Saturday, August 19, 2006

Will the Quattrone Case Be Resolved?

The Wall Street Jrl reports here that Frank Quattrone may be reaching an agreement with the government that would resolve the criminal case pending against him. Quattrone is presently facing a third trial.  The first trial was a hung jury and the second was reversed by an appeals court. The case of alleged obstruction of justice charges hinged to a large extent on an email instructing people to clean up their files.

This is not the first time that the Wall Street Jrl has suggested that a resolution of this case might be forthcoming (see post here).  And should this happen it would be beneficial to everyone. 

  • On one hand, the stress of a third trial for Quattrone would be an incredible strain - one trial is tough enough, but three is above and beyond - clearly a punishment not faced by most alleged offenders. 
  • Second, the cost of attorney fees is also a significant punishment here.  With the high cost of white collar attorney fees, having an attorney for two full trials, an appeal, and now the preparation for a third possible trial is above and beyond - clearly a punishment not faced by most alleged offenders.
  • Also Quattrone had to defend the civil NASD charge of alleged "spinning," a charge overturned and then not pursued, but likely costing him the punishment of the strain of dealing with the action and the cost of attorney fees.
  • There is a new prosecutor, a new judge, and a new defense attorney, which means everyone getting up to speed on this case --  a lot of time, and yes, money - is it really worth it?
  • Should the government be expending tax dollars on a case such as this?  Are there more important priorities that need to be addressed?

Quattrone loses either way.  He is deprived of his chance to prove his innocence and has paid a high cost experiencing the judicial process.  Some might argue that the government also loses in that they are deprived of the opportunity to prove his guilt. This is one of those situations where there will probably never be winners, but cutting everyone's losses now may just be best. 

(esp)

August 19, 2006 in Settlement | Permalink | Comments (0) | TrackBack (0)

New Presidential Pardons: Few White Collar Crimes

According to the Yahoo News (AP) here, President Bush pardoned 17 people this past week. Few were for white collar related offenses. There were a good number related to:

  • firearms("firearms to out-of-state residents and falsifying firearms records, "unlawful transfer of a firearm," "possession and transfer of an illegal weapon")
  • alcohol ("liquor law violations and conspiracy to violate the liquor laws,"possessing an unregistered still, carrying on the business of a distiller without the required bond, and manufacturing mash on other than lawfully qualified premises")
  • drugs ("possession with intent to distribute marijuana, conspiracy to possess with intent to distribute marijuana; importing marijuana," "possession with intent to distribute cocaine"

The white collar offenses being pardoned included "conspiracy to impede the functions of the Federal Deposit Insurance Corp., commit embezzlement as a bank officer, make false entries in the records of an FDIC-insured bank, and commit bank fraud" and "conspiracy to defraud the United States by making false claims."

August 19, 2006 in News | Permalink | Comments (0) | TrackBack (0)

Will Armstrong Get Credit for His Time in Jail for Civil Contempt?

Martin Armstrong has spent almost the entire 21st century in jail, having been sent there in January 2000 because he was found in civil contempt for refusing to turn over assets in an SEC securities fraud action.  Armstrong was a money manager who founded Princeton Economics International, and he was accused in parallel criminal and civil cases of defrauding Japanese investors of over $700 million.  Despite repeated attempts to get out of jail on the ground that the civil contempt was ineffective, U.S. District Judge Richard Owen -- backed by the Second Circuit -- refused to let Armstrong leave the Metropolitan Correctional Center in New York for over six years, no doubt a record for the longest civil contempt in federal court history.  Now, Armstrong has finally entered a guilty plea to a charge of conspiracy to commit securities and wire fraud, and he will be sentenced in January 2007 by U.S. District Judge John Keenan, who presided over the criminal case that was set to go to trial in October.   A Bloomberg story (here) discusses the plea agreement.

