Saturday, July 21, 2007

Executive Privilege or Presidential Stonewalling -But What About Ethics?

Washington Post writers Dan Eggen and Amy Goldstein set the stage of the controversy between Congress and the President in their article titled, "Broader Privilege Claimed in Firings." It is a legal dilemma that awaits resolution so that all can get to the bottom of what happened with the US Attorney "firings."  The issue is not that the President has the power to hire and fire United States Attorneys, but rather whether there was a impropriety in the criteria used with respect to the recent housecleaning.  And in the next few weeks, and perhaps months, it is likely that these two branches of government will be at odds in the battle of determining who will proceed with a contempt action, how it will be accomplished, and the method of doing it (all discussed in detail in the Washington Post piece).

But there is another level to this discussion that merits consideration.  Professional ethics for attorneys requires one to withdraw when he or she has a conflict of interest. It would seem that the DOJ has a conflict here and that they are not able to proceed on an action requested by Congress under law, and also promote an executive privilege claim that they contend is warranted here. They have an interest in this litigation and should be removed from proceeding.  But the real question is whether Attorney General Gonzales will let this happen.

(esp)

July 21, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Former Treasurer for Lockheed Martin Corporation’s Political Action Committee Pleads

A DOJ Press Release reports that "[a] former deputy manager and treasurer for Lockheed Martin Corporation’s political action committee has pleaded guilty to wire fraud and making false statements to the Federal Election Commission." The press release notes that the individual's  "duties included, among other things, preparing contribution checks for distribution to federal and state candidates, keeping track of disbursements and receipts within the computer system of the Lockheed Martin Employees’ Political Action Committee (Lockheed PAC), and making periodic required filings with the FEC on Lockheed PAC’s behalf."  Unfortunately, the DOJ press release states that this individual "developed a scheme whereby he took Lockheed PAC checks totaling approximately $160,000, and wrote the checks to himself instead of to federal political candidates or campaigns." 

(esp)

July 21, 2007 in Fraud | Permalink | Comments (0) | TrackBack (0)

Sentencing for Executives in Oxycotin Case

Wall Street Jrl reports that the three executives in the Oxycotin Case were given "three years’ probation and 400 hours each of community service in drug treatment programs."  For details see here.

(esp)

July 21, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Friday, July 20, 2007

New Twist in the Case Against One of Stockman's Co-defendants

When David Stockman, the former Director of Management & Budget under President Ronald Reagan, was indicted, there were several co-defendants included in the indictment.  One of these co-defendants filed a motion this week asking for the recusal of the AUSA on the case. The motion discusses the breakdown in proffer negotiations with the government and asks for the recusal of the AUSA from this case "because her representation of the government at trial will violate the unsworn witness rule."  But the motion also raises a serious concern, and one that may become the focus of this case should it proceed to trial.  That issue may be whether the AUSA "threatened [the accused] with conviction and life imprisonment under the U.S. Sentencing Guidelines, specifically detailing how the Guidelines would be applied, if he did not plead guilty and cooperate against Co-defendant Stockman."  Whether there is merit to this allegation, and whether this warrants recusal, remains to be seen.

Motion here -

Download motion20to20recuse20ausa20cantwell.pdf

(esp)

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

Thursday, July 19, 2007

Rove, Cheney, & Others Win Another Round One in Plame Matter

With the Libby commutation in hand, and no charges filed against any leakers in the Plame matter, the only remaining sign of the case was the civil action brought by Plame against several administration officials. And that too is now history as a result of the immunity provided to government officials.  The court dismissed Plame's lawsuit, noting its lack of jurisdiction. (See Washington Post)

So let me see if I understand the final results here. A prosecutor investigated the leak and indicted a senior level official on after-the-fact charges.  A jury convicted this individual, but the President commuted his sentence. Thus, the criminal process failed to ascertain who was responsible for the leak and the executive didn't seem to care.

And so the aggrieved party tried the civil process, but found that the executive has immunity.

And the executive is claiming executive privilege for certain former executive level employees who were called before Congress to testify about "firings" of US Attorneys.

I keep wondering how Alexis de Tocqueville  would have written this chapter in his book "Democracy in America."

(esp)

July 19, 2007 in Plame Investigation | Permalink | Comments (3) | TrackBack (0)

What Duke Cunningham Says

SanDiego.com (Copley News Service) has a fascinating piece discussing former Rep. Randy “Duke” Cunningham's interviews with the FBI.  The article has a sidebar that details the FBI interview. The comments following this article are also telling as many point out that this prosecution occurred in a place that suffered from an US Attorney "firing."

