Saturday, May 17, 2008
The government issued a superseding indictment in the prosecution of Barry Bonds following the court's grant of a motion to dismiss filed by defense counsel. (see here) In essence, the defense argued that there were too many different instances within each count, making it difficult to refute each charge. Bonds was given what he asked for - in a new indictment that charged more counts - but provided specificity to each count.
Basically it puts the defense and prosecution back to square one with little difference in the actual conduct alleged. One benefit to the defense now, is that prosecutors will not be able to claim a victory by proving one statement in a count that involves four different alleged acts. One downside may be if it goes to trial and the jury decides upon a compromise verdict, there are now more counts to work with.
One can almost hear the prosecutor's opening statement in this case -- if there is a trial down the road. It might go something like this -- "this is a case about lying." As a matter of fact, maybe the prosecutor can borrow the script from the Martha Stewart trial.
Superseding Indictment - Download bonds_new_indictment_508.pdf
Thursday, May 15, 2008
"The principal founder and former Chief Executive Officer of PurchasePro.com, Inc. . . . , a now-defunct internet company that specialized in business-to-business commerce ('B2B')" was found guilty after a bench trial of "conspiracy to commit securities fraud, securities fraud and witness tampering." The court noted that "PurchasePro established and promoted virtual 'marketplaces' in which buyers and sellers of goods could interact with one another." The opinion describes the relationship of this company with AOL.
In a press release issued by the US Attorney for the Eastern District of Virginia it states:
"[the defendant] originally faced trial on the securities fraud and witness tampering charges in a jury trial that began in October 2006 before Judge Kelley. [The defendant’s] first trial ended after Judge Kelley granted a motion from [the defendant]’s defense attorney to withdraw from the case and a mistrial was declared. The remaining defendants were subsequently acquitted. In the retrial, which began in October 2007, an obstruction of justice charge was consolidated with the original securities fraud charges. In addition to the guilty verdict on the original charges, Judge Kelley also found [the defendant] guilty of obstructing a federal proceeding as a result of his conduct during his original trial."
The U.S. Attorney did not issue a press release when the initial defendants were acquitted and there is only one sentence of the acquittal in this press release. (see here)
The opinion - Download johnson_final_verdict_and_opinion_w_esig.pdf
Houston Chronicle - Court Upholds Punishment for Ex-Reliant Trader
A DOJ Press Release reports that
"Former private investigator Anthony Pellicano and two associates were found guilty today of federal racketeering charges for participating in a criminal enterprise in which Pellicano paid tens of thousands of dollars to police officers in exchange for confidential law enforcement information on numerous individuals who were being investigated by Pellicano.
"A federal jury today also found that Pellicano and others were involved in the installation of wiretaps on the phones of numerous individuals whom Pellicano had been hired to investigate."
(esp)(w/ thanks to Bill Olis)
Looking at the deferred prosecution agreement signed in the Willbros matter, two things are interesting. First is the treatment of attorney-client privileged materials and the second is the document related to the appointment of an internal monitor.
With respect to attorney client privileged material, the deferred prosecution agreement allows the government to obtain the items and penalizes the company for non-compliance. The company can give notice to the DOJ if they wish to withhold access to "information, documents, records, facilities and/or employees based upon an assertion of a valid claim of attorney-client privilege or application of the attorney work-product doctrine." But "[i]n the event that WGI and WII withhold access to the information, documents, records, facilities and/or employees of WGI and WII, the Department may consider this fact in determining whether WGI and WII have fully cooperated with the Department." Is this a determination that DOJ should have control over, and should they be allowed to obtain this attorney-client privilege material as part of a deferred prosecution agreement? And is it proper to allow one party to a contract the ability to determine if there is compliance with a term within the contract?
The Deferred Prosecution Agreement - Download willbros_deferred_agreement.pdf
The monitor gets selected by Willbros. It is subject to approval by the DOJ. This may avoid situations of a DOJ appointment of a friend or former political boss. But is this going to the other extreme by allowing the company the right to chose the person who will provide oversight? Wouldn't a better approach be to have an impartial member of the judiciary making these decisions?
