Friday, August 31, 2007

Scarce Resources for Prosecution

The Wall St.Jr. reports on the financial problems faced by US Attorney offices as a result of scarce resources.  In discussing some of the staffing problems the article points out that more than 100 individuals in these offices have gone to Iraq to help out the government there. The article also reports on white collar crime statistics but one has to wonder how they defined this term and what was included.  Was it a DOJ definition that includes government corruption, environmental offenses, and OSHA related crimes?  Or was it limited to fraud? (see here)

(esp)

August 31, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Details on the Randy "Duke" Cunningham Case

The San Diego Union Tribune has an article that includes links to the government's attempt to keep sealed hearings related to former Rep. Randy "Duke" Cunningham and "New York financier Thomas Kontogiannis." The hearings detail what Kontogiannis said was his motivation for his dealings with Cunningham.  The press has been successful in having released approximately 85% of the transcripts.

(esp)

August 31, 2007 in News | Permalink | Comments (0) | TrackBack (0)

Quattrone Case Dismissed

Paul Davies reminds us on the WSJ blog that the Quattrone deferred prosecution ended and the government dismissed the charges against Quattrone.  For background see here.

(esp)

August 31, 2007 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 30, 2007

Gonzales Under Scrutiny

According to an article by Dan Eggen and Paul Kane of the Washington Post, Inspector General Glenn Fine is investigating Alberto Gonzales as to whether he "gave false or misleading testimony to Congress, including whether he lied under oath about warrantless surveillance and the firings of nine U.S. attorneys." Although it is important to see if wrongdoing occurred here, it is unfortunate that this investigation has been slow. 

(esp)   

August 30, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Work Product Privilege Upheld in Textron Case

The United States District Court for Rhode Island issued a Memorandum Order finding that "requested documents [were] protected by the work product privilege."  The court denied the government's petition for enforcement of an IRS summons served on Textron Inc. and its subsidiaries "in connection with the IRS's examination of Textron's tax liability for tax years 1998-2001.  Textron had "refused to provide the requested documents on the grounds that (1) the summons was not issued for a legitimate purpose and (2) the tax accrual workpapers are privileged."  The court rejected Textron's arguments of attorney-client privilege and tax practitioner privilege. Judge Torres, however, did accept the work product privilege as a legitimate argument since the IRS "failed to carry the burden of demonstrating a 'substantial need' for ordinary work product, let alone the heightened burden applicable to Textron's tax accrual workpapers, which constitute opinion work product."

(esp) (w/ a hat tip to Stephanie Martz)

August 30, 2007 in Privileges | Permalink | Comments (0) | TrackBack (0)

Mistrial Leads to Double Jeopardy For Two

Three individuals related to Symbol Technologies, Inc. stood trial for a variety of white collar charges.  The jury heard from 40 witnesses, and had deliberated for three days when the court declared a mistrial.   The Second Circuit held that "where the record does not indicate that there was genuine deadlock, and the court has not provided an explanation for its conclusion or pointed to factors that might not be adequately reflected on a cold record, we are unable to satisfy ourselves that the trial judge exercised 'sound discretion' in declaring a mistrial."  The court further held that double jeopardy barred the retrial of two of the individuals who had been tried. (see also law.com here)

(esp)(w/ a hat tip to Joan Hemingway)

August 30, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

DoD Steps Up Its Efforts to Find Fraud in Iraqi Contracts

The military is stepping up its investigations of fraud, bribery, and kickbacks related to the Iraq war and rebuilding program.  According to an AP article (here), the Army will look at up to 18,000 contracts that have been issued since 2003 to determine whether there has been fraud in the issuance of them, or waste and abuse of government services.  The Department of  Defense will send its Inspector General, Claude Kicklighter, and a team of investigators to Iraq to "take a look at overall contracting procedures,"  according to an Armed Forces Press Service article (here).  There have been embarrassing revelations lately of officers and civilians taking bribes to award no-bid contracts, so the effort to root out fraud is probably long overdue when contracts have been issued over the past four years for billions of dollars. (ph)

August 30, 2007 in Fraud, Investigations | Permalink | Comments (0) | TrackBack (0)

