Friday, February 8, 2008

Respected Miami Attorney Charged with Money Laundering

A highly-regarded Miami attorney, Ben Kuehne, was charged with money laundering for his role in approving payments to well-known defense lawyer Roy Black that allegedly were funds from a drug smuggling operation of the Medellín cocaine cartel.  According to a story in the Miami Herald (here), Kuehne was retained by Black in connection with his representation of the head of the Medellín cartel to ensure that the funds were not tainted.  According to the article, "Kuehne's research gave Black the confidence -- in the form of legal opinion letters -- to accept payments totaling $3.7 million in fees and $1.3 million in expenses from Ochoa, according to several sources. Kuehne earned a portion of the expense payments -- $220,000 to $260,000 -- from Black for vetting Ochoa's payments."  Kuehne is a past president of the Dade County Bar Association and one of the fifty-two members of the Florida Bar Board of Governors, elected from the Eleventh Circuit.  The Board of Governors "has exclusive authority to formulate and adopt matters of policy concerning the activities of the Bar," according to the Bar website (here).

Kuehne and his two co-defendants maintain their innocence, and it is not immediately apparent what the government's theory is in the case.  The amount he received for his work may well be on the high side, at least if he were charging an hourly rate for his work on Black's behalf, which could have triggered the government's interest.  If he received a percentage of Black's fee, then that could call into question the objectivity of his legal opinion.  But when an attorney is asked to opine on the legality of funds to pay for the defense of a drug lord, it seems counterintuitive to say the least that he would give his imprimatur knowing that the funds were in fact the proceeds of narcotics transactions that the government was likely to scrutinize carefully.  Given Kuehne's pristine reputation, it is hard to believe he would risk his entire legal career for an amount that, while significant, is hardly worth the loss of prestige and income he would suffer from a money laundering conviction.  Would you sell your law license and career for a quarter of a million dollars?  The documents in the case are not yet available, so I can't say at this point what approach the government plans to take or the evidence it is like to put on.  It is certainly a head-scratcher at this point. (ph)

February 8, 2008 in Money Laundering | Permalink | Comments (1) | TrackBack (0)

Thursday, February 7, 2008

Advertising For A Fraud Conviction

A Press Release of the US Attorneys Office for the Central District of California tells of a recent fraud conviction that started when an individual in the U.S. had a visa expire and decided that advertising for someone to marry on craigslist might remedy the problem.  So she placed 12 advertisements on the list and the evidence was that she "offered her would-be spouse as much as $15,000, stating: 'Green Card Marriage – Will pay $300/month Total $15,000' and 'This is strictly platonic business offer, sex not involved. NOT required to live together.'” 

A response followed, and the two were married.  And let me not forget that the press release says that the minister marrying the two was the boyfriend of the individual who advertised for the husband on Craigslist. Now both parties to the marriage are facing up to ten years in prison, as the individual who answered the advertisement previously plead guilty.

(esp)

February 7, 2008 in Fraud | Permalink | Comments (0) | TrackBack (0)

What's the Difference Between Criminal and Civil Insider Trading Cases?

That's an easy question: with one you pay out money (and take an injunction prohibiting future violations) while the other sends you to jail.  But two insider trading cases this week raise the issue of why some go criminal while others remain only as civil enforcement actions.  The SEC announced on February 5, 2008, the filing of a settled insider trading complaint against a former director of Dow Jones, David Li, who tipped a close friend about a potential offer by News Corp. for the owner of the Wall Street Journal and other publications.  According to the Commission's Litigation Release (here):

On May 8, 2007, the Commission filed an emergency action in the United States District Court for the Southern District of New York against Kan King Wong ("K.K. Wong") and Charlotte Ka On Wong Leung ("Charlotte Wong"), alleging that the husband-wife couple traded Dow Jones securities based on inside information. Specifically, the Wongs purchased approximately $15 million worth of Dow Jones securities in their account at Merrill Lynch and, after the Offer became public, made approximately $8.1 million in trading profits. The court entered a Temporary Restraining Order freezing those assets and imposing other relief. See LR-20106 (May 8, 2007). Today the Commission filed an amended complaint alleging that Dow Jones board member David Li tipped his close friend, Michael Leung Kai Hung ("Michael Leung"), before the Offer's public disclosure, and Michael Leung, with the Wongs' assistance, traded Dow Jones stock in their Merrill Lynch account. The Commission further alleged that K.K. Wong bought 2,000 Dow Jones shares in his TD-Ameritrade account and made approximately $40,000 in profits. Charlotte Wong is Michael Leung's daughter, and K.K. Wong is his son-in-law.

