraud?  It is unlikely, particularly in a bench trial, that the use of a machine to sign a document will be relevant, but then it seems the judge needs something to keep him interested.  The trial will likely conclude after another day or two, and the defense may not even call any witnesses.  At least everyone will be spared the reputation witnesses. (ph)

May 20, 2006 in Enron, Fraud, Prosecutions | Permalink | Comments (1) | TrackBack (0)

Friday, May 19, 2006

The Privilege Waiver as the Price of Admission to a Deferred Prosecution Agreement

The indictment of Milberg Weiss may well be a turning point in the government's pursuit of organizations through the use of criminal charges, particularly regarding issues related to the waiver of the attorney-client privilege.  On of the cornerstones of the attorney-client relationship is the privileged status of the communications, and the professional responsibility rules impose an even broader duty on attorneys to maintain the confidentiality of client-related information even if it does not meet the requirements of the privilege.  If Milberg Weiss' side of the story is to be believed, the government demanded perhaps the broadest possible waiver of the privilege by seeking all information generated in connection with the government's investigation of the firm from the time the first subpoena launched in 2002.  Other cases involving privilege waivers have usually focused on information generated in an internal investigation that would be protected by the organization's privilege, but not going to legal advice related to the government's investigation.  The line may be a fine one, but at least other deferred prosecution agreements have viewed the communications between lawyer and client regarding the response to the government as privileged. 

The investigation of a law firm involves unique issues that do not arise in other corporate crime prosecutions.  The vast majority of a law firm's files and other records will be case-related, and hence privileged (and also protected as work product).  To the extent that the alleged wrongdoing at Milberg Weiss involved its dealings with clients, there are two levels of confidentiality: the firm's attorney-client privilege, and the privilege arising from its role as an attorney for its clients.  While the firm can waive its own privilege, it cannot waive the privilege on behalf of a client without that client's permission.  If the government sought a waiver of all privilege claims related to the cases at issue in the indictment, then Milberg Weiss could not comply with such a request without having the permission of its clients. 

If a broad attorney-client privilege waiver is the price of admission to negotiating a deferred prosecution agreement, then it may be that the negotiations between the law firm and prosecutors were doomed from the start.  The prosecution of Milberg Weiss will likely involve a number of firsts, among them the fact that the privilege waiver has become the key step for prosecutors and a deal-breaker in the end. (ph)

May 19, 2006 in Fraud, Legal Ethics, Privileges, Prosecutions | Permalink | Comments (0) | TrackBack (3)

The List of Grand Jury Subpoena Recipients in the Options Pricing Probe Keeps Growing

Add three more companies to the list of those that have received grand jury subpoenas from the Southern District of New York probing the pricing of stock options granted to senior executives, including the veracity of documents for the awards.  The subpoenas, all delivered on Wednesday, May 17, were received by Affiliated Computer Services, Inc. (8-K here), Caremark Rx, Inc. (press release here), and SafeNet, Inc. (press release here).   Each company also disclosed receiving an inquiry from the SEC as part of its informal investigation -- which will go formal sometime soon, I expect -- and each states that it will cooperate in the investigation.  UnitedHealth and Vitesse Semiconductor also received subpoenas on that day (see post here), and no doubt there will be more companies disclosing the receipt of grand jury subpoenas, with the disclosures likely to come late Friday afternoon after the markets close.  It is not clear whether the SEC requests for information were received at the same time as the grand jury subpoenas, but the Commission and the Southern District of New York have a long history of close cooperation so these investigations most likely are being coordinated.  A Wall Street Journal story (here) discusses the expanding investigation. (ph)

May 19, 2006 in Fraud, Grand Jury, Investigations, Securities | Permalink | Comments (0) | TrackBack (3)

Thursday, May 18, 2006

Well, I Guess Mom Died 22 Years Ago

Dana Price entereda guilty plea to defrauding the federal Office of Personnel Management of over $700,000 by not reporting her mother's death in 1983.  The mother had been receiving survivor benefits based on her husband's service in the U.S. government, but that should have ended upon her death in September 1983.  Dana, however, continued to received the checks, and contacted OPM to make changes in where the benefits would be send.  According to the U.S. Attorney for the District of Maryland's blog (here):

On January 9, 1989, Dana Price wrote a letter to OPM using her mother’s address and social security number, and signed it as Joan Price. She requested that OPM “send my checks to my home rather than directly deposit them into my checking account.” In 1993, Dana Price submitted a form to OPM using her mother’s name and address. In 1995, she again certified Joan’ Price’s name and address in a letter to OPM. The OPM form Dana Price signed contained a specific section that was to be filled out if the annuitant had died.

