Saturday, March 4, 2006

Campbell Trial Update

The defense side of the Bill Campbell trial, the former mayor of Atlanta, is full steam ahead with supportive witnesses testifying on his behalf.  The AJC reports here on "Campbell's former special assistant, Eunice Lockhart-Moss" saying that he was not the"one who signed United Water contracts." But City Attorney Susan Langford also testified on cross-examination, with the AJC noting here that she said more than 50 times in 45 minutes "I don’t recall.”  On Friday, yet another attorney testified,  Steven Labovitz, a Atlanta attorney (see here) was a strong witness for Campbell.  As campaign treasurer he defended actions on recording funds and paying funds.

Question I - Two lawyers testifying on behalf of the defense -- is that a positive or negative?

Question 2- What will the jurors' reaction be to Langford's continual "I don't recall?"  Was it a wise move for the prosecution to elicit that many "I don't recalls" from the witness?  Will this backfire - - will she be portrayed as the honest witness who only tells what she knows? 

Question 3- Has the defense raised some doubt?

(esp)

March 4, 2006 in Corruption | Permalink | Comments (0) | TrackBack (0)

Friday, March 3, 2006

Former Rep. Cunningham Receives 100 Month Prison Term

Former Representative Randy "Duke" Cunningham, a Viet-Nam fighter ace and five-term Congressman before his 2005 resignation, received a sentence of eight years and four months after pleading guilty to corruption and tax evasion charges.  The sentence, the longest ever given a former member of Congress for conduct related to office, fell between the ten-year maximum prosecutors sought and the six years recommended by defense counsel.  As part of the plea agreement, Cunningham's sentence was capped at ten years, and if he were to cooperate in the pending prosecution of three others who paid him the approximately $2.4 million in bribes he received, he could be eligible for a sentence reduction under Federal Rule of Criminal Procedure 35.  An auction of the items acquired with the bribes, and gifts given to secure government contracts, will be auctioned in the near future, and Cunningham has also been ordered to pay $1.8 million in back taxes and penalties.  This is quite a fall from grace, but the misuse of authority for naked personal gain at the cost of awarding contracts that were unneeded by the military is among the most brazen seen in recent history.  An AP story (here) discusses the sentencing. (ph)

_________________________________________________________

Eight years four months for Cunningham for $2.4 million in bribes.   Not a case of no intent, not a case of not understanding the law, and not a case of walking a fine line in the corporate  world.

The sentencing guidelines were established to achieve uniformity.  Is this sentence uniform with those of Bernie Ebbers (25 years),  John Rigas (15 years), Timothy Rigas (20 years).  And based on this sentence, what should Jamie Olis now receive as his sentence?

(esp)

March 3, 2006 in Corruption, Sentencing | Permalink | Comments (4) | TrackBack (0)

Fitzgerald to Libby: "REDACTED"

The joy of a prosecution involving an extensive grand jury investigation along with highly sensitive national security information is that important filings in the case are largely blank when released to the public.  An affidavit filled by Special Counsel Patrick Fitzgerald (available below) opposes I. Lewis Libby's request for disclosure of information about what was disclosed to other reporters than those with whom Libby allegedly spoke about the status of Valerie Plame as a CIA operative.  The sixteen page affidavit has all of the pertinent information redacted, so that all one "reads" on pages 2 through 12 are blanks.  Paragraph 43 is particularly tantalizing and typically frustrating, stating:

The one significant piece of information that Libby is not being told is the identity of REDACTED as a source for REDACTED. Moreover, Libby has been given a redacted transcript of the conversation between Woodward and REDACTED and Novak has published an account briefly describing the conversation with his first confidential source REDACTED.

Darn, we can almost read between the lines, but not quite.  This is how it will be for a quite a while as the parties fight out issues related to disclosure of grand jury information and the Classified Information Procedure Act behind closed doors and through redacted filings, particularly from the Special Counsel's office. (ph)

Download fitzgerald_affidavit_ex_parte.pdf

March 3, 2006 in Plame Investigation | Permalink | Comments (0) | TrackBack (0)