Li is quite prominent in the Hong Kong business community, serving as the CEO of Bank of East Asia and as a member of Hong Kong's Legislative Counsel and Executive Committee.  This was not a small case as Mr. Li paid a civil penalty of $8.1 million and Michael Leung, the main trader, disgorged $8.1 million and paid a one-time penalty of the same amount, so that total from the case was over $24 million.  There is no indication that any criminal charges will be brought because of the trading, which involved the purchase of over 400,000 Dow Jones shares through a third party's account to hide the identity of the actual purchaser.  Of course, there is a chance that a sealed indictment was returned and prosecutors could be seeking to arrest either David Li or Michael Leung if they return to the United States, but it does not sound like that's the case given the civil settlement.

Meanwhile, on February 4, 2008, the U.S. Attorney's Office for the Southern District of New York announced that a jury convicted Hafiz Naseem of twenty-eight counts of insider trading and one count of conspiracy based on tipping a Pakistani banker, Ajaz Rahim, about impending deals that he learned about while working at J.P. Morgan and then Credit Suisse.  According to a press release (here):

Credit Suisse was engaged to advise either the target company or the acquiring entity in connection with business combination transactions involving the Issuers (the "Subject Transactions"). NASEEM, who was not assigned to work on any of the Subject Transactions, repeatedly searched Credit Suisse’s internal computer databases for confidential documents relating to the Subject Transactions, opened and read these documents, and passed the material non-public information concerning the Subject Transactions in these documents to RAHIM (the "Credit Suisse Inside Information"). NASEEM also was observed rummaging through papers on the desks of several analysts when the analysts were not present.

Naseem is not a U.S. citizen, and after the conviction the court revoked his bail and he was remanded into custody, most likely because he was a flight risk.  The total profits realized from the various tips was $7.9 million, the bulk of it from trading in TXU call options.   Under the Federal Sentencing Guidelines, Naseem is looking at a sentencing range of at least 78-97 months based only on the gain before any other enhancements that could easily take him up to a ten-year prison term.

While there are some differences between the two cases, there are many similarities, so it's not clear to me why one is criminal and the other only civil.  The loss amount is the roughly the same in each, and the violation of a fiduciary duty is clear for both tippers.  Each involved trading overseas, a particular problem that can threaten the integrity of the U.S. securities markets.  While Naseem was involved in a systematic course of conduct, Li was a director of a major corporation tipping a close friend.  The trading by the tippees was similar in the sense that each tried to hide his true identity, and substantial profits were made. 

Could it be that the decision was influenced by the fact that Li and Leung are prominent businessmen while Naseem is a lower-level investment bank employee who tipped a less-prominent Pakistani banker?  While it may be a consideration that Li and Leung might not be extraditable to the U.S., the U.S. Attorney's Office did indict Rahim despite the fact that it has not yet been able to get him into this country yet to face charges.  It may just have been the timing of the discovery, because Naseem was nabbed around the same time that the U.S. Attorney's Office was cracking down on others on Wall Street engaged in insider trading -- he was in the wrong place at the wrong time.  There may also be considerations about the strength of the government's evidence relating to Li and Leung that influenced the decision not to pursue criminal charges.  While the SEC complaint (here) presents the case in stark terms that makes it appear to be a straightforward insider trading case, the Commission does not have to test its evidence in court, and may only have a circumstantial case that the defendants were willing to settle so long as no criminal charges were filed.  But from the outside, at least, it is difficult to distinguish between them, and raises the question about what the appropriate criteria are for determining whether a criminal prosecution is used in addition to the civil enforcement mechanism.  That it could just be who wins or loses the criminal prosecution lottery is not very comforting. (ph) 