The Monitor Attachment - Download attachment_d_independent_corporate_monitor.pdf
(esp) (w/ thanks to Librarian Whitney Curtis)
Wednesday, May 14, 2008
Although there has been talk previously, it is now official that Willbros will receive a deferred prosecution agreement as a resolution of its matters with the DOJ. The DOJ's press release states that this company, a "construction, engineering and other services in the oil and gas industry, and Willbros International Inc. (Willbros International), the wholly owned subsidiary through which it conducts international operations, have agreed to pay a $22 million criminal penalty in connection with corrupt payments to Nigerian and Ecuadoran government officials in violation of the Foreign Corrupt Practices Act (FCPA)." The government states that "[t]he six-count criminal information charges Willbros with one count of conspiring to make bribe payments to Nigerian and Ecuadoran officials, two counts of violating the FCPA in connection with the authorization of specific corrupt payments to officials in those countries and three counts of violating the FCPA by falsifying books and records relating to corrupt payments and a tax fraud scheme."
Why a deferred prosecution agreement here? The DOJ explains that
"[i]n recognition of Willbros' thorough review of the improper payments, the companies’ exemplary cooperation, the companies’ implementation of enhanced compliance policies and procedures, and the companies’ engagement of an independent corporate monitor, the Department has agreed to defer prosecution of these companies for three years. If Willbros Group and Willbros International abide by the terms of the agreement, the Department will dismiss the criminal information when the term of the agreement ends."
Willbros now has a foreign corrupt practices act policy, and this policy was issued in October 2007.
Tuesday, May 13, 2008
The Washington Legal Foundation issued a 143 page report titled Special Report: Federal Erosion of Business Civil Liberties. (see below for a copy of the report) It begins with an introduction by the Honorable Dick Thornburgh who writes that "The Washington Legal Foundation's SPECIAL REPORT: FEDERAL EROSION OF BUSINESS CIVIL LIBERTIES provides the legal community with an excellent summary, analysis, and critique of the key legal, judicial, and regulatory developments in the growing trend to criminalize normal business activities." The Report has seven chapters, followed by an Appendix, reflecting the following topics -
- Chapter One: Mens Rea, Public Welfare Offenses, and the Responsible Corporate Officer Doctrine
- Chapter Two: Environmental Protection Agency Criminal Enforcement Policies
- Chapter Three: Department of Justice Criminal Prosecution Policies
- Chapter Four: Parallel Civil and Criminal Prosecutions
- Chapter Five: Attorney-Client and Work Product Privileges
- Chapter Six: Deferred Prosecution and Non-Prosecution Agreements
- Chapter Seven: U.S. Sentencing Guidelines
This is clearly a weekend read as it appears to capture the key issues that have been problematic to businesses operating in this country.
The Report - Download wlf_timeline.pdf (Recommendation to open - save it to your system and then it should open properly)
If you have trouble opening this link, or to obtain additional hard copies of the report and the companion timeline fold-out chart, contact Paul Kamenar at 202-588-0302 or firstname.lastname@example.org. He informed me that they plan to update the report from time to time, so he welcomes stories of abusive criminal prosecution that have not been well publicized.
White Collar Crime prosecutions continue to be extremely low, despite the fact that they have increased this past month. According to the Syracuse TRAC reporting system, there has been a 28.4 percent increase in the number of white collar crime prosecutions in the month of January. This number, however, is a -17.3 percent change from 5 years ago (including the magistrate court) and a -19.4 (excluding the magistrate court). It is disheartening to see that white collar crime is not being prosecuted at the levels that it was being handled five years ago, although AG Mukasey can credit himself with increasing these prosecutions from the last couple of administrations. Not surprising, however, is the fact that the number one charge being used by prosecutors is mail fraud - 18 U.S.C. 1341.
This reporting, however, has many deficiencies as DOJ's categories for white collar crime do not match the definition provided by many and also do not include many offenses that clearly are considered white collar crime by the individual U.S. Attorney offices (see Is DOJ Cooking the Books in its Reporting of White Collar Crime?) Interestingly, aggressive overcharging by the government, may be hurting their statistics. There is no category under white collar crime for recording the use of money laundering and RICO charges that are used by the government in so many of the white collar cases.
(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports).