It was not until 2005 that the government figured out that the mother was dead, after Price received improper payments of $728,175.32.  The guilty plea was entered two days after Mother's Day. (ph)

May 18, 2006 in Fraud | Permalink | Comments (1) | TrackBack (0)

Milberg Weiss and Two Partners Indicted

Leading plaintiff securities class action firm Milberg Weiss and two of its name partners, Steven Schulman and David Bershad, were indicted on mail fraud, conspiracy, and RICO conspiracy charges in the Central District of California (indictment below).  The defendants were added in a superseding indictment to the earlier prosecution of Seymour Lazar and another attorney related to alleged payments by Milberg Weiss to Lazar when he (and members of his family) served as a representative plaintiffs in a variety of class action suits in which the law firm served as lead counsel.  The indictment sets forth payments to three different plaintiffs, including Howard Vogel, who entered into a guilty plea in April 2006 related to making false statements in federal court that he had not received any payments for serving as the representative plaintiff while admitting to receiving money from Schulman and Bershad.  The new indictment adds the lawyers and firm as participants in an alleged general conspiracy and the scheme to defraud.  Interestingly, Milberg Weiss is not named in the RICO conspiracy count, instead serving as the so-called RICO enterprise operated by Schulman, Bershad, and Lazar.  As a technical pleading matter, an organization cannot be both the enterprise and the defendant under Sec. 1962(c), and for a conspiracy under Sec. 1962(d) to violate that provision, so Milberg Weiss could not be charged in this count under the government's theory.  The indictment also seeks forfeiture of assets from the defendants, including the law firm.

This case certainly marks a new phase in the use of criminal laws against business organizations.  I am not aware of a law firm of this size being charged in a criminal case.  In the early 1990s, Kaye Scholer settled civil charges related to its representation of Charles Keating and Lincoln Savings & Loan, but as a civil matter that did not implicate the same concerns as a criminal prosecution.  Milberg Weiss issued a statement (available below) asserting that the government's demands during plea negotiations made it impossible to reach an agreement.  The firm states:

The firm has held intense negotiations with government officials in Los Angeles and Washington over the past six months in an effort to avoid this unjust result. The government’s insistence that the firm waive attorney-client privileges as a condition to avoiding indictment is in derogation of one of the bedrock principles of American law and extended to parties the firm did not control. Governmental insistence on such broad waivers has been criticized by the American Bar Association and the U.S. Chamber of Commerce, and is currently being reviewed by Congress. The prosecutors also insisted that the firm make unfounded statements accusing its own partners of crimes and otherwise become an agent for the government. Unfortunately, the prosecutors insisted on indicting the firm unless it made these impossible concessions.

A key issue will be whether the law firm can survive a criminal indictment, and issue considered in an earlier post (here).  (ph)

Download milberg_weiss_indictment.pdf

Download milberg_weiss_statement.pdf

May 18, 2006 in Fraud, Legal Ethics, Prosecutions, RICO | Permalink | Comments (0) | TrackBack (1)

Southern District Jumps Into Options Pricing Investigation

The U.S. Attorney's Office for the Southern District of New York has issued grand jury subpoenas to Unitedhealth Group and Vitesse Semiconductor concerning the timing of options grants to senior executives and allegations that documents were backdated to allow the options to be issued at a lower price to enhance their value.  Unitedhealth announced the subpoena in a press release (here), and a Wall Street Journal story (here) discusses the subpoenas.  A grand jury in the Eastern District of New York has already subpoenaed Comverse Technology related to options timing issues at that company (see earlier post here), and it's not clear at this point whether the U.S. Attorney's Offices will be conducting a coordinated investigation. The SEC has already begun an informal investigation of a number of companies related to their options grants, and that investigation is likely to become a formal one, if it hasn't already happened, followed by the issuance of subpoenas.  Companies will be facing parallel investigations, along with the usual host of shareholder lawsuits.

Vitesse Semiconductor also announced that it had terminated its CEO, CFO, and executive vice president, who had earlier been placed on leave, and the company faces a delisting of its stock by NASDAQ because it has not been able to file its quarterly report.  More ominously for the former executives and the company is the disclosure that the internal investigation has raised questions about revenue recognition, and that its financial statements should not be relied on.  This raises an interesting question whether the options grants were linked to possible accounting violations designed to make the company look better and thereby enhance the value of the options, something that the grand jury will likely review.  An AP story (here) discusses the termination of the Vitesse Semiconductor officers. The various investigations are likely to expand rather quickly over the next few weeks. (ph)

May 18, 2006 in Fraud, Grand Jury, Investigations, Securities | Permalink | Comments (0) | TrackBack (1)

Wednesday, May 17, 2006

Enron Jury Instructed

Some white collar attorneys have come to a realization this week - and that is that different places in the United States proceed differently when it comes to the reading of jury instructions. In the trial of Skilling/Lay, reports say that instructions were given prior to the closing arguments.  This differs sharply with some jurisdictions that give the instructions after the closing arguments. 

