Saturday, August 25, 2007

Michigan Attorneys Charged with Making Illegal Contributions to Edwards Campaign in 2004

Two Michigan attorneys, one a former Democratic nominee for Governor, were charged with multiple violations of the federal campaign contribution laws for allegedly orchestrating over $125,000 in contributions to John Edwards' 2004 Presidential campaign by using straw donors.  The defendants are accused of using both employees of their law firm, where they are partners, and firm vendors to make contributions to the Edwards campaign that were subsequently reimbursed as bonuses and through false invoices.  The defendants are also accused of causing the Edwards campaign to file false contribution reports with the Federal Election Commission, in violation of Sec. 1001.  According to a Department of Justice press release (here):

[U]nbeknownst to Senator Edwards’ campaign, the defendants caused more than 60 persons, known as straw donors, to make contributions in the then-maximum allowable amount of $2,000 per donor – contributions which were actually paid for by the Fieger firm rather than the named donors. The indictment alleges a conspiracy that continued from March 2003 through January 2004. On four separate occasions, [the defendants] identified and solicited different groups of straw donors. For example, it alleges that in March 2003, they recruited 19 straw donors, each of whom was either an employee of the Fieger firm or a family member of a Fieger firm employee. Once the straw donors had been selected, [the defendants] allegedly caused the Fieger firm to pay each firm employee in the amount of that straw donor’s own contribution plus the amount of any contribution made by that donor’s family members. The indictment charges that, in March alone, $38,000 worth of illegal contributions were arranged for by [the defendants].

In addition to the campaign contribution charges, Geoffrey Fieger, the former gubernatorial candidate, is also accused of obstruction of justice during the grand jury investigation.  According to the indictment (available below), Fieger allegedly made misleading statements in an FBI interview stating that the person responsible for the contributions was a deceased partner of the law firm, and meeting with firm employees who were donors likely to be called before the grand jury and making statements "implying" that the person responsible for the contributions was, again, the deceased partner. 

The obstruction charge will present Fieger and his counsel with an interesting challenge about whether he should testify.  If he comes across as less-than-honest on the witness stand, it could effectively make the government's entire case by showing him to be a liar.  At the same time, Fieger is a well-known figure in the legal media and has charisma that could work well with a jury in the Detroit area, where he is well-known.  Fieger earlier raised issues regarding the political motivation for the investigation, and that theme is likely to be repeated at trial, to the extent the court will allow it.  That may well impel Fieger to testify to try to raise an issue regarding whether he has been targeted by a Republican administration bent on destroying its political enemies. (ph)

Download us_v_fieger_indictment_aug_24_2007.pdf

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

Friday, August 24, 2007

Third Circuit Overturns as Unreasonable a Tax Evasion Sentence

A divided panel of the Third Circuit reversed a sentence imposed on a defendant who pleaded guilty to tax evasion on the ground that the departure from the Federal Sentencing Guidelines range was unreasonable.  In the post-Booker world of reasonableness, the majority in United States v. Tomko (here) took the view that the factors on which the district court relied were insufficient to support a departure from the recommended twelve to eighteen month range.  The district court sentenced the defendant to one year of home confinement, 250 hours of community service, and a $250,000 fine.  Among the reasons cited by the judge was the fact that the defendant was a first-time offender, the fine imposed was substantial, and the defendant had a history of good works and community involvement.  In reversing the sentence, the court stated that "a defendant who committed a very serious offense 'did not receive so much as a slap on the wrist – it was more like a soft pat.'  . . . [W]e believe the sentence imposed in this case is unreasonable in light of the facts and circumstances revealed in the record and the § 3553(a) factors."  The Third Circuit majority seemed unimpressed by fifty letters sent on the defendant's behalf, many from employees of his company, and his involvement in a Habitat for Humanity project building homes for Hurricane Katrina victims. "Even assuming arguendo the purest of motives for Tomko’s well timed interest in Habitat for Humanity, and viewing as completely altruistic the letters attesting to his beneficence, this single factor fails to justify the downward variance granted in this case."