(esp)

July 19, 2007 in Corruption | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 18, 2007

Michael Vick Indicted on Conspiracy Charge Related to Dog-Fighting

Atlanta Falcons quarterback Michael Vick and three others were charged in a single-count indictment (here) in the Eastern District of Virginia with conspiracy to violate the Travel Act and the federal animal fighting statute in connection with a dog-fighting operation on Vick's property in Smithfield, VA.  According to a press release issued by the U.S. Attorney's Office:

[T]he defendants were involved in an ongoing animal fighting venture based out of a property located in Smithfield, Virginia, from early 2001 through on or about April 25, 2007. The property was purchased by Vick in June 2001. Since that time, the named defendants formed a dog fighting enterprise known as “Bad Newz Kennels” and used the property for housing and training pit bulls used in dog fights. From at least 2002, the defendants and others sponsored dog fights at the property, where participants and dogs traveled from South Carolina, North Carolina, Maryland, New York, Texas, Alabama, and other states to participate. Generally, only those accompanying the opposing kennels and “Bad Newz Kennels’” associates attended the fights. For a particular dog fight, the participants would establish a purse for the winning side, ranging from the hundreds to thousands of dollars. Participants and spectators would also place side-bets on the fight. The dog fight would last until the death or surrender ofthe losing dog. At the end of the fight, the losing dog was sometimes put to death by drowning, hanging, gunshot, electrocution, or another method.

In addition to the conspiracy charge, there is also a forfeiture count.  (ph)

July 18, 2007 in Prosecutions | Permalink | Comments (3) | TrackBack (0)

New Acting Deputy Attorney General Appointed

A press release of the Department of Justice reports that Craig S. Morford was appointed to the position of  Acting Deputy Attorney General at the Department of Justice, with the position to begin when Deputy Attorney General Paul J. McNulty departs the office. McNulty had announced his plans to leave the office during the summer. (see here) Morford presently serves as the U.S.Attorney for the Middle District of Tennessee.Morford has prior experience in various US Attorneys' offices, having held leadership positions in more than one office.

(esp)

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

Dow Jones Director Under SEC Civil Scrutiny

Trial Set for Remaining Three in KPMG Related Case

The three defendants in the KPMG related case, who were not dismissed from the government's case as a result of Judge Kaplan's recent ruling, now have a trial date according to the Wall Street Jrl. here.

(esp)

July 18, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 17, 2007

Five Year Anniversary of the Corporate Fraud Task Force

Yesterday marked the fifth anniversary of the Corporate Fraud Task Force and the DOJ celebrated by releasing its report card.  And by reading their press release it looks like they received "A"s in every course. Statistically they report:

"1,236 total corporate fraud convictions to date, including:

    • 214 chief executive officers and presidents;
    • 53 chief financial officers;
    • 23 corporate counsels or attorneys; and
    • 129 vice presidents."

They note that "the Justice Department’s Asset Forfeiture and Money Laundering Section has obtained more than one billion dollars in fraud-related forfeitures and has distributed that money to the victims of corporate fraud."  The DOJ Press Release provides numerous examples of prosecutions by highlighting the investigations and the convictions resulting from particular investigations.  For example, with respect to WorldCom it states, "The former WorldCom CEO was convicted on charges of conspiracy, securities fraud, and making false statements in SEC filings, and was sentenced to 25 years’ incarceration."

But omitted from the list of companies and employees are numbers of those found "not guilty."  The report does not speak about the death sentence given to Arthur Andersen, LLP, a conviction that was later reversed by the Supreme Court.

It is important to remember that prosecutors are to be "ministers of justice."  And "win" or conviction records are not what counts.  What matters is whether the prosecutor has proceeded against criminality in a fair and professional matter. 

(esp) 

July 17, 2007 in Fraud | Permalink | Comments (2) | TrackBack (1)

Subpoena to Protect "Harry Potter and the Deathly Hallows"

Various newspapers report that Scholastic Corp., the publisher of the forthcoming book"Harry Potter and the Deathly Hallows," needed to obtain a subpoena to find the source of leaks of the upcoming book.  (For details see, e.g., Chicago Tribune (Bloomberg), Washington Post and Wall Street Jrl).  But whether the material allegedly posted online is the true version remains unknown (see Newsday).  EWeek.com discusses whether the leak resulted from a phishing scheme.

With the book being released at 12:01 a.m. Saturday, many anxiously await the arrival of this Seventh Harry Potter book. The blogs are a frenzy of who will live and who will die. Although leak incidents may remain a civil matter, one has to wonder if the use of computers to either obtain the material and/or disseminate it warrant criminal scrutiny.  It is not uncommon for fads to be a source for federal and state fraud prosecutions. For example, during the 90's there were fraud prosecutions related to improper distribution of "Beanie Babies." (See Do We Need A "Beanie Baby" Fraud Statute?") 