February 7, 2008 in Civil Enforcement, Insider Trading, Prosecutions | Permalink | Comments (2) | TrackBack (0)

Wednesday, February 6, 2008

Wilkes in More Hot Water

As if defense contractor Brent Wilkes isn't in a heap of trouble already from his convictions for bribing former Representative Randy ""Duke" Cunningham to obtain no-bid Pentagon contracts, now he's accused of lying about his finances to get court-appointed counsel for a second corruption trial.  As discussed in a recent post (here), the Presentence Report on the Cunningham convictions recommends a sixty-year prison term -- essentially life -- based on the gains from the bribery to Wilkes company, ADCS Inc.  The second case involves alleged bribery of former top CIA official Dusty Foggo, and because of national security issues, all the lawyers in the case needed to have a top secret clearance to review materials.  Unfortunately for Wilkes, his lawyer from the first trial, Mark Geragos, declined to undergo the background check required for the clearance -- it's not clear why -- and so Wilkes needed new counsel.  He briefly had another lawyer, Eugene Iredale,* who never officially entered an appearance, and then sought court-appointed counsel based on an ex parte financial affidavit, which the district court granted.  Wilkes is now represented by the Federal Defenders office, but the government is seeking to have them removed from the case because of alleged misstatements about his purported financial need in the affidavit.

In a brief (available below) seeking to revoke the appointment of counsel, reimbursement of the costs of the Federal Defenders, and release of the financial affidavit, the government asserts:

Based upon a sealed ex parte financial affidavit, defendant Wilkes convinced the Court that he was unable to retain counsel to represent him in Criminal Case No. 07CR0329. Yet, at the time this affidavit was provided to the Court, Defendant and his wife were: (1) in the process of distributing over $2.5 million in cash proceeds; (2) the owners of a residence in Poway that had equity of approximately $800,000; and (3) owners of two properties in Rancho Bernardo and one in Chula Vista. Following the appointment of public counsel, defendant Wilkes, unknown to the Court or the government, distributed over $1 million in assets, including $100,000 in cash provided to the Wilkeses (apparently for spending money), $40,000 to their divorce attorneys, and an untold amount of cash that was transferred to their children’s trust accounts. The use of public funds while defendant continues to spend his ill-gotten gains must stop.

If the court strips Wilkes of the court-appointed lawyers, then the pending trial will have to be postponed until he retains new counsel, who will have to undergo the requisite background check.  Moreover, if the court finds that Wilkes' financial affidavit was false, it could lead to a separate perjury charge and a sentencing enhancement for obstruction of justice -- although if he receives anything near the recommended sentence for the Cunningham bribery, any additional term won't matter too much.  Wilkes has filed a motion (available below) for a new trial on the first convictions, arguing that the government violated its Brady obligation and that he was prejudiced by the denial of a continuance.  These motions are difficult to win, and the grounds asserted are not the type that usually lead to overturning a verdict. (ph)

*  Law-Geek Trivia: The attorney who briefly entered the case on Wilkes's behalf before the appointment of the Federal Defenders, Eugene Iredale, is a well-known defense lawyer who was disqualified because of a potential conflict of interest in Wheat v. United States, 486 U.S. 153 (1988), the Supreme Court case that established the broad discretion district courts have in criminal cases to disqualify counsel.

Download us_v_wilkes_motion_to_terminate_counsel_feb_4_2008.pdf

Download us_v_wilkes_new_trial_motion_feb_5_2008.pdf

February 6, 2008 in Attorney Fees, Corruption, Sentencing | Permalink | Comments (0) | TrackBack (0)

Best Wishes to Law Blogger Peter Lattman

The WSJ reports that law blogger Peter Lattman is moving on within the Jrl.  We wish him the very best in his new beat and welcome Dan Slater, the new WSJ law blogger.

(ph & esp)

February 6, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 5, 2008

Problems in the Pardon Office?

See the NYTimes here.

(esp)

February 5, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Monday, February 4, 2008

Response to Dershowitz on Clemens

Professor Alan Dershowitz, writing at Huffington Post, has an entry titled, "Why Roger Clemens, Even If Innocent, Should Take the 5th."

