Sunday, March 25, 2007

Stealing Without Spending

According to an article in the ABA Journal E-Report, prosecutors in the Eastern District of Louisiana have indicted a lawyer on federal charges, including money laundering, for allegedly taking "millions of dollars from clients and his former law firm." The article discusses the most interesting aspect of this case - that although money was allegedly taken - there does not appear to have been money spent by the lawyer.

(esp)

March 25, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Plea of Former Congressional Staffer

A DOJ Press Release reports that a "former chief of staff for a U.S. Senator from Colorado, has pleaded guilty to a charge of making a false certification,"  She admitted that "she engineered a plan to receive $2,000 in unreported income from her personal assistant by triggering larger than normal salary payments to the personal assistant from which the personal assistant was directed to pay [her] $2,000." The press release says that she then failed to include these on her disclosure forms.

(esp)

March 25, 2007 in Settlement | Permalink | Comments (0) | TrackBack (0)

More Stories on the "Firings"

Latest DOJ E-Mails -- "I don't see it as being a national story"

The Department of Justice delivered the latest set of e-mails and documents related to the termination of eight U.S. Attorneys that will be the subject of further hearings this week on Capitol Hill.  A couple items may be of particular interest, and they are available below.  First, the head of the Department's Office of Public Affairs, Tasia Scalinos, received e-mails in November 2006 about the impending termination of six U.S. Attorneys -- the number expanded shortly thereafter -- so that she was "in the loop."  In response to one of them, she wrote, "I don't see it as being a national story -- especially if it phases in over a few months.  Any concerns on your end?"  That prediction, much like Attorney General Alberto Gonzeles' dismissal of this as an "overblown personnel matter," seems to have been mistaken, at least in hindsight. 

Perhaps more troubling for the Department of Justice is Scalinos' statement in another e-mail that is part of the same string in which she notes that three of the six are from states bordering Mexico so that "you could make the connection that DOJ is unhappy with the immigration prosecution numbers in those districts."  That makes it sound as if the decision was based on one reason but the public spin, or an acceptable rationale, would have to be something else.  Professor Brad Wendel has an interesting post on the Legal Ethics Forum (here) in which he uses the employment law analysis of pretextual firings to view the U.S. Attorney terminations.  That seems like a useful way to look at the issue of whether it is proper to terminate someone from a position that is both clearly political and at-will yet also involves a position of important public (and legal) trust that should not involve strictly political considerations in the exercise of discretion.  The Scalinos statement may support a claim of pretext for the firings.

Another item highlighted in the e-mail traffic is a meeting organized by Kyle Sampson, AG Gonzales' former chief of staff, on November 27, 2006, with (among others) Gonzales, Deputy AG Paul McNulty, and Associate AG William Moschella, and the subject was "U.S. Attorney Appointments."  Statements made by McNulty and Moschella to Congress about the issue have been acknowledged as not being entirely accurate, and Gonzales pointed the finger at Sampson as the source of any misinformation.  Sampson resigned recently and is now represented by Bradford Berenson of Sidley Austin.  But if McNulty and Moschella were at a meeting to discuss this issue, and given the e-mail traffic noting that the White House would help coordinate the notification of Senators and others, how is it that Sampson was responsible for any misstatements?  He is scheduled to testify before the Senate Judiciary Committee on March 30, and the November 27 meeting will be a key focus for the Senators. 

A Bloomberg story (here) notes that the Department of Justice has begun an internal investigation of the communications to Congress, but that's hardly likely to deter the Congressional investigations.  Each set of e-mails and documents brings something new to light, and makes Capitol Hill even more suspicious about what else might be out there.  (ph)

Download us_attorney_firing_documents_march_23_01.pdf

Download us_attorney_firing_documents_march_23_02.pdf

March 25, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Scholarship on Organizational Sentencing

Three pieces in the latest edition of the Yale Pocket Part discuss the organizational sentencing guidelines.  All present thoughtful commentary on organizational sentencing.

