Saturday, November 17, 2007
Richard Mullins of the Tampa Tribune reports on the evidence obtained from the government's search at WellCare. The 200 plus agents that raided WellCare (see post here) secured materials that have now been indexed (43 pages), and some items have been described in the open press.
This is yet another difference between a white collar investigation that proceeds with a search as opposed to subpoenas. Searches can benefit the government in that they provide surprise and the security that materials will not be lost or destroyed. The downside is that the government has to index and find the materials as opposed to having the subpoenaed witness do the work of putting all the items together. And yet, another important difference is that a subpoena is for an appearance before a grand jury, a body that is bound by secrecy. Having these materials on the streets is an indication of what happens when the government investigates outside the grand jury process. In the case of a company such as this, a search can have a detrimental effect on the business as the openness of the search presents the negative picture for all the public to see.
The flood of options backdating investigations seems to be receding, with the SEC closing cases without filing civil charges. An article in The Recorder (on Law.com here) reports that the investigation of VeriSign has concluded without any further action. The company's 8-K (here) states, "The staff of the Securities and Exchange Commission (“SEC”) has formally notified the Company that the SEC’s investigation concerning the Company’s historical stock option granting practices has been terminated and that no enforcement action was recommended to the SEC." The company took a $160 million accounting charge related to the options, and its CEO and CFO both resigned. The notification to VeriSign comes on top of other recent case closings involving backdating at high-tech firms Electronic Arts, Linear Technology, Nvidia, PMC-Sierra. and Zoran Corp.
The Commission appears to be clearing out its investigative docket, likely closing the weaker cases while it prepares the stronger ones for some type of enforcement action. Don't be surprised to see some new filings in the new year as the SEC moves beyond options backdating and faces new areas of concern arising from the subprime meltdown, especially disclosure issues related to the multi-billion write-downs of CDOs by leading financial companies.
Over on the criminal side, there haven't been any significant new cases since the conviction of former Brocade CEO Gregory Reyes in August 2007, and it may be that the criminal pipeline is also shrinking. Options backdating looks like it may be on its way to becoming yesterday's news. (ph)
The continuing investigation of overseas bribery by industrial giant Siemens A.G. seems to bring to light even more suspect payments throughout the world, with the total now pegged at nearly $2 billion in questionable transactions. The amounts involved are staggering compared to other foreign bribery investigations, which are often in the hudreds of thousands of dollars and rarely exceed $10 million. A BusinessWeek article (here) speculates that the likely fines the company will pay in the United States to resolve criminal and civil investigations will easily exceed the prior record of $44 million for Foreign Corrupt Practices Act violations. Siemens' more recent public disclosure on Form 6-K (here) states:
The Company remains subject to corruption-related investigations in the U.S. and other jurisdictions around the world. As a result, additional criminal or civil sanctions could be brought against the Company itself or against certain of its employees in connection with possible violations of law, including the FCPA. In addition, the scope of pending investigations may be expanded and new investigations commenced in connection with allegations of bribery and other illegal acts. The Company’s operating activities and reputation may also be negatively affected, particularly due to imposed penalties, disgorgements, compensatory damages, the formal or informal exclusion from public procurement contracts or the loss of business licenses or permits.