While the majority's decision is not helpful for white collar defendants facing sentencing, it is interesting to note that in another post-Booker Third Circuit case, U.S. v. Cooper, 394 F.3d 172 (3d Cir. 2005), a different divided panel upheld a significant downward departure based on the defendant's good works that the dissenting judge claimed were initiated in response to the pending criminal investigation.  If you read both Cooper and Tomko, it is fair to say that the reasonableness standard adopted in Booker does not always lead to consistent results, and the Third Circuit shows how closely divided a court can be when looking at white collar crime cases that often involve fairly sympathetic defendants.  Doug Berman's estimable Sentencing Law & Policy blog discusses the opinion (here), as does Blog Emperor Paul Caron on the Tax Prof Blog (here). (ph)

August 24, 2007 in Judicial Opinions, Sentencing, Tax | Permalink | Comments (0) | TrackBack (0)

Army Corps of Engineers Contractor Pleads Guilty to Bribery

A former contractor for the U.S. Army Corps of Engineers entered a guilty plea to accepting almost $300,000 in bribe payments to direct a contract for sand and gravel related to rebuilding a levy in New Orleans destroyed by Hurricane Katrina and its aftermath.  According to a Department of Justice press release (here):

[The defendant] reviewed construction projects in the aftermath of Hurricane Katrina. Between August and October of 2006, [he] agreed to accept approximately $299,000 from a sand and gravel subcontractor in exchange for providing confidential information used by the Corps to evaluate bids.

[The defendant], who was assigned to the Army Corps’ source selection board on the Lake Cataouatche Levee reconstruction bid, gave his technical evaluation of a prime contractor’s bid and other confidential documents to another Army Corps employee, with knowledge that this information would be given to the subcontractor. [He] agreed to accept in return 25 cents per cubic yard of sand and gravel sold by the subcontractor under the contract."

(ph)

August 24, 2007 in Corruption, Settlement | Permalink | Comments (0) | TrackBack (0)

Textron Settles FCPA Investigation

Manufacturer Textron Inc. entered a deferred prosecution agreement with the Department of Justice and settled civil charges filed by the SEC for violations of the Foreign Corrupt Practices Act.  The company, though French subsidiaries, paid over $650,000 in bribes related to the corruption-riddled Iraqi Oil-for-Food program, and another $115,000 to obtain contracts in the in the United Arab Emirates, Bangladesh, Indonesia, Egypt, and India.  According to the SEC Litigation Release (here):

Textron subsidiaries David Brown Guinard Pumps S.A.S. and David Brown Transmissions France S.A. made $1,936,926 in profits on Oil for Food contracts that involved illicit after-sales service fees ("ASSF"). DB Guinard Pumps obtained three Oil for Food contracts that were inflated by ten percent to cover the cost of secret ASSFs that it had agreed to make in undisclosed side letters with Iraq. Management approved ASSFs of approximately $83,000 to be funneled to Iraq through a Lebanese consultant. When the goods were held up at the Iraqi border on one contract, the Lebanese consultant provided DB Guinard Pumps with bank records showing that the ASSF payment was made on the company's behalf into a Lebanese bank account in the name of an Iraqi individual for the benefit of the Iraqi ministry. DB Transmissions France obtained ten Oil for Food contracts that were also inflated by ten percent to cover the cost of secret ASSFs. DB Transmissions France's Export Sales Manager noted in an internal memorandum that DB Transmissions France wishes "to avoid any written agreement [concerning the ASSF] with client side" and "[i]f written document cannot be avoided, this must remain highly confidential." He also noted that he discussed this issue with French management and received approval from his superiors to include the amount of the ASSF in the inflated contract price submitted to the U.N. Management approved ASSF payments of approximately $567,000 to be funneled to Iraq through a Jordanian consultant.