Don't Ask Alaska Senator If He's a Target of a Federal Investigation

When the FBI executed a search warrant at the home of Alaska Senator Ted Stevens, that was a pretty strong indication he was a target of a corruption investigation.  But "target" is very much a term of art, meaning that the person is viewed by prosecutors as likely to be charged with a crime -- a position no one wants to be in.  The Department of Justice is not obligated to tell someone whether he or she is a target, so it can be good PR to say one is not officially a "target of the investigation" despite appearances otherwise.  In answering questions posed by a reporter for KTUU in Anchorage, Alaska, Senator Stevens stumbled over whether he is a target of this investigation while noting that he has been involved in other investigations before (video here and transcript here).  He said, "I'm not sure I'm a target yet. I've not been told I'm a target. But as a practical matter, the situation -- I shouldn't have answered that question either . . . I was not a target of those other investigations, is what I was saying."  Got that?  Watching the video doesn't make it any clearer what he meant. (ph)

August 30, 2007 in Corruption, Investigations | Permalink | Comments (0) | TrackBack (0)

Another 20-Year Sentence for Bank Fraud

The former chairman of the board of E.S. Bankest received a 20-year prison term for his role in the $164-million fraud, the same sentence received by his brother, who was president of the factoring company.  According to a press release issued by the U.S. Attorney's Office for the Southern District of Florida (here):

Evidence at trial showed that E.S. Bankest, a factoring company in the business of funding clients secured by clients’ accounts receivable, borrowed multi-millions of dollars of money from Espirito Santo Bank clients based on fraud, including fabricated accounts receivable; Espirito Santo Group eventually took the debt positions of the clients, and absorbed the loss. The indictment charged a conspiracy from approximately June, 1994, until August, 2003, when an examiner was appointed by the federal court to look into the affairs of the company, which collapsed.

(ph)

August 30, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 29, 2007

Lerach Bids Au Revoir -- What's Next?

Famed class action attorney William Lerach is stepping down from his firm as of August 31 in the midst of a drawn-out federal investigation of kickbacks paid to plaintiffs through his former firm, Milberg Weiss.  Lerach broke away from Milberg Weiss in 2004 and moved to a new firm in which his name came first, at least until Labor Day when it will be become Coughlin Stoia Geller Rudman & Robbins.  An e-mail to firm members, reprinted on the Wall Street Journal Law Blog (here), states in part:

As you know, I will be retiring in short order to resolve the investigation about alleged events at my former firm more than a decade ago – long before this firm was even a twinkle in the eye. Because the events in question do not involve this 3-year-old firm or any of you, my decision to step aside will ensure continuity and stability for the hundreds of clients who benefit from your stellar work. This will end the investigation.  Despite my mistakes, I am immensely proud that together we built a firm without peer and never shied away from taking on the world’s most powerful and corrupt corporations. [Italics added]

That certainly sounds like someone who may be close to resolving the case by way of a plea bargain, which was offered by prosecutors a few months ago but turned down.  References to moving on "to resolve the investigation," "end the investigation," and "my mistakes" convey a feeling of resignation that a conclusion to the criminal case is near.  Lerach's purported rejection of the earlier plea offer came before another former Milberg Weiss partner, David Bershad, agreed to plead guilty and is cooperating in the government's investigation.  That may impel Lerach to cut his own deal given the statement of facts in which Bershad admitted that Milberg Weiss partners contributed money and made secret cash payments to plaintiffs.

Lerach has not lost his edge, of course, beginning his e-mail by noting that "[n]ow that I have outlasted Karl Rove, John Ashcroft and Alberto Gonzalez, it is time for me to retire."  I suspect this may be the first time we have seen Lerach's name linked to these three stalwarts of the Bush Administration. (ph)

August 29, 2007 in Investigations, Legal Ethics | Permalink | Comments (0) | TrackBack (1)

Sentence Departure for Former Wal-Mart Executive Overturned

The Eighth Circuit, among the more parsimonious in allowing non-Guidelines sentences, reversed the sentence given to former Wal-Mart vice chairman Thomas Coughlin after his guilty plea for defrauding the company (United States v. Coughlin here).  Under the Sentencing Guidelines, the applicable range was 27 to 33 months imprisonment, but the district court sentenced him to 27 months of home confinement as part of five years of probation, a $50,000 fine and restitution of over $400,000.  The judge based the downward departure on two grounds: first, the defendants poor health; second, a combination of factors that included his prior good works, families ties, and the extreme fall from grace the conviction entailed.  Regarding Coughlin's health, the Eighth Circuit summarized his condition:

The record reflects Coughlin is six feet four inches tall and weighs about 330 pounds. Coughlin survived sudden cardiac death and has had an implantable cardioverter defibrillator since 2003. Coughlin presently suffers from cardiac arrhythmia, severe pulmonary hypertension, double vessel coronary atherosclerosis, type II diabetes, gout, ethmoid sinusitis, obesity, high blood pressure, severe allergies, and back and knee pain. Couglin also suffers from severe obstructive sleep apnea, which necessitates the use of a continuous positive airway pressure machine at night to prevent a dangerous drop in Coughlin’s oxygen levels.

