Friday, October 31, 2008

Operation Direct Hit - A State Investigation

Although the FBI - a federal agency - was involved in the investigation, the charges against two corporations and 61 individuals was brought by a state prosecutor - the district attorney in Queens, New York. An FBI press release speaks to accusations of "engaging in a widespread, multi-million dollar no-fault automobile insurance fraud scheme that sought to defraud insurance carriers by intentionally staging accidents, submitting false medical and bodily injury claims and arranging for unneeded treatment and costly and unwarranted medical tests."  The press release also notes that "[t]he charges are the result of a 19-month investigation by the Queens District Attorney’s Organized Crime and Rackets Bureau and the New York Health Care Fraud Task Force – which is composed of agents and detectives from the FBI, the NYPD, and other federal, state and local law enforcement entities, as well as investigators from the insurance industry."  In a world with more and more charges being brought in the federal system, it is important to see a state prosecutor working with a federal agency to bring criminal charges.

(esp)

October 31, 2008 in Fraud, Investigations, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Thursday, October 30, 2008

Reforming Corporate Criminal Liability

The Institute of Legal Reform has issued a new whitepaper on the role of criminal law as it relates to corporate conduct. One of the authors of this Report is former Enron prosecutor Andrew Weissmann. Titled, Reforming Corporate Criminal Liability to Promote Responsible Corporate Behavior - the whitepaper can be found here. It concludes stating -

"Changing the current vicarious liability rules will promote effective compliance programs within companies, and redirect to a more condign track a legal doctrine that has gone far off course. Practitioners and academics have offered practical solutions for balancing society’s need for punishing the guilty and making a victim whole against society’s interest in resorting to criminal sanctions only when a defendant has done something wrong. Given the nearly 100-year long misreading of a single Supreme Court precedent and recent pronouncements from that Court, it is high time to reform the standard for vicarious criminal corporate liability. As described above, the current doctrine is not founded on either an act of Congress or Supreme Court precedent. Compliance-based and hierarchy-based alternatives to the current regime would continue to hold lawless corporations liable for criminal acts, while ensuring that responsible corporations are not unfairly penalized. It is incumbent upon legislators, academics, and practitioners to press the case for a greater recognition of the harmful and counterproductive consequences of the current system and to seize the opportunities for reform outlined herein."

It certainly would be good to see revisions in the present approach to corporate criminal liability. I advocate for the adoption of a good faith defense in my article - A New Corporate World Mandates A Good Faith Affirmative Defense.

(esp)

October 30, 2008 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 29, 2008

Massachusetts State Senator Indicted

A Press Release of the United States Attorney's Office in Massachusetts reports on the indictment of an "[e]ight-term Massachusetts State Senator" "on public corruption charges stemming from her [alleged]acceptance of more than $20,000 in cash payments to introduce legislation in the State Senate." She is charged "with attempted extortion under color of official right and theft of honest services as a State Senator."  But it also sounds like there is another side to this story.  Check out - Michael Levenson and Jonathan Saltzman, Boston Globe, Bribery defendant Wilkerson - Senator allegedly took cash for help on liquor license, development

(esp)

October 29, 2008 in Corruption | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 28, 2008

Upcoming Conferences

NACDL/Georgetown will present their 4th Annual White Collar Seminar at the Georgetown Law School in Washington, D.C., November 6-7, 2008 - see here

ABA - The 25th Annual National Institute on Criminal Tax Fraud,  San Francisco, December 4-5, 2008 - see here

FCPA: Managing Internal and Government Investigations of FCPA Matters -January 21-22, 2009 · Venue to be Confirmed, Washington DC - see here

ABA - White Collar Crime Institute, San Francisco, March 4-6, 2009 see here

(esp)

October 28, 2008 in Conferences | Permalink | Comments (0) | TrackBack (1)

New Articles

(esp)

October 28, 2008 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, October 27, 2008

Stevens - Guilty

Details can be found at - CNN here; Washington Post here; NYTimes here; WSJ  here.  The question of whether it was a good move to proceed to trial quickly, to beat the forthcoming election, has now also been answered.

Indictment here

An added consideration to the prior blog post here, is that if there was any error that causes a reversal of this conviction, it is hard to remedy it prior to the election.  Appeals can take a long time, and certainly more time than the few days left before the election.

