Wednesday, May 7, 2008
Tuesday, May 6, 2008
While many were glued to the television, watching the happenings in Indiana and North Carolina, a most unusual investigation occurred in Washington, D.C. It seems that the FBI searched the Office of Special Counsel, and the home of its director. (See Washington Post here and WSJ here).
"The U.S. Office of Special Counsel (OSC) is an independent federal investigative and prosecutorial agency." It's authority comes from "three federal statutes, the Civil Service Reform Act, the Whistleblower Protection Act, and the Hatch Act." (see here) And yes, it is the same agency that looks at improper politicization in key government offices. Because of the supposed non-political role of the head of this office, he or she is protected from removal by an appointment for a term of five years (in this case Scott Bloch was appointed by President Bush in 2004 - see here)
This recent raid appears to surround the possible destruction of computer materials. The problem with destroying computer material during the pendency of an investigation is that it opens one up to a possible obstruction of justice charge. Yes, this was the very charge that was used against Arthur Andersen, Martha Stewart, Scooter Libby, and so many others. Whether items were destroyed here, or whether an outside company was merely called to fix a computer virus may be a question of the future. But it does appear that computer and other information were taken by authorities in this recent search.
Searches are not the usual method to secure evidence in a white collar case, although it is becoming more common in recent years. Normally subpoenas are issued and the person is requested to produce documents for a grand jury. Searches are used when there is a need for surprise and when there is a fear of destruction of materials. Unlike subpoenas, searches require a showing of probable cause to a neutral and detached magistrate.
An interesting question here may be who should have authority to investigate and prosecute, that is of course if evidence demonstrates criminal violations. If the Office of Special Counsel were investigating matters in the Department of Justice, can the DOJ turn around and now investigate their investigators? Would it be more appropriate here for a court to appoint a neutral party to hold and peruse the items obtained in the search to make certain that there is no disclosure of information that might compromise a pending matter.
With politics entering branches of the government that should be immune from such activity, there have been some recent questions about whether the Office of Special Counsel was acting sufficiently to handle these matters. But who should have authority to investigate this issue presents some problems - especially when the focus of the investigation may have criminal overtones.
Investment News - Money Fund Scrutiny Urged (Letter of several groups calling for "the Commission to adopt a rule requiring that money market funds make non public monthly electronic filings of their portfolios to enable the Commission to monitor more closely the fund's risk of loss of principal.")
DOJ Press Release - Former FirstEnergy Nuclear Operating Company Employee Sentenced for Lying to the Nuclear Regulatory Commission (4 months of home confinement, "three years of probation, 200 hours of community service and a $7,500 fine. During his probation, [the defendant] is barred from working for any organization holding a license from the NRC.")
Houston Chronicle (AP) - Ex-Dynegy exec says judge not impartial
Monday, May 5, 2008
Conspiracy to Defraud - Immigration Documents - The Seventh Circuit Court of Appeals affirmed the case of United States v. Wantuch, a case in which the accused had been charged with "a four count indictment: (1) conspiracy to defraud the United States in violation of 18 U.S.C. § 371; (2) bribery of a public official in violation of 18 U.S.C. § 201(b)(1)(A) and (2); (3) fraudulent receipt of temporary alien registration stamps, in violation of 18 U.S.C. § 1546; and (4) making false statements to the INS, in violation of 18 U.S.C. § 1001 (a)(2) and (2)."
"The government’s theory was that between March of 1999 and April of 2000, [the defendant] conspired with [another individual] and his other “clients” to defraud the government by obtaining temporary green card stamps through bribes to an INS officer and false statements on green card applications."
This case arises from a joint investigation called "Operation Golden Schemes," "which focused on the criminal activities within Chicago’s Eastern European community, particularly the marketing of fraudulent immigration documents. The FBI opened an undercover travel agency called G.S. Golden Travel (“GSGT”), located in a small two-story building on Belmont Avenue in Chicago."