Even after the guilty plea, it remains an open question whether Armstrong will be let out of jail on the civil contempt, and whether the court will take into consideration his 6+ years in jail.  On the latter issue, federal law permits the imposition of a civil contempt that interrupts a criminal sentence, and there is no requirement that the time spent in jail on the civil contempt be counted toward the criminal punishment, although Judge Keenan is free to do so in setting the sentence.  The reason why the civil contempt does not count lies in the difference between a civil contempt, which is viewed as coercive, and a criminal sentence, which is punitive.

The person held in civil contempt "holds the keys to the jail cell" according to the old adage, which means the person can "purge" the contempt by complying with the court's directive.   Most cases in this area involve individuals who have received immunity but continue to refuse to testify, and they can get out of the civil contempt simply by testifying.  One of the seminal decisions is United States v. Liddy, 510 F.2d 669 (19774), involving Watergate burglar G. Gordon Liddy -- how's that for a blast from the past -- who refused to testify before the Watergate grand jury despite an immunity grant.  In rejecting his argument that the civil contempt could not interrupt his service of the criminal sentence, the D.C. Circuit stated:

The coercive impact of confinement for civil contempt results from the fact that the contemnor 'carries the key to the jailhouse door in his pocket,' that is, he can procure his release at any time by agreeing to comply with the court order whose violation is the basis of his contempt. Had the District Court ordered that Liddy's contempt confinement be concurrent with his sentence for Watergate crimes, Liddy would have no incentive to comply with the District Court's order since his doing so would not reduce his total period of confinement. Therefore, the District Court was manifestly justified when it stated: "To give meaning and coercive impact to the Court's contempt powers in the interest of protecting the Court's integrity, the Court here finds it necessary to hold in abeyance the execution of Mr. Liddy's sentence under the indictment pending his confinement for contempt."

Armstrong faces a maximum sentence of five years on the conspiracy charge, and under the federal Sentencing Guidelines if the loss is even 10% of what the government alleges he will be in a sentencing range that will easily take him to the full five years.  Whether he gets the benefit of having spent six years in jail already poses an interesting question because he has not, to this point, agreed to cooperate in the SEC enforcement action that triggered the civil contempt.  He has, however, shown a resolve that likely would make G. Gordon Liddy proud. (ph)

August 19, 2006 in Civil Enforcement, Fraud, Prosecutions, Securities | Permalink | Comments (7) | TrackBack (1)

Is Bristol-Myers Risking a Violation of Its Deferred Prosecution Agreement?

A Department of Justice criminal investigation into an agreement between Bristol-Myers Squibb and generic drug-maker Apotex regarding a $40 million payment to the company to keep a generic version of Plavix, one of Bristol-Myers best selling drugs, from the market has certainly caught the eye of the company's board of directors.  One would think that an FBI search of the Bristol-Myers' offices, including the CEO's, would be enough to spur the board into action, but a press release issued by the company (here) on August 17 made it a point to begin by stating that the board has been treating the investigation "with the highest degree of attention and seriousness."  The release goes on to note that in addition to hiring former U.S. Attorney Mary Jo White to conduct the internal investigation, the independent directors have hired former U.S District Court judge Kenneth Conboy (now with Latham & Watkins), and that former FBI Director Louis Freeh will monitor "internal and external legal initiatives." 

I assume one of those "external legal initiatives" is to keep Bristol-Myers out of hot water with the U.S. Attorney's Office for the District of New Jersey for violating the terms of the deferred prosecution agreement it entered into in June 2005 regarding accounting fraud arising from a channel stuffing program that inflated revenues and earnings.  The agreement (here) primarily addresses securities reporting and internal control issues, but Paragraph 34 contains a general requirement that "BMS will inform the Office of any credible evidence of criminal conduct at BMS occurring after the date of the Agreement . . . ."  The definition of "criminal conduct" includes "any crime related to BMS's business activities committed by one or more BMS executive officers or directors," which certainly appears to cover the current criminal investigation.  The effect of a future criminal violation can be rather severe, as provided in Paragraph 36:

Should the Office determine during the term of this Agreement that BMS has committed any criminal conduct as defined in paragraph 34 commenced subsequent to the date of this Agreement, or otherwise in any other respect knowingly and materially breached this Agreement, BMS shall, in the discretion of the Office, thereafter be subject to prosecution for any federal crimes of which the Office has knowledge, including crimes relating to the matters set forth in the Statement of Facts.