(esp)

July 17, 2007 in Computer Crime | Permalink | Comments (0) | TrackBack (0)

Monday, July 16, 2007

What Are Others Saying About the KPMG Related Dismissals

Washington Post here.

New York Times here.

LATimes (AP) here.

Wall Street Jrl here.

Ideoblog here.

Appellate Law & Practice here

Some others are listed on TaxProfBlog here.

Martin S. (Marty) Pinales, president of the National Association
of Criminal Defense Lawyers (NACDL), issued the following statement:

"Whenever the government uses underhanded tactics or coercion to drive a
wedge between a citizen and his counsel, it undermines the truth-seeking
process. Only when government investigations and prosecutions are conducted
fairly and within the bounds of the Constitution can there be public
confidence in the outcome of a case."

(esp)

July 16, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Boeing to Pay One Million

A press release issued by the US Attorney's Office in Kansas states that "The Boeing Company has agreed to pay the United States more than $1 million to settle allegations that it improperly billed for materials used to install new engines in KC-135 aircraft."  The press release further states that "Boeing alleged that the transfer of the costs was allowed under the contract and that the charges were not improper."

(esp)

July 16, 2007 in Settlement | Permalink | Comments (0) | TrackBack (0)

Commentary on Recent Dismissal of KPMG Defendants

Judge Kaplan dismissed the criminal cases of 13 (see here).  Some commentary -

  • The government asked for this dismissal - perhaps in part to move the case to the Second Circuit faster. Because the government could not contest the judge's initial decision, as it would be in an interlocutory stage, the dismissal was a way for them to proceed to a higher court.  In many ways - what they asked for is what they got.
  • But the government's request for dismissal may now come back to haunt them.  For one, the question that will now be asked is whether this agreement serves as a waiver of their right to contest the initial court decision.  If the tables were turned and the defense had in any way agreed to something at the trial level, the government would argue that the issue is now waived for appeal.  Can't the defense make this same argument if the government should appeal this decision?
  • And more importantly, now the court is not only dismissing the matter on the basis of  its prior conclusion, but is additionally finding that the prosecutor's conduct "shocks the conscience in the constitutional sense."  This is definitely more detrimental to the prosecution should they decide to appeal.
  • In many ways the government asked for this decision by interpreting the Thompson Memo as a way to void the right to counsel of individual defendants.  By asking a company to waive attorney-client privilege and to not pay the attorney fees of individuals, even when the fees would normally be paid, the government was inserting itself in the judicial process as a party that could defeat the defense by improper means.
  • The trial court is the finder of fact, and the facts determined by this court stand absent unusual circumstances.  In light of this explicit factual finding, should the government really appeal this decision? 
  • Because of this court's finding of prosecutorial issues, will this now be conduct examined by DOJ's Office of Professional Responsibility?
  • Many have voiced concerns with the revised Holder Memo (Thompson Memo).  And even with changes of the McCullum Memo and later McNulty Memo, problems still persist.  Is this not a clear sign that DOJ needs to re-evaluate how it is handling these cases?  Isn't it more important to be able to proceed to trial, then to risk dismissal because of trying to deprive the defense of presenting the case as they wish?

(esp)

July 16, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (2)

Judge Kaplan's Decision to Dismiss 13 in KPMG Related Case

Hon. Lewis Kaplan issued a 64-page decision dismissing 13 of the individuals accused in an action tied to KPMG. He stated, "[t]he Court concludes that three of the defendants have not established that KPMG would have paid their defense costs even if the government had left KPMG to its own devices. The indictment therefore will be dismissed as to thirteen of the sixteen KPMG Defendants."

But rather than just accepting the prosecution's agreement to dismissal, the court went further and found a basis for "outrageous and shocking" action on the part of the prosecutors. The court stated,

"Just as prosecutors used KPMG to coerce interviews with KPMG personnel that the government could not coerce directly, they used KPMG to strip any of its employees who were indicted of means of defending themselves that KPMG otherwise would have provided to them. Their actions were not justified by any legitimate governmental interest. Their deliberate interference with the defendants’ rights was outrageous and shocking in the constitutional sense because it was fundamentally at odds with two of our most basic constitutional values – the right to counsel and the right to fair criminal proceedings. But the Court does not rest on this finding alone. It would reach the same conclusion even if the conduct reflected only deliberate indifference to the Defendants’ constitutional rights as opposed to an unjustified intention to injure them."

The court notes that "[t]he vice of the government's actions here was that the government improperly interfered with the payment of defense costs that KPMG otherwise would have paid, just as KPMG paid for a $20 million defense for four of its personnel in the Xerox case."

