Saturday, July 28, 2007

Dismissal Sought in Case Against Attorney Charged With SOX Obstruction

Michael Regan of the Hartfield Courant reports on a bizarre case being brought by federal prosecutors in Connecticut.  The case charges obstruction against an attorney for acts related to his representation of his client.  Prosecutors brought the matter using the post-Enron SOX amendments on destruction of evidence. 

The Connecticut Criminal Defense Lawyers Association is actively opposing the government's aggressive posture of proceeding against an attorney who allegedly destroyed a computer that contained alleged child pornography. The attorney was faced with the dilemma of retaining contraband or voiding an attorney-client privilege.  He is alleged to have destroyed the contraband. One has to wonder if Congress intended this type of application when they passed the SOX amendments.  On Friday the court heard the defendant's motion to dismiss the action.

(esp) (w/ a hat tip to Ross Garber)

July 28, 2007 in Obstruction | Permalink | Comments (0) | TrackBack (0)

Amicus Brief Filed in Gall

An incredible amicus brief has been prepared by the Federal Public Defenders in the Gall case.  The question presented is "whether, when determining the 'reasonableness' of a district court sentence under United States v. Booker, 543 U.S. 220 (2005), it is appropriate to require district courts to justify a sentence outside the range recommended by the United States Sentencing Guidelines with a finding of extraordinary circumstances."  The Brief covers four basic arguments:

"I. The Original Intent Was That Sentencing Policy and Practice Would Evolve in Response to the Actions and Views of Sentencing Courts.

II. Before Booker, The Intent That Decisions of Sentencing Judges Would Contribute to a Sentencing Common Law and Evolution of the Sentencing Guidelines Was Not Fulfilled.

III. After Booker, Aggressive Appellate Review of Sentences Outside the Guideline Range Again Forecloses the Possibility of District Court Feedback to the Commission, Discourages Development of a Sentencing Common Law, and Is Now Unlawful and Unconstitutional.

IV. Requiring Deference to District Courts’ Application of § 3553(a) to Individual Cases Will At Last Permit the Development of a Sentencing Common Law and a Dialogue with the Commission."

Credit for writing goes to Amy Baron-Evans with the assistance given her by Sara Noonan and Jennifer Coffin of the Federal Defender Sentencing Resource Counsel and Dan Kaplan, AFPD in the Arizona office. Editing and polishing done by Paul Rashkind,Henry Bemporad, David Lewis, Kristen Rogers, and Tim Crooks .

Brief - Download gall_defender_amicus.pdf

(esp) (w/ a hat tip to David Beneman)

July 28, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Greed is Not Good

U.S. District Judge Edward Nottingham described the insider trading convictions of former Qwest CEO Joseph Nacchio as "crimes of overarching greed" in sentencing him to six years in prison.  The judge also rejected the defense request for bail pending the appeal, ordering that Nachio report within fifteen days of receiving his assignment from the Bureau of Prisons.  While it is always hard to predict whether a defendant will be allowed to remain free while pursuing an appeal, the trend in recent high-profile white collar cases, such as the prosecutions of Jeffrey Skilling and I. Lewis Libby, is for judges to reject the request and order the defendant to report shortly after sentencing.  Judge Nottingham did agree to recommend that Nacchio be directed to report to the Schuylkill FCI in Pennsylvania, which is relatively close to his home in New Jersey.  But, the Bureau of Prisons makes its own decision on prisoner placement, so Nacchio could end up anywhere in the Northeast, and perhaps even further than that.  A Bloomberg article (here) discusses the sentencing. (ph)

July 28, 2007 in Insider Trading, Sentencing | Permalink | Comments (0) | TrackBack (0)

Continuing Attorney's Fee Fight in Westar Case

An earlier post (here) discussed the opinion issued by the U.S. District Court for the District of Kansas ordering utility company Westar Energy to pay a portion of the claimed attorney's fees of one of its former officers, Douglas Lake, who is facing a third trial on charges related to allegedly false reports filed with the SEC concerning benefits received by former CEO David Wittig.  The Court determined that the indemnification provision in Westar's by-laws required it to advance Lake's fees, which the company had withheld while he underwent two trials, an appeal that resulted in a reversal of the convictions rendered in the second proceeding, and the prospect of a third trial on the remaining charges.  In directing Westar to pay $3.2 million, the district court found that the indemnification provision did not permit the company to withhold the funds. 

