Saturday, February 4, 2006

Is White Collar Crime A Texas Thing?

While everyone is focusing on Houston, Texas and the Enron trial, USA Johnny Sutton, over in Western District of Texas has been pretty busy with white collar cases.

  • A former bank vice president, who plead guilty to one count of bank fraud and one count of misapplication by a bank officer or employee, was sentenced to 46 months in prison and ordered to pay restitution.  She was alleged to have stolen 1.2 million from the Bank of Sierra Blanca. (see here)
  • A San Antonio businessman "pleaded guilty to one count of conspiracy to commit money laundering" "admit[ting] to defrauding an insurance company of more than 1.3 million. (see here)
  • And looking at the list of very recent press releases here it looks like this USA's office has been busy with everything from alien smuggling charges, an ebay scam, and "foreign earned income exclusion case."

(esp)

February 4, 2006 in Fraud | Permalink | Comments (0) | TrackBack (1)

The Libby Trial: Ready, Set . . . Wait

U.S. District Judge Reggie Walton has set the trial of I. Lewis Libby to begin on January 8, 2007.  With the two sides wrangling over discovery, the likely challenges from the media to subpoenas, and, most importantly, the procedure for release of national security information under the Classified Information Procedure Act (CIPA here), even that date might be too ambitious.  The case will likely have periods with no apparent activity and then brief, contentious eruptions involving the media and discovery issues.  An AP story (here) notes that Special Counsel Fitzgerald asserted that the government has complied with all of its discovery obligations to this point, while defense counsel Theodore Wells said there were "thousands and thousands and thousands" of pages of evidence withheld by the government -- I'm not sure if that means millions because the math is a bit fuzzy there.  Unlike most discovery issues, the disclosure of information governed by CIPA will be briefed in camera and argued in closed sessions, with few public indications of how the issues are being resolved.

Judge Walton wanted to start the trial in September, but he dashed the hopes of Democrats that its conclusion might be timed for the November mid-term elections because one of Libby's lawyers has a conflict with another trial in the fall.  For those wondering how Libby is paying for his legal defense team, an AP story (here) describes the "Scooter Libby Legal Defense Trust" as having raised $2 million to date, with a total fundraising goal of $5-6 million.  Given the level of wrangling already seen, even that figure may not be enough to cover all the lawyers. (ph)

February 4, 2006 in Plame Investigation | Permalink | Comments (0) | TrackBack (0)

Friday, February 3, 2006

It Just Never Ends

Sometimes, it's just too much to keep up with all the happenings in the white collar crime world.  Thankfully, there are terrific blogs (and bloggers) who pay attention in this area, and below are three worth checking out:

