Saturday, September 16, 2006

The Abramoff Connection

With the guilty plea of Rep. Ney (see here), Jack Abramoff has again proved his value to the Government.  It is not often that one has an individual of this caliber cooperating with the government.

In addition to Rep. Ney, this cooperation has brought down some top individuals (see Washington Post timeline here)  What is particularly helpful to the DOJ is that Abramoff appears to be able to supply sufficient corroborated evidence that is causing targets of DOJ investigations to fold without the necessity of trial.  This is extremely efficient as it saves the cost of a long investigation and trial.  Most importantly, pleas often include cooperation which means an increased breadth in future investigations.

The Miami Herald here discusses the roots of this investigation and notes the extensive role that Florida prosecutors have played in the different investigations.

(esp)

September 16, 2006 in Corruption, Investigations | Permalink | Comments (0) | TrackBack (0)

National Institute Securities Fraud

When: September 28-29th  (corrected)

Where: Washington, D.C. - Fairmont Hotel

What:National Institute on Securities Fraud

"From Enron to WorldCom to investigations of mutual fund practices and finite reinsurance transactions, securities fraud has dominated the news on the business pages for the past four years. This Securities Fraud National Institute will provide an in-depth, cutting edge and rewarding educational experience for all practitioners, including prosecutors, regulators, compliance officers and defense counsel, in this exciting and headline-making field. The very best from the SEC, DOJ, corporations and top-tier law firms will share their insights about a multitude of important subjects including:

• How to handle/represent whistleblowers

• How to cope with and conduct internal investigations

• Compliance: Is your client making it or faking it?

• How to cope with parallel investigations by the SEC, DOJ and plaintiffs

• Multiple charges: Fighting the two, three, and four-front war

• Criminal provisions of Sarbanes-Oxley

• When regulatory violations become criminal prosecutions

• Outside accountants as gatekeepers

The Securities Fraud National Institute Planning Committee, in cooperation with the Criminal Justice Section (White Collar Crime Committee), Section of Business Law, and the Section of Litigation are committed to providing an educational and professional forum to discuss the legal and ethical issues that arise in securities fraud matters in both panel presentations and break-out sessions."

(esp)

September 16, 2006 in News | Permalink | Comments (0) | TrackBack (0)

Congress Starts Sniffing Around the H-P Internal Investigation

After requesting documents from Hewlett-Packard regarding the "pretexting" used to obtain private telephone records of board members and journalists, the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee has jumped into the fray with both feet by asking four witnesses to testify on September 28.  The Subcommittee sent letters to soon-to-be-former Chairwoman Patricia Dunn, General Counsel Ann Baskins, outside lawyer Larry Sonsini, and a Boston-area investigative firm owner, Ronald DeLia, who has been the subject of speculation that his firm carried out the pretexting.  A San Jose Mercury News story (here) identifies the head of H-P's global security unit, Anthony Gentilucci, as another likely witness because of his involvement in the investigation and possible connections to DeLia.

Will any of these witness actually testify?  If DeLia did engage in pretexting, most likely he will assert the Fifth Amendment privilege, although that will not necessarily spare him the unseemly charade of being dragged in front of the Congressmen to be harangued about the assertion of his constitutional right.  Any other course at this point would be foolhardy, with federal and state criminal investigations moving forward.  Gentilucci would be in a similar position if he oversaw the work of outside investigators and knew about the use of pretexting.

Baskins and Sonsini could assert the Fifth Amendment, but a more likely scenario would be to raise attorney-client privilege issues.  Gentilucci would also be in a position to assert the privilege for conversations with in-house lawyers.  Sonsini's e-mail exchange with former H-P director Tom Perkins mentions Baskins' involvement in overseeing the internal investigation of leaks that led to the pretexting to track down the person speaking with the media, so her role would involve both privilege and work product concerns.  Sonsini and his firm, Wilson Sonsini, is the company's long-time outside counsel, so his involvement, however limited or extensive it might be, in the investigation of the investigation would raise the same privilege and work product issues.  The Subcommittee could ask H-P to waive its attorney-client privilege, although the irony of doing so after a recent Senate hearing criticizing the Department of Justice for doing the same thing would be hard to overlook -- then again, Congress has never been shy about taking a "do as I say, not as I do" attitude.

