Monday, October 13, 2008
Although the Racketeer Influenced and Corrupt Organization Act (RICO), enacted in 1970, was focused on organized crime, its use in the white collar sphere is common. One finds RICO charges in many corruption and fraud prosecutions. The United States Supreme Court recently accepted on certiorari a RICO case that will hopefully resolve one of the nagging issues that pervades this area of the law. The Court, in the case of Boyle v. United States, will look at the issue: "does proof of an association-in-fact enterprise under the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. §§ 1962 (c) - (d), require at least some showing of an ascertainable structure beyond that inherent in the pattern of racketeering activity in which it engages?"
The federal circuits have been all across the board on what is required for a 1961(4) enterprise. If it is a legal structure, person, or corporation, the process is easy. In this regard prosecutors have used an Office of a Governor, Prosecutor’s Office and other entities as the enterprise for a RICO prosecution.
Less clear is when the prosecution is premised upon "any union or group of individuals associated in fact although not a legal entity."
The Second Circuit has permitted prosecutions that have an "association-in-fact" form of enterprise that merely uses the predicate acts. Other circuits have required some "ascertainable structure." In some cases they require that the ascertainable structure be "distinct from the pattern of racketeering," with other cases looking at whether it is "an on-going structure."
Hopefully, the Supreme Court will offer some guidance on how to interpret this aspect of the RICO statute.
Question Presented - here
See Scotus Blog for Petition for Certiorari here
Sunday, October 12, 2008
Guest Blogger - Stephanie Martz, Senior Director, White Collar Crime Policy, National Association of Criminal Defense Lawyers -
Here’s an evergreen issue that was just brought to my attention – United States v. Kevin A. Ring, 1:08-cr-00274, assigned to D.C. District Court Judge Ellen Huvelle as part of the Jack Abramoff series of defendants: an obstruction charge based on Ring’s alleged lying to private counsel retained to conduct an internal investigation. (By the way: Ring has moved for Huvelle to recuse herself on the grounds that having taking 13 guilty pleas in this case and presided over it for five years has compromised her ability to remain impartial.)
Ring was, among other things, a Greenberg Traurig lobbyist along with Abramoff and seems to have been the point person in the lobbying team’s contact with several Hill offices, including that of former Rep. Istook of Oklahoma (through his now ex-chief of staff, John Albaugh, who faces a stiff prison sentence thanks to a guilty plea).
Ring was indicted on charges that he conspired to bribe public officials (18 USC 201, 18 USC 371), committed honest services wire fraud, and violated both 18 USC 1512(b)(3) and (c)(2). The first two sets of charges are alleged through a series of emails which purport to show Ring promising and delivering tickets to everything from Tim McGraw to the Redskins to the Wiggles (this appears to have been changed to a horse event, but anyway) in exchange for various nods to clients in transportation appropriations bills.
The obstruction charges are very interesting, especially for those who have followed the Computer Associates indictments (U.S. v. Kumar, U.S. v. Richards) and the El Paso Gas indictment (U.S. v. Singleton). In those previous three cases, the defendants were all charged with violating 1512(c)(2), which forbids corruptly obstructing, influencing, or impeding any official proceeding, or attempting to do so. In Kumar and Richards, the government alleged that the defendants had all but real knowledge that their (false) statements would be turned over to the government by the lawyers who had been hired to conduct CA’s internal investigation, thus suggesting but not stating outright that the private lawyers were mere conduits for information to the government. In Singleton, the nexus between the lawyers conducting El Paso’s investigation and the government – and therefore the conduit of information—was more tenuous; there was no reference in the indictment to any agreement by the company that statements and information would be turned over to the government as part of a formal or informal cooperation agreement, and the suggestion was that Singleton should have assumed as much.
Here are some very interesting observations, in light of this, about the Ring indictment: First, there is the most specific and clear allegation that I have seen so far that paints a real nexus between a private firm and the government. According to the indictment, Ring was SPECIFICALLY told that his statements would likely be turned over to DOJ and/or the U.S. Senate Committee that was investigating the matter. If this is true, kudos to the lawyers who were ethical enough to admit outright this development in the culture of internal investigations, and to inform employees accordingly. As a result, my guess is that this indictment will send fewer chills through the corporate bar than Singleton, in particular.
Second, the Kumar, Richards, and Singleton indictments did not employ 1512(b)(3), which is the only obstruction provision that specifically criminalizes using an intermediary to commit obstruction, and does not require an existing proceeding. Georgetown Law Professor Julie O’Sullivan observed that this may be because (c)(2) carries with it a massive 20 year maximum, and was therefore a bigger hammer.