Although I am a bit more neutral when it comes to baseball- although admittedly a Yankee fan - I concur with Dershowitz's assessment.  Speaking - even if innocent - can be harmful to your freedom. But the problem is more complicated.  It's a problem faced by anyone who is a celebrity or politician --  Silence is not golden.

If you speak you run the risk of having anything you say used against you - even if innocent. If you don't speak people make assumptions of guilt. And if a politician or celebrity this can tarnish your career.

Why is it that truthful testimony can be used against an individual? 

  • For one the individual may not remember the exact words used in the prior statement and when subject to a sharp cross-examination, the person may come across as confused - or not telling the truth in a later trial.
  • Second, there is always the missing statement that is used against the individual.  The person answers the questions asked and fails to include every little detail - after all they might be a bit nervous in testifying.  Hitting a ball in front of a good number of fans and non-fans is not quite the same as answering questions from those in Congress. So what if something is omitted?  What will the cross-examination look like if it is pointed out that this statement was not included in the legislative testimony?
  • Finally, people view evidence from many different angles.  The same event may be told differently by several different people. Will this be viewed as a lie if it is ever presented at a later trial?

But there's a more important question here.  Is it fair to place celebrities and politicians in this catch -22? Is the testimony really needed for the hearing? How would the politician feel if the tables were turned and they were being asked questions because one person had implicated them? And don't tell me this is an invitation, I read co-blogger Peter Hennings entry here.

Some of us continue to harp on prosecutorial discretion and the many possible abuses that can arise from allowing prosecutors unbridled discretion. But maybe this is a place to discuss legislative discretion, and think about when Congress should take a step back and consider whether the testimony is really needed here and now.

(esp)

February 4, 2008 in Celebrities, Privileges | Permalink | Comments (0) | TrackBack (0)

Venue in Snipes Case

Several posts have focused on the Wesley Snipes case, the trial and the verdict (see here, here, and here).  Actor Snipes was convicted on 3 misdemeanor tax counts, but acquitted on all other charged conduct including a count charging conspiracy. As previously discussed, the conspiracy count may have had a venue basis when charged, as venue can be found in either the place of the agreement or where any of the acts occurred.  But the tax counts have been argued as improper from the initial days.

Can the two be separated?  One case, United States v. Ebersole, 411 F.3d 517 (4th Cir. 2005) does a good job of noting an important policy argument in this area  of law -

"The Supreme Court has cautioned that the question of venue in a criminal case is more than a matter 'of formal legal procedure'; rather, it raises 'deep issues of public policy in the light of which legislation must be construed.' United States v. Johnson, 323 U.S. 273, 276 (1944). The Court also has observed that the venue provisions of the Constitution are meant to act as safeguards, protecting the defendant from bias, disadvantage, and inconvenience in the adjudication of the charges against him. Travis v. United States, 364 U.S. 631, 634 (1961) (citing U.S. Const. Art. III, § 2 (pertaining to venue)); U.S. Const. amend. VI (pertaining to jury trials)."

Was Snipes biased and disadvantaged here?  Does the fact that the jury venire that he as selecting jurors was all-white make a difference?

For comments from Paul Caron's Tax Prof Blog, see here.

(esp)

February 4, 2008 in Celebrities, Tax, Verdict | Permalink | Comments (1) | TrackBack (0)

The Collateral Cost

Check out Tom Kirkendall of Houston Clear Thinker's post on the Human Cost of Questionable Prosecutions. He remarks on the void in "US mainstream media" on the many collateral consequences of prosecutions, especially prosecutions lacking validity. 

(esp)

February 4, 2008 in Prosecutions | Permalink | Comments (1) | TrackBack (0)

Former Wal-Mart Exec Gets Low Cost Sentence on Remand

Tom Coughlin, the former Chief Operating Officer and key executive at Wal-Mart, received a 27-month term of home confinement with five years probation after pleading guilty to five wire fraud counts (aiding and abetting) and one false tax return filing count. The government appealed the sentence and the appellate court spoke by remanding the case back for re-sentencing finding it unreasonable.  In the interim the Supreme Court issued the Gall decision.  The district court, on remand, has now issued its new sentence and it's probably not quite the way the government hoped.  The court added 1,500 hours of community service.