In the case of United States v. Williams, the Eleventh Circuit Court of Appeals affirmed the convictions of two individuals who had received a 96 month and 60 month sentence for a violation of 18 U.S.C. s 1832, the theft of trade secret statute. The defendants in this case were accused of trying to sell trade secrets of Coca-Cola to Pepsi. Pepsi notified Coca-Cola of the attempt to sell them trade secrets and Coca-Cola then brought in the FBI, who used an undercover agent to secure the evidence obtained in this case
The court rejected the appellants arguments of a claimed Sixth Amendment violation in limiting cross-examination, limiting the closing argument, and using the judge's recent open heart surgery as an example when defining reasonable doubt. The court also rejected a sentencing argument. Williams, who received the 96 month sentence was given an above guidelines range, in sharp contrast to a sentence given to an individual who plead guilty and received a 24 month sentence. The 11th Circuit held that giving enormous weight to one factor - in this case the seriousness of the offense - does not mean the sentence is unreasonable. The court explicitly states in discussing the 60 month sentence given to one of the individuals here that because this individual "did not provide any assistance to the government, there was no 'unwarranted' disparity between his sentence" and the sentence of 24 months given to a cooperating party.
Although the court's opinion does not discuss this point, allowing for a significant sentence reduction for cooperation raises some concerns. For one, it can put the individual with little information to provide the government at an enormous disadvantage. It also places the individual who is last to the talk with authorities at a loss, as all the information may have already been provided to the government. The credibility of those providing cooperation becomes more questionable when the rewards for giving the information reaches levels that offer a significant advantage to the cooperator. Perhaps the biggest concern is that providing such an enormous benefit to cooperators places those who decide to use their constitutional right to trial by jury, at a disadvantage.
See AJC - here
Addendum - Professor Doug Berman's Sentencing Law & Policy Blog here.
Monday, May 12, 2008
The Ninth Circuit Court of Appeals in United States v. Chapman affirmed the dismissal of the indictment in a case where a grand jury had indicted defendants in a "complex securities trading scheme" and failed to disclose over 650 pages of documents in discovery to the defense. This is likely a case that the government may have wished that they had not appealed. The court's conclusion says it all:
"The district court did not abuse its discretion in dismissing the indictment. The government egregiously failed to meet its constitutional obligations under Brady and Giglio. It failed to even make inquiry as to conviction records, plea bargains, and other discoverable materials concerning key witnesses until after trial began. It repeatedly misrepresented to the district court that all such documents had been disclosed prior to trial. The government did not admit to the court that it failed to disclose Brady/Giglio material until after many of the key witnesses had testified and been released. Even then, it failed to turn over some 650 documents until the day the district court declared a mistrial and submitted those documents to the court only after the indictment had been dismissed. This is prosecutorial misconduct in its highest form; conduct in flagrant disregard of the United States Constitution; and conduct which should be deterred by the strongest sanction available. Under these facts, the district court did not abuse its discretion in characterizing these actions as flagrant prosecutorial misconduct justifying dismissal. Nor did it abuse its discretion in determining that a retrial—the only lesser remedy ever proposed by the government—would substantially prejudice the defendants."
In a press release New York Attorney General Andrew Cuomo announced that he had reached a settlement with "a western New York law firm and a Capital Region attorney ending improper employment arrangements with school districts and various Boards of Cooperative Educational Services (“BOCES”)."
The release states:
“In recent months my office has uncovered long-term and systemic fraud on the public pension and benefits systems which have potentially wasted millions of taxpayer dollars,” said Attorney General Cuomo. “Lawyers representing school districts and BOCES across the state were given public benefits they were not entitled to. Some lawyers have received illegal perks for years and were improperly put on district payrolls. My office will continue to follow this investigation wherever it leads, and we will put an end to this abuse.”
It also states:
"Cuomo’s ongoing investigation of pension fraud includes reviews of employment practices at all school districts across the state and all 37 BOCES, and has expanded to include more than 4,000 local governments and special districts across New York state. The investigation has already revealed that many lawyers had remained on school districts’ or BOCES’ payrolls for such extended periods of time, or were included on the payrolls of so many school districts or BOCES simultaneously, that they accumulated substantial credits in the New York State Employees’ Retirement System."