That means the original securities fraud case could be restarted, which gets even scarier for the company because Paragraph 37 states that "[i]n the event of a breach of this Agreement that results in a prosecution of BMS, such prosecution may be premised upon any information provided by or on behalf of BMS to the Office at any time, unless otherwise agreed when the information was provided."  All those high priced lawyers will have to keep Bristol-Myers from having to face a government onslaught not only from the current investigation but also from last year's trouble.  (ph)

August 19, 2006 in Investigations | Permalink | Comments (0) | TrackBack (1)

Friday, August 18, 2006

Former Body Armor Manufacturer Execs Hit With Insider Trading Charges

Two senior executives of DHB Industries, Inc., a supplier of body armor to the U.S. military, were arrested on insider trading, securities fraud, and conspiracy charges, and the SEC filed a civil suit alleging securities fraud.  The former officers are Dawn M. Schlegel, DHB's CFO, and Sandra L. Hatfield, the chief operating officer, and the charges were filed by the U.S. Attorney's Office for the Eastern District of New York.  The charges involve both accounting fraud and the sale of DHB securities that resulted in a profit of over $8 million.  According to the SEC Litigation Release (here), the two defendants:

[R]egularly overstated the value of DHB's inventory by fraudulently increasing inventory quantities, labor costs, overhead costs, and the amount of raw materials used in DHB's products. The complaint alleges that together Hatfield and Schlegel also transferred millions of dollars of expenses from cost of goods sold to research and development costs to materially increase the company's gross profit. The complaint further alleges that Schlegel falsely inflated DHB's $60 million charge against earnings taken in the third quarter of 2005 to mask her and Hatfield's fraudulent conduct. Schlegel is alleged to have lied to DHB's auditors and provided fake inventory schedules and other documents to conceal the fraud.

The complaint also alleges that during the period of their fraudulent conduct, Schlegel and Hatfield collectively profited by over $8.2 million from the cashless exercise of warrants and sale of over 400,000 DHB shares. Schlegel and Hatfield sold these shares at the end of 2004 at the height of DHB's stock price and before the public knew about the misrepresentations in DHB's filings and public statements.

Last year, the military ordered the recall of one of the company's body armor products due to quality issues.  Former CEO David Brooks, whose daughter's $10 million bat mitzvah party featured legendary rockers Steven Tyler and Joe Perry of Aerosmith, left the company on July 10 "pending the outcome of federal, state, and internal investigations" while DHB settled shareholder suits (press release here)  Because federal prosecutors did not file any charges against Brooks at the same time as they did against Schlegel and Hatfield, it may be that he is cooperating in the investigation. Brooks made over $190 million from the sale of DHB stock in 2004, so he is a likely target of the grand jury investigation. (ph)

August 18, 2006 in Fraud, Insider Trading, Prosecutions, Securities | Permalink | Comments (0) | TrackBack (1)

Lots of Potential Contemnors in SF

The grand jury investigations involving Balco (Bay Area Laboratory Co-operative) and possible perjury by Barry Bonds may end up sending witnesses to jail for civil contempt for their refusal to testify in response to subpoenas.  Bonds' former personal trainer, Greg Anderson, went to jail in July for refusing to testify, and was released when the grand jury's term expired.  With a new panel in place for at least 18 months, he now runs the risk of spending a lot of time in jail.  In an appearance before the grand jury, Anderson apparently responded to a few questions, but refused to answer a key one: "Did you distribute anabolic steroids to Barry Bonds?"  The San Francisco Giants slugger denied knowingly using them in grand jury testimony in 2003.  Prosecutors have asked that Anderson be held in contempt again, and a hearing is scheduled for August 28 to decide whether he should be held on contempt for refusing to answer.  If he is ordered to respond to the question and refuses again, he may sit in jail for up to the 17 months remaining in the grand jury's term, assuming it's not extend by six months.  An AP story (here) discusses the latest twist in the Bonds perjury investigation.