Rather than pay the money, however, Westar has taken a novel tactic of filing a motion (available below) asking the court to require Lake to post a bond of $4.2 million "as appropriate security for the payment of such costs and damages as may be incurred or suffered by Westar if it is determined that the preliminary injunctive relief awarded against Westar in the Court’s Order of June 28, 2007 was wrongfully granted and that the Court make additional findings to support requiring security in connection with the Order."  The company reaches that conclusion by claiming that the district court's order is a "preliminary injunction" and therefore under Federal Rule of Civil Procedure 65(c) a bond must be posted.  Unfortunately for Westar, the court's order is not styled as a preliminary injunction but only a resolution of what is, in effect, a contract claim.  Westar has refused to pay the $3.2 million, and Lake has filed a motion to hold the company in contempt (available below).  The company's refusal to pay any of the fees has put Lake in a rather precarious position because his attorneys had filed a motion to withdraw prior to the decision ordering the payment, and could well renew the motion if they don't receive any money in advance of the next trial.  (ph)

Download westar_energy_v_lake_bond_motion.pdf

Download westar_energy_v_lake_contempt_motion.pdf

July 28, 2007 in Defense Counsel | Permalink | Comments (0) | TrackBack (0)

You Can't Tell the Congressmen Under Investigation Without a Scorecard

A New York Times article (here) provides a run-down of the various current and former members of Congress under investigation for corruption by federal prosecutors.  Many of the investigations -- but by no means all -- are traceable to the activities of former superlobbyist Jack Abramoff, currently serving a six-year prison term who has provided information that led to the guilty plea and thirty-month sentence for former Ohio Representative Bob Ney.  There is currently one Congressman, William Jefferson, under indictment, and the FBI recently searched the residence of a California Representative whose wife worked for Abramoff.  Quite a roster of questionable dealings, to be sure. (ph)

July 28, 2007 in Corruption, Investigations | Permalink | Comments (0) | TrackBack (0)

Friday, July 27, 2007

Nacchio Sentenced to Six Years in Prison

U.S. District Judge Edward Nottingham sentenced former Qwest CEO Joseph Nacchio to a six-year prison term, at the lower end of the Federal Sentencing Guidelines range.  In addition, he imposed a $19 million fine, the maximum permitted based on the 19 counts of conviction, and ordered a forfeiture of $52 million based on his total gain.  The Denver Post blog on the Nacchio trial (here) has the details. (ph)

July 27, 2007 in Insider Trading, Sentencing | Permalink | Comments (0) | TrackBack (0)

Is There a Special Prosecutor in Gonzales' Future?

Four Democrat senators sent a letter (here) calling for the appointment of a special prosecutor to investigate Attorney General Alberto Gonzales for possible perjury in his testimony before the Senate Judiciary Committee about dissent in the Administration over the secret surveillance program and his role in the firing of nine U.S. Attorneys.  The issue came to the forefront when former Deputy Attorney General James Comey testified about a meeting in 2004 in the hospital room of then-Attorney General John Ashcroft to pressure him to renew the authorization for the surveillance program over Comey's objection.  Gonzales was there as Counsel to the President, and Ashcroft refused to override Comey's decision.  In testimony on July 26 before the Committee, FBI Director Robert Mueller appeared to call into question Gonzales' early statements denying any dissension over the program, according to an AP story (here).  The Senators' letter states that "the Attorney General has provided -- at a minimum -- half-truths and misleading statements about the removal and replacement of U.S. Attorneys, about his role in trying to circumvent Acting Attorney General Comey, and about the Administration's position on the NSA wiretapping program."

The White House has maintained its support of Gonzales, asserting that his testimony has not been inconsistent.  Press Secretary Tony Snow stated (here):

Q: On Gonzales, this Negroponte memo shows an apparent contradiction in what he told the committee two days ago about that briefing at the White House. But yet Gonzales' spokesman says that what he said on Tuesday was true. How can that be? Can you explain that?