The court cites to a landmark passage from Berger v. United States and follows this with the following conclusion:

"The Department of Justice, in promulgating the aspects of the Thompson Memorandum here at issue, and the USAO in the respects discussed above and in Stein I, deliberately or callously prevented many of these defendants from obtaining funds for their defense that they lawfully would have had absent the government's interference. They thereby foreclosed these defendants from presenting defenses they wished to present and, in some cases, even deprived them of counsel of their choice. This is intolerable in a society that holds itself out to the world as a paragon of justice. The responsibility for the dismissal of this indictment as to thirteen defendants lies with the government.

Order -

Download 2007716_order_dismissing_as_to_13_def_for_viol_of_rights_to_counsel_2.pdf

Commentary to follow.

(esp)

July 16, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (2)

Sunday, July 15, 2007

Where's the Milberg Weiss Case Headed

The cooperation of former Milberg Weiss partner David Bershad most likely will lead the firm to negotiate a quick resolution of the criminal charges, so the issue becomes whether any other current defendants will cooperate and if the case will be extended to others who worked at the firm, such as Melvyn Weiss and William Lerach.  In filing a response to a motion to dismiss the honest services counts of the indictment filed by, among others, former name partner Steven Schulman, federal prosecutors included as an exhibit a short portion of the grand jury transcript of an unnamed broker.  The broker testified that Schulman gave him cash payments to provide the names of clients who owned shares of companies Milberg Weiss was considering suing so they could act as lead plaintiffs.  The payments, which consisted of packs of hundred dollar bills, were made in restaurants at a Howard Johnson or Holiday Inn in Newburgh, New York, by passing the money underneath the table -- I'd hate to think what else might be found under there. 

It's not entirely clear what law Schulman might have broken in making the payments, although paying cash to a broker to obtain clients is questionable.  It would not be a scheme to defraud the brokerage firm, nor would it be a fraud on the class of plaintiffs because the case had not been filed.  It is certainly unethical to pay a person, particularly a non-lawyer, for clients.  As with many other charges in the case, however, representations were made to the court about the representative plaintiff and the lawyer's role in the matter, so the payments could be part of a broader fraudulent scheme.  Regardless of whether the payment is illegal in itself, it does not put Schulman in a very good light and is consistent with Bershad's plea agreement about the use of copious amounts of cash in connection with the class actions.

A post on the CAL LAW Legal Pad blog (here) speculates that prosecutors are looking into payments to an expert witness used by Milberg Weiss to establish damages from the alleged misconduct as a possible avenue for charging Lerach.  The expert is in prison on an unrelated fraud charge, so he won't be an effective witness.  But if the payments can be traced through others, or if Lerach made  or authorized false statements to the court that the expert did not receive a contingency fee, which is prohibited, then a perjury or criminal contempt charge could be brought.  (ph)

Download us_v_milberg_weiss_grand_jury_transcript.pdf

July 15, 2007 in Legal Ethics, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Maybe Now The Sentencing Commission Will Listen

In a post-Libby commutation world, and a pronouncement by the President that Libby's guidelines sentence was "excessive," the next step is clearly for changes in the sentencing guidelines. And the ABA has provided some thoughtful advice for the Sentencing Commission to consider.  In a letter to the Commission, Denise A. Cardman writes:

I write on behalf of the American Bar Association ("ABA") regarding the Commission’s priorities for the 2008 amendment cycle. Our recommendations were developed after careful study of the ABA’s Criminal Justice Section Sentencing Committee, co-chaired by James Felman and Barry Boss. We concur with the Practitioners’ Advisory Group (PAG) that the Commission should once again prioritize the development of additional alternatives to incarceration, consider an expansion of the "safety-valve" to non-drug cases, and we also urge you to take action to encourage probationary sentences under specified circumstances.

Although this letter was not written in response to the President's commutation of Libby's sentence, if the Commission takes the advice of this non-political body made up of many different constituents, we may find that individuals beside "Scooter" Libby will be recipients of "diversion and deferred adjudication."

(esp)

July 15, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Attorney-Client Privilege Bill Picking Up Support

Initially it was Senator Arlen Specter's bill (S 186) in the Senate that stood alone, asking to provide additional protection to the attorney-client privilege.  But as of last week, the House also has a similar bill circulating.  There is bi-partisan support on the bill authorship, with the new bill being introduced by Representatives Bobby Scott (D-VA) and Randy Forbes (R-VA).  The house version matches the proposed legislation in the Senate.  In commenting on this new bill, ABA President Karen Mathis stated,

In so doing, it strikes the proper balance between the legitimate needs of prosecutors and regulators and the constitutional and fundamental legal rights of individuals and organizations.  The American Bar Association strongly urges Congress to approve this critical legislation as soon as possible.

Many support the house bill (see NACDL).

(esp)

July 15, 2007 in Privileges | Permalink | Comments (0) | TrackBack (0)