Trivia - The late Rep. Charles Diggs was re-elected while awaiting sentencing (although he did eventually resign) here.

(esp)

P.S.  Will the defense be raising an issue on appeal regarding a response to a jury question during the deliberation process?  See  BLT Blog here

October 27, 2008 in Verdict | Permalink | Comments (4) | TrackBack (0)

Federal Charges for Allegedly Changing Grades

The Acting U.S. Attorney in the Northern District of Florida has charged students for allegedly changing grades in the Florida Agricultural and Mechanical University (FAMU) computer system. A press release states in part,

"According to the indictment, the conspirators caused the grades of approximately 90 FAMU students to be changed, effecting changes in approximately 650 grades overall. The grade change increased the grade point averages of the majority of students whose grades were changed, which in turn, made these students eligible for financial aid in the form of grants, scholarships, and loans to which these students would not otherwise have been entitled."

The charges include conspiracy to commit wire fraud, the computer fraud statute (18 USC 1030), and aggravated identity theft.   Is this an example of overcriminalization/overfederalization?

(esp)

October 27, 2008 in Prosecutions | Permalink | Comments (17) | TrackBack (0)

Update on the Stevens Deliberations

The Washington Post (AP) story is titled, Judge Removes Juror in Sen. Stevens's Trial.  When a judge replaces a juror with an alternate, it is necessary that the jury start the deliberations from the beginning.  Federal Rule of Criminal Procedure, Rule 24(c)(3) states:

Retaining Alternate Jurors.

The court may retain alternate jurors after the jury retires to deliberate. The court must ensure that a retained alternate does not discuss the case with anyone until that alternate replaces a juror or is discharged. If an alternate replaces a juror after deliberations have begun, the court must instruct the jury to begin its deliberations anew.

If the jury deliberation went for a long period of time, this could be difficult as it may be difficult to remember in the new deliberations what had, and had not, already been discussed.  But perhaps with the simpler case, and with a deliberation that has not been extensive, this may be easier. 

For Senator Stevens (and perhaps his opponent) in the Senate race, a different clock is running as election day is close at hand. This raises interesting questions on whether it is proper to indict a person immediately prior to their election or re-election to office.  On one hand, if there is a conviction the public has a right to know this prior to the election or re-election of the candidate.  On the other hand, if there is no conviction, the negative publicity prior to voting day and the candidate's inability to fully campaign because they have a trial to contend with can be harmful to the election process.

(esp)

October 27, 2008 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

In the News and Blogosphere

Mike Scarcella, Legal Times Blog, Stevens Trial Deliberation Postponed to Accommodate Juror

Doug Berman, Sentencing Law and Policy Blog, Saying Sorry Helps in Mortgage Fraud Cases

Houston Chronicle, Digest: Skilling transferred to prison in Colorado (w/ a hat tip to Bill Olis)

Lindsay Fortado, Bloomberg, Freddie Mac, Fannie Mae Hire Lawyers for U.S. Probe  

Alyson M. Palmer, Fulton County Daily Report, Law.com, En Banc 11th Circuit Case Tests Mail Fraud Law

Amanda Bronstad, National L J., Former senior Milberg Weiss partner asks for no prison time in kickback case   

(esp)

 

October 27, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Saturday, October 25, 2008

ABA Sentencing Advocacy, Practice and Reform Insitute

The ABA's recent sentencing institute was packed full of wonderful discussion on the effect of Booker, Rita, Gall, and Kimbrough, as well conversations on many other issues related to sentencing.  Just a few comments, related to white collar matters:

At lunchtime, Professor Doug Berman of the Sentencing Law & Policy Blog spoke. His theme was that "perspectives matter more than politics."  He advocated, in this regard, for "more perspectives."  He said that it is "very hard to change people's politics"  but noted that it is easier to influence their perspective. 