Dunn could assert the company's attorney-client privilege for any discussions with Baskins and lawyers in her office, or with Sonsini and other outside lawyers, although her "defense" has been that she had to recuse herself from much of the internal investigation because she was as much a target as other directors.  Given her asserted uninvolvement in the investigation, she would likely not have a need to assert the Fifth Amendment, unless her participation was greater than has been disclosed.  Dunn may have to appear to take the berating from the Subcommittee members, once again put in the lead role of delivering the mea culpas as she winds down her role as chair of the board.  The hearing may turn out to be much ado about nothing, but at least Congressional hearings, or at least the threat of them, are always entertaining. A Marketwatch story (here) discusses the Subcommittee's letters to the potential witnesses. (ph)

September 16, 2006 in Investigations | Permalink | Comments (0) | TrackBack (0)

Prosecutors Seek En Banc Review of Enron Nigerian Barge Decision

The Enron Task Force has asked the Fifth Circuit to review en banc the panel decision in United States v. Brown, 2006 WL 2130525 (5th Cir. Aug. 1, 2006), overturning the convictions of three defendants for violating the mail fraud statute in connection with the Enron Nigerian Barge transaction.  The government's request centers on the reversal of the convictions on the ground that the "right of honest services" provision, 18 U.S.C. Sec. 1346, does not cover the conduct for which the defendants were convicted.  The key to that analysis was the court's determination that the defendants believed their conduct was aligned with Enron's interest, and therefore they did not intend to deprive the company of their honest services:

We do not presume that it is in a corporation's legitimate interests ever to misstate earnings--it is not. However, where an employer intentionally aligns the interests of the employee with a specified corporate goal, where the employee perceives his pursuit of that goal as mutually benefiting him and his employer, and where the employee's conduct is consistent with that perception of the mutual interest, such conduct is beyond the reach of the honest-services theory of fraud as it has hitherto been applied.  Therefore, the Government must turn to other statutes, or even the wire fraud statutes absent the component of honest services, to punish this character of wrongdoing.

This opinion should not be read to suggest that no dishonest, fraudulent, wrongful, or criminal act has occurred. We hold only that the alleged conduct is not a federal crime under the honest-services theory of fraud specifically.

I suspect the government's concern is that future defendants will seize on this language in private right of honest services fraud cases to argue that they believed their interests were aligned with the corporate employer, so that they did not have the requisite intent to defraud the company of their honest services.  En banc's are fairly rare, although the Fifth Circuit has used that approach in another case, United States v. Brumley, 116 F.3d 728 (5th Cir. 1997), to clarify the scope of the honest services form of mail and wire fraud, although Brumley involved a public official and not private actors. 

The other danger, of course, is that the en banc court will read the honest services fraud form of mail/wire fraud even more narrowly, or worse for the government, finds that it is unconstitutionally vague and therefore unenforceable.  A Houston Chronicle story (here) quotes blog co-editor Ellen Podgor about the appeal, who points out that "[w]hen courts have trouble deciding whether conduct is within or outside the honest services language of the statute, then how can we expect lay people to know if what they are doing is criminal? . . . What really needs to happen here is for Congress to rewrite the law so that it is clear and people know what is legal and what will be considered criminal."  While an unfavorable decision from the Fifth Circuit en banc might trigger an appeal to the Supreme Court, the Enron Task Force is 0 for 1 there so far, so the Solicitor General's Office may not see this case as any more appealing to the Court than Arthur Andersen was, when the government's theory was roundly criticized. (ph)

September 16, 2006 in Enron, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Ney's Plea Agreement