So the question is whether it is better to have instructions before or after the closing argument?   

For the prosecution it means using language in the final closing that may come directly from the instruction and emphasizing the important phrases in the rebuttal.  For the defense it may mean having the jury aware of the law before even starting the closing arguments. 

But there really are two problems with this analysis.  The first is that the instructions are usually incomprehensible to a jury.  We use jury instructions to teach law students, and I am confident that many of them would tell you that this stuff isn't easy.   Second is whether there should be uniformity here.  It is always amazing how the DOJ continues to desire uniformity on the final phase - the sentencing, but fails to object to the lack of uniformity for other parts of the trial.


May 17, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

Tenet Shows It Knows When to Fold 'Em

The Department of Health & Human Services' Office of the Inspector General tried to wipe out Alvarado Hospital in San Diego by initiating a proceeding to bar it from participating in federal healthcare programs, a death sentence for any provider in the field (see earlier post here).  Tenet Healthcare Corp, Alvarado's corporate owner, decided to avoid a nasty fight by agreeing to divest itself of the hospital, which appears to have satisfied OIG because the agency has now dropped its threat to exclude Alvarado from the federal programs.  According to an OIG press release (here):

Today’s agreement allows for the orderly transfer of the hospital to a new operator in a manner that would not affect access to hospital services in the community. If Tenet chooses to close Alvarado, OIG will work closely with the Centers for Medicare and Medicaid Services and state and local authorities to ensure community access to emergency and other hospital services.

Putting Kenny Rogers' advice to good use likely saved both sides from a drawn-out legal battle that Tenet probably could not win without expending significant resources.  The question now is whether this will also resolve the criminal charges against the hospital and its former CEO, a case that has been tried twice and resulted in two hung juries   (see below) (ph)


UPDATE:  In addition to the HHS announcement, the U.S. Attorney's Office for the Southern District of California announced (press release here) that it has reached a settlement with Tenet in which the company will pay a $21 million civil penalty, and the government will not pursue a third trial on the charges against Alvarado and its former CEO.  (ph)

May 17, 2006 in Civil Enforcement, Fraud | Permalink | Comments (0) | TrackBack (0)

Would You Believe I Overheard Two Guys in a Bar Talking About the Deal?

My mother always said that it wasn't what I did that got me in trouble, it was the fact that I lied about it.  That was not entirely true, of course, but the lie can certainly turn a bad situation worse.  That is especially applicable when the lie involves an SEC insider trading investigation and the initial story is that the information was overheard from two guys talking in a bar, a tale sure to pique the Enforcement Division's interest.  Stephen Messina will plead guilty to violating Sec. 1001(criminal information here) for making a false statement during an SEC investigation of his purchase of call options in Electronic Boutiques right before the announcement of an acquisition of the company by Game Stop that triggered a 34% increase in the stock price, giving him a profit of over $300,000.  It turns out that the information came from Messina's friend Robert Downs, an attorney at the time at Philadelphia law firm Klehr Harrison, which worked on the deal, although Downs was not involved in the representation. 

Messina and Downs settled an SEC civil insider trading action, with Messina disgorging his profits, plus paying a 50% penalty, while Downs paid a penalty equal to Messina's profits (Litigation Release here).  Down, who is no longer with the law firm, was not involved in the criminal prosecution, and it will be interesting to see if the Pennsylvania state bar pursues any disciplinary action against him if the SEC allegations are correct.  As a general matter, disclosing client-related information to a third party to trade on it would violate the confidentiality rules and the fiduciary obligation of  lawyers that prohibits use of client information for personal benefit, even if the client does not suffer any direct harm. A Philadelphia Inquirer story (here) discusses the case.  (ph)

May 17, 2006 in Insider Trading, Prosecutions, Securities | Permalink | Comments (0) | TrackBack (1)

DOJ Corporate Charging Policies Article

An article studying how the Department of Justice approaches charging corporations with crimes and the terms of deferred prosecution agreements will be published in the St. Louis University Law Journal.  The article, Devolution of Authority: The DOJ's Corporate Charging Policies, was written by Lawrence D. Finder and Ryan McConnell, and is available through SSRN (here).  The abstract states:

This paper examines the Department of Justice's corporate charging policy through the lens of reported deferred and nonprosecution agreements entered into since 1991. The authors have collected and examined each agreement and present their findings, in part, through detailed tables which highlight the salient features of these agreements. The paper ties changes in these pre-trial agreements to the pre-trial diversion procedures in the U.S. Attorney's Manual and the implementation of the Organizational Guidelines within the Federal Sentencing Guidelines as well as various memorandums issued by the Department including the Holder Memorandum, the Thompson Memorandum, and the McCallum Memorandum. The article highlights how these agreements have changed over the past 15 years. By analyzing these agreements and explicit charging policies (the Organizational Guidelines, the various DOJ memorandums, and the U.S. Attorney's Manual), the article shows that DOJ corporate charging policy has devolved into an office by office policy and that the terms of a pre-trial agreement depend on which U.S. Attorney's Office is handling the investigation.

Mr. Finder is the former U.S. Attorney for the Southern District of Texas and is now a partner at Haynes & Boone, while Mr. McConnell is an associate at BakerBotts.  Deferred prosecution agreements and non-prosecution agreements have become common features in corporate criminal investigations over the past four years, and the article's analysis adds to the discussion in this developing area of the law. (ph)

May 17, 2006 in Scholarship | Permalink | Comments (0) | TrackBack (1)

Fugitive Hedge Fund Manager Arrested

Kirk Wright, who is accused of defrauding clients in hedge funds he managed, has been arrested in a Miami hotel, according to a Wall Street Journal story (here).  Among the investors who put money into Wright's firm were a number of former NFL players and many African-American professionals in the Atlanta area, and the losses appear to be over $100 million.  Wright was charged in a single-count information in the Northern District of Georgia with securities fraud, and with his arrest a much more extensive indictment is likely to be handed up by a grand jury in the near future.  According to the Journal, Wright recently left $30,000 in cash with his former wife to pay alimony and child support, and was arrested with $28,000 in cash.  That's a start, but I suspect that hopes for recovering any significant amounts of investor money will not pan out. (ph)

May 17, 2006 in Fraud | Permalink | Comments (0) | TrackBack (0)

Adieu, Milberg Weiss?

The investigation of alleged kickbacks to representative plaintiffs in class actions looks like it will ensnare two name partners at Milberg Weiss and perhaps even the firm itself.  While there has been media speculation that the firm might be able to work out a deferred prosecution agreement with the Department of Justice -- the preferred method these days for dealing with organizational misconduct -- the New York Times reports (here) that talks for an agreement may be foundering over issues such as "the waiver of client-attorney privileges; new compliance and monitoring systems and personnel the firm would be required to put in place; and the size of any potential payments . . . ."  Milberg Weiss announced that name partners Steven Schulman and David Bershad have taken leaves of absence from the firm (see Law.Com story here), and a press release issued by the firm (here) states that the leave "will allow Mr. Bershad to focus fully on other matters."  Those other matters include a federal grand jury in Los Angeles that meets on Thursdays, and an indictment of the two partners could come as early as May 18, assuming neither is negotiating a plea agreement.  Whether the firm is also named is a key decision that may not be decided until the last minute.

Indicting Milberg Weiss would not necessarily put it out of business because, unlike accounting firms such as Arthur Andersen, law firms are not licensed by the state, only the individual lawyers, and the professional responsibility rules only indirectly govern law firms.  That said, lawyers know that reputation is an attorney's most valuable asset, so a criminal indictment would likely cause such serious harm to the law firm and its laywers that it would break up in all likelihood.  If that happens, I expect that at least one new firm, with different named partners, will emerge to take on some of the same client matters while unencumbered by the taint of criminal charges against Milberg Weiss.

Is a deferred prosecution agreement practical for a law firm?  The hurdles to crafting such an agreement may be too great, at least if the Department of Justice insists on provisions similar to those in other such agreements.  For example, many agreements contain an attorney-client/work product waiver, which Milberg Weiss could not do without permission from its clients.  Obtaining that type of waiver would be even more difficult given the types of cases the firm takes because class actions involve multiple clients (and law firms).  Another standard provision is the appointment of an outside monitor, which raises a different set of attorney-client privilege issues that might make it impossible to have a third-party being privy to all the law firm's operations.  A limitation on the types of cases the firm could accept might cripple its ability to retain lawyers, the firm's most valuable asset, so an agreement that makes it more difficult to maintain the firm's profitability could end up killing it. 