MR. SNOW: Unfortunately we get into areas that you cannot discuss openly. It's a very complex issue. But the Attorney General was speaking consistently. The President supports him. I think at some point this is going to be something where members are going to have to go behind closed doors and have a fuller discussion of the issues. But I can't go any further than that.

Q Everyone else says the meeting was about the TSP. Negroponte says it, people who were there said it, Comey said it. How could that not be right?

MR. SNOW: It's simply more complex than that, and I can't go into any more detail.

Q Is there another program that existed besides the TSP program?

MR. SNOW: I will repeat myself -- it's more complex, and I cannot go any further than that. [Italics added]

For those who remember the days of Watergate, the answers seem perilously close to a non-denial denial ("It's a very complex issue"). 

As co-blogger Ellen Podgor pointed out in an earlier post (here), Gonzales has recused himself from the investigation of the firing of the nine U.S. Attorneys, and his involvement in the meeting with Ashcroft and Comey in 2004 likely knocks him out of any participation in an investigation of that issue.  The letter from the Senators is addressed to Solicitor General Paul Clement, the highest ranking DOJ official not recused from the matters.  While it is unlikely at this point that a special prosecutor will be named, questions about Gonzales' testimony will persist.  If a special prosecutor is appointed, I doubt Patrick Fitzgerald's telephone will ring, despite his experience in the area.  A logical candidate would have been Craig Morford, a career prosecutor with experience in a variety of districts who has no strong political ties, but he's now the Acting Deputy Attorney General due to the pending resignation of Paul McNulty.  We shall see. (ph)

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

Former SafeNet CFO Indicted for Options Backdating

The former CFO of computer security company SafeNet, Inc., who also served as its president for two years, was charged in the Southern District of New York with one count of conspiracy and one count of securities fraud for her role in backdating options (indictment below).  The case is one of a growing roster of prosecutions of senior corporate officers charged with crimes related to the issuance of backdated options, and in most instances they allegedly profited personally from the awards in which the dates were picked to increase the value of the securities by lowering the strike price of the options.  According to a press release issued by the U.S. Attorney's Office (here):

ARGO and her co-conspirators routinely backdated options grants by papering them as if they had been issued on select historical "grant dates" when SafeNet's stock price had closed at or near a periodic low point. With the benefit of hindsight, ARGO created an opportunity for herself and others at SafeNet to reap substantial benefits by awarding herself and others backdated options grants with particularly advantageous exercise prices. As a result, a substantial number of SafeNet’s options grants during this time period were in-the-money on the day they were granted and therefore had an immediate compensatory and expense component and value to the recipient.

The indictment does not name any other individual conspirators, and further charges may be filed in the case, particularly if there are cooperating witnesses who have agreed to plead guilty and testify for the prosecution in the case.  SafeNet was taken private in April 2007.  (ph)

Download us_v_argo_indictment_july_25_2007.pdf

July 27, 2007 in Prosecutions, Securities | Permalink | Comments (0) | TrackBack (0)

Rove and Jennings Receive Subpoenas

On what appears to be an "in for a penny, in for a pound" approach, the Senate Judiciary Committee sent subpoenas (here) to White House aides Karl Rove and J. Scott Jennings, the deputy political director, to testify and provide documents related to the firing of nine U.S. Attorneys in 2006.  Rove's name appears in e-mails from Kyle Sampson, Attorney General Gonzales' then-chief of staff, approving the firings, and Jennings corresponded with, among others, Monica Goodling, Gonzales' White House liaison.  The subpoenas require their appearance on August 2, although the odds of either appearing are nil.  The White House asserted the position that current and former Presidential aides have a complete immunity from appearing before Congress on the ground of Executive Privilege to resist subpoenas to Harriet Miers and Josh Bolten.  Given that both Rove and Jennings currently work in the White House, I believe there is no realistic chance they will appear before the Committee, even if only to assert Executive Privilege.  So you can probably add their names to the list of those who will be the subject of a debate over possible contempt of Congress charges, much like Miers and Bolten before them.  (ph)

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

Will Nacchio Receive Bail Pending Appeal?