The first What Booker Means for Convicted Corporations,  by Timothy A. Johnson, argues "that Booker’s logic should apply to the Organizational Sentencing Guidelines just as it does to the rest of the Sentencing Guidelines." 

In response, co-blogger Peter Henning has a piece titled "The Organizational Guidelines: R.I.P.?". Professor Henning notes that "[t]he time has come to bury the Organizational Guidelines now that prosecutors can achieve the goal of reforming corporate cultures through deferred and non-prosecution agreements."  This piece makes important points regarding the recent McNulty Memo.

Christopher A. Wray & Robert K. Hur also respond to Johnson's piece in one titled, "The Power of the Corporate Charging Decision Over Corporate Conduct."  In their " Essay, [they] describe the Justice Department’s efforts to make prosecutors’ charging decisions more consistent, transparent, and predictable, and we suggest that the initial threat of corporate criminal charges has far broader and deeper effects on American businesses’ behavior than does the prospect of sentencing itself."

(esp)

March 25, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Saturday, March 24, 2007

Another Official Snared in Abramoff's Web

Former superlobbyist Jack Abramoff spread himself around Washington D.C., and those contacts resulted in yet another official entering a guilty plea arising from their relationship.  Former Deputy Interior Secretary J. Steven Griles entered a guilty plea to one count of obstruction of justice for lying to a Senate committee investigating Abramoff's lobbying activities.  Griles, the highest-ranking Administration official caught up in the Abramoff web, admitted that he did not tell the truth when he said his relationship with the lobbyist was not "unique" when in fact his girlfriend introduced them, giving Abramoff an in to Griles to lobby for clients.  According to an AP story (here), at one time prosecutors threatened other charges against Griles, including honest services fraud and criminal conflict of interest.  Under the plea agreement, Griles will receive a ten-month sentence, half of which will be served in prison.

Abramoff has been cooperating in the ongoing corruption investigation while serving his 5+ year prison term, but that time may be shortened soon.  Federal prosecutors have filed a Rule 35 motion for a reduction of his sentence due to substantial assistance.  It is not clear whether any more defendants will be charged, and it may be that the so-called "low hanging fruit" has been picked in the case.  Whether anyone else on Capitol Hill or in the Administration will face charges remains to be seen, and Abramoff certainly carries some heavy baggage as a witness.  An MSNBC story (here) discusses the sentence reduction motion. (ph)

March 24, 2007 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Building Pressure From the U.S. Attorney Firing Investigations

That "overblown personnel matter" involving the firing of eight U.S. Attorneys heads into another week of tension between Congress and the White House, with Attorney General Alberto Gonzales seemingly carried forward in its wake.  The House and Senate Judiciary Committees authorized the issuance of subpoenas to five Presidential aides, including Karl Rove and Harriet Miers, regarding their roles in the decision to fire the federal prosecutors.  The subpoenas have not yet launched, and appear to be more bargaining chips to get the White House to let the aides testify in a setting that goes beyond the offer of a private, unsworn, off-the-record briefing -- hard to get much publicity out of that.  Responding to the threat of subpoenas, the White House indicated that the offer of a briefing is "off the table" if subpoenas are sent.  A CNN.Com story (here) discusses the confrontation.

The Department of Justice also announced that it had found more e-mails and documents relevant to the firings, proving that the document production problems that have plagued Wall Street firms like Morgan Stanley are not limited to the private sector.  It's not clear what the latest trove of e-mails will reveal, but that last bunch have shown just how embarrassing "private" e-mails can be to their authors.  In the fine tradition of Berkshire Hathaway's 8-K filings, the documents will likely be release on a Friday or over the weekend.