That's not very reassuring for a quick resolution of the investigations, particularly in the U.S. With the ever-expanding internal and governmental investigations comes the cost of paying for all those lawyers and accountants. According to the most recent disclosure, in fiscal 2007 the company had "€347 million in expenses for outside advisors engaged by Siemens in connection with the investigations into alleged violations of anti-corruption laws and related matters as well as remediation activities." No word yet on the estimated cost of any fines, and in all likelihood one or more outside monitors will be required as part of a settlement, which will drive up the expenses from the overseas bribery even more. (ph)
Friday, November 16, 2007
Homerun record holder and erstwhile San Francisco Giant Barry Bonds was indicted on four counts of perjury -- technically false declarations under 18 U.S.C. Sec. 1623 -- and one count of obstruction of justice arising from his testimony before a federal grand jury on December 4, 2003. The testimony was part of the investigation of the Bay Area Laboratory Cooperative (Balco) for the manufacture and distribution of designer steroids, including "the clear." The four perjury counts relate to Bonds' denial that he received steroids from his long-time personal trainer, Greg Anderson, who was involved in Balco and entered a guilty plea to narcotics charges back in 2005. Bonds received immunity before he testified, but a grant of use/fruits immunity does not protect against a perjury indictment if the testimony is false. In looking through the indictment (available below) and thinking about various aspects of an investigation that has dragged on for over two years now, the following occurred to me:
- Is there a "literal truth" defense available? In order to successfully prosecute a person for perjury, the government must establish that the witness statements were lies, and not just misleading or non-responsive. The famous case of United States v. Bronston, 409 U.S. 352 (1973), requires that the testimony be false because "the perjury statute is not to be loosely construed, nor the statute invoked simply because a wily witness succeeds in derailing the questioner -- so long as the witness speaks the literal truth." (Italics added). The Bonds testimony identified as perjurious in the indictment seems fairly straightforward, with him responding "No" to questions about receiving steroids from Anderson or having Anderson inject him. Of course, ambiguity in the questions can preclude a conviction if a defendant can assert he did not understand it, or was confused in how to respond. Some of the questions seem fairly straightforward, such as "in the weeks and months leading up to November 2000, were you taking steroids -- No." Other responses seem a bit more ambiguous, such as "Not that I know of" or "I don't recall having anything like this . . . ." Bonds' lawyers are sure to argue that his statements were not misleading, and perhaps challenge the materiality of the testimony. And even without a "literal truth" issue, the government still has to prove Bonds knew his statements were false, which is no easy task.
- What took so long? Prosecutors have been investigating Bonds for perjury at least since March 2005, and perhaps earlier. Part of the delay is attributable to dealing with contempt issues related to the leaking of Bonds' testimony to two San Francisco Chronicle reporters, who were spared jail when the government determined it was the lawyer for another Balco defendant who leaked the transcripts of a number of baseball players who testified. There was also the contempt citations of Anderson, the former trainer, who has been sent to jail twice for not testifying before the grand jury. Perhaps more importantly, the U.S. Attorney's Office in San Francisco has been involved in quite a bit of turnover, including the removal of former U.S. Attorney Kevin Ryan in 2006 when he was one of the seven U.S. Attorney's fired in what became a major scandal in Washington, D.C. There is still no permanent appointee in the position, and any time there is turnover in the leadership of the U.S. Attorney's Office a case as sensitive as Bonds' will be delayed.
- What happened to the tax evasion investigation? There were media reports about an investigation of whether Bonds declared income from sports memorabilia sales, including claims that an alleged former girlfriend would testify to cash transactions. The credibility of the witnesses in this area, at least as described in the media, was open to serious question, and tax counts would likely have distracted from the core perjury/obstruction case. The tax issue could potentially be used to cross-examine Bonds if he chooses to testify and claim he is a truthful person, so the issue isn't dead, but it was probably a good idea to go with a single issue prosecution.
- Where's Greg Anderson? As noted above, prosecutors subpoenaed Anderson twice to testify before the grand jury, and each time he refused and landed in jail for contempt. The first stint ended when the grand jury's term expired in July 2006, but a new grand jury was empaneled a short time later and Anderson headed back to jail, where he has been for over a year. Anderson was released the same day the indictment issued, and I think it is likely he did not testify before the grand jury. After waiting over a year for him to crack, the federal prosecutors probably decided to move forward without him. Once the indictment issued, there was no further need to hold him in contempt for refusing to testify before the grand jury. Whether the government will try to get him to testify at trial remains to be seen, but I rather doubt it because he would be such a risk, i.e. testifying favorably for Bonds, without grand jury testimony to hold over him.