Textron's David Brown subsidiaries entered into thirty-six contracts involving illicit payments totaling $114,995.20 in countries other than Iraq. The payments were similar to the ASSF payments made on Oil for Food contracts because no bona fide services were performed and the payments were made to secure contracts. In the United Arab Emirates, subsidiaries paid $20,429 to employees of two government-owned gas companies, GASCO and ZADCO. $16,342 was paid to two "friends" employed by a Bangladesh government-owned fertilizer company. In Indonesia, a company representative was paid $149,000 of a $321,171 contract (more than half the contract value) to perform after-sales services. Of the $149,000 paid to the representative, $10,000 went to a procurement official of a government-owned company, Pertamina, to sponsor a golf tournament with very little documentation to show what the representative actually did with the remainder. Finally, $13,354 was paid to a government customer in Egypt, and $51,870 was paid to a non-government customer in India to secure business.

According to the Department of Justice press release (here), the government agreed to a deferred prosecution agreement rather than requiring a guilty plea "in recognition of Textron’s early discovery and reporting of the improper payments; Textron’s’ thorough review of those payments as well as its discovery and review of improper payments made in other countries, including India, Egypt, and the United Arab Emirates; and the company’s implementation of enhanced compliance policies and procedures." (ph)

August 24, 2007 in Civil Enforcement, FCPA, Settlement | Permalink | Comments (0) | TrackBack (0)

Thursday, August 23, 2007

Nacchio Granted Bail Pending Appeal

In an uncommon decision, a panel of the Tenth Circuit issued an order (available below) granting former Qwest CEO Joseph Nacchio bail pending completion of his appeal of the nineteen insider trading convictions returned in April 2007.  On July 27, U.S. District Judge Edward Nottingham turned down Nacchio's request for bail pending appeal of the convictions and sentenced him to a six year prison term, although Nacchio had not yet reported to the Bureau of Prisons.  The Tenth Circuit maintained the same bail conditions that currently apply, and set the case for expedited hearing.  Under the accelerated schedule set by the appellate court, the defense brief is due October 9, the government answer on November 9, and any reply on November 20.  Unlike many appeals, in which the parties have upwards of six to nine months after sentencing to prepare and file their briefs, the hearing will be in mid-December, only five months after the sentencing.  While the panel's decision does not mean the conviction will be reversed, it does indicate that there is enough there to trigger a higher measure of scrutiny of the appellate issues, including Judge Nottingham's exclusion of classified information and his instructions on the materiality of the inside information.  (ph)

Download us_v_nacchio_10th_circuit_bail_order.pdf

August 23, 2007 in Insider Trading, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Mississippi Attorney and Firm Charged with Criminal Contempt

A prominent plaintiff's attorney and his firm were charged with criminal contempt under 18 U.S.C. Sec. 401 for conduct in insurance litigation arising from Hurricane Katrina.  U.S. District Court Judge William Acker found that the attorney had violated a preliminary injunction requiring him to return documents obtained from State Farm by two former employees of the insurer.  When the U.S. Attorney for the Middle District of Alabama declined the court's invitation to pursue the contempt action, Judge Acker appointed three local Birmingham, Alabama attorneys to act as special prosecutors, pursuant to his authority under Federal Rule of Criminal Procedure 42(a)(2).  An interesting issue will be whether a jury will decide the issue or a judge.  If tried to the court, then the maximum sentence that can be imposed for a criminal contempt is six months.  If a greater sentence is imposed, then a jury must find the defendant guilty under the Supreme Court's decision in Codispoti v. Pennsylvania, 418 U.S. 506 (1974).  An AP story (here) discusses the criminal contempt proceeding and a copy of the charges is available below (courtesy of the WSJ Law Blog). (ph)

Download us_v_scruggs_contempt_charge_aug_2007.pdf

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

How a Bill Becomes Law

Those of us who remember our civics class probably studied the wonderful flow chart of "How a Bill Becomes Law" that set forth the steps by which a Congress passes a piece of legislation that becomes the law of the land -- recall the cute stick figure putting a bill in the box at the start of the process.  At TPM Muckraker (here), there is a review of how the language in an appropriations bill containing a $10 million earmark for a section of I-75 in Florida got changed after it was approved by both houses of Congress but before it was sent to the President to be signed into law.  The bill itself was the 800-page transportation appropriations bill approved in 2005 that contained 6,371 special earmarks totaling $24.2 billion for special projects.  It seems that one of these earmarks, sponsored by Alaska Representative Don Young, was changed from "Widening and Improvements for I-75 in Collier and Lee County" to "Coconut rd. interchange I-75/Lee County" after it was approved.  Interestingly, the person who wanted the new interchange, which was opposed by the county, also helped raise $40,000 for Representative Young.  I don't recall seeing a little stick figure soliciting campaign contributions in the flow chart. 