As the two sides negotiate over the terms of any testimony by Rove et al., AG Gonzales' former chief of staff, Kyle Sampson, will testify before the Senate Judiciary Committee on March 30, agreeing to make his statements under oath.  Sampson is at, or at least very near, the center of the controversy, and resigned after it became clear that DOJ witnesses were not entirely truthful in their testimony about White House involvement in the firings.  His e-mails with Miers show her involvement in the issue in early 2005, almost two years before the U.S. Attorneys were sacked.  The Committee's Democrats will focus on e-mails stating that one quality of a good prosecutor is being "loyal" to the President, with Sampson describing some in another e-mail as "loyal Bushies."  Sampson's communications prove yet again that people will write things in e-mails that they would never say in any type of official situation.  An AP story (here) discusses Sampson's agreement to testify.  Don't look for this story to lose much steam any time soon. (ph)

March 24, 2007 in Investigations, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Friday, March 23, 2007

Blame It on Sarbanes-Oxley

David Stockman went on the offensive regarding his possible (even likely) indictment on charges related to his tenure as CEO of auto parts supplier Collins & Aikman.  A story in the Wall Street Journal (here) quotes Stockman as asserting that any case against him would be a "crimeless prosecution" -- a phrase I've never heard before, and perhaps he meant a "baseless" prosecution.  He further argued that filing charges for his public statements to analysts and investors is a sign that the Sarbanes-Oxley Act has led to  "flyspecking of every word in a CEO's earnings call in the midst of an auto industry meltdown where every investor knew there was high risk."  It's not clear how Stockman reaches that conclusion, at least if one looks at the terms of the statute that deals more with internal controls and corporate governance than proscribing CEO comments.  It's likely that any securities related charges will involve the anti-fraud and books and records provisions, which long pre-date the passage of Sarbanes-Oxley.  There is a small possibility that Stockman could be charged with violating the CEO certification provision that is part of the act, but that statute (18 U.S.C. Sec. 1350) is among the least controversial provisions of Sarbanes-Oxley.  Once again, perhaps in the heat of the interview Stockman meant to bemoan the atmosphere that engendered the act and led to the recent corporate executive prosecutions assailed by some as the "criminalization of agency costs."  Regardless of what he meant, it's clear that Stockman shows no interest in negotiating a resolution of the case, which means we will probably see yet another high-profile CEO in court facing criminal charges. (ph)

March 23, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Political Telephone Harassment Conviction Reversed

The First Circuit reversed the conviction of James Tobin, the former New England Regional Director for the Republican National Committee, for his role in a scheme to jam telephones used by the Democrat party on election day in November 2002 to get out the vote.  Tobin was convicted on conspiracy and aiding and abetting charges for violation of 47 U.S.C. Sec. 223(d), which makes it a crime to make telephone calls with an "intent to harass."  The First Circuit found that the district court's jury instructions "unduly broadens" the intent level for the statute by allowing a conviction if the defendant's purpose was to interfere with the operation of the telephone lines even though the caller never directly harassed or threatened the recipient of the call (see opinion below).  The court stated:

The district court's "bad faith-improper motive" instruction would include harassing conduct so defined but would also include almost anything else of which the jury might disapprove including conduct that was solely designed to interfere with telephone communications. We think that a Congress that sought to reach and outlaw attempts wrongfully to disrupt communications would have used quite different language (e.g., "impede" access or use; "disrupt"), along the lines of state statutes that are expressly so aimed. It is also hard to think why a Congress seeking to protect access to unimpeded telephone communication would have been worried only about disruption caused by ringing (as opposed, for example, to cutting the line or sabotaging the gear where the drop cable enters the home).

The appellate court remanded the case to the district court to consider further the "intent to harass" issue, but the opinion ends with a strong hint that the government's theory of prosecution may not be tenable.  The opinion states: "We think it fair to add that despite the unattractive conduct, this statute is not a close fit for what Tobin did. If the government thinks this a recurring problem, it better seek an amendment."  Of course, any amendment would not do any good for the prosecution of Tobin, whose conduct may be that rare instance which is not addressed by a federal statute. (ph)

Download us_v_tobin_opinion_march_21_2007.pdf

March 23, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Will the Defendants Maintain a United Front in the Hollinger Trial?