Ohio Representative Bob Ney will plead guilty to conspiracy to commit honest services mail fraud and filing false statements regarding expenses paid on his behalf.  A Department of Justice press release (here) outlines the factual basis for the corruption charges:

Congressman Ney admits that he corruptly solicited and accepted a stream of benefits from Jack Abramoff and other lobbyists, including:

  • international and domestic trips, such as a trip Scotland with others costing $160,000; a $7000 trip to New Orleans and a $3500 vacation at Lake George, New York all paid for by lobbyists and their clients; and
  • Thousands of dollars worth of meals, drinks, tickets to concerts and sporting events and free use of box suites to conduct fundraisers.

In exchange, as Congressman Ney admits, he agreed to take and he took a series of official actions.  For example, he

  • Agreed to insert four separate unrelated amendments to an election reform legislation at Abramoff’s request;
  • Agreed to insert statements into the Congressional Record; and
  • supported Abramoff’s efforts to get a multi-million dollar contract for his client

Then, to conceal this illegal conduct from the public, he failed to accurately report these benefits and lied on his Annual Financial Disclosure Statements filed with the House of Representatives.  In addition, as part of the conspiracy to deprive the public of his honest services, and with the intent to be influenced, Congressman Ney took thousands of dollars in free gambling chips from a foreign businessman.  This foreign businessman was seeking an exemption to the U.S. export laws prohibiting the sale of his goods to a foreign country, and a visa to the United States.  Congressman Ney traveled to London, took free gambling money and, then, Congressman Ney agreed to help, and indeed made efforts to help when he returned home to the United States.  Congressman Ney admits that he intentionally concealed the amount of gambling proceeds by filing a false U.S. Customs disclosure form and false annual financial disclosure statements.  And Congressman Ney had a staff member carry approximately $5,000 through Customs so the Congressman could falsely report a smaller amount to Customs officials.

Representative Ney certainly developed a facility for lying that included repeated denials of having engaged in any wrongdoing and assertions of his innocence, all of which are now shown to be utterly dishonest.  He has entered a treatment program for alcoholism, and will not formally enter the plea until October 13.  It is not clear whether Representative Ney will resign his position after entering his guilty plea, although I would hope he would not drag Congress down any further than he already has by leaving that body as soon as possible. (ph)

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

Friday, September 15, 2006

Ohio Representative Expected to Plead Guilty in Corruption Probe

Ohio Representative Bob Ney reportedly is going to plead guilty to a federal criminal charge related to the corruption investigation spawned by the activities of former high-powered lobbyist Jack Abramoff.  An AP story (here) reports that Republican party officials said that Ney will enter a guilty plea for his role in accepting benefits from Abramoff, many of which have already been described in the guilty pleas of former Congressional aides and Abramoff's lobbying team.  Ney has long maintained his innocence, although he recently dropped out of the race to be reelected, a strong signal that he was looking to resolve the investigation.  If Ney does plead guilty, he will be the first elected official charged in the Abramoff investigation, and the second snared on corruption charges this year, following former California Representative Randy (Duke) Cunningham, who is serving an eight-year prison term.  An interesting question will be whether Ney will cooperate in the government's continuing investigation of Capitol Hill corruption, and if he could provide information about other Congressmen. (ph)

September 15, 2006 in Corruption | Permalink | Comments (0) | TrackBack (0)

Specter Tells of Upcoming Legislation to Stop Thompson Memo Practices

Senator Arlen Specter spoke at the NACDL-Georgetown White Collar Crime Luncheon on September 14.  Blogging on that speech for the White Collar Crime Prof Blog is Jack King of the NACDL, who reports:

At lunch today, Specter said that he would prepare legislation addressing the “Thompson memo.” Michael Peel of Financial Times (London) asked what the legislation would “look like” and what the “timetable might be.”  Specter replied:

        “I would say that the government may not consider on charging a corporation whether the corporation has waived the attorney-client privilege and waived the inadmissibility – or the status – of work product. And then it would say that you can’t consider on charging whether the corporation is going to pay attorney’s fees, if that’s in a contract or what the practice is. As for when I’m going to introduce it, we’re going to be in session for two weeks, and I don’t think there’s time enough to put it together, but I would shoot for the lame-duck session, which I think is going to start on November 13. But the timeline for passage is totally unpredictable. Not until next year at the earliest.
        "Have I had any indications of support? Yes, Sen. Leahy is for it.”

