Saturday, June 16, 2007

Washington Legal Foundation Files Petition Asking for Changes at EPA

The Washington Legal Foundation has petitioned "the Environmental Protection Agency (EPA) to revise its criminal enforcement policy and practices to ensure that more reasonable non-criminal remedies - including administrative and civil remedies - are utilized as Congress intended to address alleged violations of the myriad of complex environmental laws and regulations."  Press Release here -

Download 061207pk.pdf

The 13 page filing by this organization provides an array of examples to support its position. and further describes the prosecutorial discretion that permits "a growing number of unwarranted and abusive criminal prosecutions, particularly against smaller businesses, and their owners, and employees, for violations of federal laws and regulations."  It will be interesting to see if the government responds.

Their petition can be found here-

Download wlf_petition_to_epa.pdf


June 16, 2007 in Environment | Permalink | Comments (0) | TrackBack (0)

NACDL's Third Annual White Collar Crime Conference

Defending the White Collar Case: In & Out of Court"

NACDL & Georgetown's 3rd Annual White Collar Seminar - Sept. 27-28.

Information here.


June 16, 2007 in News | Permalink | Comments (0) | TrackBack (0)

An Ostrich Visits the Black Trial

U.S. District Judge Amy St. Eve accepted the government's request to instruct the jury considering the fate of Lord Conrad Black and three other defendants that they may find the defendants had the requisite intent if they were willfully blind.  Known as the ostrich instruction, the government can prove the intent for the various fraud counts by establishing the defendant's purpose to engage in the alleged fraudulent scheme or by showing that there were indicia of wrongdoing but they chose to turn a blind eye to the red flags -- i.e., they stuck their heads in the sand.  The advantage is that the government can secure a conviction on proof that might not be sufficient to show an actual fraudulent intent, allowing the jury to infer it based on a defendant's acting in the face of facts indicating a substantial problem.  This is awfully close to recklessness, but not quite because the prosecution must still prove knowledge of the circumstances giving rise to the willful blindness. 

The trial is taking place in Chicago, so there is no better person to explain the issues related to the ostrich instruction than Seventh Circuit Judge Richard Posner, who wrote in U.S. v. Giovannetti, 919 F.2d 1223 (7th Cir. 1990):

The most powerful criticism of the ostrich is, precisely, that its tendency is to allow juries to convict upon a finding of negligence for crimes that require intent.  The criticism can be deflected by thinking carefully about just what it is that real ostriches do (or at least are popularly supposed to do). They do not just fail to follow through on their suspicions of bad things. They are not merely careless birds. They bury their heads in the sand so that they will not see or hear bad things. They deliberately avoid acquiring unpleasant knowledge. The ostrich instruction is designed for cases in which there is evidence that the defendant, knowing or strongly suspecting that he is involved in shady dealings, takes steps to make sure that he does not acquire full or exact knowledge of the nature and extent of those dealings. A deliberate effort to avoid guilty knowledge is all the guilty knowledge the law requires. (Italics added)

A judge instructing the jury along these lines runs a substantial risk of reversal if there is not a sufficient basis for the instruction because it effectively allows the jury to return a guilty verdict on evidence that might not support a finding of the requisite intent.  The instruction has been a feature in other high profile white collar crime prosecutions, notably that of Bernie Ebbers of WorldCom and Jeffrey Skilling of Enron.  Is the instruction warranted in this case? Lord Black and the others did not testify, and the government's key witness, F. David Radler, testified primarily about the knowledge of the defendants -- save perhaps former general counsel Mark Kipnis -- regarding the non-compete agreements.  Nevertheless, the government gets the benefit of the ostrich instruction that may make it easier to convict on the fraud counts.