Two afternoon sessions were directly relevant to white collar matters.  The first, Sentencing in White Collar Cases: Sarbanes-Oxley, A Five Year Retrospective, was moderated by Anthony Joseph of Maynard Cooper & Gale, PC. Michael Horowitz, a Commissioner on the US Sentencing Commission started with statistical data. David Nahmias, US Attorney from the Northern District of Georgia and Pravin B. Rao of Perkins Coie offered comments on the status of sentencing in white collar cases.  It was clear that attorneys had been targets in some of the mortgage fraud cases and that first offenders had received stiff sentences - for example, a 30 year sentence.  (see here)

The next panel, one that I moderated, started with Beryl Howell, a Commissioner of the US Sentencing Commission providing statistics on recent white collar prosecutions. For those who were claiming that white collar prosecutions were down, they would be pleased to find that incarcerations had in fact gone up. Further the average prison term of 17 months in 2000 was up to 25 months in 2007 and so far for 2008 running at an average of 27 months. There were many other wonderful statistics offered and I will likely blog on these down the road, but the one that I found the most telling was that there had been an increase in upward departures in white collar cases since 2000.

Attorney Art Leach and Joshua Hochberg (McKenna, Long, and Aldridge) offered the audience a lively discussion that looked at binding agreements, whether charge bargaining would still play an important role in the criminal process, what practitioners should focus on in prepping a white collar case, and what role "loss" calculations might or should continue to play in sentencing.  The program, The Future of White Collar Sentencing Practice: What Practitioners Need to Know, ended with the panelists offering thoughts on what changes should be made to the guidelines and what might be on the horizon.  For more information on this program see here.

(esp)

October 25, 2008 in Conferences | Permalink | Comments (0) | TrackBack (1)

The University of Houston Law Center Tax Fraud Symposium

Guest Blogger Geraldine S. Moohr:

The University of Houston Law Center’s symposium, "White Collar Crime: Issues in Tax Fraud" was held on October 14, 2008. Gerry Moohr, Alumnae Professor of Law at the Law Center moderated the event and provided this summary of the presentations by scholars and tax specialists with experience on both sides of the courtroom.

Stuart Green, Professor of Law and Justice Nathan L. Jacobs Scholar at Rutgers School of Law - Newark, answered the question, "Is tax evasion a moral wrong?" He noted first that there was little consensus on this point. There are many aspects to the moral ambiguity of income tax evasion, including the difficulty in drawing a clear line between aggressive accounting and criminality, the fact that tax evasion causes a small harm to a large number of victims, and concerns that the criminalization of both inchoate and successful crimes dilutes the seriousness of the offense.

Indeed, the tax laws and their enforcement may foster the idea that tax evasion is not a serious wrong. For instance, the heightened mens rea of "willful" (defined as an intentional violation of known legal duty) makes tax offenses difficult to prove, lowering the deterrent impact of enforcement. The heightened mens rea may also downplay the significance of the actus reas of tax evasion.

Returning to his larger theme of the morality of tax evasion, Stuart addressed the effect of the deep ambiguity about the norms governing tax avoidance and tax evasion. Ultimately, the moral content of tax evasion depends to some extent on the fairness of the underlying tax code.

Stuart asked whether these crimes are punished because they represent a breach of the overarching moral obligation to obey the law, because they are a species of cheating, (focusing on the horizontal relationship between the tax avoider and her fellow citizens), or because they are analogous to stealing (focusing on the harm to the government fisc).

Bob Davis, a tax specialist at K & L Gates, noted Justice Holmes’ belief that an income tax is the price of living in a civilized community. Notwithstanding Holmes’ support for the income tax, Bob emphasized that paying them is no longer voluntary. Withholding, civil fines, high interest rates on taxes owed, and criminal fines and penalties add an element of coercion that belies the myth of voluntary compliance. Bob also noted distinctions between enforcement actions that involve illegal income and income from legal sources that raised questions about case selection. Increasing the budget of the DOJ Tax Division will not significantly increase the number of charged cases because the Tax Division, positioned between the IRS and U.S. Attorneys, pursues cases referred to it by those entities.

Jack Townsend, of Townsend & Jones, specializes in tax controversies and represented one of the KPMG defendants in the Stein case, which dismissed charges because of prosecutorial misconduct. Noting the difficulty of proving evasion and tax perjury, he emphasized the government’s increasing use of the tax obstruction provision, 26 U.S.C. § 7212, patterned after the general obstruction statute, 18 U.S.C. § 1503. Jack also noted the use of the general conspiracy statute, 18 U.S.C. § 371, making it a crime to "defraud the government" by interfering with the operation of the IRS.

The roundtable discussion, with panelists Professor Linda Fentiman, Professor of Law at Pace University School of Law (visiting this semester at the University of Houston), and two litigators in Houston’s white collar bar, Larry Finder, and George Connelly, Jr., considered these and other topics, including the policy and political choices inherent in criminal enforcement and the special problems posed by tax protestors (a.k.a. "deniers," according to the IRS).