How do we know what Bonds said before the grand jury?  That brings us to two more potential witnesses who have asserted they will not testify about who leaked Bonds' testimony to them despite being ordered by a federal judge, who refused to quash subpoenas to San Francisco Chronicle reporters Mark Fainaru-Wada and Lance Williams.  Prosecutors are investigating the leak of grand jury material that is supposed to remain confidential.  The reporters, whose First Amendment privilege claim has been rejected by courts in a variety of situations, have stated that they will not disclose the confidential source of the grand jury testimony.  As discussed in an earlier post (here), the person who leaked the testimony of Bonds and other major league baseball players could face a criminal contempt and other charges for disclosing the transcripts.  Within a few weeks, there could be three people in jail for refusing to testify before the grand jury, and no one has even been indicted yet. (ph)

August 18, 2006 in Grand Jury, Investigations | Permalink | Comments (1) | TrackBack (1)

U.S. Wins RICO Case Against Tobacco Companies -- And the Opinion Will Cure Insomnia

U.S. District Judge Gladys Kessler ruled in favor of the federal government in its massive RICO case against the tobacco companies alleging that they engaged in misleading conduct for decades as part of a broad conspiracy (U.S. v. Philip Morris USA, et al. here).  The opinion may be nearly as dangerous to the environment as smoking, coming in at 1,653 pages, not counting the appendices, so that's a whole lot of trees.  The table of contents alone is 29 pages, although there are only 58 footnotes. 

Judge Kessler ruled earlier in the case that the government could not seek disgorgement of the profits made by the defendant cigarette manufacturers under RICO, which was affirmed by the D.C. Circuit (396 F.3d 1190), and the Supreme Court rejected the government's certiorari petition in October 2005.  With disgorgement knocked out, the remedial portion of the opinion comes off as almost anti-climactic:

[T]he Court is enjoining Defendants from further use of deceptive brand descriptors which implicitly or explicitly convey to the smoker and potential smoker that they are less hazardous to health than full flavor cigarettes, including the popular descriptors “low tar,” “light,” “ultra light,” “mild,” and “natural.” The Court is also ordering Defendants to issue corrective statements in major newspapers, on the three leading television networks, on cigarette “onserts,” and in retail displays, regarding (1) the adverse health effects of smoking; (2) the addictiveness of smoking and nicotine; (3) the lack of any significant health benefit from smoking “low tar,” “light,” “ultra light,” “mild,” and “natural” cigarettes; (4) Defendants’ manipulation of cigarette design and composition to ensure optimum nicotine delivery; and (5) the adverse health effects of exposure to secondhand smoke.

As a reformed smoker, these don't mean very much to me.  For those interested in reviewing documents related to the tobacco litigation -- assuming the opinion just whets your appetite -- the Department of Justice has a webpage with links to documents and testimony (here).  (ph)

August 18, 2006 in RICO | Permalink | Comments (1) | TrackBack (0)

Thursday, August 17, 2006

Government Obtains Convictions in South Florida Bank Fraud Case

A major bank fraud case in Florida that lasted three months followed by three weeks of jury deliberations resulted in a split verdict on some of the counts, but a guilty finding against all the defendants. (See Miami Herald here)  All were taken into custody immediately (See David Marcus' Southern District of Florida Blog here).  David Marcus raises the question of whether these defendants will be punished more harshly for having exercised their right to a jury trial.

The US Attorney's Office for the Southern District of Florida issued a Press Release that includes the following:

According to the evidence presented at trial, the defendants conspired to fraudulently inflate, by hundreds of millions of dollars, the value of collateral used to obtain loans through Espirito Santo Bank of Florida. The defendants worked for E.S. Bankest, LLC, a company in the business of “factoring.” Factoring involves the purchase of accounts receivable from client companies at a discount. Espirito Santo Bank was a joint venture partner in E.S. Bankest, LLC, and was responsible for arranging funding for E.S. Bankest, LLC’s factoring operations. The accounts receivable E.S. Bankest, LLC, supposedly purchased were to serve as the collateral for the funding arranged by Espirito Santo Bank and provided by Espirito Santo Bank customers.