The defense rested after a little less than two weeks, and Judge St. Eve has set aside an entire week for closing arguments.  With four defendants, each will probably get about a day before the jury after the government presents its argument, and then the prosecution gets the last word.  It may be interesting to see how many times Radler is called a liar or some synonym for being dishonest by defense counsel, particularly Lord Black's attorney Edward Greenspan.  After listening to the lawyers for a week, the jurors will probably welcome the relative peace of deliberations.  A Chicago Tribune story (here) discusses the decision on the ostrich instruction. (ph)

June 16, 2007 in Fraud, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Senate Committee Issues Report on Student Loan Abuses

Senate Education, Labor, Employment and Pensions Committee Chairman Ted Kennedy issued a report (here) highlighting abuses in the student loan program in which lenders sought favored treatment from college loan officers in exchange gifts, lavish parties, and other benefits.  The analysis of the Federal Family Education Loan (FFEL) program includes the following conclusions:

  • Some FFEL lenders provided compensation to schools with the expectation, and in some cases an explicit agreement, that the school will give the lenders preferential treatment, including placement on the school’s preferred lender list.
  • Other FFEL lenders spent large sums on travel and accommodation expenses for meetings of Advisory Boards comprised of school officials, and often expected these benefits to yield increased loan volume, or other preferential treatment, at Board members’ schools.
  • School officials held financial interests, including stock and options to purchase stock, in FFEL lenders which are on the preferred lender list or are otherwise recommended to students.
  • School officials received payments for consulting and other services from FFEL lenders which are on the preferred lender list or are otherwise recommended to students.

The Committee also released a number of documents (here) supporting its conclusions, including a rather embarrassing e-mail summarizing the requirements to curry favor with one large university's financial aid director and his staff.  The message states that ten yearly visits are expected of "top lenders" that should include birthday parties for the director's family and free sports tickets.  In a similar vein, the director "loves tequila and wine -- since becoming director . . . he has not had to buy any tequila or wine -- lenders provide this to him on a regular basis."  The director has since been terminated, and probably has to buy his own tequila now, and this gravy train has probably come to a stop.  (ph)

June 16, 2007 in Investigations | Permalink | Comments (0) | TrackBack (0)

Friday, June 15, 2007

Libby Denied Bail Pending Appeal -- On to the D.C. Circuit

Not to anyone's great surprise, U.S. District Judge Reggie Walton rejected the request by I. Lewis Libby for bail pending appeal of his conviction on perjury, false statement, and obstruction of justice charges.  The Judge sentenced Libby to a thirty-month term of imprisonment on June 5, and invited both sides to submit briefs on the issue of whether to grant him bail while he appeals to the D.C. Circuit Court of Appeals.  In addition, a brief submitted by a group of law professors argued that the issue of Special Counsel Patrick Fitzgerald's constitutional authority was sufficiently close to warrant a grant of bail under 18 U.S.C. Sec. 3143(b)(1)(B).  While the general presumption is that the defendant begin serving the sentence while appealing, bail can be granted if, inter alia, the court finds that an issue "raises a substantial question of law or fact" that would result in reversal of the conviction.  In denying the defense request, Judge Walton determined that there were no "substantial" questions likely to result in reversal, and he was not overly impressed with the contribution of the law professors.

Under Federal Rule of Appellate Procedure 9, however, the district court is just a way station on this issue, not the final word.  Rule 9(b) (available here) allows a defendant to obtain a fairly quick review of a district court order denying release pending appeal by filing a notice of appeal or filing a motion with the circuit court, at which point the procedures of Rule 9(a) kick in.  That provision provides: "After reasonable notice to the appellee, the court of appeals must promptly determine the appeal on the basis of the papers, affidavits, and parts of the record that the parties present or the court requires. Unless the court so orders, briefs need not be filed."  The bail request is rarely the subject of oral argument, and the court of appeals or even a single judge on the court can order the defendant's release pending the disposition of the substantive appeal (see Rule 9(a)(3)).  This procedure means that a decision on whether to grant Libby bail could come quickly, before he is due to report to the Bureau of Prisons and well in advance of the filing of full briefs challenging the conviction.  Even if he is denied bail at this point and begins serving his sentence, the D.C. Circuit could order his release after the oral argument if it determines that there's a likelihood of reversal, which happened to defendants in the Enron Nigerian Barge prosecution.