Guest Blogger - Gordon Kirsch (rising 3L Stetson University College of Law)
Session V: Legal Ethics: A View from the Bench - A Summary by Gordon Kirsch
In the last session of the White Collar Crime Institute held at Stetson University College of Law, hypotheticals were discussed by several federal judges (Chief Judge Patricia C. Fawsett, Judges Richard A. Lazarra, Anne C. Conway, Mary S. Scriven, Thomas B. McCoun III).
The first problem questioned whether attorneys can stipulate to the application of a guideline, knowing that it might not be applicable in their case? As each of the judges weighed in, the answer became clear -- full candor toward the tribunal is required and a judge should not accept pleas based on facts which do not exist.
The second problem asked whether the defense attorney can enhance facts as part of a plea agreement to avoid a minimum mandatory sentence. The conclusion here was that a judge has an obligation to explore the full facts and decide for him or herself whether they support the plea. Again, full candor is needed and it should be emphasized that judges are not party to plea agreements and can refuse to enforce them.
Problem three was a short problem asking whether a prosecutor can suggest the defense agree to a smaller amount of damages as part of a securities fraud plea agreement? Every judge agreed that full candor was necessary and that this should not be allowed.
The final problem involved a large conspiracy and issues related to entering into a joint defense agreement with the alleged co-conspirators. Discussed were issues such as attorney-client privilege. Among the attorneys in the audience, many expressed their views that often the joint defense agreements are not worth the paper they are written on, though in some circumstances they may be necessary.
DOJ Press Release - Former Alaska State Representative Victor Kohring Sentenced On Public Corruption Charges (sentenced to 22 months in prison) ("part of an ongoing investigation into public corruption in the State of Alaska")
ABA Law Journal News - Ex-Prosecutor Acquitted at Trial Loses Bid for Attorney Fees; Paul Egan, Detroit News - Convertino Request is Denied - He Sought Attorney Fees for Case that Resulted in Acquittal on Obstruction of Justice Charges
NYTimes - Corruption Case Taints Rising Political Star (discussing Rezko trial and presidential candidate Obama & Governor Blagojevich)
Sunday, May 11, 2008
60 Minutes aired a special on Chiquita Banana, The Price of Bananas, in which they reported on the issues that faced this company in trying to operate in Colombia and their self-reporting to the DOJ of violations in making illegal payments to a paramilitary group in Colombia. Their self-reporting resulted in the company facing a significant penalty - a $ 25 million dollar fine and 5 years probation. (see Sentencing Memo here) The company also was the subject of a prosecution and plea, and not the recipient of a deferred prosecution agreement. To a large extent, this recent report mirrored and expounded upon the work of former Wall Street Journal reporter Laurie Cohen, who back in August 2007 discussed the dilemma faced by Chiquita in trying to protect employees and also trying to comply with the law. (see Laure Cohen, Chiquita Under the Gun, WSJ)
Some interesting points:
- 60 Minutes reported that "the Colombian government is now talking about extraditing Chiquita executives to Colombia." The extraterritorial application of U.S. laws by the DOJ may be coming back to haunt them as other countries may now think they have the right to come into the U.S. and proceed against corporate executives here. The cost of a company operating abroad may be significantly increased if CEOs, or others within the U.S., start facing indictment in other countries.
- The 60 Minute Special includes names of other companies that are alleged to be in violation, although the source of the allegations is in prison and charged with offenses in Colombia. One has to wonder if the DOJ has investigated these other companies, or if the only one who gets prosecuted is the one who comes forward and does the right thing by turning themselves into the government. Based on this 60 Minute Special one might have a certain skepticism about whether the government is taking a proactive role in this investigation. On the other hand, the effect of the WSJ article, and now 60 Minutes, may stimulate further DOJ activity. Of course, there is also the possibility that they did investigate and find no merit to the allegations that other companies were involved in illegal payments.
- The DOJ took a positive approach in not indicting individuals after Chiquita turned themselves into authorities. Perhaps this will send a message to corporate executives at other companies that they need to work with the DOJ to avoid individual liability. This could place the company against the individual when an individual may be trying to protect themselves from personal liability while the company is saying that proof is not present, so the company should not self-report.