Bankruptcy Concealment - Advice of Counsel Instruction Precluded - The Seventh Circuit rejected a convicted defendant's arguments in United States v. Van Allen where the defendant was "convicted of a series of financial crimes involving the structuring of currency transactions and the concealment of assets in a bankruptcy proceeding, in violation of 18 U.S.C. §§ 152(1) and (2) and 31 U.S.C. §§ 5324(a)(3) and (d)(2)." The defendant unsuccessfully attempted to secure an advice of counsel instruction, but the instruction was not supported by the testimony of the bankruptcy counsel.
Mail Fraud (1346) Not Vague & What is Private Gain - In United States v. Sorich the Seventh Circuit weighed in on the honest services statute, holding that it is not unconstitutionally vague here. The court spoke about whether private gain was necessary for mail fraud using the following scenarios:
"Imagine scenario (A) in which a mayor surreptitiously channels city contracts to his cronies in the business community; they get a windfall whereas he has merelyhelped his friends and takes no money. Or imagine scenario (B) in which an attorney bribes a court in order to obtain favorable results for his clients in their lawsuits. Or scenario (C) where a union boss sells union property to a senator even though the senator did not offer the highest price, and in exchange receives the senator’s vote on a matter that concerns the union. In all three scenarios the public has been defrauded of the honest services of its public servants: the mayor, the court, and the senator. Moreover, in all three scenarios the defendant—the mayor, the attorney, and the union boss—was not the one who stood to gain financially. Certainly the defendants all received something" :in (A), the mayor received the gratitude of his friends; in (B), the attorney could boast to future clients of a high success rate, which is good for business; and in (C) the union boss curried valuable favor with the senator. But the money went to another party. All three scenarios have played out in the federal courts and have resulted in convictions for mail fraud."
The court noted that "Robin Hood may be a noble criminal, but he is still a criminal."
Sunday, May 4, 2008
Alice Fisher has given notice of her intent to leave as the head of DOJ's criminal division. The date of departure is set for May 23rd. In addition to her efforts in combatting international organized crime, chairing the Katrina Fraud Task Force, and her role in the Medicare Fraud Task Force, the department notes in a press release that:
"Ms. Fisher promoted efforts to ensure integrity in the government, including developing and chairing the National Procurement Fraud Task Force. Since its inception, the Task Force has charged, convicted, or brought civil actions in more than 300 cases, including 46 individuals or companies criminally charged in procurement fraud related matters to the global War on Terror. Additionally, the Criminal Division has led high profile public corruption investigations including the Abramoff prosecutions that have resulted in 12 convictions to date and the ongoing investigation into public corruption in state government in Alaska."
This departure allows AG Mukasey the opportunity to put "his person" in this powerful position. But with a relatively short tenure to the position, one has to wonder whether an outsider will be anxious to take this position.
Often the sentence given to convicted offender focuses on the offense, as opposed to the offender. But Tracy Bishop of the Baltimore Sun has an incredible article/story, titled Contrary Criminal, that tells of a woman being sentenced on a backdating case out of SafeNet. Judge Rakoff gives her 6 months.
What do you do with someone who did not benefit from the crime, who was always helping people, and accepts responsibility? One has to wonder whether her sentence is the equivalent of someone receiving a much harsher sentence in actual jail time in that the truly "good person" will be affected greater by a sentence than the person who is less caring and more self-centered. The truly "good person" who missteps in the law, oftentimes because the law is unclear or unenforced, may be more concerned about having failed their family, as opposed to the time that they will actually have to serve. And does the truly "good person" who tries to please people stand more of a chance of being charged and convicted for such crimes?
Saturday, May 3, 2008
Carrie Johnson's Washington Post article titled, Ex-Aide Sentenced, New Probe Emerges discusses a 6 month sentence being given to an individual who faced a possible 2 years for an embezzlement related charge. But the telling part of this article pertains to a probe involving lawmakers using staff members for political related activities. The problem here being that the political activities may have occurred during government paid time. So, what does an embezzlement plea have to do with this new probe?
- Will it be a Political Investigation: The article notes that the person being sentenced is affiliated with two lawmakers who are Democrats. So a first question will be whether this investigation will be limited to one political party? With a politicized justice department in the recent past, such investigations raise concerns as whether they will be an outgrowth of the politics in the department.