(esp)

September 15, 2006 in Government Reports, Investigations, Legal Ethics, News | Permalink | Comments (0) | TrackBack (0)

Hiring a Former AUSA . . . Priceless

The Hewlett-Packard "pretexting" mess has put the company in the line of fire in state and federal investigations.  When the company first disclosed the issues related to the internal investigation on September 6, it was represented by Silicon Valley's leading firm, Wilson Sonsini.  Shortly thereafter, it retained Morgan, Lewis & Bockius to represent it in the federal case.  According to an article in The Recorder (here), Morgan Lewis partner John Hemann arranged a proffer session with the U.S. Attorney's office on Monday, September 11, only five days after the tempest started.  How do you get a meeting that quickly, perhaps arranged even before the federal investigation came to light publicly?  Hemann spent eight years in the U.S. Attorney's Office for the Northern District of California before being detailed to the Enron Task Force, where he was involved in the prosecutions of Andrew Fastow, Jeffrey Skilling, and Ken Lay.  Hemann joined Morgan Lewis in 2005 (firm biography here), and is already paying dividends by having the right contacts to get in the door quickly.  Given that the session has been described as a "proffer," I assume H-P has agreed to waive the attorney-client privilege -- despite recent calls to curtail the practice -- because so much of the company's conduct involves corporate counsel, both in-house lawyers and outside firms.  That early audience with the federal prosecutors may save H-P from facing criminal charges, a significant victory. (ph)

September 15, 2006 in Investigations | Permalink | Comments (0) | TrackBack (0)

Don't Ask How It's Made

I recall something about not watching how sausage or legislation is made, and it gets a bit scarier when the sausage-maker does not follow the federal meat inspection rules.  The U.S. Attorney's Office for the District of Connecticut announced the sentencing of Nicholas DeYulio to three years probation for selling meat products without the required federal inspection.  According to a press release (here):

DeYULIO owns and operates DeYulio Sausage Company in Stamford, which prepares and sells wholesale and retail meat products throughout Connecticut, Rhode Island and Massachusetts. The Federal Meat Inspection Act requires that companies such as DeYulio Sausage Company have their meat products inspected by Department of Agriculture inspectors before the products are sold. In pleading guilty, DeYULIO admitted that, in May 2004, DeYulio Sausage Company sold approximately 10,000 pounds of Italian pork sausage representing that the meat had been federally inspected and had passed inspection when, in fact, no such inspection had occurred.

Think twice before you bite into that Italian sausage next time you're at the game. (ph)

September 15, 2006 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Former Executive Settles FCPA Complaint with SEC

The SEC settled a civil complaint against Jim Bob (J.B.) Brown -- my favorite defendant name this year -- a former executive of Willbros Group for violating the Foreign Corrupt Practices Act.  The company provides engineering services to the oil and gas industry, and according to the SEC Litigation Release (here):

The Commission alleges in its complaint that Brown, a former supervisory employee in Willbros's Nigerian and Latin American operations, participated in three separate schemes to bribe foreign officials. First, the complaint alleges that, in February and March 2005, Brown procured $1 million on behalf of a Willbros affiliate and delivered that money as partial payment of previously-made commitments to Nigerian government officials and to employees of the operator of a joint venture majority owned by an arm of the Nigerian government. He also assisted, according to the complaint, in the payment of an additional $550,000 that was also used to satisfy the earlier commitments. Second, Brown, in return for the granting to Willbros of a $3 million contract, knowingly assisted a scheme to pay a $300,000 bribe to officials of an oil and gas company owned by the government of Ecuador and its subsidiary. Finally, Brown knowingly assisted a long-running scheme in which employees of Willbros affiliates used fabricated invoices to procure cash from the company's administrative headquarters in Houston that was used to, among other things, bribe Nigerian tax and court officials.