- Why the obstruction charge? The obstruction of justice charge is broader than the perjury charges because it does not require proof that Bonds made literally false statements, only that he sought to impede the grand jury investigation. The charge looks like a backstop -- note the use of baseball terminology -- in case there are problems with one or more of the substantive perjury counts that leads to a "not guilty" verdict. The obstruction count includes both the alleged false statements by Bonds and that his testimony before the grand jury was "evasive and misleading." This claim would be insufficient for perjury, but can be enough for obstruction. If Bonds were convicted of obstruction, then any "not guilty" verdicts on perjury counts would not affect the likely sentence.
- Why Didn't Word About the Indictment Leak Out in Advance? In a case riddled with leaks, the indictment, or at least its timing, seems to have been a complete surprise. This has been a closely watched case, and there was some speculation that an indictment would be returned after the baseball season ended in late September, but nothing happened and it seemed to drop off the radar screen. For once, grand jury secrecy seems to have worked.
- When will the trial take place? While there is a very slight chance a trial could be completed before baseball's regular season starts in April, I don't see any realistice possibility of that happening. Indeed, the trial is likely to take place after the next baseball season, and it may well start in 2009 rather than 2008. In looking at other prosecutions of a high-profile defendant on similar charges, Martha Stewart was indicted in June 2003 and convicted in May 2004, while I. Lewis Libby was indicted in October 2005 and convicted in March 2007. The Bonds case is sure to include the usual array of pre-trial motions, from discovery to dismissal, and getting the lawyers and judge to clear time for the case will likely result in a trial date no earlier than nine months from now, and perhaps even next November. The initial statement from Bonds' attorney indicated a likely charge of prosecutorial misconduct related to leaks in the case, and that will require time to sort out. Claims from either side that they want a quick trial date does not necessarily mean that's in their interest. Delay beyond the start of the 2008 season may mean that Bonds remains permanently at 762 as his homerun total. Bonds has been cut loose by the Giants, and at this point no team has signed him during the free agency period. There is a chance that MLB Commissioner Bud Selig will suspend Bond pending resolution of the case, but that remains to be seen. It may be that no team will sign him, and Selig then won't have to take any action one way or other until the case is resolved, probably after the 2008 season. If Bonds does not play in 2008, will any team take a chance on a 44-year old player who has sat out a year and had serious steroid use allegations aired, even if he's found not guilty?
- What are the odds of a plea bargain? The morning line in Vegas won't be less than 100-1, roughly the same odds as the Tampa Bay Rays winning the World Series. This may be Bonds' last chance to salvage his legacy, so I think a trial is a foregone conclusion, unless somehow a court dismisses the charges, which is equally unlikely.
Let the games begin. (ph)
The convictions of Tyco's former CEO Dennis Kozlowski and CFO Mark Swartz on grand larceny charges were upheld by the New York Supreme Court, Appellate Decision. The court rejected the claim of the defendants that they were entitled to the payments they received from the company that the government accused them of effectively stealing by not disclosing the transfers. The opinion (here) states:
Defendants' testimonial claims of entitlement -- that the bonuses represented early payouts of money that would otherwise have been due them or, at least, that they believed was due them -- presented a question of fact for the jury and was, indeed, a hard sell. While the committee could have made midyear payouts if it chose to, such an event would have run counter to Tyco's highly touted pay-for-performance philosophy.
More significantly, though, the entitlement claim was flatly refuted by Mark Foley, the Tyco executive who was responsible for the calculation of the year-end figures on which the annual bonuses were based. In fact, Foley's testimony unequivocally established that defendants received everything they were entitled to under the end-of-the-year formula. Thus, defendants' claims only succeeded in pitting their credibility against that of the committee members and Foley and various other members of their own staff. Defendants even contradicted each other on a number of points. The jury's resolution of this factual issue is amply supported by the weight of the evidence since defendants' self-serving testimony was illogical, internally inconsistent, refuted by Tyco's records and shown to be false by all other witnesses. While defendants assert that their entitlement and good-faith claims present a legal sufficiency issue, we cannot discern one except for the 1999 bonus, preserved by the motion for a trial order of dismissal, which we reject.