Although the vast majority of the media attention has focused on Lord Conrad Black's role in the alleged looting at Hollinger International, there are three other defendants on trial who may have a significant impact on its outcome: former CFO Jack Boultbee, former executive vice president Peter Atkinson, and former general counsel Mark Kipnis.  In his opening statement, Kipnis' lawyer, Ronald Safer, for chief of the criminal division in the U.S. Attorney's Office in Chicago, appeared to be distancing his client from the other defendants, all of whom have much longer ties to one another.  According to a National Law Journal story (here), Safer emphasized that Kipnis owns one house in the Chicago area, unlike Lord Black, and only received a $150,000 bonus for his work on the transactions, unlike the millions reaped by others.

An interesting question is whether any of the other defendants will testify, and if they do, whether one or more might try to emphasize his lack of involvement in the transactions as compared to Lord Black.  I doubt Lord Black will testify after his attorney described him in the opening as arrogant. The opening statement on behalf of Kipnis certainly indicates that he may testify to establish his lesser role in crafting the non-competition payments at the heart of the case.  It's not clear whether any mud will be sent in Lord Black's direction, but the attorneys for Boultbee, Atkinson, and Kipnis will be looking out for their clients well-being and may not hesitate to point fingers. (ph)

March 23, 2007 in Prosecutions | Permalink | Comments (1) | TrackBack (0)

Thursday, March 22, 2007

Stockman Looks Like the Next Former CEO Charged

Former Congressman and Reagan Administration budget wunderkind David Stockman could be facing federal charges shortly related to his time as CEO of Collins & Aikman, a now-bankrupt auto industry supplier.  Stockman made a splash in the early part of the century when his investment fund, Heartland Industrial Partners, began rolling-up auto suppliers that resulted in the formation of C&A, which went into bankruptcy in 2005 shortly after Stockman stepped down as CEO.  According to a CNN.Com report (here), Stockman and other former executives may be facing the usual array of conspiracy, securities fraud, and false records charges related to accounting for rebates -- a problem that has plagued other auto suppliers like Delphi -- and misstatements to shareholders about the financial condition of the company.  Another possible area relates to receivables financing that may lead to mail or wire fraud charges. 

There was a time when the accounting troubles at companies like Enron and WorldCom were attributed in part to their involvement in the high-tech "new economy" that encourage some rather creative accounting.  Stodgy, old-time manufacturers were thought to be immune to such problems, but recent accounting woes at General Motors, Delphi, and C&A show that even the smokestack industries seem to have their fair share of financial legerdemain. (ph)

March 22, 2007 in Fraud, Prosecutions | Permalink | Comments (0) | TrackBack (0)

There Goes $1.58 Billion

Investor Ronald Perelman won $1.58 billion in compensatory and punitive damages from investment bank Morgan Stanley on a fraud claim in 2005 in large part because the firm's e-mail production was so bad that the trial judge finally ordered a partial default judgment as a sanction for discovery abuses.  The case arose from Morgan Stanley's role in assisting the purchase of Coleman Cos., owned by Perelman, by Sunbeam in 1998, not too long before Sunbeam collapsed.  Perelman claimed that Morgan Stanley aided and abetted a fraud against him by not revealing the problems at Sunbeam.  On appeal, Florida's Fourth District Court of Appeal reversed the award on the ground that Perelman did not introduce sufficient evidence of damages to establish any loss on the transaction.  According to the court (opinion available below):

A plaintiff who seeks a benefit-of-the-bargain measure of damages is not entitled to a better bargain than the one it made. This is true even under Florida’s "flexibility theory" of damages. The "flexibility theory" of damages, which allows a plaintiff to chose either benefit-of-the-bargain or out –of-pocket damages in fraud cases, is not so flexible as to allow a plaintiff to pick and choose which parts of the contract it wants to affirm and which parts it wants to disaffirm. Furthermore, applying [Coleman]’s "but for" rationale to proving damages would result in recovery of all non-fraud related losses in virtually every fraud case, because the defrauded party would need only assert that it would not have agreed to the contract had it known of the fraud.