Third Rigas Sentenced

Reuters reports (here) on the sentencing of the "third" Rigas -- Michael -- who was acquitted on some counts and the jury hung on others at the 2005 trial that resulted in the conviction of his father John and brother Timothy on conspiracy and securities fraud charges.  Michael entered a guilty plea to a false document filing charge, and has been sentenced to ten months home confinement and two years probation, a significantly (to say the least) lighter sentece than his father (15 years) and brother (20 years) received.  In giving the sentence, U.S. District Judge Jed Rakoff noted that Micheal was "on a totally different footing" from his father and brother, and certainly his sentence distinguishes him from them. (ph)

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

Former Homestore Executive Pleads Guilty

Former Homestore Inc. executive Peter Tafeen agreed to plead guilty to one count of securities fraud in connection with an accounting fraud at the internet company.  The scheme involved round-trip transactions in which Homestore would record revenue from deals in which there was no real exchange of value but that allowed the company to show increased revenue, feeding Wall Street's desire for ever-increasing growth.  Tafeen admitted to making $6.5 million from selling Homestore shares, and has agreed to testify against former CEO Stuart Wolff at his fraud trial scheduled to begin in late March.  Tafeen has been involved in continuing litigation in Delaware state court regarding the company's obligation to pay his attorney's fees under an indemnification agreement, and that aspect of the case is likely to come to a close with the guilty plea (see earlier post here on the insurance company getting out of its obligation to reimburse the cost of counsel). An AP story (here) discusses the guilty plea. (ph)

March 3, 2006 in Fraud | Permalink | Comments (0) | TrackBack (0)

Hotel Owner Indicted for Katrina-Related Fraud

The lure of easy money from the Hurricane Katrina disaster relief seems to have tempted a supplier.  Galveston hotel owner Daniel Yeh was indicted in the Southern District of Texas on wire fraud and false claims charges related to falsified submissions for reimbursement for providing lodging to Katrina victims at the Flagship Hotel.  According to the U.S. Attorney's Office press release (here):

[I]t is alleged that Daniel Yeh took over the task of billing the federal lodging programs online after Hurricane Rita. Yeh is accused of filing fraudulent claims for reimbursement for (1) rooms in the names of hotel employees who previously stayed at the Flagship free of charge as part of their employment arrangement; (2) rooms in the name of supposed hurricane evacuees on dates when those rooms were occupied by paying hotel guests with different names; (3) rooms occupied by friends, relatives, and employees of his wife’s business, who were recruited to stay at the hotel, but were not evacuees; (4) rooms in the names of supposed hurricane evacuees who never had rooms at the Flagship; (5) rooms in the name of supposed hurricane evacuees on dates when those rooms were unoccupied; (6) for multiple rooms in the names of a single guest when, in fact, the guest occupied fewer rooms than billed.

Yeh is accused of bilking the FEMA Public Assistance program out of $232,000, a much higher figure than the amounts seen in other Katrina frauds. (ph)

March 3, 2006 in Fraud, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Thursday, March 2, 2006

Another One Caught in a Nigerian 419 Scam

The e-mails arrive with alarming regularity -- at least if your address is publicly available like mine -- imploring you to help the widow or orphans of a high level former government official from an African country whose untimely demise has left a large sum of money sitting in a bank waiting for you to help move it, for a cut of the profit of course.  They are almost laughable, with the misspellings and appeals to greed cloaked in altruism.  Except that, somehow, these missives continue to draw in people, some quite well-educated, who can lose large amounts of money chasing the pot of gold.  An LA Times story (here) discusses another victim, this time Dr. Louis A. Gottschalk , a prominent psychiatrist at the University of California at Irvine, who may have been taken for upwards of $3 million over ten years as part of the scam.  Dr. Gottschalk's son, Guy, has filed a lawsuit to remove the 89-year old as the administrator of a family partnership because he has allegedly destroyed records to hide the amount of the losses from the scheme.  Dr. Gottschalk has responded that his son is on a "vendetta."  If the son's claims about the scam are true, this may rank among the most successful Nigerian 419 frauds perpetrated, and it probably will encourage more e-mails seeking the next victim.  I can't wait to receive them. (ph)

March 2, 2006 in Fraud, International | Permalink | Comments (0) | TrackBack (1)

Former Associate GC Sued for Insider Trading by SEC

The SEC filed a civil insider trading action against Mitchell Drucker, the former associate general counsel at NBTY Inc., a nutritional supplement company, for insider trading and tipping his father before the announcement of bad news at the company.  According to the SEC's Litigation Release (here):

The Commission's Complaint, filed in the United States District Court for the Southern District of New York, alleges that on October 18, 2001, M. Drucker directed the sale of his entire holdings of NBTY stock, consisting of 25,700 shares, after learning material, non-public information that NBTY's fourth quarter earnings per share ("EPS") would be about 50 percent lower than analysts' expectations. The day after M. Drucker's sales, NBTY publicly announced, through a press release, that its fourth quarter EPS would be significantly lower than analysts' expectations. On the next trading day following the issuance of the press release, the price of NBTY shares fell by 27%, or $2.69.