  • David Giacalone on the f/k/a . . . blog discusses the sentences of lawyers who ran a debt counseling agency with offices in New York and Vermont, and the widely disparate sentences they received (here and here).  One defendant, who cooperated in the investigation, received a one-month sentence given by U.S. District Judge Murtha in Vermont.  The second defendant, who went to trial, received a 188-month sentence.  A bit of a gap there?  The cost to the clients was enormous, and  David asks whether the one-month sentence was a type of "professional courtesy" in which the judge showed greater sympathy for the defendant than for the numerous victims who placed their trust in a fiduciary required to put their interests first.  For the first defendant, the court noted that he suffered from a drug addiction, but the fraud spanned numerous locations and involved many victims who suffered substantially. 
  • Tom Kirkendall on the Houston's Clear Thinkers blog (here) has a post about Edwin T. McBirney from the old Sunbelt Savings, one of the many S&Ls that flamed-out spectacularly in the late 1980s and early 1990s.  In those rather quaint days, McBirney received the then-unheard of sentence of 15 years, and he testified against a number of his cronies from Sunbelt and got the sentenced dropped to five years, with five years probation.  As Tom recounts in his post,  "Alas, it seems as if McBirney had a difficult time reconciling his taste for living with his $7.5 million restitution obligation. While in prison, McBirney set up a trust to mask his post-prison earnings, so -- upon his release from prison -- McBirney was able to get by on as little as $50,000 a year despite the fact that he continued to enjoy a chauffeur-driven limousine, a $600,000 home in North Dallas and expensive meals in trendy restaurants. In short, McBirney never met an expense that couldn't be written off as a cost of doing trust business." McBirney was convicted on multiple counts of fraud, money laundering, and lying to the federal government.  Does anyone remember a time when the S&L Crisis was the biggest thing to ever hit corporate America?  Where will the next scandal come from?  Needless to say, it may be difficult for McBirney to argue that his conduct was an aberration.
  • Bruce Carton on the Securities Litigation Watch blog has a post (here) about the settlement of an SEC insider trading case in which the defendant made an anonymous posting on a company's stock bulletin board signalling a takeover the next day of a company.  The post states, "by: auntbetty1234 [. . .] Happy Valentine’s Day to my Nephew Smitmie. He’ll be 12 ½ on thursday. When I take him shopping, he just wants to buy-out everything in the store. He’s so cute and much smarter than most.  Love, Aunt Betty."  Bruce translates the posting by William Day, who settled the case: "The SEC says that on February 13, 2002, approximately twenty-four hours before the acquisition was publicly announced, Day made the anonymous posting above using the online alias 'auntbetty1234' on an internet message board dedicated to Oratec, the contents of which revealed that he possessed material, nonpublic information regarding the tender offer, including: the name of the acquiring company ('Nephew Smitmie'); the price per share ('He’ll be 12 ½'); the tender offer structure ('buy-out'); and the offer announcement date ('Happy Valentine’s Day)."  As they used to say on Get Smart: "Genius, Max, genius."  Unfortunately, Mr. Day got caught, so he's not that smart.

(ph)

February 3, 2006 in Insider Trading, Prosecutions, Sentencing | Permalink | Comments (0) | TrackBack (1)

Former Connecticut State Sentator Receives Five-Year Term for Corruption

Former Connecticut state Senator Ernest Newton received a five-year prison term after pleading guilty to bribery, tax evasion, and honest services fraud charges.  Former Connecticut Governor John Rowland was sentenced to a year-and-a-day for accepting over $100,000 in gifts, while Newton received a much more substantial sentence based on his guilty plea to accepting a $5,000 bribe -- which was not reported on his taxes, not surprisingly -- and taking campaign contributions for personal use.  Newton's attorney requested a sentence of home confinement, which in the current political environment was quite unlikely.

Regarding the disparity between the Rowland and Newton sentences, a Hartford Courant article (here) notes that the U.S. Attorney stated the government had sought a longer term for Rowland, and that Newton plead guilty to three charges and Rowland only one, although the number of counts of conviction usually does not affect the prison term that much.  The two were sentenced by different judges, and Senior U.S. District Judge Nevas stated in sentencing Newton that his own political experience in the state legislature informed his view of the harm caused by Newton.  Still, a former governor receiving a year and a state senator receiving five years for roughly comparable corruption is hard to explain.  (ph)

February 3, 2006 in Corruption, Sentencing | Permalink | Comments (0) | TrackBack (0)

Thursday, February 2, 2006

Deferred Prosecution Agreements and Admissions of Guilt

The National Law Journal has an interesting story (here) about the challenge by the KPMG individual defendants to the partnership's deferred prosecution agreement related to the sale of tax shelters.  One provision of the agreement requires that employees of the firm conform their statements to KPMG's admissions regarding the wrongfulness of the tax shelters and that incomplete or inaccurate information was provided by the firm to the IRS and clients.  In effect, any witness called by the government must be consistent with that position or the firm risks breaching the agreement and triggering the reinstatement of the criminal charges, a virtual kiss of death for an accounting firm. 