Former Qwest CEO Joseph Nacchio faces sentencing before U.S. District Judge Edward Nottingham, and an important question beyond the prison term -- the Sentencing Guidelines range is 70 to 87 months based on the government's calculations -- is whether he will be allowed to remain free on bail pending appeal.  Nacchio filed a brief (available below) outlining four likely issues that raise a substantial question regarding his convictions to allow the court to permit him to remain free while he pursues the appeal.  Two of the issues relate to the materiality of any information he had at the time of the trading, and the others relate to the sufficiency of the evidence and the trial court's exclusion of classified information related to contracts Qwest might have obtained that would have bolstered its stock price.  Trying to gauge whether an issue will be successful on appeal is always difficult, and in the bail-after-conviction context it is even more difficult because the standard essentially asks Judge Nottingham to second-guess himself.  As co-blogger Ellen Podgor points out (see here), recent white collar cases are all over the place on the issue, with some defendants granted bail (e.g. Bernie Ebbers) while others (Jeffrey Skilling) are not.  Former HealthSouth CEO Richard Scrushy and former Alabama Governor Don Siegelman were even taken into custody at the end of the sentencing hearing, an uncommon but not impossible scenario.  The bail statute presumes the defendant will not be granted bail pending appeal, so the odds are against Nacchio. (ph)

Download nacchio_motion_for_bail_pending_appeal.pdf

July 27, 2007 in Insider Trading, Sentencing | Permalink | Comments (0) | TrackBack (0)

Paul Caron Turns 50!!!!

Blog Emperor Paul Caron turns 50 today.  Happy birthday, Paul.

(esp) & (ph)

July 27, 2007 in News | Permalink | Comments (0) | TrackBack (0)

Thursday, July 26, 2007

NFL Hires Former Deputy Attorney General to Investigate the Vick Dogfighting Charge

The National Football League hired former Deputy Attorney General Eric Holder to conduct an investigation of the indictment of Atlanta Falcons QB Michael Vick on a conspiracy charge involving dog fighting on his property in Virginia.  NFL Commissioner Roger Goodell asked the team to withhold taking any punitive action against Vick until the League's investigation is complete.  Prior to his service as the DAG, Holder was the U.S. Attorney for the District of Columbia, and he's now a partner at Covington & Burling -- which happens to be the former law firm of Goodell's predecessor, Paul Tagliabue.  During his tenure at Main Justice, Holder got to affix his name to the first memorandum outlining the government's policy regarding charging corporations with crimes, the eponymous Holder Memo, that was subsequently supplanted by the Thompson Memo and the current McNulty Memo.  All three have generated significant controversy in the white collar crime world, although they are droplets compared to the almost daily coverage of the indictment of Vick and three others for conspiracy (see L.A. Times story here). 

An interesting question will be whether Vick's attorney will allow him to cooperate with Holder's investigation.  In baseball, former Senator George Mitchell's investigation of steroid use has been largely stymied by the refusal of players to meet with him, save Jason Giambi after his virtual admission to using performance-enhancing substances.  Unlike the baseball players, Vick is facing a federal charge that could land him in jail if he's convicted and would likely cost him a couple seasons out of the NFL.  Anything Vick might say to Holder would not be privileged, and federal prosecutors in all likelihood could obtain his statements for use against him at trial.  Is the NFL trying to set Vick up so that the League can suspend him for not cooperating, rather than barring him from playing because of a charge on which he has not been convicted and is presumed innocent, at least in the criminal proceeding?  The lack of cooperation could well be the easy way out for the NFL to get a player off the field who is bound to generate significant negative publicity.  For all you fantasy football players out there, don't look for Vick to play any time soon, although he may be worth a fourth or fifth round pick on the off-chance this gets resolved sooner rather than later. (ph)

July 26, 2007 in Investigations | Permalink | Comments (0) | TrackBack (0)