The SEC calculates that Drucker's loss avoided was $138,174, his father's was $51,116, and the account of a friend who Drucker directed to sell shares avoided losing $7,953.  (ph)

March 2, 2006 in Civil Enforcement, Insider Trading, Securities | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 1, 2006

Former Louisiana Governor Strikes Out Again Attacking His Conviction

It took the federal government a few trips to the well to convict former Louisiana Governor Edwin Edwards -- elected to that office four times and one of the more colorful rogues in recent political history.  Edwards and his son, Stephen, were convicted in 2000 on a variety of corruption charges, including RICO, and they received sentences of 120 months and 84 months, respectively.  Even then, another federal trial after the conviction resulted in an acquittal of Edwards on different corruption charges.

After affirming the convictions on direct appeal in 2001 that was argued by Alan Dershowitz, the Fifth Circuit has now turned down the Edwards' Sec. 2255 motions to vacate the convictions on grounds that the government suppressed exculpatory evidence in violation of Brady v. Maryland.  They first contended that a key government witness had a secret agreement with federal and state prosecutors to shield his gains from a gambling license obtained through bribery of then-Governor Edwards from a state civil forfeiture action, and along the way threw in a claim that the federal judge who took the witness' plea was a party to the secret agreement.  The Fifth Circuit's opinion (U.S. v. Edwards here) flatly rejected the claim, finding no evidentiary support and noting that the state court hearing the civil forfeiture suit heard testimony that there was no such agreement.  The second basis for the Sec. 2255 motions was that the government failed to disclose one of its witnesses was planning to write a book about his involvement in Edwards' bribery, a fact that the Fifth Circuit held was immaterial to the case and therefore not a ground to reverse the conviction.

This is likely the last gasp by Gov. Edwards to have his conviction overturned.  He is currently serving his term at the Oakdale (LA) federal detention center, which includes a satellite camp for minimum security prisoners.  His release date is July 2011, at which time he will be 83 years old.

March 1, 2006 in Corruption, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

L.A. Divorce Lawyer Is a Subject of the Pellicano Investigation, But That May Not Mean Much

Los Angeles divorce lawyer Dennis Wasser, whose clients have included Tom Cruise and Steven Spielberg, may be caught up in the burgeoning investigation spawned by the secret wiretapping and government data base inquiries of former PI Anthony Pellicano.  An LA Times story (here) states that prosecutors informed Wasser that he is a "subject" of the grand jury investigation that appears to be related to the recent indictment of another Los Angeles attorney, Terry Christensen, whose involvement with Pellicano relates to the divorce proceeding of billionaire investor Kirk Kerkorian.   

What does it mean to be a "subject" of a grand jury investigation?  It is certainly not comforting, but the Department of Justice's definition in the U.S. Attorney's Manual (here) is quite broad: "A 'subject' of an investigation is a person whose conduct is within the scope of the grand jury's investigation."  Given the breadth of the grand jury's investigative power -- to inquire into any possible violation of federal law, or to assure itself that there has not been a violation -- being a subject does not necessarily indicate that the person will be charged with a crime, or that their conduct is anything more than a tangential part of the investigation.  Unlike a target, "a person as to whom the prosecutor or the grand jury has substantial evidence linking him or her to the commission of a crime and who, in the judgment of the prosecutor, is a putative defendant," a subject could turn out to be a witness whose involvement does not involve any criminal conduct. 