Does such a provision violate the rights of the defendants by preventing them from obtaining evidence from current employees that would support their defense?  The government likely will argue that the agreement is binding on the firm alone, and the admission of wrongdoing is the "truth" regarding the tax shelters so there is no obstruction of the defendants' access to evidence.  The agreement does not prevent the defendants from obtaining evidence because what they will get is in fact consistent with the firm's admissions in the deferred prosecution agreement.  Such an argument is a bit circular -- if that's not the same as being kinda pregnant -- because the assumption is that KPMG's admissions are both accurate and complete, and there are no shades of gray.  Of course, in tax, we know differently.

The recent deferred prosecution agreement by Roger Williams Medical Center contains a provision in which the hospital "admits" that its executives, who were also indicted, committed the charged offenses (see earlier post here).  Does this provision have any meaning?  To the extent that the Medical Center is bound to assist the government, it would have to support that admission.  While the statement has no direct effect on the determination of the guilt of the individual defendants, it could affect the jury pool by getting into the media the assertion of the defendants' guilt.  As deferred prosecution agreements evolve, I wonder whether the Department of Justice will craft internal guidelines for what is and is not permissible in such an agreement.  At the moment, it's still the Wild West. (ph) 

February 2, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Special Counsel Fitzgerald's Response to Libby's Discovery Requests

The Raw Story has the letter (here) sent by Special Counsel Patrick Fitzgerald to I. Lewis Libby's counsel, dated Jan. 31, 2006, responding to requests for certain documents as part of the discovery in the prosecution.  Defense discovery in federal prosecutions is fairly limited, governed by the provisions of Federal Rules of Criminal Procedure 16 (discovery of documents and tangible items) and 26.2 (witness statements/Jencks Act), along with the due process requirement of Brady v. Maryland that material exculpatory evidence be produced in time to be used at trial.  The discovery dance can be quite elaborate, and the Libby prosecution is complicated by the fact that the Classified Information Procedure Act will also be invoked because national security information is at issue.  In Fitzgerald's letter, the initial issue addressed is the Special Counsel's rejection of the defense demand for "open file" discovery, asserting that it is not the policy of either the District of Columbia or the Department of Justice to turn over all documents.  Later on, buried in the penultimate paragraph of the seven-page letter, is the statement that not all e-mails sent through the President and Vice President's offices were preserved.  How much is missing is not clear, but one begins to see the ghost of Rosemary Woods stretching out somewhere near the White House's computer server. (ph)

February 2, 2006 in Plame Investigation | Permalink | Comments (1) | TrackBack (0)

DOJ Website for Enron Exhibits

In the absolute blizzard of information on the Enron conspiracy trial, the Department of Justice has put up a helpful website that will contain links to exhibits introduced by the prosecution in the case.  According to a posting on DOJ's website, "The Enron Exhibits Website will contain publicly released documents, including exhibits entered into evidence by the government and any press releases related to court proceedings."  The website is http://www.usdoj.gov/enron/index.html.  As usual, the best coverage in the general media is the Houston Chronicle's website: http://www.chron.com/news/specials/enron/.  (ph)

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

Two Former Bank of China Employees Charged with $485 Million Fraud and Money Laundering Scheme

Two former Bank of China employees and their wives have been charged with fraud, money laundering, and RICO violations related to a fraud that netted approximately $485 million.  According to the Department of Justice press release (here):

Xu Chaofan (a/k/a Hui Yat Fai), Xu Guojun (a/k/a Hui Kit Shun), Kuang Wan Fang (a/k/a Wendy Kuang), Yu Ying Yi, and Kwong Wa Po were charged in the 15-count superseding indictment. The charges in the indictment stem from an elaborate scheme to defraud the Bank of China of at least $485 million, orchestrated by former managers Xu Chaofan, Xu Guojun and a third former bank manager, Yu Zhendong (a/k/a Yu Wing Chung) who has pleaded guilty in connection with this investigation and is cooperating. The scheme allegedly involved efforts by the bank managers to launder the stolen money through, Hong Kong, Canada and the United States, among other countries, and then immigrate to the United States from China with their wives by obtaining false identities and entering into sham marriages with naturalized U.S. citizens. The bank managers’ true wives, Kuang Wan Fang and Yu Ying Yi, allegedly assisted their husbands in laundering the proceeds of the fraudulent scheme and violated U.S. immigration laws by entering this country illegally and then securing United States citizenship and passports through fraudulent means.