- Can't Give too Good a Deal: An individual facing 2 years gets 6 months. The government doesn't want to give too good a deal (such as no time) if they plan on using the person to testify against others. Credibility of the individual providing the information is important, and too good a deal makes one wonder whether the person is in fact being truthful.
- How Many Dominoes Will Fall: One has to wonder whether this plea is but one domino in a major investigation. Will this individual provide information that will be verified by others, and will there be more pleas prior to the filing of a major indictment of a top person?
- How High Will it Go: One problem for the government with these types of investigations -- in seeing how high you can go --is determining the knowledge of the top individuals. Did the individuals leave such matters to those below them, did they have actual knowledge of how their staff was used, or is it a willful blindness situation, where the individual knows what is going on but just avoids being a part of the conduct to avoid criminal culpability?
- Will it Hit a Wall: What may sometimes seem like a major investigation can sometimes fall flat when there just isn't any criminal conduct there. Could this be the case here?
A lot of unanswered questions, but Carrie Johnson at the Washington Post is onto something worth watching.
FBI Press Release - Two owners and corporate officers of Engineering Dynamics, Inc. ("EDI") plea to a one-count information of conspiracy to violate the International Emergency Economic Powers Act and the Iranian Transactions Regulations
Doug Berman's Sentencing Law & Policy Blog - A (record-setting?) long white-collar sentence (330 years)
FCPA Blog - Ex-World Bank Manager Sentenced for FCPA Offense
Examiner.com - Baltimore man gets lengthy sentence in $8 million fraud case (15 years - 27 counts of mail and wire fraud)
DOJ - Southern District of Indianapolis Press Release - Louisville Woman Sentenced for Embezzling $7,000,000 From Credit Union (97 months)
Houston Chronicle (AP) - 3 NatWest Bankers Get Different Prisons (here)
Attorneys for Jamie Olis filed a Reponse to Government's Answer and Motion for Summary Judgment, and Motion for Reconsideration of Olis' Motion for Discovery. Perhaps the most fascinating argument pertains to the payment of attorney fees. What role did the Thompson Memo have in depriving Olis of Dynegy money to present his defense? One paragraph from the brief states:
"The government also urges that trial counsel’s awareness of the existence of the Thompson Memorandum put Olis on notice of the constitutional violation. Gov’t Answer at 12-14. That suggestion misses the mark for two reasons. First, Olis’ counsel, . . . , did not understand that the Thompson Memorandum would by itself prevent Dynegy from fulfilling its contractual obligations to Olis. On the contrary, [he] believed that Dynegy decided to put funds in escrow in order to circumvent the implications of the Thompson Memorandum by putting the funds out of the company’s reach. Kelley Decl. (Docket # 318) Ex. D at 65:23-66:12. Second, Olis does not contend that the Thompson Memorandum alone violated his constitutional rights. Rather, it was the actions of the USAO, which improperly used the Thompson Memorandum to put pressure on Dynegy, that constituted the violation."
Friday, May 2, 2008
Check out Mary Flood at Houston Chronicle - Kelley asks judge to leave the Olis case
(esp) (w/ a hat tip to Bill Olis)
Addendum - WSJ Blog here.
Commentary - When should a judge recuse him or herself from a case? There are many times that the answer to the question is easy, such as when the judge is related to a party or when the judge has personal knowledge of the facts in question. But many times the answer to this question is less clear. The ABA Model Code of Judicial Conduct provides judges with guidance to assist in deciding whether recusal is necessary. Specifically Rule 2.11 pertains to disqualification (see here). But as with so many ethics rules, one is often left trying to decide an issue in the gray area of the rules.
For defense counsel, filing such a motion may pose problems. If the defense counsel is successful, then they have succeeded with their motion and a new judge is appointed. But if defense counsel raises the issue and is unsuccessful, then one often wonders if they continue their case in front of the judge with a certain stigma attached to their cause. It is easy to say that judges will not hold this against the party who loses a judicial recusal motion, after all defense counsel is just doing their job. But this fear may cause hesitation in the filing of a judicial recusal motion.
Wall Street Journal - SEC Sues Alabama Mayor in Muni Case
Washington Post - Police: 'D.C. Madam' Palfrey Hanged Self in Fla.