In failing to impose jail time, the court states:

"[This] punishment is far from an act of leniency, and its characterization as such deprives sentencing courts of a valuable and effective form of punishment.

That form of punishment is especially appropriate in cases such as Coughlin’s, where there is little concern for future criminal activity on the part of the defendant and the defendant is in need of medical attention."

The Hon. Robert T. Dawson should be credited for demanding individualized sentencing and explaining all the rationales that support his issuing this particular sentence.  He states:

"Punishment is imposed parsimoniously and with respectful consideration for the individuality of each peculiar defendant. A court that mechanically doles out precalculated sentences on a wholesale basis to categories of faceless defendants fails to do justice. A court that succumbs to apathy, bred by repetition, will cease to see defendants as individuals, with pasts and potentials, with humanity and promise."

Also check out WSJ here, Benton County Daily Record - NW Arkansas News Service here, Professor Douglas Berman's Sentencing Law & Policy Blog here.

(esp)

February 4, 2008 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Sunday, February 3, 2008

Export Controls

A DOJ Press Release tells that "the director of a Singapore-based aviation company was arraigned [this past week] in federal court in Brooklyn on charges that she illegally exported controlled U.S. military aircraft components and shipped commercial aircraft components to Iran."

Defendants were "indicted with one count of conspiring to export aircraft parts to Iran and 15 counts of exporting aircraft parts to Iran, in violation of the International Emergency Economic Powers Act (IEEPA); one count of conspiring to export defense articles without a license and two counts of exporting and attempting to export defense articles without a license, in violation of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR); and one count of conspiring to launder the proceeds of the unlawful export of defense articles."

(esp)

February 3, 2008 in International | Permalink | Comments (0) | TrackBack (0)

Will the Wesley Snipes Convictions Hold Up on Appeal?

Previously blogged was the acquittal of Wesley Snipes on the conspiracy and fraud counts, and also on three of the six tax filings counts. (see here). Peter Goldberger sent in an important comment on the Wesley Snipes three misdemeanor convictions.  He stated:

"Also worth noting is that Snipes was convicted only on counts where venue was much contested, both legally and factually.  Was he really a legal resident, for tax-filing purposes, of the Florida town where he went to high school, while living for years in NYC and LA as a movie star?  If not, the counts of conviction are precisely those most vulnerable on appeal."

This is an important point because conspiracy cases allow the prosecutor to bring charges in a host of different venues.  It can be the place of agreement or the place of any of the overt acts. With the acquittal of the conspiracy charge, is venue is lacking? Also lacking perhaps is the venue that might have been present if Snipes had been convicted on the fraud count (a count that included an aiding and abetting aspect).  So how does one get this case to Florida?  Couple these questions with a strong objection raised by defense counsel pre-trial to the venue, and the fact that the venire failed to include the race of the accused. But does the fact that the issue gains viability after trial, because of the acquittal of several counts, make a difference? 

(esp)

February 3, 2008 in Celebrities, Tax, Verdict | Permalink | Comments (2) | TrackBack (0)

Saturday, February 2, 2008

The Many Battles of Dickie Scruggs

Two hoary maxims that Napoleon ignored were never fight a two front war and never invade Russia in the winter.  Famed Mississippi tort lawyer Dickie Scruggs is fighting on more than two fronts these days, although under the terms of his bail I don't think he'll be heading to Russia any time soon.  His criminal entanglements began with a contempt charge in the Northern District of Alabama, a case we haven't heard much about lately but that continues to percolate.  The contempt came out of Scruggs' possession of information taken from State Farm Insurance related to payment of claims from damager caused by Hurricane Katrina.  The most recent filing (available below) by the Special Prosecutors attacks Scruggs' motion to strike a request for Rule 17(c) subpoenas.  Among the points mentioned in the brief is a claim by Mississippi Attorney General Jim Hood that Scruggs was working as a "confidential informant" on the Hurricane Katrina litigation, and thus should not be found in contempt for his alleged defiance of a federal judge's order.