(ph)

February 2, 2006 in Fraud, Money Laundering, Prosecutions | Permalink | Comments (0) | TrackBack (0)

General Re and AIG Executives Indicted for Fraud Related to Reinsurance Transaction

Three former General Re executives and one former American International Group Inc. executive have been indicted in the Eastern District of Virginia .  The fraud and conspiracy charges arise out of a transaction between the companies that permitted AIG to inflate its insurance reserves by treating it as a reinsurance agreement when in fact under accounting rules it should have been treated as a loan.  The transaction allowed AIG to overcome problems it had on Wall Street with estimates that its insurance reserves, a key financial figure, were insufficient, while General Re reaped the benefit of a lucrative transaction with a leading insurer.  The General Re defendants are its former CEO, Ronald Ferguson, CFO Elizabeth Monrad, and assistant general counsel Robert Graham, while Christian Milton was the head of AIG's reinsurance operations.  Ferguson retired from General Re in 2001, and in 2005 the company's parent, Berkshire Hathaway, terminated his consulting agreement because he refused to cooperate in the government's investigation by stating he would assert his Fifth Amendment right.  Monrad left General Re to become the CFO at TIAA-CREF, from which she resigned after the investigation became public.

Although reports of the indictment have appeared in the press (see Bloomberg story here), neither the U.S. Attorney's Office nor the SEC have made any public statement.  Most likely, the indictment was returned on Feb. 1 and then sealed to permit the defendants to arrange to surrender, rather than having an unseemly "perp walk" after being arrested.  Once the prosecutors and SEC release their filings, a link to them will be posted.

One interesting aspect of the prosecution is whether famed investor Warren Buffet, CEO of Berkshire Hathaway, will be called to testify for the government.  Prosecutors and SEC investigators interviewed Buffet about his discussions with Ferguson about the AIG transaction, and so Buffet may be in important witness regarding Ferguson's knowledge of the transaction and whether his statements were less than truthful regarding whether it was qualified as a reinsurance agreement.  Former AIG CEO Maurice Greenberg also had contact with the transaction, but at this point there's no indication that he is a potential defendant in either the civil or criminal suits. (ph)

UPDATE: The SEC's civil securities fraud complaint is available here, and in addition to the four defendants in the criminal case, it also names Christopher Garand, who was the head of General Re's finite insurance business through which the AIG transaction was underwritten.  The opening line of the SEC's description of the factual background to its suit states: "This case is not about the violation of technical accounting rules."  That assertion does not guarantee that it will be interesting, however. (ph)

February 2, 2006 in AIG, Fraud, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 1, 2006

Iraq Contracting Officer to Plead Guilty

Robert Stein, who was a contracting officer for the Southern Region of the Coalition Provisional Authority in Iraq, has agreed to plead guilty to charges of fraud and conspiracy related to a scheme to steal upwards of $2 million through contract awards to a businessman identified as Philip Bloom.  Stein awarded approximately $8.6 million worth of contracts to Bloom, each less than $500,000 because that was the limit of his authority without further authorization.  In an example of the type of stuff no one engaged in a fraud would ever commit to paper, but for some reason is written into an e-mail, Stein wrote to Bloom that "I love to give you money" related to a $200,000 to build a police academy.  In response to an e-mail from Bloom regarding using different company names for the contracts, Stein responded, "Since we are paid in cash it really doesn't matter tax wise."  That's right, if you're evading taxes, but it surely does matter for a fraud (and tax evasion) case.  In addition to Bloom, an AP story reports (here) that five Army reserve officers have also been implicated in the fraud/kickback scheme.  Of course, there may have been another tip-off to possible problems involving Stein: he was convicted in 1996 of bank fraud and sentenced to an eight-month term of imprisonment (see earlier post here). (ph)

February 1, 2006 in Corruption, Fraud | Permalink | Comments (0) | TrackBack (2)

How Do You Have a "Non-Meeting" with a Real Person?