According to the evidence, over the nine-year period from June 1994 through August 2003, the defendants’ conspiracy deceived Espirito Santo Bank and investors by falsifying financial statements, creating fictitious invoices and checks, using fictitious companies, and engaging in other machinations to create the appearance that millions of dollars in fictitious accounts receivable were actually real. Through these tactics, defendants deceived Espirito Santo Bank, federal banking regulators, and independent public accounting firms that examined E.S. Bankest, LLC, about the value of the accounts receivable owned, all to support additional loans through the bank. As a result of their schemes, the conspirators fraudulently obtained approximately $170 million in loan proceeds.

(esp) (w/ thanks to David Marcus for the hat tip)

August 17, 2006 in Fraud, Verdict | Permalink | Comments (2) | TrackBack (4)

Will Prosecutors Really Oppose Lay's Motion to Abate the Conviction and Indictment?

With the court granting the motion to permit Ken Lay's widow, Linda, to appear on behalf of his estate, her attorneys have filed a motion to abate the conviction and indictment so that there will be no official record of him having been prosecuted for crimes related to Enron.  The scope of the abatement doctrine in the Fifth Circuit is clear from that court's en banc decision in United States v. Estate of Parsons, 367 F.3d 409 (5th Cir. 2004), which held that "the appeal does not just disappear, and the case is not merely dismissed. Instead, everything associated with the case is extinguished, leaving the defendant as if he had never been indicted or convicted." (citations omitted)  With a case so clearly on point, what is amazing is that the brief covers three pages (motion available below).

But perhaps even more amazing is a statement accompanying the motion that the Enron Task Force "will oppose the motion."  It's not clear what grounds the government can advance to oppose the request of Lay's estate when the Fifth Circuit's case law is so clear on the issue of abatement.  It may be that the government wants to preserve the conviction for the purpose of pursuing the criminal asset forfeiture, although as noted in an earlier post (here), prosecutors have now asked that co-defendant Jeffrey Skilling be held liable for the full amount of the forfeiture, including Lay's portion.  A criminal forfeiture proceeding is against the individual, while a civil forfeiture is directed against the tainted property and proceeds (in rem), and is a more difficult case to win, especially with an innocent owner defense available.  As I've come to learn, courtesy of Prof. Gerry Beyer of the Wills, Trusts, and Estates Law Prof Blog, Texas is a community property state so Linda Lay has a 50% ownership interest in all community property, and the government is unlikely to be able to reach her portion unless it can show her involvement in the underlying criminal conduct.

In the end, it's not clear what the government would gain in opposing a motion that is clearly governed by recent circuit case law.  It may be that the effect of the abatement doctrine is to create a windfall for Lay's heirs, and the desire to recover assets may be so strong that one might be able to make a passable appeal to equity in not giving complete effect to the doctrine.  The fact that an argument makes it past the laugh test does not mean it's a good one, though. (ph)

Download laymotiontovacateconviction.pdf

August 17, 2006 in Enron | Permalink | Comments (1) | TrackBack (0)

Was Anybody Looking Over His Shoulder

Embezzlement is sometimes as easy as opening up a can of beer on a hot summer day, at least from the description of some cases.  A press release (here) from the U.S. Attorney's Office for the District of New Jersey sure makes it sound like it was easy for an accounting manager at the Hoboken Housing Authority to steal over $110,000.   According to the press release, Eric Hurt admitted that "he embezzled the funds – in 34 checks written to himself – between about August 2001 and February 2004. To conceal the embezzlement, Hurt admitted that he falsely reported to the Housing Authority that the payees on the checks were various vendors doing business with the Housing Authority by entering them that way in the general operating fund check register."  Not even a false name or a dummy corporation with a bank account he controlled, just a false entry in the check register.  They're called internal controls for a reason, and once again they seem to be ignored, no doubt because Mr. Hurt was a trustworthy sort of person. (ph)