The appellate court majority found that the plaintiff's expert ignored the actual value of the Sunbeam shares received by Coleman at the time of the transaction, so the compensatory damages calculation of $680 million was unsupported by any evidence.  Once the compensatory damages left the building, so too did the $850 million in punitives.  Easy come, easy go, I guess, but there's enough at stake here to guarantee an appeal to the Florida Supreme Court, so it may be a bit premature to reverse any litigation reserves.  (ph)

Download morgan_stanley_v_coleman_4th_dist_court_of_appeal_march_2007.pdf

March 22, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Black and Nacchio Trials In Full Swing

The jury selection is complete, the opening statements made, so the trials of former CEOs Conrad Black (newspaper publisher Hollinger International) and Joseph Nacchio (telecom Qwest Communications) are now moving ahead with the first witnesses being called by the government.  Criminal trials, perhaps most particularly white collar crime cases, can be rather boring, unlike the impression given by programs like Law & Order, Boston Legal, and Shark that make them appear to be full of high drama.  There's nothing quite like a records custodian to make it dreadfully dull.  But there are moments that catch your attention.  In the Black trial, one of his attorney's, Edward Genson, described the Lord of Crossharbour in the opening as someone who "sounds snotty" and "has an arrogant attitude" -- not a ringing endorsement, but then you don't have to be lovable to be not guilty (see Reuters report here).  In the Nacchio trial, the live-blog written by Jeralyn Merritt for Denver magazine 5280 (here) discusses an objection by the prosecutors to the defense opening argument, causing the judge to note that he did not want constant hearings interrupting the case that would require him "to babysit the lawyers or encourage thumb-sucking."  No word on whether any blankies were taken away.  (ph)

March 22, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 21, 2007

Will Bush Use Executive Privilege?

It is clear that the U.S. Attorney "firings" is not going away, as some may have thought.  The latest is Congress authorizing subpoenas to white house personel (e.g. Karl Rove) (see N.Y.Times, Wall Street Jrl, and Washington Post).  The President's response - (see Wall Street Jrl here).

Should a showdown result between the legislature and executive, here are some interesting case quotes that we may be seeing:

U.S. v. Nixon, 418 U.S. 683 (1974):

"However, neither the doctrine of separation of powers, nor the need for confidentiality of high-level communications, without more, can sustain an absolute, unqualified Presidential privilege of immunity from judicial process under all circumstances. The President's need for complete candor and objectivity from advisers calls for great deference from the courts. However, when the privilege depends solely on the broad, undifferentiated claim of public interest in the confidentiality of such conversations, a confrontation with other values arises. Absent a claim of need to protect military, diplomatic, or sensitive national security secrets, we find it difficult to accept the argument that even the very important interest in confidentiality of Presidential communications is significantly diminished by production of such material for in camera inspection with all the protection that a district court will be obliged to provide."

U. S. v. American Tel. & Tel. Co., 551 F.2d 384 (D.C. 1976):

"In the only previous suit presenting a clash of congressional subpoena power and executive privilege, Senate Select Committee on Presidential Campaign Activities v. Nixon, 498 F.2d 725 (1974), this court reached the merits. In that case Congress sought the assistance of the courts to enforce a subpoena against the President, who claimed an executive privilege based on the need for confidentiality of communications between the President and his advisors. We held that, in light of the fact that the tapes were already in the possession of another congressional committee, the Senate Select Committee's showing of need for the subpoenaed tapes to perform its legislative function was inadequate to overcome the President's claim of confidentiality. Senate Select Committee establishes, at a minimum, that the mere fact that there is a conflict between the legislative and executive branches over a congressional subpoena does not preclude judicial resolution of the conflict. United States v. Nixon, 418 U.S. 683 (1974) resolved an analogous conflict between the executive and judicial branches and stands for the judiciability of such a case."

Cheney v. U.S. Dist. Court for Dist. of Columbia, 542 U.S. 367 (2004):

"In light of the 'fundamental' and 'comprehensive' need for 'every man's evidence in the criminal justice system, not only must the Executive Branch first assert privilege to resist disclosure, but privilege claims that shield information from a grand jury proceeding or a criminal trial are not to be "expansively construed, for they are in derogation of the search for truth," The need for information for use in civil cases, while far from negligible, does not share the urgency or significance of the criminal subpoena requests in Nixon. As Nixon recognized, the right to production of relevant evidence in civil proceedings does not have the same "constitutional dimensions." (Citations omitted)."