The "scared straight" speech given by Boeing general counsel Doug Bain (from the Seattle Times here) to the company's top executives about significant legal (and moral) problems at the company is certainly striking for its candor, and Peter Lattman on the Wall Street Journal Law Blog has a thorough recap (here) of the highlights (and lowlights) of the talk.  Bain mentioned a number of instances in which Boeing's conduct falls well short of the type of ethical, much less legal, standards expected of a corporation, particularly one involved in sensitive government defense contracts.  One particular part of the speech caught my attention, concerning the contacts between former Boeing CFO Michael Sears and top Pentagon procurement officer Darleen Druyun that led to the aborted hiring of Druyun even though she had not recused herself from Boeing contract awards and admitted she favored the company, which was where her daughter also worked.  One would expect a chief financial officer to know the requirements for negotiating with a government official, and that one must adhere to fairly strict guidelines.  Yet, Sears described his meeting to recruit Druyun as a "non-meeting," as recounted by Bain:

On October 17, 2002, Mike Sears [then chief financial officer of Boeing] flew in a company airplane down here to Orlando and met with Darleen Druyun [then chief acquisitions officer for the Air Force] and offered her a job.  The question everyone keeps asking is, why? The rules on dealing with government employees are not hard. In fact, during the meeting Darleen told him, 'I have not recused myself from Boeing business.'  As best we can figure out, Darleen told Mike in Orlando that she had just received a handshake offer, which she had accepted, from Lockheed Martin. It's my personal belief that Mike then went into a sales mode. He not only wanted to make sure that he got Darleen; he wanted to make sure that Lockheed Martin did not.  The next day, Mike sent an e-mail that said "I had a 'non-meeting' with Darleen Druyun."  If this were all we were facing, we might have been able to deal with it better. But there were a lot of other events that came out. It turned out, in August 2002 Mike had had Darleen come to Chicago and even though the R word was never used, the prosecutors say 'This looks like a recruitment meeting.' So maybe the Oct. 17 conversation was not a one-off.  During the month of September, there was a string of e-mails between Mike and Darleen's daughter, who was employed as an HR person in St. Louis. The e-mails clearly are negotiations for Darleen coming to work for us.  Again, if this is all we were dealing with, we might have had a different issue. However, in the year 2000, Darleen sent a copy of the résumé for her future son-in-law to Mike, asking for his assistance in getting him a job. Mike merely sent on the resume, did not ask for anything to be done. But the people who received it assumed Mike was going to say 'Make it happen' — and they did. A few months later, this had worked, Darleen sent the résumé of her daughter to Mike. Same thing happened. Mike sent the résumé along, and the people made it happen.  All this stuff came together when Darleen was sentenced and she said 'I might have favored Boeing in awarding contracts' because of the favors Boeing had done for her in hiring the son-in-law and the daughter.

So, the cultural questions: How come nobody said to Mike, 'What in the hell do you mean by a non-meeting'? How come in the year 2000 nobody said, 'Should we really be hiring the relatives of our chief procurement officer for the largest customer we have on the defense side?'  It also raises the question, Do we have a culture of silence — don't ask the tough questions?

Both Sears and Druyun ended up being sentenced to federal prison.  Bain is right that a culture of  "getting it done" at any cost can land a company in serious trouble, such as the investigations of Boeing being conducted by two United States Attorney's Offices.  What can possibly impel a senior corporate officer to describe a conversation with a government official who makes decisions regarding the award of contracts to the company, or its competitors, as a "non-meeting" on the assumption that a wink-and-a-nod will make it go disappear?  Maybe Boeing can change, and Bain's speech is certainly a start in addressing the issue of corporate accountablilty beyond simply asserting that these are mere "agency costs." (ph)