SEC Sues KLA-Tencor and Its Former CEO for Options Backdating

The SEC sued computer chipmaker KLA-Tencor and its former CEO for options backdating that occurred primarily from 1999 to 2002, although there is alleged to be one award in 2005.  The company settled the matter and, interestingly, there was no civil penalty and the allegations in the complaint (here) do not include any claims that the antifraud provisions were violated.  Unlike other companies that had to pay millions of dollars as part of the settlement, KLA-Tencor is getting off fairly lightly with only a "sin no more" injunction prohibiting future violations of the recordkeeping provisions.  Its former CEO, however, did not settle, and the SEC's separate complaint (here) against him alleges violations not only of the accounting and reporting requirements but also Rule 10b-5, the main antifraud provision.  According to the SEC Litigation Release (here):

[T]he Commission charges that he repeatedly engaged in backdating after becoming CEO in 1999, including pricing large awards of options to himself that were "in the money" by millions of dollars -- a potential windfall never disclosed to KLA-Tencor's shareholders. According to the complaint, Schroeder received a legal memorandum in March 2001 cautioning that "the Board and its committees are limited in their ability to grant options at a retroactive price without exposing the company to risk of an accounting charge." The memo further warned that "[a]ny attempt to set a price before such a grant is made raises substantial risks under securities and tax laws [and] accounting rules and gives rise to disclosure obligations." The Commission alleges that Schroeder nonetheless continued to backdate options.

The company disclosed in May 2006 (here) that it had received grand jury subpoenas from the U.S. Attorney's Offices in Brooklyn and San Francisco, and it's not clear which office is controlling the investigation and whether any criminal charges are likely to follow the SEC complaint.  (ph)

July 26, 2007 in Civil Enforcement, Securities, Settlement | Permalink | Comments (0) | TrackBack (0)

House Judiciary Committee Votes to Recommend Contempt

The House Judiciary Committee, in a party-line vote of 22 to 17, recommended to the full House that it pursue a contempt citation for former Counsel to the President Harriet Miers and former White House Chief of Staff Josh Bolten for their refusal to appear before the Committee to testify regarding the firing of nine U.S. Attorneys.  The Committee issued a 52-page report (available below) discussing the reason why their testimony was necessary for the investigation to justify the contempt recommendation.  The report recounts the information gathered to date regarding the dismissals in 2006 and seeks to refute the White House's position that the aides have an absolute immunity from being subpoenaed to testify before Congress.  The matter now moves to the full House, and all this is only a prelude to the issue whether a prosecutor will pursue the case if there is Congressional authorization of a contempt proceeding.  (ph)

Download house_judiciary_committee_contempt_memo_july_24_2007.pdf

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

Wednesday, July 25, 2007

Mediation -- That's What is Needed Here!

Is this not the classic case needing mediation?   

Congress needs to enforce its powers.  After all it is the legislature, and for many years the Courts have been giving deference to this branch of government.  Equally persuasive is that when an executive out and out defies the legislature's powers it needs to stand its ground.  So it is not surprising to see this Congressional committee move for contempt against White House Chief of Staff Josh Bolten and President Bush's former legal counselor Harriet Miers. (see WSJ AP here) (See Wash Po here)

And one would think that the Executive would want Congress to have oversight abilities.  After all this is a democracy with three equal branches of government. The perception of an executive that can do as it pleases would bring us back centuries.

But playing this scenario out presents some interesting questions:  if the full house votes for contempt and then it goes to the US Attorney for the District of Columbia, it seems likely he will have to recuse himself because of a conflict of interest.  And if eventually the matter does get presented what kind of result could be expected? Would the President pull a "Scooter" Libby on this one?  Could this be a situation of a lot of time and money spend on worthless acts?  This could go in circles for some time, and in part it is because we have a balanced system of government that is supposed to have three co-equal branches. 

So wouldn't mediation be a better solution here? Many have said that we need to incorporate alternative dispute resolution into our legal system.  Perhaps this might be a good time to start.