While the appellate court found the admission of statements by Swartz, made to David Boies during the internal investigation that implicated Kozlowski, was improper as to Kozlowski because the conspiracy had already ended, the error was deemed harmless. The defendants received sentences of 8+ to 25 years and have been in a New York State prison since September 2005. Kozlowski currently is in the Mid-State facility, a medium security prison, and Swartz is in the medium security prison in Oneida. According to the New York Department of Correctional Services website (here), Kozlowski and Swartz are first eligible for parole in January 2014. The appeal now moves to the New York Court of Appeals. (ph)
The first thing to do when your conduct is the subject of a government investigation is to hire counsel to advise you, and that's what former Attorney General Alberto Gonzales did shortly after leaving office in September. As discussed in an earlier post (here), Gonzales retained former Deputy Attorney General George Terwilliger in connection with an investigation by the Inspector General at the Department of Justice concerning the truthfulness of Gonzales' testimony before Congress about the terrorist surveillance program -- including the famous meeting with then Attorney General Ashcroft in the ICU -- and the firing of eight U.S. Attorneys. That earlier post said "[d]on't be surprised to see a legal defense fund organized soon to help out with the legal costs, if it hasn't begun already." Well, the Alberto R. Gonzales Legal Defense Trust has now come into existence, as detailed in a Washington Post article (here). According to an e-mail sent by an organizer of the fund, ""In the hyper-politicized atmosphere that has descended on Washington, an innocent man cannot simply trust that the truth will out . . . He must engage highly competent legal counsel to represent him. That costs money, money that Al Gonzales doesn't have."
Legal defense funds are common in cases involving the prosecution of current and former public officials, including former Vice-Presidential aide I. Lewis Libby (scooterlilbby.com), former New York City Police Commissioner Bernie Kerik (keriklegaltrust.com), and Representatives Tom DeLay (tomdelay.com) and Jim McDermott (mcdermottlegaltrust.com). I have not been able to locate a website for the new Gonzales legal defense trust, but I suspect one is on the way. (ph)
State Department Inspector General Howard "Cookie" Krongard has recused himself from a second investigation by his office. After withdrawing from any investigations of security company Blackwater Worldwide's conduct in Iraq due to his brother's connections to the company, Krongard announced that he is also recusing himself from the investigation of allegations of corruption, fraud, and abuse in the construction of the massive new U.S. Embassy in Baghdad. The House Oversight and Government Reform Committee has been investigating the issue, and has put Krongard in the cross-hairs because of allegations that he squelched an inquiry into corruption at the Embassy. With Krongard now having recused himself from the two most significant investigations involving his office, has it reached the point where the IG should hand over the reigns of the office to someone who can lead the investigations rather than just removing himself from them? An AP story (here) discusses Krongard's latest recusal. (ph)
Thursday, November 15, 2007
KTVU.com has a story with a headline of, "Bonds Indicted By BALCO Federal Grand Jury." Press reports say the charges are perjury and obstruction of justice. (Wall Street Jrl (AP) here, CNN here) More to follow.
The government's civil asset forfeiture complaint against assets owned by the late Enron CEO Ken Lay moved a small step forward when U.S. District Judge Ewing Werlein denied a Rule 12(b)(6) motion to dismiss filed by Linda Lay, the administrator of Lay's estate. The case -- with the wonderful caption used in asset forfeiture cases of U.S. v. 2121 Kirby Drive (available below) -- was filed after Lay's death wiped out his criminal conviction and required the government to pursue civil asset forfeiture rather than the much easier criminal forfeiture route. The government is seeking to forfeit a bank account with $22,000, $10.1 million from an investment partnership, and a condo in Houston worth $2.5 million. Under the relatively low threshold for surviving a motion to dismiss for failure to state a claim, Judge Werlein found that the government's 26-page complaint and affidavit outlining the basis for tracing the proceeds from the Enron fraud was sufficient to allow the case to move forward. Surviving the motion to dismiss may impel the parties to resolve the case through a settlement rather than litigate it further with the expense of discovery looming, but it's entirely possible Mrs. Lay will continue the fight. (ph)
State Department Inspector General Howard "Cookie" Krongard appeared before the House Oversight and Government Reform Committee looking into his conduct investigating fraud and abuse in Iraq contracting, and his oversight of security contractor Blackwater Worldwide. At the outset, Committee Chairman Henry Waxman dropped the news that Cookie Krongard's brother, A.B. "Buzzy" Krongard, was invited by Blackwater in July 2007 to join its Advisory Board, a position that would pay him an honorarium of $3,500 per meeting, which he could designate to the charity of his choice (see invitation letter here). Buzzy Krongard is a former executive director of the CIA, and agreed to join the Advisory Board shortly after receiving the invitation. According to news reports, Buzzy Krongard participated in meetings at Blackwater just a few days earlier, apparently unknown to his brother.