O’Sullivan also observed, though, that in bringing indictments like these, DOJ risks killing the goose that laid the golden egg. DOJ is happy to reap the benefits of a culture of cooperation in which enforcement agents and the private corporate bar are partners in crime-fighting, but these benefits will diminish over time as indictments are brought that turn the private bar into de facto government agents. The use of 1512(b)(3) in addition to (c)(2) might make a difference – or it might have the same chilling effect.
Ring Indictment - Download ring_indictment.pdf
Wendy Gerwick Couture, White Collar Crime's Gray Area: The Anomaly of Criminalizing Conduct Not Civilly Actionable, available at SSRN here
Adam J. Kolber, The Comparative Nature of Punishment, available at SSRN here
Friday, October 10, 2008
Mike Scarcella, BLT Blog, Williams & Connolly Wants to Put Lawyer on Witness Stand in Senator Ted Stevens trial. It raises an interesting question as to whether an attorney can testify on a legal issue and/or whether in this particular situation the testimony relates to relevant matters.
Matt Apuzzo, Chicago Tribune (AP), Alaska legislative panel finds Palin abused her power in seeking the firing of ex-relative; CNN, Panel: Palin abused power in trooper case; Serge F. Kovaleski, N.Y. Times, Alaska Inquiry Concludes Palin Abused Powers
Atlanta Jrl Constitution (AP), Man pleads guilty to selling fake Coke
Debra Cassens Weiss, ABA Law Journal News Now, Prosecutors Seek 230-Year Sentence for Ex-Gen Re Lawyer
Noeleen G. Walder, NY Law Jrl, Law.com, Criminal Prosecutions Predicted to Surge Over Financial Crisis
Martha Neil, ABA Journal, Law News Now, Top Alaska Court Allows Sarah Palin Probe to Proceed; Report Expected Tomorrow
Sue Reisinger (posted by Brian Zabcik Am Law Daily), Corporate Counsel, Former Gen Re Lawyer Could Face Life in Prison
Kare11.com (AP), Petters ordered held; whistleblower identified (background - DOJ, Press Release, Thomas Petters arrested (charges are mail fraud, wire fraud, money laundering, and obstruction of justice)); DOJ Press Release, Three Plead Guilty to Money Laundering, Mail Fraud in connection with Petters Company Fraud
Thursday, October 9, 2008
It sounds like the government has several issues in its prosecution of Senator Ted Stevens.
- For one there has been the question of whether the prosecution has provided all exculpatory material to the defense. It is mandatory that all exculpatory material be turned over to the defense. In addition to this being a requirement of law, it is also in the rules of professional conduct that regulate many attorneys. Rule 3.8 of the ABA Model Rules of Professional Conduct provide -
The Prosecutor in a criminal case shall: ...(d) make timely disclosure to the defense of all evidence or information known to the prosecutor that tends to negate the guilt of the accused or mitigates the offense.....except when the prosecutor is relieved of this responsibility by a protective order of the tribunal.
The court allowed the case to proceed, but the judge's comments to the jury could hurt their credibility with the jury. Del Quentin Wilber, Washington Post, Judge Assails Evidence in Stevens Trial -Jurors to Be Told to Ignore Two Pieces From Scolded Prosecution
- To tell the jury to disregard evidence presented because prosecutors had knowledge that the witness had worked in a different state for time listed in the records, also hurts credibility. See James Vicini, Washington Post (Reuters), Prosecutors wrap up case against Sen. Stevens; BLT Blog, Federal Judge Slams Prosecution in Stevens Trial -- Again
- Cooperating witnesses are always subject to scrutiny. But when the cooperating witness has benefitted enormously by cooperating with the government, the testimony becomes suspect. What was the benefit here and will if effect the credibility of the witness? see here.
- And is the evidence sufficient here to sustain a conviction - the ultimate question that the jury will be resolving.
- Having the defense bring in a Democrat senator as a character witness is powerful to say the least. See Del Quentin Wilber, Washington Post, Inouye Praises Steven's Integrity
Wednesday, October 8, 2008
Washington Post, Grand Jury Indicts Alleged Palin Hacker (charged under 18 U.S.C. 1030 - the computer fraud statute)
Robert G. Morvillo and Robert J. Anello, Calculating Loss Under the Guidelines (w/ a hat tip to Bil Olis)
David B. Caruso (AP). Law.com, Former UBS General Counsel Settles Insider Trading Rap
Lynne Marek, National Law Journal, law.com, Milberg Kickback Defendant Gets Three-Month Term
So where's the task force to deal with the current financial situation?