Although the district court credited the testimony of Coughlin's physician that he would not receive adequate care in the federal prison system, the Eighth Circuit found an abuse of discretion because the basis for the departure was not supported by sufficient facts.  Moreover, the appellate court rejected the alternative grounds for the departure based on Coughlin's good works and the impact of the conviction.  Coughlin will have to be resentenced by the same judge, and it will be interesting to see if the court gives the same basic sentence based on stronger evidence of his medical condition that his attorneys present at the hearing. (ph) 

August 29, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

SEC Charges GC for Options Backdating at Two Companies

The SEC filed civil securities fraud charges against the former general counsel for two high tech companies, KLA-Tencor and Juniper Networks.  The complaint (here) asserts that the GC touted her experience in securities administration when she switched from KLA-Tencor to Juniper.  According the the SEC Litigation Release (here), the complaint

alleges that she routinely used hindsight to identify dates with historically low stock prices, facilitating the backdating of option grants by KLA's stock option committee. According to the Commission, Berry then moved to Juniper shortly before its 1999 IPO, touting her experience in stock administration. The complaint alleges that Berry established a similar backdating process at Juniper, creating minutes of fictitious stock option committee meetings to document false grant dates — at times affixing the names of other committee members with a signature stamp.

According to the Commission's complaint, the backdated grants resulted in materially misleading disclosures, with KLA overstating its net income in fiscal years 1998 through 1999 by as much as 47 percent and Juniper overstating its 2003 net income by nearly 22 percent. In 2007, both KLA and Juniper restated their financial statements, with Juniper recording nearly $900 million in previously unreported compensation expenses.

Juniper settled a separate SEC complaint and agreed to an injunction, but there was no civil money penalty assessed against it.  KLA-Tencor reached a similar settlement in July that also did not involve any payment, a reflection of the Commission's new policy on not imposing fines when companies are the victims of the securities fraud.  KLA-Tencor's former CEO has also been charged with securities fraud related to his role in the backdating, and the question is whether there will be any criminal charges in light of the recent conviction of former Brocade CEO Gregory Reyes for his role in backdating options grants. (ph)

August 29, 2007 in Civil Enforcement, Fraud, Securities | Permalink | Comments (0) | TrackBack (0)

Hazing Charges Against Two University Administrators Dismissed

Two administrators at Rider University won the dismissal of charges related to the death of an undergraduate student at a fraternity party.  The administrators, one a Dean of Students and the other responsible for Greek organizations, were charged along with three students with aggravated hazing arising from from ingestion of a large amount of alcohol at a fraternity party that resulted in a blood alcohol level of .426 at the time of death.  A grand jury indicted the two administrators, and the Mercer (N.J.) County Prosecutor's office asked for the dismissal because there was insufficient proof to convict them.  The charges against the three students remain.  An AP story (here) discusses the dismissal. (ph)

August 29, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Monday, August 27, 2007

Corrupt or Incompetent

The NYTimes reports on a continuing investigation into the handling of weapons for Iraq.  With increased reporting for businesses under SOX, it is surprising to see that the military is having recordkeeping problems. Do they need a SOX type of statute?  Many federal criminal investigations start small, and through cooperation move up the chain to individuals with more power. It is likely that a key issue here will be to determine if acts were committed with fraudulent intent or whether the individuals involved were just plain incompetent.

(esp)

August 27, 2007 in Investigations | Permalink | Comments (0) | TrackBack (0)

The Acting AG

President Bush appointed Paul Clement as the Acting AG following the resignation of AG Alberto Gonzales.  Clement is the Solicitor General.  Check out this piece by Jess Bravin in the Wall Street Jrl. Interestingly, it was Paul Clement who has been handling the investigation of the fired US Attorneys, following the AG's recusal.