On a related note, Peter Lattman on the Wall Street Journal Law Blog points out (here) that Wasser's attorney's firm has "an interminable law-firm name that once again seems to uphold our theory about Hollywood lawyers needing to see their name in lights."  Remember, it is Hollywood, so no doubt the story has already been optioned by a studio. (ph)

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

Four Korean Executives Agree to Plea Bargain and Jail Sentences in Price Fixing Conspiracy

Four Korean executives of Hynix Semiconductor Inc. entered guilty pleas to a single count of conspiracy to fix prices in the Dynamic Random Access Memory (DRAM) chip market that will include serving sentences from five to eight months in the United States.  The defendants agreed to waive any challenges to U.S. jurisdiction over them and to pay $250,000 fines. The government's investigation of the world-wide price-fixing conspiracy in the DRAM market, which includes sales in the U.S. of over $7 billion annually, has already snared leading manufactures who have entered guilty pleas and agreed to pay hefty fines: Samsung ($300 million), Hynix ($185 million), Infineon ($160 million), and Elpida Memory ($84 million).  A Department of Justice press release (here) discusses the guilty pleas and the investigation. (ph)

March 1, 2006 in International, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Young Testifies for Campbell

This will be a historical moment in years ahead.  Former Mayor Andrew Young taking the witness stand to testify for Former Mayor Bill Campbell in his criminal trial in federal court. (see prior post here)  The Atlanta Journal Constitution reports here on Young's testimony as the first witness for the defense in the Campbell case.  Young noted how everyone wants to be your friend when your in office as the mayor. 

The prosecution probably made some points with some jurors when showing the difference between the trips taken by Campbell and those that Young took when he was mayor. Gambling jaunts versus going abroad to find business for the city of Atlanta is a different approach to the political office.  But does this gambling conduct of Campbell amount to criminality?  More importantly will some jurors empathize with Campbell after hearing the difficulties of the office from former Mayor Andrew Young,  someone who is so well-respected by people in the city of Atlanta.

(esp)   

March 1, 2006 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Poof Goes Over $100 Million

The mess at International Management Associates (IMA), the Atlanta-based hedge fund manager accused by a group of former NFL players of fraud and embezzlement, looks like it will result in a nearly complete loss for investors.  The SEC filed a securities fraud suit against IMA and its CEO, Kirk Wright, on Feb. 27 alleging that the firm lied to investors and that its has only minimal assets.  According to the SEC Litigation Release (here):

The Complaint alleges that from February 1997 to the present, approximately $115 million, and as much as $185 million, was raised from up to 500 investors through the fraudulent investment scheme. IMA and IMA Advisory, through Wright, have been providing investors with quarterly statements that misrepresented both the amount of assets in the respective funds and the rates of return obtained by them. In fact, by 2005, the assets of the funds had been largely dissipated, and this fact was not disclosed to the investors of the funds. The Complaint further alleges that Wright produced for certain investors account statements purportedly from a securities broker-dealer, showing over $155 million in securities in four accounts for August 2005, when in fact the first three accounts did not exist, and the fourth account number pertained to an account unrelated to the defendants. The Complaint also alleges that account statements and summaries which Wright displayed to an investor's representative reflecting the balances of Platinum I, Platinum II and Emerald Funds as of December 30, 2005 were fabricated and reflected assets which the funds did not possess at that time.

It has been reported that only $150,000 has been found to this point, and that Wright is no where to be found at the moment (see CNN.Com story here); a warrant was issued by a Georgia state court for his arrest in connection with the appointed receiver's efforts to find the firm's money.  More ominously for Wright, the FBI is surely on the scene looking for him and the money.  As noted in an earlier post (here), the only real protection for investors in hedge funds is the integrity of the operators, and in this case it looks like there won't anything more tangible than falsified records for investors to chew on. (ph)

March 1, 2006 in Civil Enforcement, Fraud, Securities | Permalink | Comments (0) | TrackBack (0)

The Abramoff Effect

With Jack Abramoff talking, it is not surprising to see others taking note.  For one, AP reports here that state lawmakers are cracking down on lobbying with new laws that prohibit gift-giving in the lobbying industry.

And the Washington Post had a wonderful story here giving detail on the personal side of Jack Abramoff.  The column presents a different side to the Abramoff being portrayed in most papers. One has to wonder if many are deliberately trying to paint Abramoff negatively so that his image will be tainted when he testifies against the politicians and others who might have been engaged in wrongdoing with him.