The President's Corporate Fraud Task Force was created several years ago to prosecute corporate frauds. (see here) It's 2008 Report attempts to demonstrate the successes achieved by this task force. But as noted here, the Report failed to provide the "not guilty" verdicts and reversals received from appellate courts. As noted here, it was a Report that failed to provide a full assessment of what actually had transpired. But at least there was a task force to handle the alleged frauds.
Just this past week, DOJ issued a Press Release concerning its Katrina Hurricane Task Force and noting the large number of prosecutions and highlighting some of the major ones. Again, no acknowledgment of any unsuccessful prosecutions. But again, there was a task force to handle the alleged frauds.
If there was illegality in this recent mess as some at a recent debate insinuated, and if the harm was caused by such illegality, shouldn't there be a task force to investigate it? (see here) The FBI has one, where is DOJ's?
Tuesday, October 7, 2008
John Wagner of the Washington Post has an article titled, Ethics Counsel Testimony Is Sought in Currie Probe. It is an important investigative piece as it reports on a subpoena that was served on the Maryland legislature's ethics counsel. The federal investigation appears to involve Senator Ulysses Currie and the feds seem to want attorney-client privileged material of the ethics counsel. It is hard to imagine that federal prosecutors would not realize the ramifications of such a move. Once you start subpoenaing testimony from an ethics counsel, individuals will stop seeking the advice of that counsel. The net result will be less compliance with the law.
(esp) (hat tip to Neal R. Sonnett)
Mike Stanton & W. Zachary Malinowski, Projo.com, Split Verdict in Roger Williams Corruption Case
Carrie Johnson, Washington Post, Court Won't Force Testimony On Firings of U.S. Attorneys -Issue Left to Next Congress In Victory for White House
Del Quintin Wilber, Washington Post, Jurors Hear Stevens Talk Of Possible Punishment - FBI Enlisted Benefactor And Taped Phone Calls
Mark Hamblett, N.Y. Law Journal, Three Plead Guilty in Multimillion-Dollar Subprime Scheme
Opinion, Perverted Justice - Politics Drove Firing of U.S. Attorneys
Aaron Seigel, Investment News, Lehman's Fuld roasted at House hearing
William "Billy" Wilkins, Former Chief Judge, joins Nexsen Pruet. He was "Ronald Reagan’s first selection to the federal bench in the nation and the former Chief Judge of the U.S. Court of Appeals for the Fourth Circuit." As a partner at Nexsen Pruet, "he will lead the firm’s White-Collar Crime, Appellate Advocacy, and Corporate Compliance/Crisis Management practice groups and actively participate in the firm’s Business Litigation Group. Judge Wilkins will be based in the firm’s Greenville, S.C., office."
Monday, October 6, 2008
How many times should a person be sentenced and at what point does the continued uncertainty constitute part of the punishment. Although the First Circuit does not cover this aspect in its recent decision in the United States v. Thurston case, it does state:
"This, the third review of William Thurston's sentence, was necessitated by the Supreme Court's decision in United States v. Gall, 128 S. Ct. 586 (2007). We affirm the sentence. . . . To say that the journey of this case has been arduous for the parties involved would be an understatement."
The defendant was convicted of "conspiring to defraud the Medicare program of more than five million dollars." The district court sentence, given deference by this court, was for 3 months incarceration and 24 months supervised release.
Opinion - Download Thurston.pdf
(esp) (w/ a hat tip to Paul Kamenar)
In United States v. Amato, the Second Circuit held that restitution could be ordered under the mandatory Victims Restitution Act of 1996 for victim's expenses of attorney fees and auditing costs that were a "direct and foreseeable result of the offense." The court stated:
"Defendants perpetrated a complicated fraud against a large corporation and a number of its clients, as well as the states to which those clients were required to turn over escheated funds. That this fraud would force the corporation to expend large sums of money on its own internal investigation as well as its participation in the government's investigation and prosecution of defendants' offenses is not surprising. There is no doubt that EDS's attorney fees and auditing costs were a direct and foreseeable result of defendants' offenses."
See also Daniel M. Gitner & Brian Jacobs, New York Law Journal, Seeking Restitution for the Costs of Internal Investigation
Talk about a hot topic - there were no available seats in the room for the session titled The Sub-Prime Meltdown: Reactions and Action at the SEC and DOJ, and people were standing in the back and on one side of the room. Moderating the panel, Philip Hilder, introduced the topic by saying that we are likely to be headed for some serious investigations. Craig Margolis focused on subprime basics. When you have defaults and "perceptions of default" problems arise. The ripple effect and downgrades will likely lead to investigations and prosecutions.