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

The Outlines of Libby's Defense

As noted in this earlier post (here), the most likely defense for I. Lewis Libby on the charges of perjury and false statements is the "Dedicated-but-Overworked-Public Servant" position, that a person at his high level dealt with so many issues that a couple telephone calls to (or from) reporters about a bit player in a Washington D.C. sideshow is hardly worth the attention of the chief of staff to the Vice President -- not to put too fine a gloss on things.  In a recent discovery request, Libby's lawyers gave a preview of his defense in requesting documents from the government, many of them secret, regarding the types of national security issues he was dealing with and whether the disclosure of Valerie Plame's position with the CIA caused any damage to national security.  According to his brief filed with the U.S.  District Court, "These documents are material to establishing that any misstatements he may have made were the result of confusion, mistake and faulty memory . . . rather than deliberate lies."   Libby is also seeking information from the special counsel's office regarding contacts with other journalists to determine whether others leaked Plame's identity.

It seems that the defense is taking a two-step approach, first acknowledging that perhaps Libby could have disclosed her identity, albeit inadvertently, and then that any revelation was so insignificant that he would not have recalled it when speaking to the FBI or testifying before the grand jury.  This is similar to the defense offered by Frank Quattrone, the former Credit Suisse First Boston investment banker, to obstruction charges based on his forwarding an e-mail urging other bankers to cleanse their files when he was aware of a pending SEC investigation.  In Quattrone's case, the jury found him guilty, although his conviction has been on appeal before the Second Circuit for nearly a year now.  For Libby, acknowledging that he spoke with reporters about Plame does not draw him into a "he said, he said" fight with the government's witnesses.  At the same time, his credibility will be on the line, and he will almost have to testify to establish his intent (or lack thereof) to rebut the government's case.  With the request for secret documents now before the court, the provisions of the Classified Information Procedures Act kick in, which will slow the pre-trial discovery phase, perhaps significantly. A Washington Post article (here) discusses the latest requests for information by Libby.

February 1, 2006 in Plame Investigation | Permalink | Comments (0) | TrackBack (0)

Insider Trading Based on Recklessness

The SEC filed a settled civil insider trading action against Victor Menezes, a former senior executive at Citigroup, for exercising options and selling shares in the company before a negative earnings announcement.  In late March 2002, Menezes, who was then head of Citi's Emerging Markets division and CEO of Citibank, N.A., leaned that the Argentina debt crisis would have a substantial negative impact on the company's quarterly results.  On March 28, the last day on which he could exercise options and sell shares before the pre-earnings report blackout period, Menezes exercised options on 825,960 Citigroup shares and immediately sold 597,000 of the shares to cover the exercise cost and taxes.  The sale price was $49.99, and on April 15, when the negative earnings announcement came out, the stock dropped to $45.92.  Menezes, who has since retired from Citi, settled the matter by agreeing to pay $2,680,157.77, comprised of disgorgement of $1,567,557, pre-judgment interest of $328,822.77, and a $783,778 civil penalty.

The SEC's Complaint (here) does not allege that Menezes acted with an intent to defraud, but relies solely on an allegation (which will not be disputed) that his conduct was reckless.  The Complaint stated:

As CEO of Citibank and CEO of Citigroup's Emerging Markets division, Menezes owed a duty to Citigroup and its shareholders not to misuse information that he learned in the course of his employment by Citigroup. Menezes was reckless in not knowing that the information he learned about Citigroup's projected Argentina losses and its projected failure to meet consensus earnings estimates was material, nonpublic information. He also was reckless in not knowing that, because the options exercise included the sale of 597,000 Citigroup shares on the open market, he could not engage in the transaction while in possession of such information.