The Commission can move for a civil penalty in a later proceeding, but at this point Brown only agreed to be enjoined from future violations. (ph)

September 15, 2006 in Civil Enforcement, FCPA, Settlement | Permalink | Comments (0) | TrackBack (0)

Thursday, September 14, 2006

Former HealthSouth CFO Receives 3-Year Prison Term

The third time was the charm for federal prosecutors, who finally had a substantial prison term imposed on former HealthSouth CFO Michael Martin.  Twice before, Martin, who cooperated in the case after pleading guilty, was sentenced for his role in the $2.7 billion fraud, receiving probation and then a seven-day term in prison.  Martin was one of the five former HealthSouth CFOs who pleaded guilty, and he testified against former CEO Richard Scrushy when his comparatively light sentence was fodder for the cross-examination.

The government appealed each of the first two sentences, arguing that they departed too much from the Federal Sentencing Guidelines and were unreasonable.  After the second reversal, the Eleventh Circuit reassigned the case to a different district court judge, and now Martin has been sentenced to three years in a federal correctional institution; he will serve about 30 months in prison and then be eligible for release to a half-way house.  The case is a good example of how disparate sentences can be in white collar cases, especially when a defendant has cooperated to receive a lower sentence.  An AP story (here) indicates that, while perhaps not satisfied with the new sentence, Martin has accepted it, quoting him as stating, "Finally you can put a period on it . . . I'm just glad it's over." (ph)

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

Tough Times for Two GCs

The Sarbanes-Oxley Act increased the pressure on in-house lawyers by requiring that a company's "chief legal officer" be the key conduit for reviewing claims of potential wrongdoing and advising the independent directors on how to act in response to potential legal violations.  This week, that seat got even hotter as Bristol-Myers Squibb fired its general counsel, Richard Willard, along with CEO Peter Dolan because of their involvement in a transaction that could trigger a violation of the company's deferred prosecution agreement.  In a company press release (here), however, Bristol-Myers asserted that there was no criminal conduct or violation of the agreement, asserting that the company's outside monitor "and the U. S. Attorney did not find that there had been any violation of the deferred prosecution agreement. No finding of any unlawful conduct by the company or any of its employees has been made. The inquiry did not involve any matters that are the subject of the ongoing investigation by the Antitrust Division of the Department of Justice into the PLAVIX settlement agreement. The Monitor may make additional recommendations with respect to governance matters when he makes his final report on the inquiry."  If that's the case, then was Willard fired for public relations purposes?  It certainly was a move to assuage the government, and shows that a company's general counsel is among those whose heads will roll when questionable conduct comes to the government's attention.

The Hewlett-Packard situation is perhaps even more threatening to its general counsel, Ann Baskins.  An e-mail exchange between the company's outside counsel, Larry Sonsini, and a former board member, Tom Perkins, discusses the role of Baskins' office in the internal investigation that involved "pretexting" to obtain private records of board members.  Sonsini wrote, "I was not involved involved in the design or conduct of the investigation. The investigation was run by the HP legal department with outside experts. I reviewed the report after the investigation for Board process. Pattie [Dunn, chair of the board], was not involved in the design or conduct of the investigation either, to my knowledge. I am sure that Ann Baskins looked into the legality of every step of the inquiry and was satisfied that it was conducted properly."  That certainly puts Baskins squarely in the line of fire now that California Attorney General Bill Lockyer has stated that criminal conduct occurred at H-P and he expects individuals to be charged.  The U.S. Attorney's Office is also investigating, and will certainly look at the role of the company's general counsel's office in the internal investigation.  Even if Baskins is not directly involved in the pretexting, and avoids any criminal entanglement, ultimately it looks like her office was responsible for the internal investigation.  I would not be surprised if she took the hit for this, much like Willard was dumped after 14 years at Bristol-Myers.  It can be mighty tough to be a general counsel these days. (ph)

