Monday, September 11, 2006

Look Who's Knocking on H-P's Door

It is no great surprise (see earlier post here) that the U.S. Attorney's Office for the Northern District of California has taken an interest in the conduct of the internal investigation into boardroom leaks at Hewlett-Packard that included "pretexting" to gain private information about directors and newspaper reporters.  In a 10-Q (here), the company disclosed that "we have been informally contacted by the United States Attorney's Office for the Northern District of California requesting information similar to that sought by the California Attorney General. We are cooperating fully with these inquiries."  Interesting that at this point it is only an informal inquiry, but it may be that the federal prosecutors were coordinating their case with the California Attorney General's office.  Grand jury subpoenas to the private investigators and perhaps even corporate counsel could be on their way as each office figures out where it wants to go. 

The case raises some interesting questions related to the attorney-client privilege, particularly in light of the disclosure of an e-mail exchange between Larry Sonsini, long-time counsel to the company, and former H-P director Tom Perkins, about the internal investigation.  The government will want to learn not only about the initial leak investigation, but also the investigation of the investigation, which will likely raise privilege questions.  The company stated that it is cooperating with the various government investigations, and it is likely that a request to waive the privilege has already been made.  I suspect H-P will grant such a request to avoid an even greater public relations disaster than it already faces. (ph)


UPDATE: In case the knocking seems to be getting louder in H-P's headquarters in Palo Alto, the House Energy & Commerce Committee has also asked for documents related to the "pretexting" as part of its investigation of that practice.    Among the demands is the name of the heretofore undisclosed private investigation firm that conducted the pretexting.  Once that information gets out, and it will in short order, look for further government inquiries into the conduct of the H-P leak investigation. An AP story (here) discusses the burgeoning investigation. (ph)

September 11, 2006 in Investigations | Permalink | Comments (0) | TrackBack (0)

Government Appeals Sentence of Former Wal-Mart Executive

The U.S. Attorney's Office for the Western District of Arkansas announced that it will appeal the sentence given to former Wal-Mart senior executive Tom Coughlin for defrauding the company by submitting fake invoices.  While the Federal Sentencing Guidelines called for a sentence in the 24-30 month range, U.S. District Judge Robert Dawson sentenced Coughlin to 27 months of home confinement.  Judge Dawson relied on alternative grounds for sentencing outside the Guidelines, finding that Coughlin's serious health issues warranted home confinement, and that his charitable works and the effect of his guilty plea on his standing in the community, among other things, were sufficient punishment and that a prison term was not necessary to fulfill the goals of sentencing.  A variance of that degree was likely to draw an appeal from federal prosecutors, particularly the latter grounds cited by the judge.  A Morning News (N.W. Arkansas) story (here) discusses the government's sentencing appeal.

In addition to having to defend the sentence, Coughlin has been sued by the other former Wal-Mart executive caught up with assisting him in the embezzlements from the company.  Robert Hay, a former vice president of merchandising systems who pleaded guilty to mail fraud in connection with falsifying the invoices for Coughlin, filed a lawsuit in state court seeking damages for emotional distress.  In addition, Coughlin still faces a civil suit from Wal-Mart over his conduct, so his legal worries are far from over. An AP story (here) discusses Hay's lawsuit. (ph)

September 11, 2006 in Fraud, Sentencing | Permalink | Comments (0) | TrackBack (0)

Payer of Bribe to Louisiana Congressman Sentenced to 87-Month Prison Term

Kentucky businessman Vernon Jackson, former CEO of telecommunications company iGate Inc., received an 87-month prison term after pleading guilty to two counts of conspiracy and bribery.  According to the criminal information (press release here) filed in the case:

Representative A told Jackson that Representative A would not continue to provide official assistance to Jackson’s company iGate, unless Jackson agreed to pay a nominee company ostensibly maintained in the names of Representative A’s spouse and children. Jackson agreed and signed a consulting services agreement committing iGate to pay the nominee company various things of value in return for Representative A’s performance of official acts in furtherance of iGate’s business in Africa and elsewhere. This includes, but is not limited to monthly payments of $7,500; a percentage of iGate’s gross sales; a percentage of capital investments raised for iGate; options for iGate stock; and payment to a member of Representative A’s family to perform legal work for various iGate business ventures.

"Representative A" has been identified as Louisiana Representative William Jefferson, and this is the second defendant to plead guilty to paying bribes to the Congressman, who denies receiving any corrupt payments.  Both defendants have agreed to cooperate in the continuing investigation. 