The process is more of a summary one in which the court of appeals makes a preliminary assessment of the issues in deciding whether to allow a defendant to remain free until the conclusion of the appeal.  Rule 9 gives Libby at least one more bite at securing his freedom while the appeal is pending, and if granted by the D.C. Circuit he is likely to remain free for upwards of another year or so while his appeal wends its way through the appellate process.  Given the close proximity of the District and Circuit Courts in the District of Columbia, it's really just a short hop to seeking another hearing on the issue. (ph)

June 15, 2007 in Plame Investigation, Sentencing | Permalink | Comments (1) | TrackBack (1)

Second Circuit Upholds Constitutionality of Anti-Bootlegging Statute

The Second Circuit Court of Appeals upheld the constitutionality of the federal live performance anti-bootlegging statute, 18 U.S.C. 2319A.  In a challenge to a prosecution under the statute, the district court had declared it unconstitutional because the statute exceeded Congress's power under the Copyright Clause and the Commerce Clause could not support a provision that otherwise would not pass constitutional muster under a specific power.  The statute makes it a crime to copy, transmit, or distribute a live music performance without the performer's consent.  In upholding the statute, the Second Circuit found in U.S. v. Martignon (available below) that the criminal provision was not an exercise of power under the Copyright Clause, which only authorizes Congress to secure rights "[t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."  According to the court of appeals, Section 2319A is a criminal statute and not a grant of rights to performers, so the statute is not subject to the limitations of the Copyright Clause.  It then determined the statute is a permissible exercise of power under the broadest grant of power in Article I -- the Commerce Clause -- leading the court to conclude: "It would have been eminently reasonable for Congress to conclude that the sale and distribution of bootleg phonorecords will have a substantial interstate effect on the sale and distribution of legitimate phonorecords. Because Section 2319A is not a copyright law and its enactment was well within the scope of Congress’s Commerce Clause authority, it is constitutionally permissible unless some other constitutional provision prevents its enforcement." (ph)

Download us_v_martignon_opinion_june_13_2007.pdf

June 15, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Thursday, June 14, 2007

Capitol Hill Gears Up to Confront the White House Over U.S. Attorney Firings

The demise of the "no confidence" motion on Attorney General Alberto Gonzales may have just whetted the appetite of Democrats in Congress to pursue the investigation of the firing of nine U.S. Attorneys in 2006.  The House and Senate Judiciary Committee chairmen launched subpoenas to two former senior aides to President Bush, former Counsel to the President Harriet Miers (here) and former Director of Political Affairs Sara Taylor (here), to discuss their roles in the decision.  The subpoenas are for documents and testimony, and the White House also received a document subpoena.  Taylor is supposed to appear before the Senate Committee on July 11, and Miers before the House Subcommittee on Commercial and Administrative Law on July 12 -- each Committee gets its moment in the spotlight, apparently.

Whether the testimony will ever take place remains an open question because the White House will almost certainly raise an Executive Privilege claim for the former aides to prevent them from testifying.  Note also that current Bush aide Karl Rove has not been subpoenaed, but that too may be in the offing.  A letter from White House Counsel Fred Fielding warned the Committees again that sending subpoenas would not be a welcome development.  His letter (here) concludes, "[I]t is our strong hope that the Committees will not feel compelled to elevate the stakes by pursuing the path of subpoenas and compulsory process referrer to in your recent letters, which will only prolong this debate . . . ."  Sounds to me like a threat to assert the privilege. 

Senate Committee Chairman Patrick Leahy wrote back to Fielding in a cover letter to the document subpoena (here) stating:

The White House cannot have it both ways -- it cannot withhold documents and witnesses and thereby stonewall the investigation and, at the same time, claim that the facts about the White House’s improper influence over federal law enforcement have not been revealed in detail.  The White House’s continued stonewalling leads to the obvious conclusion that the White House is hiding the truth because there is something to hide.  Because the White House has continued its refusal to provide the requested information to the Senate Judiciary Committee on a voluntary basis, I am issuing subpoenas."

That sounds like the gauntlet being thrown down by Congress.