There is a federal investigation of the Coconut Road earmark, and any attempt to obtain materials from Representative Young related to it could trigger some thorny Speech or Debate Clause claims.  The issue of the scope of the protection afforded legislative acts has already come up in the investigation of Louisiana Representative William Jefferson, whose Capitol Hill office was searched by the FBI.  Representative Young's possible involvement in the earmark squarely raises questions related to the exercise of legislative authority, so any attempt to subpoena records or conduct a search of his office will run into the privilege afforded members of Congress.  (ph)

August 23, 2007 in Investigations | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 22, 2007

Commentary on the Ryan Decision: Was it Efficient?

The contrast between the majority and dissent (see opinion here) is a telling picture of our judicial system. Former Illinois Governor Ryan fought hard against a death penalty that operated in a system with mistakes.  He wanted a judicial system that provided due process rights. He went so far as to grant a moratorium on the death penalty in his state to study the errors in these trials.  And in his own trial, a trial with a multitude of unfortunate incidents, he also argued for a trial free from bias and one that would provide him with due process of law.

So the question becomes, where is the line between a near perfect trial and a trial that violates the defendant's due process rights? Obviously, the majority and dissent do not agree on this point here.

The majority notes that "[t]he fact that the trial may not have been picture-perfect is, in itself, nothing unusual...'there can be no such thing as an error-free, perfect trial, and ... the Constitution does not guarantee such a trial.'" Finding no error in some instances, and others as harmless errors, the court affirms.  In contrast, Judge Kanne, in dissent, provides 18 bullets in which he "highlights in a summary fashion" some of the problems with this case. His conclusion states that "this case was inexorably driven to a defective conclusion by the natural human desire to bring an end to the massive expenditure of time and resources occasioned by this trial - to the detriment of the defendants."

Efficiency in a judicial system is important.  But values - such as the value of it being a fair system - are likewise crucial.  It is clear that the majority is more forgiving of trial errors, with the dissent more focused on scrutinizing the errors and considering them cumulatively. It is almost as if Ryan lost more than just his appeal here.  He lost a position on when efficiency needs to be overruled. The irony of the situation is that he was the champion of the cause that failed in his very own case.

(esp)   

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

Waxman on the Warpath

The Senate and House Judiciary Committees are not the only ones on Capitol Hill hounding the White House and various agencies about soon-to-be former Presidential aide Karl Rove's work in federal agencies.  Representative Henry Waxman, chairman of the House Oversight and Government Reform Committee, sent a letter (here) to eighteen agencies asking for information about “asset deployment” meetings organized by the political office at the White House allegedly to discuss the use of federal resources to promote the election of Republicans in Congress.  The agencies receiving Waxman's letter are the Departments of Justice, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, Interior, Justice, Treasury, Veterans Affairs, Labor, State, Agriculture, Commerce, Transportation, Environmental Protection Agency,  Small Business Administration, General Services Administration, United States Agency for International Development, and the Office of National Drug Control Policy.