(esp)

July 25, 2007 in News | Permalink | Comments (1) | TrackBack (0)

Tuesday, July 24, 2007

Gonzales Raising More Concerns

Dan Eggen and Paul Kane, of the Washington Post, provide in-depth coverage of  Attorney General Alberto Gonzales' appearance before the U.S. Senate Judiciary Committee on the Oversight of the Department of Justice. (see here) The article contains a link to the transcript of the hearing. The conflict issue (see here)was one point of discussion and the Attorney General appropriately recognized his conflict in matters with the White House.  In response to questions by Senator Specter he stated:

"SPECTER: Thank you, Mr. Chairman.

Attorney General Gonzales, does Solicitor General Paul Clement now have the unquestioned authority to appoint a special prosecutor since you and the deputy attorney general are recused?

GONZALES: It would be his decision, yes.

SPECTER: Just to be abundantly clear, so that if a request were made to him to appoint special prosecutor to handle the contempt proceedings arising out of this entire matter, it would be his decision?

GONZALES: Yes.

SPECTER: His sole decision?

GONZALES: I would not be involved with it; neither would the deputy attorney general."

The hearing covered many different topics and many criticisms of the AG were voiced.  But Senator Specter's closing remarks were very telling when he asked the Attorney General to look at the low morale in the department and later stated in noting the OxyContin case (see here), "But it looks to me candidly, Attorney General Gonzales, as if the department's dysfunctional."

(esp)

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

Bail Pending Appeal

Who gets bail, and who doesn't has certainly been a topic focused upon in recent days.  There is also the question of who is immediately taken from the courtroom upon conviction, and who has the benefit of reporting directly to the facility where the time will be served.  Recent years show that the answer to this question differs by judge, defendant, circumstances, and perhaps many unknown factors. For example, Jeffrey Skilling was denied bail pending appeal, so too for former Atlanta Mayor Bill Campbell.  Martha Stewart was allowed to remain free, but chose to do the sentence while the appeal was pending. And but for the President's commutation of "Scooter" Libby's sentence, he might have been off to prison very quickly. And then there was former HealthSouth CEO Richard Scrushy and former Alabama Governor Siegelman who were taken immediately from the courtroom into custody with bail denied. Unlike many white collar offenders they were not given the opportunity to report to the facility (see here).  The question now is what will happen to Conrad Black, and how about Former Qwest chief executive Joe Nacchio (see here).  Check out Doug Berman's Sentencing Law and Policy Blog where he discusses the bail issue in Nacchio and the recent addition to the legal team in the Conrad Black case.

(esp)

July 24, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Two Republicans Under Looking Glass

The Wall Street Jrl reports of DOJ scrutiny facing Republican Representatives Don Young of Alaska and Senator Ted Stevens.

(esp)

July 24, 2007 in News | Permalink | Comments (0) | TrackBack (0)

Washington Legal Foundation Files Tort Action Claiming Malicious Prosecution

The Washington Legal Foundation (WLF) issued a press release telling of its filing of a federal lawsuit in  the Western District of Louisiana. The lawsuit alleges that the plaintiff was "maliciously prosecuting" by the government "for allegedly storing a hazardous substance without a permit from the Environmental Protection Agency (EPA)."

Press Release -

Download vidrine_v. US Press Release.pdf

Complaint -

Download original_complaint.pdf

(esp)

July 24, 2007 in Environment | Permalink | Comments (0) | TrackBack (0)

Monday, July 23, 2007

Is AG Gonzales a Responsible Corporate Officer?

Dan Eggen of the Washington Post tells of the showdown set for Wednesday - when the House Judiciary Committee will vote on whether Bolton and Miers should be held in contempt. (for background see here) But another aspect of this article also merits serious consideration.  The article states that "Gonzales says allegations that some of his aides used political considerations in hiring career employees were 'troubling to hear,' but he said he was staying in his job to initiate reform." 

Should Gonzales be held to the same standards that he holds CEOs of corporations?  Is he a responsible corporate officer?  And if he is, should he be held accountable for any wrongdoing that occurred under his administration?  Where was the compliance program to protect against wrongdoing?

(esp)

July 23, 2007 in Prosecutors | Permalink | Comments (0) | TrackBack (0)