Menezes retained over 200,000 Citigroup shares after the transaction, which is not what one would expect of a person who traded on material nonpublic information.  The claim of only recklessness certainly indicates that the case could not be charged as a criminal violation, and if Menezes were to fight this one I wonder whether the SEC would prevail.  The payment is substantial, and this may truly be a situation in which it  was simpler to settle the case by paying the money rather than risk a trial.  It's not your typical loss avoided case, however, where the seller keeps over 200,000 shares of the company's stock, is not accused of tipping anyone else, and makes the sale a fairly substantial amount of time (over two weeks) before the news will hit. (ph)

February 1, 2006 in Civil Enforcement, Insider Trading, Securities | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 31, 2006

Opening Statements - Lay & Skilling Case

It was opening statements in the Lay and Skilling case today.  It looks like the government will focus on a theme of "the defendants lied" - a smart approach to avoid getting bogged down in this being a white collar paper trial with financial intricacies.  The defense is making its points with comments like - he may have been responsible for the bankruptcy - but not for any crimes. See Peter Lattman's Wall Street Journal Blog here, Tom Kirkendall's Houston Clear Thinkers here, and of course the Houston Chronicle blog here for detailed comments on the opening statement.  But I wasn't sure if it was the Houston Chronicle bloggers and/or the the actual openings that were filled with the sports references. I couldn't help but think how in legal education we find in feminist literature that some professors make assumptions about people being attuned to the sports world in analogies used in the classroom. Catherine Weiss and Louise Melling, The Legal Education of Twenty Women, in the Stanford Law Review 1299, 1337 (May 1988) note the following comment in their article: "Men presume that everyone understands a sports analogy. I would never presume to use a knitting analogy." (Although, I too, use plenty of sports analogies on this blog).

(esp)

January 31, 2006 in Enron | Permalink | Comments (0) | TrackBack (0)

President Bush - State of the Union

One does not find any reference to white collar crime in President Bush's State of the Union address.  He states here that "violent crime rates have fallen to their lowest levels since the 1970's." (NYTimes). And white collar crime?  Is it that there isn't time to cover everything in this speech? 

(esp)

January 31, 2006 in News | Permalink | Comments (1) | TrackBack (0)

Wal-Mart Exec Pleads

Looks like former Wal-Mart executive Tom Coughlin entered a guilty plea. (see AP here).  The plea will be to wire fraud and tax charges. Peter Lattman over at The Wall Street Journal blog here tells of a statement issued by Couglin's attorneys, William Taylor and Blair Brown of Washington D.C.’s Zuckerman Spaeder.  For background on this case see here.

(esp)

January 31, 2006 in Fraud | Permalink | Comments (0) | TrackBack (0)

The Attorney Client Privilege Issue

The attorney-client privilege waiver issue has been a hot topic in the corporate arena with corporations being asked to provide these waivers to secure a deferred prosecution agreement. (see posts here and here)  Back in September, the Sentencing Commission announced that one of its priorities would be to re-examine this provision and what follows is their request for comment. (see federal regulations here):

12. CHAPTER EIGHT - PRIVILEGE WAIVER

Issue for Comment: The Commission has been asked to reconsider a portion of its 2004 amendments to Chapter Eight, the Organizational Sentencing Guidelines, namely, a single sentence of commentary at §8C2.5(g). Section 8C2.5 provides for the calculation of the culpability score for defendant organizations, and subsection (g) provides for graduated decreases in the culpability score if a defendant organization has self-reported, cooperated with the authorities, and accepted responsibility. In 2004, the Commission added the following sentence to the commentary:

Waiver of attorney-client privilege and of work product protections is not a prerequisite to a reduction in culpability score under subdivisions (1) and (2) of subsection (g) [Self-Reporting, Cooperation, and Acceptance of Responsibility] unless such waiver is necessary in order to provide timely and thorough disclosure of all pertinent information known to the organization.

In the Reason for Amendment (see Supplement to Appendix C (Amendment 673)), the Commission stated that it expects such waivers will be required on a limited basis, consistent with statements of the Department of Justice in the United States Attorneys’ Bulletin, November 124 2003, Volume 51, Number 6, pp. 1 and 8.

In light of requests to modify or remove this language submitted to the Commission in the past year, the Commission listed as one of its priorities for the current amendment cycle, the "review and possible amendment" of the waiver language in Application Note 12. At its public meeting on November 15, 2005, the Commission heard testimony from five representatives on behalf of various organizations (the American Bar Association, the Association of Corporate Counsel, National Association of Manufacturers, the Chemistry Council, the Chamber of Commerce, the National Association of Criminal Defense Lawyers, and former officials of the Department of Justice) about what they perceived as the unintended but potentially deleterious effects on the criminal justice process of this commentary language.