Look for the symposium essays and articles in the Houston Business and Tax Law Journal next spring. A podcast will be available soon. For details, contact Kacie Bevers, Symposium Editor, here.

(gsm)

October 25, 2008 in Conferences | Permalink | Comments (1) | TrackBack (0)

Tuesday, October 21, 2008

In the News and Blogosphere

DOJ Press Release, Former FAMU Director Sentenced to Federal Prison, ("sentenced to 46 months in federal prison based upon her conviction on conspiracy and theft from Federal programs charges.")

Susanne Craig & Randall Smith, Wall St. Jrl, U.S. to Ask Analysts if Lehman Misled

DOJ Press Release, Former Coast Bank Officer Agrees to Plead Guilty to Fraud and Money Laundering

DOJ Press Release, Executives of Michigan Wastewater Treatment Company Found Guilty of Illegally Discharging Untreated Liquid Wastes

Mary Flood, Houston Chronicle, Houston lawyer found guilty in mortgage fraud case

Del Quitin Wilber, Washington Post, Fate of Sen. Stevens In the Jury's Hands - Gifts and Home Renovation at Issue

And a happy birthday to Sentencing Law & Policy Blogger Doug Berman.

(esp)

October 21, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Monday, October 20, 2008

Stevens Trial Nearing Conclusion

It looks like the Ted Stevens case is nearing its conclusion as one seldom finds many, if any, witnesses following the testimony of the accused.  Ted Stevens took the stand at the end of last week and his cross-examination finished today. (see Joe Palazzolo and Mike Scarcella, Legal Times, Now, It's All About Stevens Senator takes stand?and spotlight?at his trial. Will it pay off?); Del Quentin Wilber, Washington Post, Sen. Stevens Wraps Up Testimony in His Trial, So far this trial has been riddled with problems for the government (see here and here). But for the accused, it is the final verdict that will make the difference.  Stay tuned.

(esp)

October 20, 2008 in Prosecutions | Permalink | Comments (2) | TrackBack (0)

In the News and Blogosphere

Sunday, October 19, 2008

Response to NYTimes Article on Financial Fraud Cases

Several people have been emailing me the New York Times article by Eric Lichtblau, David Johnston and Ron Nixon, titled, F.B.I. Struggles to Handle Financial Fraud Cases, as it discusses the problems that are faced in the prosecution of white collar crime.  It is a wonderful article that emphasizes how post 9-11, investigative resources were moved from areas related to fraud to matters of national security. Although I am not convinced by the figures that seem to reflect an enormous decrease in the prosecution of white collar crimes, it is clear that investigations of financial institution fraud have not been to an acceptable level. But more importantly, there are a host of other areas that deserve attention and because there has fortunately been no devastating event to trigger these investigations, they have not received the resources they too deserve. So lets look at the figures and more importantly at the problem with approaching regulation, legislation, and prosecutions in a reactive manner - which is the way it has and continues to be approached.

To begin, one can't be so sure about the "statistics" on white collar prosecutions. (see here) The problem here is that there is no clear definition of what constitutes white collar crime.  Many fail to include statutes of RICO prosecutions figuring that these fall under the rubric of organized crime. (see here and here) In reality, however, the most used predicate acts in RICO are crimes such as mail fraud and wire fraud - crimes that are clearly white collar.  So many RICO prosecutions are in fact white collar under any definition that one might use, but these statistics are not reflected when looking at the reportings of white collar crime. The same analysis can be said for the crime of money laundering.  Although the statute has its roots in drug activity, one finds this offense in many white collar cases. (see here). So it is quite possible that some of the alleged decrease in white collar prosecutions may be nothing more than a function of the statistics failing to appear in the category being used to measure the level of reported white collar prosecutions.  DOJ's attempt to overcriminalize some of the improper white collar activities, by using non-white collar crimes as the basis of the prosecution, causes a problem in trying to determine the extent to which white collar prosecutions have decreased.

But that said, it is clear that we aren't seeing as many white collar prosecutions.  Some may claim that this is a function of the DOJ's use of deferred prosecutions to replace the actual prosecution.  In the corporate sphere there may be some truth here - but if the deferred prosecutions curtail criminal conduct as they often do, is that so bad? Some may also claim that the prosecutions are occurring to low-level individuals who are receiving heavy sentences under the guidelines while more culpable individuals skate with cooperation agreements. 