The Department of Justice responded to an earlier Committee request for information about political briefings in a letter (here) sent on June 14 outlining the dates of the meetings and the participants.  The letter shows five such meetings in 2001, two in 2002, and one in 2003, and then the next one is in March 2006.  There were four meetings in August and September 2006, shortly before the mid-term elections, including one on September 5 that may well pique the attention of investigators looking into the firing of nine U.S. Attorneys.  The letter describes the meeting as being for agency chiefs of staff and White House liaisons, and "the briefing would be led by Karl Rove."  It's not clear if former DOJ chief of staff Kyle Sampson and former White House liaison Monica Goodling, both of whom quit during the U.S. Attorney firing probe, attended the meeting, but it looks like they had it on their calendars.  Is this another avenue of inquiry into the politicization of the Department of Justice, and if asked about the meeting, will the White House assert Executive Privilege to shield the discussion? (ph)

August 22, 2007 in Investigations | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 21, 2007

Highlights of the Ryan Opinion

Some highlights from the majority:

The majority opinion, after finding no basis for reversal in the procedural issues raised on appeal, moved to some of the substantive matters.

  • The Seventh Circuit Court of Appeals rejected the defendant's argument that the State of Illinois should not be allowed to be an "enterprise" for purposes of RICO. The court references the en banc Sixth Circuit decision in U.S. v. Thompson where the court allowed the "Office of the Governor" to be an enterprise for purposes of RICO.
  • The majority also reflected on whether the "honest services" doctrine used for mail fraud was vague. Stating:

"We are unpersuaded that the references to state law in the jury instructions were phrased in a way that makes the use of the mail fraud statute here unconstitutional. Many of the state law provisions in the instructions explained what kinds of financial transactions are not prohibited for state officials. This explanation was more likely to undermine than to assist the prosecution in showing the defendants’ intent to deprive Illinois citizens of Ryan’s honest services."

And from the dissent:

"My colleagues in the majority concede that the trial of this case may not have been "picture-perfect," – a whopping understatement by any measure. The majority then observes that the lack of a picture-perfect trial "is, in itself, nothing unusual." I agree that from my experience this is a realistic proposition. There is rarely perfection in any human endeavor – and in particular jury trials. What we expect from our judicial system is not an error free trial, but a trial process that is properly handled to achieve a fair and just result. That fair and just result was not achieved in this case.

"The basis for my dissent lies not in the exceedingly drawn out evidentiary phase of this trial but in the dysfunctional jury deliberations."

(esp)

August 21, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Former Governor Ryan's Conviction Affirmed

The Seventh Circuit Court of Appeals affirmed the conviction of former Illinois Governor George Ryan. The opinion can be found here.

Commentary to follow.

(esp)

August 21, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Subpoena and Contempt

The Wall Street Jrl reports here that Senator Leahy is pressing for requested information and testimony.  Perhaps what is the most fascinating part of this piece is to hear that the Executive claims it needs more time to produce the items requested. Leahy thinks 2 months is enough time for them to produce the requested material.

It is interesting to see the White House claiming a need for more time.  Is this portion of the executive branch, ready and willing to provide companies with this same luxury when items are subpoenaed by DOJ?  Should the White House receive a preference when items are requested pursuant to subpoena?

(esp)

August 21, 2007 in Investigations | Permalink | Comments (0) | TrackBack (0)

Monday, August 20, 2007

Embezzlement at a Red Cross Office Leads to Prison

A DOJ press release tells of the sentencing of "[t]he former assistant director of accounting at the Orange County Chapter of the American Red Cross, who previously pleaded guilty to federal charges of embezzling more than $100,000 in Red Cross funds."  This person received a sentence of "six months imprisonment, immediate payment of $110,000 in restitution to the Red Cross, and three years supervised release with a term of six more months in home detention."  For the DOJ Press release see -

Download red_cross_embezzlement_sentencing.pdf

(esp)

August 20, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

What's Included in the Settlement?

The LATimes reports on a court decision that finds that the University of Phoenix may still be subject to a lawsuit despite a prior "$9.8-million settlement it made with the federal government."