Unlike Time Warner or Bristol-Myers Squibb, companies that entered into deferred prosecution agreements and have extensive ongoing businesses with significant fixed assets, law firms have few tangible assets and a work force that is highly mobile, so there would be little incentive to stay if an agreement imposed terms viewed as too onerous.  A deferred prosecution agreement for Milberg Weiss may result in a situation where there is no party on the other side shortly after the ink dries because lawyers can reconstitute their practices with relative ease while clients can switch to new counsel on a moments notice.  Unlike corporations or even non-profits (such as hospitals) with continuing businesses in fixed locations, law firms may not be amenable to deferred prosecution agreements, which raises the question whether a criminal prosecution of the firm is even worth the effort. (ph)

May 17, 2006 in Fraud, Grand Jury, Investigations, Legal Ethics | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 16, 2006

Looks Like Boeing Gets a Non-Prosecution Agreement

According to the Washington Post here, we can expect an agreement between Boeing and the government - and it may be costing Boeing A LOT OF MONEY. It looks like Boeing could be paying $615 million to get the government off its back.  According to the Post, the settlement, however, will not include civil or criminal charges. Boeing has been having its defense procurement issues with the government, and the investigation has been around for a long time (see post here).

Interestingly, this comes just days after Judge J. Michael Luttig formerly of the Fourth Circuit Court of Appeals agreed to join the company. The company was using this new hire to show their desire to comply with ethics rules. (see AP here). And perhaps the price of adding Luttig should be added to the 615 million. (see Conglomerate here).

But if this Boeing deal goes through, there are a host of questions that need resolution. For example: What criteria does the government use to decide whether a company is entitled to a deferred prosecution agreement, a non-prosecution agreement, and whether these agreements will include civil or criminal fines? Does it all come down to whether the company has met the Thompson Memo criteria? Does one receive a benefit if they give up employees, not pay their attorney fees, and waive the attorney client privilege?  In one sense companies want transparency in what criteria the government uses for making the decisions.  On the other hand, does it become government extortion when the only way one can obtains the best deal is to become a mini-prosecutor for the government.


May 16, 2006 in Settlement | Permalink | Comments (0) | TrackBack (0)

Former Army Colonel Found Guilty in SOCom Case

According to the Tampa Tribune here, "a 1979 West Point graduate" who served part of his "military career at U.S. Special Operations Command" (see here) was found guilty of bribery, conspiracy, and wire fraud. For a compilation of prior posts concerning the investigation at SOCom see the following:

Things Are Heating Up at SOCom here

More Problems related to SOCom here

FBI Joins Special Op Command Investigation here


May 16, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Surivor Winner Hatch Receives 51-Month Sentence

Richard Hatch, the first Survivor contest winner, was sentenced to a 51-month term of imprisonment after being convicted in U.S. District Court in Rhode Island of tax evasion.  Hatch did not declare his $1 million prize for winning on Survivor, nor did he pay taxes on over $300,000 in income received from a Boston radio station and other money that was supposed to go to a charitable foundation.  While U.S. District Judge Ernest Torres indicated that the sentencing range for the offense was around three years, the judge increased the sentence to over four years based on his finding that Hatch committed perjury during his testimony during trial.  Hatch has been in jail since his conviction in January, so that time will be applied to the sentence, and with credit for good time while in prison he will likely serve about another forty months.  An AP story (here) discusses the sentencing. (ph)

May 16, 2006 in Sentencing, Tax | Permalink | Comments (0) | TrackBack (3)

Monday, May 15, 2006

ABA President Addresses ALI

American Bar Association President Michael S. Greco addressed the American Law Institute (ALI) yesterday morning, and in speaking on attorney-client privilege he presented a contrast to a presentation at an ethics seminar of the prior afternoon. Interestingly the ethics seminar of the ALI-ABA concerned the topic of "Representing a Corporate Employee as an Individual During an Investigation; Current Issues Regarding the Attorney-Client Privilege." At that seminar, the speaker on the DOJ attorney-client privilege issue was Gregory F. Linsin, Special Litigation Counsel of the Environmental Crimes Section, Environment and Natural Resources Division of the DOJ.

The next morning, before the American Law Institute annual gathering of members, Greco spoke of the ABA stance regarding DOJ's  "efforts to erode the privilege."  He enlightened the ALI audience on the Thompson Memo, the position of the Sentencing Commission, and on the importance of the attorney-client privilege. The ABA position can be seen in this letter here of May 3, 2006 to Attorney General Gonzalez.


May 15, 2006 in Defense Counsel, Privileges, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)