August 17, 2006 in Fraud | Permalink | Comments (0) | TrackBack (5)

Liquidmetal in Hot Water Over Accounting

Liquidmetal Technologies, Inc., disclosed that it had received a grand jury subpoena for documents related to the company's accounting.  A press release (here) states: "The documents being sought include accounting records, documents relating to the Company’s relationship with Growell Metal of Korea, and documents and records relating to transactions in Company stock by officers and directors. The Company has been advised that the materials sought are pertinent to a grand jury investigation recently initiated in the Middle District of Florida by the U.S. Department of Justice, Criminal Division, Fraud Section concerning alleged accounting improprieties by the Company, among other things."  While the press release is vague -- naturally -- it may be that the overseas transactions involve possible Foreign Corrupt Practices Act violations, particularly when the Fraud Section conducts the investigation.  The issues related to transactions in company stock could indicate possible insider trading questions, but again it's not clear where the government is going.  (ph)

August 17, 2006 in Fraud, Grand Jury, Investigations | Permalink | Comments (1) | TrackBack (0)

Wednesday, August 16, 2006

Reporters Ordered to Testify About Leaks in Balco Grand Jury Investigation

Two reporters for the San Francisco Chronicle, Mark Fainaru-Wada and Lance Williams, have been ordered to testify before a federal grand jury about the leak of the grand jury testimony of major league baseball players who testified in 2003 about receiving steroids from Balco (Bay Area Laboratory Co-operative).  Among those whose testimony reached the reporters is San Francisco Giants slugger Barry Bonds, who stated to the grand jury that he did not knowingly use steroids provided by his personal trainer who also worked at Balco.  Bonds is now the target of a separate grand jury investigation into possible perjury, and the Department of Justice has also been investigating the leak for well over a year.  Fainaru-Wada and Williams published the book Game of Shadows that asserted Bonds used steroids for a number of years, which apparently triggered baseball's investigation of steroid use and may have stimulated the perjury investigation.

U.S. District Judge Jeffrey White issued an opinion (In re Grand Jury Subpoenas to Mark Fainaru-Wada and Lance Williams available below) rejecting the reporters' assertion of a journalist privilege to maintain the confidentiality of sources, and found that the grand jury subpoenas were not "unreasonable or oppressive" under Federal Rule of Criminal Procedure 17(c).  The decision to enforce the subpoenas is consistent with the decisions reached in the Special Counsel's investigation of the leak of Valerie Plame's identity as a CIA agent in which former New York Times reporter Judith Miller spent almost three months in jail on a civil contempt before I. Lewis Libby released her from the promise of confidentiality.  See In re Grand Jury Subpoena, Judith Miller, 438 F.3d 1141 (D.C. Cir. 2006).  Among those filing affidavits in support of the two reporters were former baseball commissioner Fay Vincent and well-known journalist and author Carl Bernstein.

The reporters are unlikely to testify before the grand jury and could end up in jail for civil contempt, a fate that has already befallen Bonds' former personal trainer, Greg Anderson, who refused to testify in the perjury investigation.  While Judith Miller's source released her from the confidentiality agreement, that is probably less likely to occur here because of the substantial legal risks that person (or persons) faces.  The leak of grand jury material is punishable as a criminal contempt under Rule 6(e)(7).  Moreover, during the government's investigation, it appears that all parties to the Balco case with access to the leaked grand jury testimony have stated they did not disclose it, so revealing the source of the information could well open that person up to additional charges of perjury, obstruction of justice, and making a false statement (Sec. 1001).  The two reporters may be in jail for quite a while if the case is being investigated by the new grand jury empaneled in July in the Bonds perjury investigation because the civil contempt lasts for the panel's term, which could be until January 2008 (assuming it's not extended another six months).  (ph)