The second front, much more well known, is the prosecution of Scruggs and two others for their alleged involvement in the attempted bribe of a Mississippi state court judge in litigation over attorney's fees.  A recent government filing (available below) states cryptically that "the United States will seek to introduce similar act evidence pursuant to Rule 404(b) . . . ."  That Rule prohibits the use of other "crimes, wrongs, or acts" of a defendant except as "proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident."  A confederate of Scruggs' has entered a guilty plea to paying a bribe to a judge in a different case, and that certainly may be the evidence the government is referring to, but it could be that there is more prosecutors may want to bring in at trial.  Rule 404(b) evidence is often quite powerful because, while it cannot be used directly to establish the defendant's "bad" character, once admitted the jury can do with the evidence what it will.

Recently, a third front has opened up for Scruggs, this time a civil suit filed by State Farm accusing Mississippi Attorney General Jim Hood of conspiring with Scruggs to threaten the insurer with criminal charges if it did not settle Hurricane Katrina litigation brought by -- you guessed it -- Scruggs.  State Farm noticed the deposition of Scruggs for February 1, which caused his attorney, John Keker, to send a series of e-mails (available below) stating that his client would assert the Fifth Amendment and not show for the deposition.  Any criminal defense lawyer would instruct a client to assert the privilege against self-incrimination before trial, and that's usually the end of the matter.  But State Farm has advanced a particularly aggressive argument in a brief (available below) for wanting Scruggs to appear and take the Fifth in response to specific questions: "Even if Mr. Scruggs invokes the Fifth Amendment, his testimony is necessary because that invocation will entitle State Farm to a negative inference against Mr. Scruggs’ principal and co-conspirator, General Hood." 

Can that argument really work?  While taking the Fifth can be a ground for inferring that the witness' testimony would be incriminating, I have never heard of that inference being drawn against another person.  [UPDATE: A sharp-eyed reader pointed out that I'm mistaken in my belief, and that courts have permitted a negative inference to be drawn from one witness' assertion of the Fifth Amendment against another party.  Those cases tend to involve corporations or other organizations and the witness is an employee or former employee, but the language in the opinions is clear that it is not limited to only that situation and depends on the circumstances.  I happily stand corrected.]  While a statement of one conspirator may be used against another, that's only for what was said during the conspiracy -- and in furtherance of it -- not at a subsequent deposition.  It's hard to see a court extending the potential inferential value of asserting the self-incrimination privilege from one non-party individual (Scruggs) to another individual (AG Hood) based solely on a claimed conspiracy, especially when Scruggs is facing two pending criminal prosecutions that may be the reason for asserting the Fifth Amendment.  I doubt State Farm will be able to make this argument stick, but it's worth a shot.  The litigation points up another potential area for a government investigation, the relationship between Scruggs and AG Hood, which could spread quite far and wide in Mississippi.  I suspect we have not seen the last set of criminal charges involving Scruggs. (ph)

Download us_v_scruggs_response_to_motion_to_strike_feb_1_2008.pdf

Download us_v_scruggs_notice_of_prior_act_evidence_jan_28_2008.pdf

Download state_farm_v_hood_plaintiff_brief_re_deposition_of_dickie_scruggs.pdf

Download state_farm_v_hood_keker_emails_re_scruggs_deposition.pdf

February 2, 2008 in Civil Litigation, Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Friday, February 1, 2008

Can a Disqualified Lawyer Continue to Help Out?

[Moved up from January 28 with a brief update at the end]

The prosecution of Dickie Scruggs has been fascinating, to say the least, including the view it has provided on the web of connections between the various lawyers in and around the case.  The latest filing by Scruggs' defense counsel raises an interesting issue of legal ethics that could present problems down the road.  Earlier, Scruggs sought to hire a well-regarded local Mississippi attorney, Kenneth Coghlan, to be part of his defense team in the bribery case.  Unfortunately, Coghlan had earlier represented a co-defendant, Steve Patterson, for a brief period before withdrawing, and Patterson has now entered a plea agreement and will testify against Scruggs.  Needless to say, this presents a clear conflict of interest problem, despite the waivers by both Scruggs and Patterson because of the possibility that privileged information will be made available to Scruggs' defense team or Coghlan cannot provide effective representation because of his confidentiality obligations to Patterson -- the privilege lasts forever, of course.  Not surprisingly, Senior U.S. District Judge Neal Biggers denied Scruggs' motion to have Coghlan appear as his counsel on January 16.