September 14, 2006 in Investigations | Permalink | Comments (0) | TrackBack (0)

The Best Way to Rob a Bank

There is an old adage that the best way to rob a bank is to work for it.  While not always successful, the sentencing of Dana Smith shows that at least you won't get as much time as you would if you pulled a gun, which usually triggers a five-year mandatory minimum.  Smith was the head teller at a bank branch, and the U.S. Attorney's Office for the District of Maryland's blog (here) describes what she did:

On December 7, 2005, a representative from the bank’s headquarters conducted an audit at the bank and found that it was exactly $100,000 short. When the representative approached Smith about the shortage, Smith produced two fake teller tickets that she created, which indicated that the missing money was in the ATM cassette. The representative found the ATM cassette empty and $1,095 missing from the teller cash drawer. Smith admitted to the bank’s vice president that she took money from the bank vault, and during a subsequent interview by the FBI, again admitted stealing money from the vault. She indicated that she covered up the missing money by manipulating the daily vault settlement sheets and creating false inter-teller tickets.  Smith stole $102,095 from the bank during the course of a year.

Smith received a sentence of a year-and-a-day for bank larceny, which means she will be released in approximately ten months.  And, it's much better than getting all that blue dye on you and having to watch the grainy videotape of your theft. (ph)

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

Wednesday, September 13, 2006

Scrushy Gets Some of His Attorney's Fees Covered

An arbitrator has decided that HealthSouth must pay former CEO Richard Scrushy's attorney's fees from the criminal trial in which he was acquitted of all counts related to the massive accounting fraud at the company.  Scrushy claimed that his employment contract required the company to pay the fees, and under Delaware corporate law -- HealthSouth is incorporated there -- he had a statutory right to have the attorney's fees paid because he was successful on the merits.  The arbitrator's decision is not a surprise, although Scrushy did not get all that he claimed, however, only being awarded $17 million of the $32 million claimed.  Nevertheless, that is a significant amount to spend on a criminal defense, and shows the costs of defending a large-scale criminal prosecution..

Scrushy victory may not result in him receiving any money to pass along to his attorneys.  HealthSouth earlier obtained a judgment, upheld by the Alabama Supreme Court, that he must repay over $47 million in bonuses, plus interest, that he received when the accounting fraud took place that were awarded based on the company meeting certain performance targets.  HealthSouth has requested that the $17 million for attorney's fees be offset against the large judgment, so look for yet another fight over the attorney's fees. An AP story (here) discusses the arbitrator's decision. (ph)

September 13, 2006 in Defense Counsel, HealthSouth | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 12, 2006

"Challenges Facing Today’s Federal Prosecutors"

After yesterday's hearing on the Thompson Memo and its inclusion of a waiver provision, waiving the attorney-client privilege, today brings a subcommittee hearing on the "Challenges Facing Today’s Federal Prosecutors"  (see here).  The witnesses lined up to appear today are:

Mike Battle
Director
Executive Office of U.S. Attorneys
United States Department of Justice
Washington, DC

Susan Brooks
U.S. Attorney
Southern District of Indiana
United States Department of Justice
Washington, DC

William Shockley
Former President
National Association of Assistant U.S. Attorneys
Lake Ridge, VA

(esp)
Smooth left corner image

September 12, 2006 in Government Reports, Prosecutors, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

The Thompson Memo Hearings

The Thompson Memo has without doubt raised significant controversy in the legal community.  It contains provisions such as waiver of the attorney-client privilege, that factor into whether the company will be prosecuted or receive the benefit of a deferred prosecution agreement. Today was the day of airing this issue before a Senate Judiciary Committee (see here).  The day started with a statement from Senator Patrick Leahy, ranking member of the Senate Judiciary Committee. (see here)  He noted that:

"[t]he protection of communications between client and lawyer has been fundamental to our nation’s legal justice system since its inception. The right to counsel has long been recognized as essential to ensure fairness, justice and equality under the law for all Americans. This Administration has taken extraordinary steps to investigate and prosecute the press and to intimidate the press, critics, and attorneys while it has claimed unlimited privileges and secrecy for itself."