Download order_denying_motion_to_quash_subpoenas_fainaruwada.pdf

August 16, 2006 in Grand Jury, Investigations, Privileges | Permalink | Comments (1) | TrackBack (5)

Tuesday, August 15, 2006

Attorney Sentenced to 33 Months for Obstruction

A DOJ press release here reports on an attorney in Puerto Rico receiving a sentence of 33 months imprisonment for an obstruction of justice conviction. The press release states that the defendant was sentenced "for his involvement in a conspiracy to obstruct justice and obstruction of justice in connection with federal investigations by the U.S. General Services Administration, Office of Inspector General (GSA-OIG), and a federal grand jury into a kickback scheme to defraud Tricon Restaurants International. Tricon, which was recently purchased by Encanto Restaurants, owns and operates fast food restaurants in Puerto Rico."  The press release further states:

"The indictment charged that Guardiola attempted to conceal the true nature of the kickback payments by attempting to persuade witnesses to provide false information about the kickback payments to the grand jury and the GSA-OIG. The indictment also charged that Guardiola drafted a phony services contract to conceal the true nature of the kickback payments."

This case comes out of the Antitrust Division.  Two individuals have plead guilty and await sentencing related to this case, and one other "convicted at trial of the same charge" was "sentenced to serve 12 months and one day in jail and two years of supervised release." 

(esp)

August 15, 2006 in Defense Counsel, Obstruction, Sentencing | Permalink | Comments (0) | TrackBack (3)

"Prosecutorial Overreaching"

Professors Christine Hurt and Joan Hemingway are having an interesting conversation over at Conglomerate Blog here.  To some extent what is happening in the criminal/business area has happened for many a year outside this context.  For one, the role of the grand jury has been in need of reform. ( see NACDL Reform Project here). What is fascinating is the increased discussion of issues once the white collar/business individuals are subject to what others may have faced for many a year.

(esp)

August 15, 2006 in Scholarship | Permalink | Comments (1) | TrackBack (6)

If in Israel, Can Kobi Alexander Be Extradited to the US?

If it turns out that Kobi Alexander is in Israel, the issue may be whether he can be extradited back to the United States.  (see post here) According to the Wall Street Jrl here, Robert Morvillo,  Alexander's attorney, is stating that he has no idea of the whereabouts of his client. Morvillo states that his client is an Israeli citizen which may make extradition difficult. 

Eddie Antar  (Crazy Eddie Inc.'s founder) was extradited from Israel to the United States in January of 1993. He had tried to seek asylum in Israel, but failed after three years. (See Philadelphia Inquirer Jan. 11, 1993, at A1)  Alexander, however, may be an Israeli citizen and as such there may be different laws applicable here. Israel, like some European countries (See Baltimore Sun, Oct. 23, 1997, at 2A), has rules that permit the home country of the individual to prosecute the accused as opposed to extraditing them. Thus, Alexander, as an Israeli, may be subject to prosecution in Israel.  If this applies, this would not be the first time that Israel prosecuted an individual for a crime in the United States. Samuel Sheinbein left the United States for Israel.  He eventually entered a plea in Israel related to a homicide occurring in Maryland and was sentenced and imprisoned in Israel. 

Kobi Alexander's case may present additional issues: does it make a difference whether the crime is also a crime in Israel, and is this alleged conduct a crime in Israel?

(esp)      

August 15, 2006 in Fraud | Permalink | Comments (2) | TrackBack (0)

Monday, August 14, 2006

Joint and Several Liability & Jeff Skilling

Although Ken Lay's estate may end up escaping liability to the government (see post here), Jeff Skilling may be penalized because of Lay's death.  According to CNN here and Houston Chronicle here, the government is seeking $183 million in restitution from Skilling which represents a portion that would have been paid by Ken Lay, were he alive. 

Individuals charged with a federal conspiracy can also be charged with the individual crimes of co-conspirators if the crimes were in futherance of the conspiracy and forseeable.  Courts often give this instruction, known as a Pinkerton instruction, in federal cases. The question now becomes whether restitution should be jointly liable, implicating Jeff Skilling for the total amount. 