(esp)

March 1, 2006 in Corruption | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 28, 2006

Restricting the Hobbs Act

The Supreme Court today issued a decision in the case of SCHEIDLER et al. v. NATIONAL ORGANIZATION FOR WOMEN, INC., et al. (see here), a case that has made its way to the Court on more than one occasion. Although the case is clearly not a white collar matter as it involves the physical violence aspects of the Hobbs Act, the Court's decision may lend a clue as to how the Court feels about a broad interpretation of this statute.  In Scheidler the Court stated, "[w]e hold that physical violence unrelated to robbery or extortion falls outside the scope of the Hobbs Act."  The Court noted that:

"Congress did not intend to create a freestanding physical violence offense in the Hobbs Act. It did intend to forbid acts or threats of physical violence in furtherance of a plan or purpose to engage in what the statute refers to as robbery or extortion (and related attempts or conspiracies). "

Obviously, it is unknown whether this posture would carry over to white collar cases premised on other portions of the Hobbs Act, or for that matter RICO (the Hobbs Act is a RICO predicate).

(esp)

February 28, 2006 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Monday, February 27, 2006

Respect for the Press

Subpoenaing the press will not be haphazard at the SEC. The Wall Street Journal reports here that Securities and Exchange Commission Chairman Christopher Cox  will require commissioner notification prior to subpoenaing documents from journalists.  This policy comes in the aftermath of a subpoena that had been issued to two Dow Jones & Co. journalists.

Internal agency policy on issues of this magnitude is important to protect against individual decision-makers, who may have enormous discretion, acting in variance with others with the same discretionary power. Approval not only will provide oversight to these policy decisions, but also allow the agency to operate with some uniformity in making such decisions.

(esp)

February 27, 2006 in Media, Securities | Permalink | Comments (1) | TrackBack (2)

Campbell Trial: Call Your First Witness

Lawyers are taught that the law of primacy and recency should be considered in choosing the order of witnesses. Seeing who will be the first witness for Bill Campbell lets one know that this was definitely considered by the defense team.  The witness according to the AJC here is going to be Andrew Young, "the former Atlanta mayor, U.S. ambassador to the United Nations and one of the Rev. Martin Luther King Jr.'s closest aides."  If he proves to be helpful, this could be devastating to the prosecution. If he proves incredibly supportive, it may be possible that Campbell will not need to take the stand. (see here). Stay tuned.

(esp)

February 27, 2006 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)

DOJ - Not Everything is Loss!

Tom Kirkendall's Houston Clear Thinkers has a wonderful post here that discusses yet another attempt by DOJ to include everything and also the kitchen sink in its determination of fraud loss (see prior posts on Jamie Olis here).  It is rather ironic to see DOJ trying to increase the fraud loss amount to increase a defendant's sentence via what I term - "new arithmetic."  It kind of makes one wonder if DOJ is padding the books to include more into a fraud loss calculation then really should be there.

(esp)

February 27, 2006 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Do We Need Another Special Prosecutor?

Back in January it was noted here that AG Gonzalez was planning to investigate who was the whistle-blower who leaked that NSA was alleged to be tapping telephones without a warrant.  It seemed bizarre at that time that the AG would be investigating who leaked an alleged violation of federal law.  It is therefore good to see that some in Congress are now requesting the appointment of a special prosecutor to investigate whether there has been a violation of federal law in the alleged eavesdropping program. (see CNN here) What is bothersome here is that this request is coming only from Democrats in Congress.  This should be a non-partisan request.  If there has been no violation of federal law then a special prosecutor will make that determination.  But if there has been a violation, then it is important that the perpetrators be brought to justice.

(esp)

February 27, 2006 in News | Permalink | Comments (2) | TrackBack (0)

Sunday, February 26, 2006

Will Campbell Testify?

The big question in the Bill Campbell trial is whether the former mayor will take the witness stand? (See AJC here).  It is a tough call in a case such as this one.  The cross-examination of the key witnesses connecting Campbell to the illegal payments would lead one to believe that he will not take the witness stand.  On the other hand, there is some evidence out there that does require a response. For the defense it is a tough call as it will open him up to cross-examination and who knows where that will lead the government.  On the other hand, we are dealing with an attorney, former mayor, and an individual who can probably hold his own against the prosecution.

It is nice for the defense to not be required to have to prove anything and to have the prosecution bear the burden of proof.  But on the other hand, should our criminal system have one rolling dice on how best to proceed.

I have to agree with  University of Georgia law professor Ron Carlson (see AJC) -- I think we will hear from Bill Campbell in his trial.  But I have been known to be proved wrong.

(esp)

February 26, 2006 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)