Scruggs' defense team has filed a motion to reconsider, arguing that the waivers by Scruggs and Coghlan dissipate any problems from the potential conflict created by the confidential information received from Patterson.  No great surprise there, and it's doubtful Judge Biggers will grant the motion because allowing conflicted counsel to appear would be playing with fire.  The interesting issue, especially from a legal ethics point of view, is the following statement in the defense filing (available below):

In the event that the Court does not permit Mr. Coghlan to enter an appearance on behalf of Mr. Scruggs, the undersigned counsel wishes to notify the Court that counsel intends to consult with Mr. Coghlan on issues related to local custom and practice, jurisdiction, jury selection and other strictly legal and procedural (i.e., non-evidentiary issues) that may be pertinent to the defense of the case but which do not implicate any attorney-client privileged communications or information. Mr. Coghlan will have no role in the trial of this matter and will not render any legal advice or consultation to Mr. Scruggs. Furthermore, Mr. Coghlan will not be consulted regarding the specifics of either Mr. Scruggs’s or Mr. Patterson’s alleged involvement in the conduct at issue in the Indictment.

Can it be that a lawyer prohibited from representing a defendant because of a potential conflict of interest can continue to work on the case?  That strikes me as a bit odd.  While Coghlan was not disqualified by Judge Biggers, because he had not yet entered an appearance to represent Scruggs in the case, the district court's denial of the appearance motion seems to me to be the functional equivalent of disqualification under Wheat v. United States.  In that case, the Supreme Court gave trial judges broad discretion to disqualify lawyers because of potential conflicts of interest, especially based on concurrent or prior representation of co-defendants.  If a lawyer is disqualified due to a potential (or even actual) conflict, I take that to mean the lawyer may not continue any form of representation under the professional responsibility rules.  Therefore, can Coghlan consult on Scruggs' case without representing him in court?

It is not clear whether Coghlan would have an attorney-client relationship with Scruggs, or only be a "consultant" to the lead defense lawyer, John Keker.  An argument can be made that Mississippi Rule of Professional Conduct 1.9(a) would allow Coghlan to continue to represent Scruggs, only not in court.  The Rule states: "A lawyer who has formerly represented a client in a matter shall not thereafter: (a) represent another in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client consents after consultation . . . ."  Because Patterson agreed to waive any conflict of interest claims against Coghlan, it could be that the continuing representation does not violate the rule.  But if Coghlan continues to represent Scruggs, only not appear in court, that seems to go against the spirit of Judge Biggers order, which looked to be based on the district court's authority under Wheat to disqualify an attorney due to the potential conflict.  Judge Bigger's decision may have been to remove Coghlan from representing of Scruggs to protect against any possibility of an ineffective assistance claim by Scruggs if there was a conviction.

If Judge Biggers understood his decision to be a disqualification under Wheat, then hiring Coghlan as a "consultant" looks more like a subterfuge to get around the effect of the court's order.  If a lawyer has a conflict of interest due to possessing privileged information, then that attorney must be completely removed from the case.  The whole idea behind screening lawyers with conflicts is that they can have no contact with the attorneys representing a client, so the lawyer cannot be consulted for general knowledge and background with a promise that no confidential information will be passed.  Moreover, if Coghlan is not representing Scruggs, then discussions with him would not necessarily be privileged, although they could qualify for protection under the attorney work product doctrine.