On another front, former interim U.S. Attorney Bradley J. Scholzman, who took the place of the ninth fired U.S. Attorney, Todd Graves, in the Western District of Missouri, sent a letter (here) to the Senate Judiciary Committee clarifying a misstatement in his recent testimony.  Scholzman testified about the prosecution of four members of a liberal voter registration organization called ACORN that was filed right before the 2006 election, and said that he had been "directed" to file the case by an career official in the Elections Crime Branch of the Department of Justice's Public Integrity Section.  In his letter, Scholzman writes, "I want to be clear that, while I relied on the consultation with, and suggestions of, the Elections Crime Branch in bringing the indictments when I did, I take full responsibility for the decision to move forward with the prosecutions related to ACORN when I was the interim U.S. Attorney."  Yet another Emily Litella moment in the U.S. Attorney imbroglio. (ph)

June 14, 2007 in Investigations, Prosecutors | Permalink | Comments (0) | TrackBack (1)

Former Law Firm Managing Partner Settles Insider Trading Case

The former managing partner at Katten Muchin Rosenman's D.C. office, David A. Schwinger, settled an SEC civil enforcement action alleging insider trading in Vastera,  Inc.  According to the complaint (here), Schwinger learned about an impending merger of Vastera when he interviewed the company's general counsel, who was seeking a new job because of the transaction.  Schwinger bought 10,000 shares and made a profit of a shade over $13,000 after the announcement of the deal.  According to the complaint, Schwinger violated a duty of trust and confidence he owed to Katten Muchin to maintain the confidentiality of firm information, especially because Vastera was a client of the firm.  The case shows how hard the SEC is pushing insider trading cases these days.  Schwinger settled the action by disgorging his profits, prejudgment interest, and a double penalty based on the profits.  Lawyers certainly pay a price for trading on inside information far beyond the amount at issue.  Whether the D.C. Bar will impose sanctions on Schwinger for possible misuse of confidential firm information remains to be seen. (ph)

June 14, 2007 in Civil Enforcement, Insider Trading, Securities | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 13, 2007

A Resume Check at Usana

Utah-based nutritional supplement distribution company Usana Health Sciences, Inc., seems to be having a few problems with the resumes of some of its officers.  An AP article (here) reports on the latest bit of possible resume padding, this time by the CFO who listed himself as a CPA even though his license expired in 1986.  Probably a technical violation, because a company's chief financial officer does not have to be a CPA, but a bit sloppy.  The article notes three other resume problems: a company director decided not to stand for re-election in April 2007 due to a master's degree listed on his resume that he never received; a member of a medical advisory board who claimed to be a licensed doctor had his licensed suspended in two states; and, a senior officer changed his resume to show that his Ph.D. was in forestry, not biology -- a minor difference to be sure for those of us who abhor science classes.

Usana has been embroiled in a fight with Barry Minkow, the former head of ZZZZ Best who served a then-substantial prison sentence in the 1990s for fraud and who now researches companies that he believes are acting improperly through his Fraud Discovery Institute.  Usana filed a defamation suit against Minkow in March 2007 and sent a letter to the SEC asking for an investigation of him.  Usana faces its own investigation by the SEC, as the Commission's Salt Lake City office informed the company that it had initiated an informal investigation, which a press release  (here) brushed off as related "to assertions appearing in the mass media about USANA," i.e. Minkow.  A New York Post article (here) states that the SEC is also looking into stock sales by Usana's CEO in February 2007, right when Minkow began raising questions about the company.  This fight is likely to take place in the media as the various sides trade accusations. (ph)

June 13, 2007 in Investigations | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 12, 2007

Libby Facing Strong Prosecutorial Arguments Against Bond

The Wall Street Jrl reports on the position of  Prosecutor J. Patrick Fitzgerald on whether Libby should be allowed to remain free pending appeal.  The article is titled, "Prosecutor Pushes Libby Sentence."  No surprises here.