In May, the FBI conducted a search of Representative Jefferson's Capitol Hill office, triggering a confrontation between Congress and the Department of Justice over interference in the legislative branch.  A District Judge upheld the legality of the search, and the issue is now before the D.C. Circuit, which has ordered prosecutors not to allow any review of the seized documents until after the court renders its decision.  Given that the mid-term elections are nearly upon us, it is unlikely the Department of Justice will seek an indictment of the Congressman before the election, to avoid any interference in the process.  Once that is past, however, the government may well bring charges. (ph)

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

Who Wants to Sponsor DOJ's Bill to Preserve Lay's Conviction

As discussed in an earlier post (here), the Department of Justice has sent a proposed bill to Congress seeking to avoid the effect of the abatement doctrine that would otherwise remove the indictment and conviction of Ken Lay from the record because he died before his first appeal was completed.  If adopted, and assuming it is constitutional, the proposed law would permit prosecutors to rely on the jury's verdict in seeking forfeiture of Lay's assets.  As the Houston Chronicle reports (here), to this point the bill does not have a sponsor, which is necessary for it to move forward in Congress.  In a fine show of political conviction, Houston-area Congressman Gene Green stated, "I have dozens of people who have lost all their life savings when they invested in 401(k)s in Enron . . . I don't like Congress to react to just one case, but in this case, because it is in the Houston area, I would vote for it and support it."  No word yet whether Rep. Green will sponsor the legislation, although a lone Democrat on a bill is not a strong signal that it will pass quickly. (ph)

September 11, 2006 in Enron, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Sunday, September 10, 2006

Stolt-Nielsen Indicted for Antitrust Violation

After a two-year battle to keep from being charged, parcel tanker shipping company Stolt-Nielsen S.A. and two of its subsidiaries were indicted for antitrust violations, along with two individuals.  The case has been closely watched because this is the first time the Department of Justice has indicted a company that had taken advantage of the Antitrust Division's Corporate Leniency Policy.  The Policy, adopted in 1993, states (here) that "[t]he Division has a policy of according leniency to corporations reporting their illegal antitrust activity at an early stage, if they meet certain conditions. 'Leniency' means not charging such a firm criminally for the activity being reported. (The policy also is known as the corporate amnesty or corporate immunity policy.)"  The policy is unique in that the first one to report -- assuming it comes early enough -- gets a complete pass and not the more common deferred prosecution agreement or single-count guilty plea seen in other corporate crime cases. 

While Stolt-Nielsen originally reported itself under the Policy and received the immunity from prosecution, that all changed when the Department claims to have received information that the price-fixing activities continued.  According to the Department's press release (here):

In March 2004, the Antitrust Division revoked the conditional leniency that had previously been granted to the Stolt-Nielsen entities under the Division’s Corporate Leniency Program. Stolt-Nielsen’s conditional leniency was predicated on a number of representations made by the company, including a promise that the company “took prompt and effective action to terminate its part in the anticompetitive activity being reported upon discovery of the activity.” The Division revoked the conditional leniency after it learned from other sources that top Stolt-Nielsen executives, including its managing director Wingfield, had continued to meet with competitors and participate in the conspiracy for months after the scheme’s discovery by Stolt-Nielsen’s then-general counsel, and that Stolt had both withheld and provided false and misleading information about the true extent of the conspiracy.

Stolt-Nielsen obtained an injunction from the District Court prohibiting the indictment because of the Corporate Leniency Policy, but the Third Circuit reversed the lower court, which dissolved the injunction on August 24, 2006, paving the way for the indictment.  The company has a number of court filings relevant to the case on its website (here).

The widespread use of deferred prosecution agreements for corporations is a fairly recent phenomenon, and to this point no company has been found to have violated the terms of one, although the ongoing investigation of Bristol-Myers Squibb may raise the issue (see earlier post here).  Stolt-Nielsen can still assert its position regarding the Corporate Lenience Policy in a motion to dismiss the indictment because the Third Circuit's decision was based on the limited authority of a court to enjoin the Executive Branch under separation of powers principles, and not the merits of the company's claim that it had not violated the Policy.  The way this issue plays out will be interesting for possible future cases involving alleged violations of deferred prosecution agreements. (ph)

September 10, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Who Better to Teach Accounting 101

Former Texas Southern University president Priscilla Slade will not be permitted to teach accounting courses this term due to the pending criminal charges against her arising from alleged misuse of University funds for her personal expenses.  Slade was fired as president earlier in 2006 because of the alleged financial improprieties, but she retained her tenured position as a professor of accounting and was scheduled to teach courses this term.  Seeking to avoid the problem of having her put her practical finance knowledge to use in the classroom, the University's acting president placed her on paid leave while the faculty reviews whether to strip her of tenure and remove her from the faculty.  For those familiar with academia, that is a momentous step, and one rarely taken. 

An article in the Houston Chronicle (here) notes that Slade is the highest paid professor on the faculty, in large part because her contract as president permits her to return to the faculty at 75% of her administrative pay.  That's almost enough to make one want to become an administrator . . . almost.  For an interesting take on this case and a lawsuit in Austin involving a UT law professor, check out Tom Kirkendall's post on the Houston's Clear Thinkers blog (here). (ph)

September 10, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (6)