Cookie Krongard initially denied knowing about his brother's Blackwater connection, but then after a break in the testimony he said that he had spoken with Buzzy Krongard a month earlier about his involvement in Blackwater. Cookie Krongard then announced that he was recusing himself from all IG investigations of Blackwater -- no great surprise there. Denying that his brother's ties to Blackwater had any effect on his office's investigations of Blackwater, Cookie Krongard went with the tried-and-true defense: "I'm not my brother's keeper." That may be true, but it sure doesn't look good to "correct" testimony after a break and have to explain that your brother was working for a company your office is investigating. An AP story (here) discusses the hearing.
And what are we to make of the Krongard family's choice of monikers for its members -- Cookie and Buzzy? (ph)
Two bi-partisan organizations are calling on the Department of Justice to renew its dedication to the fair administration of justice without the taint of any political considerations affecting its prosecutorial decisions, hiring, and legislative efforts. The Constitution Project recently issued a draft document outlining "Principles for Assuring Legitimacy to the Crucial Decisions of the Department of Justice" (available below). The Principles are being circulated for review, so the version available here is not the final form, and anyone interested in signing on to the Principles should contact Corey Owens, the Communications Director for The Constitution Project, at firstname.lastname@example.org.
Under the heading "Prosecution" The Constitution Project offers the following five principles to address issues that have arisen in the past year regarding the politicization of the Department of Justice:
- Prosecutions should never be based on partisan considerations. Decisions to prosecute should be based solely on the facts and the law. Politics should play no part in determining either whether to bring the case or the timing for bringing the case.
- Prosecutors should have no communications with Members of Congress or congressional staff relating to whether a criminal case will be brought or the timing of such case. Any such attempted communications should be reported to appropriate officials at the Department.
- It is never appropriate for the President or a member of the White House staff to direct, urge, or suggest that a Federal prosecutor bring a specific prosecution or seek a particular sentence or terminate an investigation or case.
- Elected officials and their staffs may furnish pertinent information or views to the Attorney General, the Deputy Attorney General, or the Associate Attorney General for his or her consideration and such disposition as he or she believes appropriate. Any such information should be memorialized regarding what was said and what was done with the information.
- It is appropriate for the President or the Attorney General to direct, or for a member or committee of Congress to recommend, that special attention or resources be devoted to a particular category of cases as a matter of policy and federal priority.
In a similar vein, the National Association of Former United States Attorneys (NAFUSA) adopted a resolution (available below) after its recent annual meeting that offers certain "rules of conduct which are written to promote the essential independence of United States Attorneys in their districts." Among the rules is one that states, "A United States Attorney should never be asked to resign or be terminated from his or her position because a Senator or Representative has complained to the Department of Justice or White House regarding the U.S. Attorney's decisions regarding indictments or prosecutions." It's a little hard to believe that this rule would even be necessary, but the firing of eight U.S. Attorney's in 2006 changed all that. (ph)
Oil giant Chevron Corp. settled civil and criminal investigations related to illegal kickbacks paid into Iraqi-controlled accounts in 2001 and 2002 as part of the UN's Iraq Oil-for-Food program that has turned out to be a cesspool of corruption. According to the SEC Litigation Release (here):
The Commission's complaint alleges that from approximately April 2001 through May 2002, third parties with which Chevron contracted paid approximately $20 million in illegal kickback payments in connection with Chevron's purchases of crude oil under the U.N. Oil for Food Program. Chevron knew or should have known that third parties paid a portion of the premiums they received from Chevron to Iraq as illegal surcharges. The Oil for Food Program provided humanitarian relief to the Iraqi population during the time that Iraq was subject to international trade sanctions. However, the surcharges paid by third parties in connection with Chevron's purchases of oil bypassed the escrow account and were instead paid to Iraqi-controlled bank accounts in Jordan and Lebanon.