June 12, 2007 in Plame Investigation | Permalink | Comments (0) | TrackBack (0)

University of Medicine and Dentistry of New Jersey Not Out of the Woods

Newsday provides an update on what's happening at UMDNJ in an article titled "Federal Monitor's Report Finds Billing Problems at UMDNJ."  This was a case where the company had signed a deferred prosecution agreement that allowed for the appointment of a federal monitor. (for background see here and here). Note also that the Chronicle of Higher Education (subscription required) has an article titled, Anti-Corruption Bills in N.J., a Response to Scandal, Would Challenge Colleges that links to the Newsday story.

(esp) (w/ a Stetson hat tip to Dean Darby Dickerson)

June 12, 2007 in Settlement | Permalink | Comments (0) | TrackBack (0)

Monday, June 11, 2007

Gonzales Skates

It was no surprise to see that there were not quite enough supporters to progress to a vote that could sound the "no confidence" note against Attorney General Gonzales. (see NYTimes here, Washington Post here)  And although it was seven votes shy of the sixty needed to move to the voting arena, it sends a strong message that many are not happy about the way things are running in the DOJ house. Some may think that Gonzales should be satisfied that he can continue without a "no confidence" brand on his tenure in office.

For all the law school deans out there- would you stay in your position if more than half of your faculty wanted to take a vote on whether there was "no confidence" in you or your performance? Would this not be a sign to move on?


June 11, 2007 in Prosecutors | Permalink | Comments (1) | TrackBack (0)

Stealing Intelligence Funds is Not Intelligent

A DOJ Press Release reports that "a former Intelligence Contingency Funds (ICF) officer for the Department of Defense, was sentenced to 12 months in prison for stealing over $100,000 in intelligence funds from his former employer." The individual was "responsible for budgeting, disbursing, and accounting for Intelligence Contingency Funds, which were DOD monies intended for and made available to DOD intelligence agents in furtherance of their official duties."  What is perhaps the most frightening aspect is that this individual "was also required to manage classified bank accounts and supervise agents engaged in classified intelligence-gathering activity."


June 11, 2007 in Settlement | Permalink | Comments (0) | TrackBack (0)

Wesley Snipes Moves to Dismiss Tax Charges

Attorneys for Wesley Snipes filed a Motion to Dismiss the Indictment of tax charges, arguing selective prosecution.  Prof Paul Caron at TaxProf Blog has links to the indictment and motion to dismiss, and also explains the history of this case. (See also the story on Yahoo News).

The Motion to Dismiss (see Smoking Gun) starts with a claim that the section 371 conspiracy charge "fails to allege the essential elements" of the statute.  This is followed by a claim that the court does not have jurisdiction.  The Motion concludes with claims of selective prosecution.

Selective prosecution is a difficult argument to make as it requires that the defendant prove not only that similarly situated individuals were not prosecuted, but that this prosecution was "intentional or purposeful" and that it was due to an "arbitrary classification." See LaFave, Israel, & King, Criminal Procedure 2d s 13.4.  The problem facing defense counsel is that he or she can't prove the "intentional or purposeful" prong without obtaining discovery, and many courts will not give them discovery upon a mere allegation of prosecutorial selectivity. The Supreme Court provides an allowance for discovery, but a certain base level of proof is needed to reach that level. (See United States v. Armstrong, 517 U.S. 456 (1996). 


June 11, 2007 in Tax | Permalink | Comments (2) | TrackBack (0)

Sunday, June 10, 2007

No Confidence Vote on Gonzales Set for Today

According to the NYTimes here, Alberto Gonzales is likely to face a vote on a motion of "no confidence."  But the predictions are that he will remain standing at the end of the day.  But also check out the Washington Post here on Immigration Judges often picked by GOP Ties.


June 10, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Take the Politics Out of DOJ

Co-blogger Peter Henning has an op-ed piece in the National Law Journal titled, "The Danger of Politics."  It is hard to imagine that in a department of career prosecutors, politics could enter into the hiring and firing of people in the office.  Why weren't prosecutors speaking up? Why was the individual at the top allowing this to happen?  Didn't they have a proper compliance program?


June 10, 2007 in News | Permalink | Comments (0) | TrackBack (0)