(esp)

March 21, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 20, 2007

Conrad Black Trial

After a one day delay, the trial of Conrad Black proceeded to opening statements. (See Chicago Tribune here). Canadian Press is following this trial closely. (See Toronto Globe & Mail here)

(esp)

March 20, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Privilege

The U.S. Attorney firings discussion continues.  The latest is the letter (found on Findlaw) of White House Counsel Fred Fielding in which he offers some terms for Senate and House Judiciary committees to question individuals presently in the executive or who previously held these positions. Whether these conditions satisfy the legislature remains to be seen.

But the real question is whether a privilege applies here.   Fielding states in his letter that "the President must remain faithful to the fundamental interests of the Presidency and the requirements of the constitutional separation of powers."  But is this a "presidential privilege" here, or more aptly a case of a "deliberative process privilege." And if so, should Congress be satisfied with the accommodations offered if they want people like Karl Rove to testify under oath?

Also of importance here is whether the government should be entitled to any privilege here? In the case of In re Sealed Case, 121 F.3d 729 (D.C. Cir. 1997), the court stated that "where there is reason to believe the documents sought may shed light on government misconduct, 'the privilege is routinely denied,' on the grounds that shielding internal government deliberations in this context does not serve 'the public's interest in honest, effective government.'" (citations omitted).   Fielding claims in his letter that "[t]hese documents do not reflect that any U.S. Attorney was replaced to interfere with a pending or future criminal investigation or other improper reason." But can all the emails be seen that way, and is Fielding the one to be making this call.

The real irony here is that this administration has been at the forefront of destroying privilege - something that has been a sore point for many groups like the ABA, NACDL, Heritage, and the Chamber of Commerce when it came to the issue of attorney-client privilege.  It has also been problematic when Attorney General Ashcroft allowed monitoring of attorney-client conversations in prisons, all in the name of terrorism.  Privileges play an important component in the proper functioning of our legal system, but one has to wonder here whether the privileged are getting a privilege, while others are left without one.

(esp)

March 20, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Monday, March 19, 2007

Commentary: The Firings - Is it a Crime?

Discussed here, here, here, here, and here, as well as prior to these posts are entries regarding the "firing" of 8 US Attorneys. But a must read is Adam Cohen's editorial observation in the New York Times here.  He provides the issue-spotting exam for what charges might a special prosecutor look at based upon the possible conduct being described. 

My exam, however, would go one step further.  It would ask, what considerations might a special prosecutor have for not bringing any of these charges. 

I can say I do agree on one thing - someone independent needs to be considering the allegations and seeing if there is any merit to all of this. 

(esp)

March 19, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Plea Nets 15 Months for former exec at Citibank

A press release of the U.S. Attorney for the Southern District of New York states that "the former head of the commodities trading desk at Citibank NA("Citibank"), was sentenced today to 15 months’ imprisonment for conspiring to falsify bank records and to commit wire fraud."  The press release also states that that the defendant "pleaded guilty to scheming to inflate the trading profits of the Citibank commodities desk by as much as $20 million during 2003 in order to enhance his apparent job performance and his eligibility for bonuses from Citibank."  (see also Wall Street Jrl here)

(esp)

March 19, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

More on the Georgetown Conference

A description of one panel from the Georgetown Conference on Corporate Criminality: Legal, Ethical, and Managerial Implications is here.  One can also hear the entire conference here.

(esp)

March 19, 2007 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Sunday, March 18, 2007

More on US Atty Firings

The headlines say it all -  this topic is not going away -

The Seattle Times has an article with the following headline -"U.S. Attorney White Can't Practice Law in this State."   

Fox News has a piece titled, "White House Aides Targeted in Attorney Firings Probe.

Kansas City.Com's article is headlined, "U.S. Attorney's Firing May Be Connected to CIA Corruption Probe."

And the Washington Post now has a central page for all their articles on this topic.

(esp) (w/ a Stetson hat tip to Dorothea Beane for one item).

March 18, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)