Some quotes from the testimony -

Hon. Paul McNulty (USA Eastern District of Virginia) here - "We see nothing wrong in asking a corporation to disclose to us the results of their internal investigation to assist us in investigating a corporation’s claim of innocence. Indeed, we believe it is good practice because it conserves public and private resources and, if the corporation’s claim is well-founded, it brings a quick conclusion to the government’s investigation."

Thomas J. Donohue, President & CEO -U.S. Chamber of Commerce here -

  • "A company that refuses to waive its privilege risks being labeled as uncooperative, which all but guarantees that it will not get a settlement.
  • The “uncooperative” label severely damages a company’s brand, shareholder value, their relationships with suppliers and customers, and their very ability to survive.
  • Being labeled uncooperative also drastically increases the likelihood that a company will be indicted and one need only look to the case of Arthur Andersen to see what happens to a business that is faced with that death blow."

Karen J. Mathis, ABA President 

Download attyclientprivissueabatestimonytosenjudcommkarenmathissept122006.pdf

"First, the Department of Justice's policy is inconsistent with the fundamental legal principle that all prospective defendants - including an organization's current and former employees, officers, directors and agents - are presumed to be innocent."

Other compelling testimony was also provided - see here

(esp)

September 12, 2006 in Government Reports, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Republican Fundraiser Gets Two Years +

Tom Noe, an Ohio Republican fundraiser and rare coin dealer, was sentenced today to two years and three months in prison, in addition to receiving a fine. (see AP here) He pleaded guilty to these charges related to campaign funds, but has pleaded not guilty to other charges pending against him. According to Reuters here, Noe said he felt "pressured by Bush campaign officials." 

For background on this case see-

Ohio Republican Fundraiser Pleads Guilty to Three Charges here

The Dominoes Start Falling here

Noe Faces A State Indictment here

(esp)

September 12, 2006 in Sentencing | Permalink | Comments (0) | TrackBack (0)

USA Attends Special Board Meeting at Bistol Myers

The Wall Street Jrl here reports of the special board meeting at Bristol Myers. This was clearly an important meeting as CEO Peter Dolan was "ousted."  But one sentence  of the Wall Street Jrl article is fascinating.    It says, "[t]he meeting was attended by the U.S. Attorney for New Jersey, Christopher Christie, who appointed Mr. Lacey last year in the settlement agreement." Lacey is former federal Judge Frederick B. Lacey, who serves as the monitor.

Now let me see if I understand this correctly -

The USA is personally attending a meeting of the company, and the CEO was "ousted" at this meeting. The Bristol -Myers agreement does state in paragraph 22 that:

"Within thirty (30) days of the execution of this Agreement, BMS agrees to call a meeting, on a date mutually agreed upon by BMS and the Office, of its senior executives and any senior financial personnel, and any other BMS employees who the Company desires to attend, such meeting to be attended by the United States Attorney and other representatives of the Office for the purpose of communicating the goals and expected effect of this Agreement."

Is Christie advising the company?  Is he there to oversee the monitor appointed?  Does his appearance place undue pressure on the company? Keep in mind that any breach of the agreement is determined by the DOJ Office.  As stated in paragraph 37 of the agreement - "The parties further understand and agree that the determination whether BMS has breached this Agreement rests solely in the discretion of the Office, and the exercise of discretion by the Office under this paragraph is not subject to review in any court or tribunal outside the Department of Justice."