- Why is it that Chiquita received a plea with conviction, while other companies get a deferred prosecution agreement? Is this but another example of the enormous discretion of the DOJ?
Addendum - ABA Jrl Law News Now - Colombia Extradites 14 Warlords to Face U.S. Drug Charges
Saturday, May 10, 2008
The Third Circuit Court of Appeals entered a stay of the Cyril Wecht trial pending appeal (for background on this case see here). The case of the 77 year old coroner charged with federal violations for alleged state conduct was set for retrial following a hung jury.
A motion to expedite the appeal was also entered. The appellee's brief is due on or before May 15th and the appellant's reply brief has a deadline of May 20th. On the day this order was granted, there was also an entrance of appearance by Richard L. Thornburgh, former Pennsylvania Governor and former Attorney General of the United States and now with the law firm of Kirkpatrick & Lockhart, Preston, Gates, Ellis LLP.
Should DOJ really be spending taxpayer money on this attempt to re-prosecute this individual?
Government's Response Arguing that a Stay is Not Necessary - Download govt. Response-Wecht.pdf
Court Order Rejecting Government's Position - Download wecht_order.pdf
Thursday, May 8, 2008
Two airline related cases reached agreements -
1. A plea agreement was filed in United States v. Japan Airlines International Co., Ltd. on a Sherman Antitrust Act, 15 U.S.C. § 1, matter. The criminal fine of $110 million is offered with cooperation by the company. There are a few interesting aspects of this plea -
- It actually outlines an agreed upon payment plan -
"The United States and the defendant agree to recommend, in the interest of justice pursuant to 18 U.S.C. § 3572(d)(1) and U.S.S.G. §8C3.2(b), that the fine be paid in the following installments: within thirty (30) days of imposition of sentence -- $20 million; at the one-year anniversary of imposition of sentence ("anniversary") -- $20 million; at the two-year anniversary -- $20 million; at the three-year anniversary -- $20 million; at the four-year anniversary -- $20 million; and at the five-year anniversary -- $10 million; provided, however, that the defendant shall have the option at any time before the five-year anniversary of prepaying the remaining balance then owing on the fine."
One can't help but think if the accountants were considering tax implications here.
- It accounts for the need to secure testimony from those outside the United States -
"16. The United States agrees that when any person travels to the United States for interviews, grand jury appearances, or court appearances pursuant to this Plea Agreement, or for meetings with counsel in preparation therefor, the United States will take no action, based upon any Relevant Offense, to subject such person to arrest, detention, or service of process, or to prevent such person from departing the United States. This paragraph does not apply to an individual's commission of perjury (18 U.S.C. § 1621), making false statements (18 U.S.C. § 1001), making false statements or declarations in grand jury or court proceedings (18 U.S.C. § 1623), obstruction of justice (18 U.S.C. § 1503, et seq.), or contempt (18 U.S.C. §§ 401-402) in connection with any testimony or information provided or requested in any Federal Proceeding."
2. A DOJ/Antitrust Press Release notes that "[t]he former highest-ranking Qantas Airways Limited cargo executive employed in the United States has agreed to plead guilty, serve 8 months in jail, and pay a criminal fine for participating in a conspiracy to fix rates for international air cargo shipments."
Henry "Hank" Asbill spoke as the keynote speaker at the White Collar Crime Institute held at Stetson University College of Law. Asbill successfully represented an AOL executive in both the criminal and civil actions brought by the government. The theme of this talk: when the government is over-aggressive it can backfire. This is especially true when the lawyer is Hank Asbill, who calls the government's bluff and tries to proceed on the civil case that the government just assumes will be stayed. From the jury selection process in the case, to how the venue was chosen by the government, were examples of how being over-aggressive can come back to haunt the government. His inspirational talk emphasized that a defense attorney can stand up to the government. One additional trial point he made concerned the importance of humor in the courtroom, especially in a long trial.
It was especially good to hear him mention something that has been bothering me. I continually see the government issue press releases for indictments, pleas, and convictions. But why is it that we never see a press release for a not guilty. If the government is truly a minister of justice, then reporting the not-guilty verdict should be just as important. Asbill noted how the government keeps the Indictment up on the web, but they fail to mention what happened - a not guilty and no civil finding of liability.