When a judge decides to disqualify an attorney from a case, I always assumed that it meant the lawyer was completely removed from any aspect of the client's legal representation.  The Scruggs prosecution once again presents a new and interesting twist.  It remains to be seen whether the U.S. Attorney's Office will seek a complete disqualification if Coghlan continues to do some work on the case, but it would not surprise me to see the prosecutors challenge this type of consultation on behalf of Scruggs. (ph)

Download us_v_scruggs_motion_to_reconsider_jan_25_2008.pdf

                                                                                                            

UPDATE: Judge Biggers denied the motion for reconsideration in a short opinion (available below), stating that Scruggs could hardly complain about a lack of defense help with "five eminent attorneys" already on his team.  Interestingly, the Judge passed on making any decision about whether Coghlan could continue to help out with Scruggs' defense, stating in a brief footnote at the end of the opinion, "As to the extra-judicial matters for which the defendant states he intends to employ Mr. Coghlan, the court has no opinion at this time."  I suspect that if Coghlan starts showing up in the courthouse for hearings the judge may express an opinion. (ph)

Download us_v_scruggs_order_denying_motion_for_reconsideration_jan_30_2008.pdf

February 1, 2008 in Corruption, Defense Counsel, Legal Ethics | Permalink | Comments (0) | TrackBack (0)

Snipes Not Guilty of Fraud & Conspiracy Charges; Guilty of 3 Misdemeanors

The press (here, here, here, and here) is reporting that Wesley Snipes has been found guilty of three misdemeanors and not guilty of the charges that carried more severe penalties.  Unlike his co-defendants, Snipes was acquitted of the conspiracy charge that he faced.

The indictment against Snipes had charged him with conspiracy under section 371, and if convicted this charge could have produced a hefty sentence for the actor.  In addition to being found not guilty on this charge, Snipes was also acquitted of count two which charged him with a fraud related offense under 18 U.S.C. 287.    Finally, the government was only successful on half of the tax charges brought against Snipes, in that he was acquitted of three of the years charged under 26 U.S.C. 7203.

The minor convictions for Snipes and major ones for his co-defendants sends the message that one cannot claim ignorance if they follow a promoter of a tax scheme. But more importantly, those who promote such conduct can be charged and convicted of crimes such as conspiracy.

The numerous acquittals in the Snipes case should be making the government wonder whether it was worth the time, cost, and effort to proceed criminally against him, and whether civil penalties may have been more appropriate.

(esp)

February 1, 2008 in Celebrities, Tax, Verdict | Permalink | Comments (3) | TrackBack (0)

Adventures in Witness Recollection

Preparing your client for a hearing is a must for every attorney.  But offering to have your client's memory fade in exchange for favors is a major problem, as illustrated in a recent SEC case.  The SEC filed an administrative action (here) to bar an attorney licensed in New York from appearing before the Commission because of what he told the attorney for a brokerage firm and its president who were being investigated.  The attorney's client came to the SEC's attention as a potential witness, and so the attorney began dealing with the investigators seeking to arrange her testimony.  At the same time, the attorney also had some conversations with the brokerage firm's lawyer that were rather revealing.  How did the SEC learn what was said, you might ask?  Well, it seems that the brokerage firm's attorney taped the conversations, as summarized in the administrative filing:

During the taped conversations, Respondent requested that Blumer [the brokerage firm's president] arrange for a "severance package" (i.e., removing his client as the co-signer on two car leases with Blumer and paying her salary) for his client. In return for this severance package, Respondent indicated that his client might not cooperate with the Commission and/or that her recollection of the relevant events might "fade." In the last of these conversations, Blumer’s attorney asked Respondent "what package" his client wanted to "not cooperate." Respondent stated, "Get her off those leases and, you know, your salary, and you can even pay it out over a year." Blumer’s attorney then asked, "what will we get if they do that, she won't cooperate or she won't remember?" Respondent stated "probably both."

New York is a one-party consent state for taping telephone calls, so there's no problem on that front.  Can't you trust the attorney you're trying to extort in exchange for having your client's memory "fade" a little bit?  It seems not, and the New York attorney may find himself in a bit of hot water with the Bar authorities who tend to take a dim view of such conduct.  Whether the U.S. Attorney's Office takes an interest in a possible obstruction of justice case remains to be seen.  Be careful what you offer in exchange for favorable testimony, it can cost you your career. (ph)

February 1, 2008 in Civil Enforcement, Investigations, Legal Ethics, Securities | Permalink | Comments (0) | TrackBack (0)