(esp)

August 27, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Commentary on President Bush's Comments

Yes, President Bush is partly correct when he states in commenting on the Gonzales resignation that Gonzales was "dragged through the mud for political reasons." But the political reasons were that he had "fired" U.S. Attorneys for political reasons.  The comments and criticisms of the AG crossed party lines and it is important for the President to recognize this in selecting the next Attorney General. What is more important then ever before is that the appointee to this office restore the DOJ as a non-political entity of the government.

(esp)

August 27, 2007 in Prosecutions | Permalink | Comments (1) | TrackBack (0)

Commentary on the Resignation of AG Alberto Gonzales

This has been a troubled time for the Office of the Attorney General.  For years the office was seen as a top quality place where the best of the best students went upon graduation.  They were there to serve their country.  And although politics has long played a role in the individual appointment of U.S. Attorneys in the 93/94 different offices, the moment the individual took the oath as the U.S. Attorney, the politics was supposed to end.  More importantly, there was to be no politics among the appointment of the many attorneys and staff who worked in the office.  This was a government office - a place for civil servants to work and serve their country.

The reign of AG Gonzalez was different.  From what was a non-political office, it became a place where politics suddenly mattered.  The "firing" of US Attorneys set the snowball rolling to open up to the public these transgressions in the office.  And at the height of the storm, AG Gonzalez continued in the office, despite many calling for his resignation.

One has to respect Gonzalez for now stepping down.  Many will say he should have done it sooner, and many will probably wish to continue to criticize what happened here.  It is important to investigate this scenario to learn from this experience so that what happened here does not happen again.  It is also important to move on and regain respect for this important office. Thank you AG Gonzalez for allowing this to happen.

(esp)

August 27, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Sunday, August 26, 2007

Fact or Fiction

The rumors are buzzing about AG Gonzales?  Will he stay or will he go?  Check out Berman's Sentencing Blog here, The Volokh Conspiracy here, U.S. News here.  And if he goes, will he be having a joint going away party with Karl Rove.

And the latest just in -  CNN says there is truth to this rumor. 

(esp)

August 26, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Collateral Consequences - The Pension

In many white collar and non-white collar cases, the collateral consequences of a criminal conviction can destroy a person's future livelihood or have other ramifications. In some cases when an individual does business with the government they can be debarred from continuing in that role. Ellen Gedalius of the Tampa Tribune reports on the recent unanimous decision of a city board to deny a pension to an individual convicted of conspiracy, wire fraud, and bribery.

(esp)

August 26, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Reviewing Grand Jury Transcript

The ABA Jrl, in an article by Debra Cassens Weiss, explores the effect of a recent federal court ruling that allows witnesses to review their grand jury testimony. The title of the article is, "Ruling Thwarts Perjury Prosecutions." 

The court's opinion in In Re Grand Jury states:

"This case raises a question that, surprisingly, has not yet been decided by this court: whether federal grand jury witnesses, after they have testified, are entitled to examine the transcripts of their own testimony. Applying Federal Rule of Criminal Procedure 6(e)(3)(E)(i), we hold that grand jury witnesses are entitled to review the transcripts of their own testimony in private at the U.S. Attorney’s Office or a place agreed to by the parties or designated by the district court."

In rejecting one of the government's arguments, the DC Circuit Court states:

"[T]he Government is concerned about grand jury witnesses (or their attorneys) who disclose information to other grand jury witnesses (or their attorneys) with the purpose of obstructing the criminal investigation. The Government identifies joint defense agreements among attorneys as a threat to the integrity of the grand jury process. But denying witnesses access to their own transcripts to help prevent witnesses from talking to others makes little sense to begin with – and makes even less sense given that grand jury witnesses are under no legal obligation of secrecy. A grand jury witness is legally free to tell, for example, his or her attorney, family, friends, associates, reporters, or bloggers what happened in the grand jury. For that matter, the witness can stand on the courthouse steps and tell the public everything the witness was asked and answered. See Fed. R. Crim. P. 6(e)(2)(A)-(B); Fed. R. Crim. P. 6, Advisory Committee Notes, 1944 Adoption, Note to Subdivision (e) ("rule does not impose any obligation of secrecy on witnesses"). The secrecy rules therefore are no justification for denying witnesses access to their own transcripts."

(esp)(hat tip to John Wesley Hall)

August 26, 2007 in Grand Jury, Perjury | Permalink | Comments (0) | TrackBack (0)