(esp)

September 12, 2006 in Settlement | Permalink | Comments (0) | TrackBack (0)

The Senate Talks About the Thompson Memo

The Senate Committee on the Judiciary has scheduled a hearing on "The Thompson Memorandum’s Effect on the Right to Counsel in Corporate Investigations" for today.  The impressive lineup of individual's giving testimony are:

PANEL I


The Honorable Paul J. McNulty
Deputy Attorney General
U.S. Department of Justice
Washington, DC


PANEL II


The Honorable Edwin Meese
Former Attorney General
Ronald Reagan Distinguished Fellow in Public Policy
Chairman, Center for Legal and Judicial Studies
The Heritage Foundation
Washington, DC


Thomas J. Donohue
President and CEO
U.S. Chamber of Commerce
Washington, DC


Karen J. Mathis, Esq.
President
American Bar Association
Chicago, IL


Andrew Weissmann, Esq.
Partner
Jenner & Block LLP
New York, NY


Mark B. Sheppard, Esq.
Partner
Sprague & Sprague
Philadelphia, PA

The testimony from these witnesses will be retrievable online here.  More will be posted on this blog tomorrow regarding this testimony.  But to give a preview,  the written testimony of the Hon. Edwin Meese includes the following passage regarding the McCallum Memo, an unsuccessful attempt by the government to appease people by saying that waivers of attorney client privilege need to coordinated within each individual USA's office.  Meese states:

"Nevertheless, it appears that the McCallum Memorandum does not represent a sufficient improvement. The main objectives of the Memorandum included providing greater uniformity, predictability, and transparency to the process that federal prosecutors use when requesting a waiver of a business organization’s attorney-client privilege. But the McCallum Memorandum does nothing to address the inherently coercive nature of the Thompson Memorandum factors that take into account whether a company has waived its privilege."

There are many important issues of the day that need to be addressed by the Senate.  So why is DOJ allowing so much time to be spent on the waiver issue, an issue they could easily resolve by just removing it from the Memo and from practice? Don't they get it -  asking for a waiver of the attorney-client privilege is just plain wrong.

(esp)

September 12, 2006 in Government Reports, Legal Ethics, News, Prosecutions, Statutes, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Accounting Investigation of Dell Gets a Lot More Serious

It is a tough time for leading computer companies, with the government investigation of Hewlett-Packard's use of possibly illegal methods to gather private information about its board members and now Dell's disclosure that it will not be able to file its financial statements due to continuing accounting problems.  Dell disclosed in August (8-K here) that the SEC had initiated an informal investigation of its accounting "relating to revenue recognition and other accounting and financial reporting matters for certain past fiscal years . . . ."  The company soft-peddled the inquiry, burying it in a press release that championed its second quarter results.  The disclosure of the informal inquiry came a number of months after the SEC contacted the company.  Now comes another Dell 8-K (here) with the news that the U.S. Attorney's Office for the Southern District of New York has subpoenaed the company in connection with its accounting, and that the issues will affect prior years.  Taking the same approach that seems to discount the investigation, Dell states that "[t]he SEC requests for information have been joined by a similar request from the United States Attorney for the Southern District of New York, who has subpoenaed documents related to the company’s financial reporting from 2002 to the present." 

While one can describe a grand jury subpoena as a "request" from the Department of Justice, subpoenas are a bit more than just a casual missive sent when prosecutors have nothing better to do.  Moreover, the fact that federal prosecutors from the Southern District are now involved in the case means it is a much greater threat to the company, and perhaps to individual officers.  If any executives on the financial side of Dell suddenly resign, that is a good sign that the criminal investigation has advanced and is targeting individuals.  Unlike the Hewlett-Packard investigation, which is unrelated to the company's core business, this investigation goes to the propriety of Dell's financial reporting, a key issue for investors and regulators. (ph)

September 12, 2006 in Grand Jury, Investigations, Securities | Permalink | Comments (0) | TrackBack (0)