Gil Soffer, from the Office of the Deputy Attorney General, after giving the DOJ disclaimer for anything said, noted that U.S. Attorneys offices were prosecuting in the districts and there were also quite a number of task forces that might include players such as DOJ, SEC, and others.
Everyone on the panel seemed to be talking about the complexity of securities cases - the same complexity that seemed to be pervasive in the Enron investigation.
But some matters may prove to be simple. Lisa Monaco, Deputy Chief of Staff to the Director of the FBI, noted a caseload that had more than doubled - from 700 to 1400 cases -- cases involving everything from misrepresentation on loan applications to property flipping. And Andy Calamari, Associate Regional Director of the U.S. Securities and Exchange Commission talked about coordinating on a policy level.
The luncheon address was given by Deputy Attorney General Mark Filip. His talk can be found here. Some might say that it sounded like a plea not to be subject to a statute like the Attorney-Client Privilege Protection Act. And although the new guidelines are a step in the right direction, as guidelines they are not enforceable at law absent a court using its supervisory powers.
Finally, the last panel I had the opportunity to see was the one I participated on - Monitors: When, Why and How? Is Congressional Oversight Inevitable. Joshua Hochberg, the moderator, asked some thoughtful questions following my brief overview of the proposed Accountability in Deferred Prosecution Act. Panelists, Jonathan (Jon) Barr, Paul Pelletier (DOJ), Cheryl Scarboro (SEC) and Amy Walsh looked at questions such as the role of a monitor, the selection of a monitor, the cost of paying a monitor, and some of the controversies related to the appointment of a monitor.
I did not have the chance to hear some wonderful panels that included many top individuals and was sorry to miss the talks of others from the academy - Professors John Coffee and Sara Sun Beale. From the little I did see, I would rank the Third Annual Securities Fraud conference as the best yet. For more information on this conference see here.
Former General Counsel at McAfee was acquitted in a case of alleged backdating. Dan Levine has a wonderful piece describing the "intent" issue faced by the jury in this case. See Dan Levine, The Recorder, No Charges Stick to Former McAfee General Counsel in DOJ Case Mens Rea is typically the most crucial element in a white collar crime case. This case sends a message to the government that they need to think twice about bringing backdating prosecutions.
Sunday, October 5, 2008
Kate Giammarise, Toledo Blade, Enron prosecutor says case parallels crisis in subprime mortgage industry
Laylan Copelin, Statesman.com, Sides in DeLay case bicker over change in money-laundering law -Despite theories, DeLay may have had nothing to do with it.
Heather Smith and Andrea Rothman, Bloomberg, Airbus Executive Questioned, Released in French Probe
Jamie Satterfield, Knownews.com, Roth Case May Be Lesson, Prosecutors Hope Retired Professor's Conviction a Deterrent
LATimes, Helio Castroneves Pleads Not Guilty - Castroneves, a race car driver and 'Dancing with the Stars' winner, faces tax charges; DOJ Press Release, Indianapolis 500 Winner and Two Others Indicted on Tax Evasion Scheme
Legal Times, BLT - Judge Walton Reflects on Libby Case, Sentencing Disparity (w/ a hat tip to Whitney Curtis)
David Glovin, Bloomberg, Pirate in Exile - Prosecutors accuse Viktor Kozeny of stealing $1 billion of investors' money. The Czech fugitive says he should be thanked for bringing capitalism to Eastern Europe
Symposium -- "White Collar Crime: Issues in Tax Fraud"
October 14, 2008, 3:30 p.m. to 7 p.m.
University of Houston Law Center
Stuart Green, Professor of Law and Justice Nathan L. Jacobs Scholar, Rutgers School of Law – Newark is the lead speaker.
Tax specialists Jack Townsend, Esq., of Townsend & Jones, L.L.P., and Robert Davis, Esq. of K & L Gates, L.L.P., will provide commentary on enforcement issues raised by the criminal tax laws.
These three presentations will be followed by a roundtable discussion with panelists Professor Linda Fentiman, Pace University School of Law and Visiting Professor of Law, University of Houston Law Center, Larry Finder, Esq., Haynes & Boone, L.L.P., and Larry Campagna, Esq., Chamberlain, Hrdlicka, White, Williams & Martin, L.L.P.Gerry Szott Moohr, Alumnae Professor of Law, University of Houston Law Center, will moderate.
Transcripts and related articles will be published in the Houston Business and Tax Law Journal, and a podcast will be available at www.hbtlj.org.
The symposium is sponsored by the Houston Business and Tax Law Journal and the Criminal Justice Institute of the University of Houston Law Center.
(w/ a hat tip to Gerry Moohr)