(esp)

August 20, 2007 in Settlement | Permalink | Comments (0) | TrackBack (0)

Vick Will Plead Guilty

Michael Vick has agreed to plead guilty to charges related to a dog-fighting operation on his property in Virginia, according to a report on ESPN.com (here).  A plea hearing is scheduled for August 27 for Vick to admit to the conspiracy charge on which he was indicted on July 17, and sentencing will likely be set for about three months later.  It is not clear what sentence will be recommended by the Federal Sentencing Guidelines because the conspiracy charge includes both a violation of the federal dog fighting statute (7 U.S.C. Sec. 2156), for which there is not a specific sentencing provision, and to assist in an unlawful enterprise involving gambling.  For the latter charge, Sec. 2E3.1 would provide for a base offense level of 12, and prosecutors could argue for an enhancement for a leadership role in the offense, which would add four level to bring the total to 16.  If there is a two-level reduction for acceptance of responsibility, that would put Vick's sentence in a range of 15 to 21 months in a federal prison, and he would have to serve 85% of the sentence, most likely a bit over one year.  If Vick's attorneys were able to negotiate a Guidelines calculation -- which would not be binding on the Judge -- that did not include the four-level enhancement for his role in the offense, then he could have a score of 10, which would have a 6 to 12 month sentencing range.  More importantly, a Guidelines offense level of 12 or less would allow the court to give him a split sentence, which might allow for a period of home confinement during which he could train for a possible return to the NFL.  Once the sentencing ramifications are clear, then the issue will be how long the NFL will suspend Vick.  Moreover, Vick's criminal legal troubles are not over because the Virginia state prosecutors can still pursue charges against him for the dog-fighting operation. (ph)

                                                                              

UPDATE: According to an AP story (here), the government will recommend a sentence of 12 to 18 months for Vick.  A discussed in an earlier post (here), if Vick receives a sentence of a year-and-a-day, he will be out in a little over ten months -- just in time for the second half of the 2008 season?  That will depend on NFL Commissioner Roger Goodell.  (ph)

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

Sunday, August 19, 2007

Hyde Amendment Recovery

It is rare that one succeeds on a Hyde Amendment claim, but occasionally it happens.  A U.S. District Court in the Southern District of Texas issued such an order.  In the Introduction, the court states:

"The United States Attorney indicted an Oklahoma businessman in conscious indifference to the legal and factual basis of the charges that they brought against him. The fifty-four-count indictment was a jumble of claims and stray facts – a garbled press release about working men who cannot get insurance. The court dismissed all counts of the indictment. The businessman seeks defense costs. He will be repaid because the prosecution was not substantially justified."

And in the conclusion the court states:

"Criminal prosecution casts a shadow on defendants that can linger even after an acquittal. The discretion the government has to prosecute those it thinks guilty of crimes must be grounded in a sound facts and articulated law. The Hyde Amendment was passed to give some recompense to those prosecuted without this most basic discretionary safeguard from prosecutorial oppression. The case against [this individual] lacked even a semblance of responsible work by the government. His attorneys had to work with a jumbled array of facts and theories, a mountain of documentary evidence, and unresponsive government lawyers."

Order - Download hyde20amendment20opinion2020claro.pdf

(esp)

August 19, 2007 in Defense Counsel | Permalink | Comments (1) | TrackBack (1)

White Collar Prison Survival

Caroline Waxler, of Conde Nest Portfolio.com, authored an article titled, CEO Prison Guide: Pre-Prison Prep."  It includes everything from letting you know that "Club Feds are as dead as disco," to offering a list of ten pieces of advice, including, "[t]hink of prison as a sabbatical."  This is an article that is likely to get a good number of computer clicks, with more corporate individuals facing time.

(esp)

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

Oil For Food Plea

An interesting post can be found on the blog "Grits for Breakfast" which states that "a Texas oilman pled guilty in Manhattan last week to giving kickbacks to secure contracts with Saddam Hussein's government as part of the pre-war oil for food program in Iraq."  It refers to a Reuter's article here.

(esp)

August 19, 2007 in Settlement | Permalink | Comments (0) | TrackBack (0)

The Hatch Act & Karl Rove

Check out this Washington Post article titled, "How Rove Directed Federal Assets for GOP Gain."  But the real question is whether an independent person or body will fully investigate the questions that have been raised.

(esp)

August 19, 2007 in News | Permalink | Comments (0) | TrackBack (0)