The settlement requires Chevron to pay $30 million, to be divided between a $20 million forfeiture payable as part of a settlement with the U.S. Attorney's Office for the Southern District of New York, $5 million in disgorgement in a settlement with the Manhattan D.A.'s office, a civil penalty to the SEC of $3 million, and another $2 million civil penalty to the Treasury Department's Office of Foreign Asset Controls. Looks like everyone gets to claim a piece of this settlement. (ph)
The Eleventh Circuit affirmed the conviction of an attorney for violation of: 1) 18 U.S.C. Sec. 1512 (c)(2) ("attempting to obstruct a grand jury investigation") and 2) a conspiracy under section 371 and 1505 ("conspiring to obstruct a Securities and Exchange Commission."). The court rejected the defendant's claim that "he was entitled to the benefit of the safe harbor provision of 18 U.S.C. s 1515(c)" ("This chapter does not prohibit or punish the providing of lawful, bona fide, legal representation services in connection with or anticipation of an official proceeding.") The court noted that "the jury was instructed to consider whether or not the government had disproved this affirmative defense beyond a reasonable doubt."
Opinion - Download 200611212.pdf
Tuesday, November 13, 2007
Federal prosecutors filed their brief in the appeal by former Enron CEO Jeffrey Skilling challenging his convictions on conspiracy, securities fraud, and false statement to the SEC charges. Skilling is currently serving a 24+ year sentence in the Waseca, Minn., federal correctional institution. The brief (available below) is a hefty 218 pages, nearly matching Skilling's 230+ page brief filed in early September (see earlier post here). The Fifth Circuit allowed the extensive briefing in light of the number and complexity of the issues in the case.
The key issue in the case remains the effect of the Fifth Circuit's decision in U.S. v. Brown that limited the "right of honest services" theory when the defendant believes he or she is acting in the corporation's best interest as defined by management. The government included this theory in its broad conspiracy count, and the Brown decision overturning convictions for the use of honest services fraud in the Enron Nigerian Barge trial came out about three months after the jury returned its verdict convicting Skilling and Ken Lay -- too late for prosecutors to remove it. The government argues that Brown does not apply because it is limited to lower-level employees and not a CEO who it describes as the leader of the fraud. The problem with that argument, however, is that Brown does not seem to create a "CEO exception" to its analysis of the applicability of honest services fraud theory in a private setting in which the company is the victim of the fraud.
The greater problem for the government is not so much the application of Brown to the conspiracy count -- which I suspect they will lose -- but whether the use of a Pinkerton instruction for Skilling's liability means other counts will also fall. Pinkerton allows a jury to find a defendant guilty of an offense if any other member of the conspiracy committed a crime, and charging the honest services fraud theory as one basis for the conspiracy may taint counts in which the jury could have found Skilling liable based on what other conspirators did. The Pinkerton instruction can be very powerful for the government, but when there is a flaw in the conspiracy count it could result in reversal of the substantive counts tied in with the conspiracy because the jury only returns a general verdict and does not outline the basis for its decision to convict. That could put some of Skilling's securities fraud convictions in jeopardy, although I suspect the insider trading and false statement charges are less likely to be affected by any problem from Brown.
The government argues that the Pinkerton theory of liability was unlikely to have affected the verdicts, and the Fifth Circuit could apply a harmless error analysis to find that the jury likely did not base its decision on that theory. Whether the appellate court goes along with that suggestion remains to be seen, but the Fifth Circuit could cut back on Brown a little bit by refining the standard for when a defendant's intent to benefit the company will preclude a conviction for honest services fraud.