What I think we all can agree upon is that everything seems to be based upon a reactive approach.  9-11 moved resources to national security, Enron's happenings moved the establishment of a Corporate Task Force, fraud post-Katrina created a Katrina Task Force.  This approach is nothing new, and can be seen in the added resources given after the Savings and Loan crisis years ago. Oddly enough, there has been no unitary task force established by DOJ to investigate and prosecute matters from the existing financial mess. (see here)

DOJ and FBI clearly need more resources, but there also needs to be more accountability on how these resources are used. Perhaps less resources should be spent on pornography prosecutions and more on computer crimes like identity theft.  And why are we wasting precious resources to have a prosecution against Ben Kuehne, a respected attorney who is basically charged for writing an opinion letter. (see here) And yes, perhaps more resources need to be spent on educating individuals on what is criminal and the ramifications of criminal activity. Before Congress, the DOJ, or the FBI,  just dumps money someplace so that someone can be blamed for the financial mess we now face, it might be wise to re-evaluate what are the criminal issues of the future and how are scarce resources best spent to deter future criminality.

(esp)   

October 19, 2008 in Prosecutions | Permalink | Comments (1) | TrackBack (0)

Podcast on RICO Case By Interim Dean Alan Michaels

Brian Leiter on his blog links to the May 28, 2008 appointment of Alan Michaels as Interim Dean at Ohio State. Michael's appointment results from Dean Nancy Rogers stepping down as dean to serve as the Interim Ohio Attorney General. It reminded me that Dean Michaels, who teaches white collar crime, has a link to a thoughtful podcast on his webpage that discusses the RICO decision - Wilkie, Charles, et al. v. Robbins, Harvey.  Check it out here.

(esp)

October 19, 2008 in RICO | Permalink | Comments (0) | TrackBack (0)

Friday, October 17, 2008

Court Affirms Kozlowski & Swartz Convictions

The New York Court of Appeals, the highest state court in New York, affirmed the convictions of L. Dennis Kozlowski and Mark H. Swartz. The former  CEO and CFO of Tyco received sentences of 8-25 years, despite being first offenders. (see here, here) The decision, included the question of "whether the admission of an attorney's testimony concerning certain facts related to a corporate internal investigation improperly conveyed to the jury an opinion regarding defendants' guilt." The Court found that the testimony and prosecutor comments "did not convey such an opinion." The Court also held that there was no abuse of discretion "in quashing defendants' subpoena duces tecum, which sought the factual portions of certain interview notes and a memorandum prepared during the course of the internal investigation." 

The decision does reference the Stein case in saying:

"While collaboration between prosecutors and attorney investigators may provide a public benefit through the more efficient detection and punishment of corporate wrongdoing, it may come at the expense of the proper safeguarding of the rights of individual corporate employees (see Stein, 2008 US App LEXIS at *66-69). Courts must be sensitive to these competing considerations and endeavor to strike an appropriate balance between the rights and interests of law enforcement, corporations and their employees, and the accused. We cannot say that the balance struck by the trial court here amounts to an abuse of discretion as a matter of law."

See also Joel Stashenko, NYLJ, Law.com, Former Tyco Executives' Convictions, Fines Upheld by N.Y. High Court

(esp)

October 17, 2008 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

In the News & Blogosphere

Wednesday, October 15, 2008

In the News and Blogosphere

Tom Hays and Jesse J. Holland, Washington Post (AP), Colleague calls Stevens one of Senate's true lions

Brian Katkin, Legal Times, A White-Collar Windfall, But Where's D.C.? As probes begin, lawyers jockey for roles (w/ a hat tip to Whitney Curtis)

Del Quentin Wilber, Washington Post, Stevens's Reputation 'Sterling,' Powell Says

Law.com (AP), Paralegal Pleads Guilty to Taking $1.7 Million From Firm

Norma Love, law.com, Tyco, Investors Want Judge to Freeze Assets of Former CEO Kozlowski

FCPA Blog, What's the Count (also check out the blog comments for this entry)

October 15, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 14, 2008

In the News and Blogosphere

(esp)

October 14, 2008 in News | Permalink | Comments (0) | TrackBack (0)