Government Returns Third Superseding Indictment in Prosecution of Defense Attorney Benedict P. Kuehne
Guest Blogger Jon May, Esq. writes:
When the indictment against Miami attorney Ben Kuehne was unsealed, lawyers across the country scratched their heads. The indictment alleged that Kuehne, hired to vet legal fees paid to famed defense counsel Roy Black for his defense of Fabio Ochoa, was guilty of money laundering. The indictment, however, was almost totally devoid of any facts that explained what Ben actually did that violated the law. The government has attempted to remedy that deficiency in the second and third superseding indictments, but lawyers are still scratching their heads. The government does not contend that the source of the Colombian pesos used to pay Black’s fees were proceeds of any unlawful activity. Rather the government argues that the United States dollars exchanged for the pesos in the United States (by United States agents) were derived from drug trafficking. But the "tainted dollars" exchanged for the clean pesos were not proceeds of any illegal activity involving Fabio Ochoa. These dollars came from various sting operations run by the DEA in New York.
It is the government’s theory that all money exchange businesses operating in the United States are so polluted with tainted dollars and that Attorney Kuehne knew that the money ultimately transferred to Attorney Black was illegal proceeds. Because Kuehne’s trust account was used to temporarily hold the transfer of these funds to Black and because Kuehne drafted opinion letters attesting to the legal source of the funds, the government contends that he committed money laundering.
The government has made this same argument in a number of cases against United States banking institutions who have dealt with money exchanges involving currency from various Latin American nations, most recently Wachovia Bank. But thus far each of these investigations has resulted in deferred prosecutions. Ben Kuehne’s prosecution may be the first case where this unprecedented and peculiar theory has been employed against an individual, in this case a prominent criminal defense lawyer.
A new twist is presented by the third superseding indictment. In addition to money laundering, Ben is charged with defrauding the Government of Colombia, on the theory that these money exchanges defeat Colombian currency control laws. What this means is that the United States is now fully engaged in enforcing other nations’ laws in the courts of the United States.
As this prosecution unfolds, it becomes clearer that the government is using this case to test new theories that have broad implications for every lawyer who provides legal advice that is later argued to have impeded law enforcement efforts, even those of foreign countries. It also threatens to subject civil and corporate counsel to potential prosecution for any legal advice given that somehow violates a foreign law.
Third Superseding Indictment -
Jason Cato, Pittsburgh Tribune Review - Court delays Wecht's 2nd trial
Pillyburbs.com (AP) - Circuit court stays Wecht retrial over defense appeal
Mary McGuire, Georgetown University's Newspaper - the hoya.com - First U.S. Crime Museum to Open in D.C. (reported that it will include materials related to white collar crime)
The White Collar Crime Institute being held at Stetson University College of Law - Tampa today has a full day of speakers on important issues related to white collar crime. The opening panel, U.S. v. You - Ethically Representing Your Client Without Becoming One included John Fitzgibbons and Jane Moscowitz, who each emphasized how difficult it is to be a criminal defense attorney today. They noted the safeguards an attorney needs to take to protect themselves from being a defendant. Jane Moscowitz, who represents Ben Kuehne (see here and here), stated "don't get in between the government and the money."
This panel couldn't have said more times the phrase- be careful. But it was also noted that lawyers just don't know how much research you have to do today to be careful? It was noted that "if you plea your client guilty there will be no questions about your fee." But it was also stated that the essence of the problem is that the government refuses to give any guidance. It used to be that a third party paying the fee was suspicious and today its the opposite.
This panel was moderated by Patrick Doherty (Brown and Doherty). Other panelists included Paul I. Perez (Fidelity National Financial Inc. and former U.S. Attorney in Florida) and Rachelle D. Bedke (AUSA Middle District of Florida).
This panel reminds one of how difficult it is to be a criminal defense attorney today. But should it be? Should lawyers be fearful about representing those accused of crimes? Should there be such stumbling blocks that puts lawyers at risk - of possibly being indicted - when they handle criminal matters? DOJ needs to rethink its position on this issue - after all they have an obligation to protect the constitutional rights of individuals accused of crimes.