An argument for the government is that one who engages in a conspiracy takes the risk of the acts committed by their co-conspirator and therefore they should be held liable.  A defense response is that Skilling is basically being punished additionally just because Lay did not live.

(esp) 

August 14, 2006 in Enron | Permalink | Comments (1) | TrackBack (1)

Spellissy Sentencing & Ability to Remain Free on Bond

Former SOCOM official, Tom Spellissy, given 15 months for conspiracy, had a strong background to present at his sentencing hearing.  (see Tampa Tribune story here). The judge cited his military background as a basis for the reduction of the sentence. (See Tampa Tribune here) Interestingly, however, according to the Tampa Tribune's story of the accused statements made at sentencing, he did not appear to express remorse. He did, however, show how the conviction "killed" him. (See also AP here).  This is yet another example of how the mere conviction of a white collar offender serves as an enormous punishment. 

Additionally, Spellissy will not have to go immediately to prison.  Unlike former Mayor Campbell in Atlanta, the judge decided that Spellissy can remain on bond until the completion of this appeal. (see St Pete Times here)  Is there consistency in when an individual must commence their sentence immediately and when they can wait?  Should there be?  It does seem like white collar cases have a better chance of having the individual remain on bond.  But this may be a factor of the ability of the attorney to present interesting issues on appeal because of the complexity of many white collar crimes, the fact that there might be less of a flight risk with the white collar offender, and perhaps less likelihood of harm, especially when the offender is no longer in a position of power.

(esp)

August 14, 2006 in Sentencing | Permalink | Comments (1) | TrackBack (0)

Spellissy Gets 15 Months in Prison

According to the Tampa Tribune here, former SOCOM official, Tom Spellissy, received a sentence of 15 months in prison and a fine. For background on this case, see here. Stay tuned for upcoming commentary on this sentence. 

(esp)

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

Voice Samples in a White Collar Case

One might find voice samples being requested by the government in street crime cases, especially ones where the accused is thought to have made a threatening telephone call or a statement at the scene of the crime.  But in a white collar case? 

Yes, AP reports here that a judge has allowed the government to obtain voice samples from three individuals charged in the "theft of trade secrets from The Coca-Cola Co." case. This case originates when Pepsi turned over evidence to Coca-Cola that someone was trying to sell them alleged trade secrets.

In the case of United States v. Dionisio, 410 U.S. 1 (1973), the Supreme Court held that requiring a grand jury witness to produce voice exemplars would not violate constitutional rights under the Fourth and Fifth Amendments.

(esp)

August 14, 2006 in Investigations, Privileges, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Sunday, August 13, 2006

More on KPMG - Stein et al and Thompson Memo

Attorneys Stephen W. Grafman and William F. Boyer have a superb piece in the National Law Journal here discussing Judge Kaplan's recent decision in the KPMG related case.  They argue that the opinion does not go far enough and that dismissal of the government's case is in order.

Many have been critical of the Thompson Memo.  The question now is whether the government is hearing the message.  More importantly, in light of Judge Kaplan's decision, the ABA response, and so many criticisms levied against the government, will DOJ continue to use the memo.  That is, will DOJ continue to place future prosecutions in jeopardy by allowing this document to stand on the record.  As long as the Thompson Memo exists, there is the possibility of it being used, being interpreted to require, or being a convincing work that companies will feel compelled to follow in order to escape prosecution.

The results here could be devastating for prosecutors.  The company could escape prosecution, the individuals case may get destroyed by the memo's existence, and everyone may walk out free and clear.  As a taxpayer, I am not sure this benefits our pocketbooks.  Might it just be wiser for the government to issue a new memo, call this one quits, and move onto something a bit more acceptable to the legal community. Might it be the best way to assure that prosecutions do not fail.

(esp) 

August 13, 2006 | Permalink | Comments (2) | TrackBack (1)