Among the other issues argued in the brief are the jury instructions, including the willful blindness/ostrich instruction, venue, hindering Skilling's access to witnesses, and the reasonableness of the sentence. I suspect these are weaker arguments for Skilling, particularly the venue and witness access issues, which are very difficult for defendants to prevail on. The real action is going to be figuring out how Brown will be applied to the case, which raises interesting issues about how far-reaching that decision will be in the Enron prosecutions, and even beyond when the next wave of scandals hits. (ph)
H.R. 3013, “The Attorney-Client Privilege Protection Act of 2007, passed the U.S. House. The National Association of Criminal Defense Lawyers (NACDL) issued a press release that provides in part the following statement from a coalition of groups:
“.... If enacted, H.R. 3013 will prevent prosecutors and enforcement professionals from assuming a role properly reserved for impartial courts and judges. In addition, H.R. 3013 would overturn recent federal policies that have been found to violate employees’ Sixth Amendment right to counsel and Fifth Amendment right against self-incrimination and will prevent government prosecutors from inappropriately pressuring organizations to not pay their employees’ legal fees during investigations, to fire employees for not waiving their rights, or to take other punitive actions against them long before any guilt has been established.
It also stated:
“The legislation passed today is supported by a group of former senior Justice Department officials from both Republican and Democratic administrations, including three former attorneys general, most of the country’s major national newspapers and a broad and diverse group of organizations, including the American Civil Liberties Union, the American Bar Association, the Association of Corporate Counsel and business organizations.
“The Coalition is a uniquely broad and nonpartisan group of membership organizations with one thing in common: we are all deeply troubled by the corrosive effect that federal investigative and prosecutorial policies and practices have had on four fundamental elements of the American system of justice: the attorney-client privilege, the work product doctrine, and the Fifth and Sixth Amendments.”
Monday, November 12, 2007
John Wesley Hall, over at Law of Criminal Defense posts about "one criminal defense lawyer federally disbarred and another suspended 5 years for false testimony about source of cash fee and failure to file Form 8300."
It is seldom one hears any more of attorney cases involving Form 8300, as most criminal defense attorneys may have become shy when it comes to taking cash or perhaps have resigned themselves to filing the form with enough information to keep things quiet. 26 U.S.C. s 6050I provides the rules under the tax code for filing an IRS reporting form when the sum exceeds a set amount of money. The form is 8300, and the IRS has determined that lawyers are "trades and businesses" and thus required to file this form. The form is a difficult one for a criminal defense lawyer who is representing a client and at the same time being forced to disclose information to the government about the source of funds received from his or her client. Both the second (Goldberger & Durbin, 935 F.2d 501 (2d Cir. 1991)) and the eleventh circuits (U.S. v. Leventhal, 961 F.2d 936 (11th Cir. 1992) have cases with a strong government position, while the Eighth Circuit offers an interesting fact scenario (U.S. v. Sindel, 53 F.3d 874 (8th Cir. 1996)). And one can't forget the courageous criminal defense lawyer who argued the issue (U.S. v. Lefcourt, 125 F.3d 79 (2d Cir. 1997)) and the case of what happens when the IRS doesn't follow certain procedures (U.S. v. Gertner, 65 F.3d 963 (1st Cir. 1995).
If you think that the United States has white collar crime issues, check this article out about Hungary. It notes that a PricewaterhouseCoopers study said that "up to 62% of Hungarian companies were the victim of financial crime during the previous two years."
Sunday, November 11, 2007
A Press Release of Senator Chuck Grassley, the ranking member of the U.S. Senate Committee on Finance, tells that he has "asked six media-based ministries for information regarding expenses, executive compensation, and amenities given to executives." Senator Gassley states that this investigation is "part of ... [his] long-standing interest in making sure tax-exempt organizations are accountable to donors." The Tampa Tribune (here) provides details of this investigation including links to each of the letters received by the ministries. The information requests are detailed and include requests for credit card statements, information on housing allowances, and clothing and cosmetic surgery expenses that might have been paid for by a ministry. Will we be seeing a Sarbanes-Oxley type legislation applicable to tax-exempt organizations?