Saturday, January 6, 2007

Is the Lake (Westar) Reversal Big?

The reversal of the convictions against two former Westar executives may wind up being one of the most talked about white collar decisions of the year.  A discussion of the case is here, and commentary is here. And there is no doubt that many white collar defense attorneys are scrutinizing their fraud cases to see if there were any required/compelled documents that formed the basis of the charge/conviction. But what is so significant about this decision?

1. To the two defendants it is clearly important as their huge sentences may be lost to history.  Professor Doug Berman here questions whether the size of these sentences caused the intense appellate scrutiny that resulted in this reversal.

2. The use of the "legally compelled mailing (wiring)" doctrine is what makes this a "talked about" decision.  This is a doctrine that has been used by defense counsel in the past (Parr), noted as something that exists by the Supreme Court (McNally, footnote 2), but for the most part is seldom argued. It seemed to have been lost in history when there was a continual rise in cases that held that the mailing or wiring portion of mail/wire fraud was not the essence of the crime.  Historically, the mailing was the key as the statute for mail fraud was passed in 1872 as a mere section within a larger recodification of the Postal Act.  The wire fraud statute is more recent, passed in 1952, and is clearly a part of the newer trend to focus on the fraud, as opposed to the jurisdiction hook that allows the statute to thrive.  But even today, it is necessary that the mailing be "in furtherance" of the scheme to defraud, and a "legally compelled mailing/wiring" is not in furtherance of that scheme to defraud.

3. With respect to the counts dismissed on insufficiency of the evidence, the government may have enormous hurdles before it. (e.g. Smalis v. Pa.) What happens with the rest of the case remains to be seen.

4.  What perhaps may make this a more important case today is that so many documents in white collar cases will fit the bill as required/compelled documents. The Sarbanes Oxley Act, as well as other reporting requirements, may find an array of mailings or wirings to form the basis of a prosecution. If the documents are false then the exception  (see here) may apply.  In this regard prosecutors may now be careful to make certain that in selecting the mailing or wire transmission that forms the federal jurisdiction hook for the case - they select one that is not a compelled document.  And it they do use a compelled document, then it will be important to make certain that there is some falsity in that document.  Will this be difficult?  Probably not.  But it will be a new step in the checklist to make certain that convictions obtained are convictions maintained.


Fraud, Judicial Opinions | Permalink

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