Accordingly, the Commission solicits comment on the following: (1) whether this commentary language is having unintended consequences; (2) if so, how specifically has it adversely affected the application of the sentencing guidelines and the administration of justice; (3) whether this commentary language should be deleted or amended; and (4) if it should be amended, in what manner.

(esp) (see also Wall Street Journal here)

January 31, 2006 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Monday, January 30, 2006

Skilling and Lay - Selecting a Jury

It is becoming fairly common for judges to use jury questionnaires to screen for potential bias or other factors that warrant removing a person from the jury, so it was not surprising to see it used here in the trial of Ken Lay and Jeff Skilling.  What perhaps is incredible is the speed in which a jury was picked.  One would think that it might take some time to find and properly screen people from hometown Houston.  After all, it is important to find people who have no connection with Enron and also individuals who have not formed an opinion on this case.  Perhaps the worst scenario is to try the case for a couple of months and then find the need to dismiss jurors who may have been truthful in the answers on their forms, but unaware of all circumstances that needed to be disclosed.

Full details on the trial are being provided by the Houston Chronicle Enron Blogwatch, which reports here that the panel of "16 includes 10 women and six men. The first 12, the most likely jury is four men and eight women."

Tom Kirkendall's Houston Clear Thinkers Blog, reports here of the anticipated long day tomorrow - a 9 A.M. start with the prosecution getting two hours to do their opening and each defendant getting two hours.

(esp)

January 30, 2006 in Enron | Permalink | Comments (1) | TrackBack (0)

Round One- Bill Campbell Trial

Although Round One is not over, so far it sounds like the prosecution may be leading this round of the Bill Campbell trial.  The Atlanta Journal Constitution reports here that a witness who lived in Campbell's  home testified to seeing the passing of money to Campbell. This type of direct evidence could be difficult testimony for the defense to contend with at closing argument.  But cross-examination may show otherwise.  Judges typically instruct jurors at the end of the trial that they judge the credibility of the witnesses who testify and that their bias in testifying can be used in that determination. Stay tuned. 

(esp) 

January 30, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Oral Argument in Ebbers Case

Bernie Ebbers has a lot riding on his appeal as he received a sentence of 25 years. (see here)  He has been permitted to be free pending his appeal, and in large part this is because of the significant issues raised in this appeal. (see here).  A panel of the second circuit, in oral argument, heard Reid Weingarten, Ebber's attorney, argue that defense witness immunity should have been provided in this case. (see here)

Although the prosecution has ample opportunity to obtain immunity for its witnesses, the defense usually is not provided with this benefit.  It is a major disadvantage that the defense has in a criminal case.  While prosecutors can offer plea deals and witness immunity and then use the individuals against an accused, the defense has to find witnesses who are not intimidated by fear of future prosecutorial action, like being indicted.   

CNN (Reuters) (here) also notes that the issue of "conscious avoidance" of knowledge of the fraud at WorldCom and court instructions regarding the mens rea of the crime were discussed at the oral argument. (See here) Should the jury have been allowed to consider the "ostrich" defense? Finally, as one might imagine, the court asked about the high sentence received by Ebbers. (CNN Reuters here)

It is interesting to see these issues being discussed just as Ken Lay's and Jeffrey Skilling's trial begins.  Like Ebbers, Lay and Skilling also may have problems presenting some of their witnesses as a result of these individuals being fearful of prosecutorial retribution.  And like Ebbers, a key issue for Lay and Skilling will be whether they can be held criminally liable for acts in which they may not have been a major or minor participant.  Where is the line between actual knowledge and avoiding knowledge?  For Ebbers the question is surely whether avoiding knowledge should be a sufficient standard for someone receiving a 25 year sentence.

(esp)

January 30, 2006 in WorldCom | Permalink | Comments (1) | TrackBack (3)