Tuesday, December 16, 2008
The Hartford Courant reports on the sentence of a former General Re executive. See Convicted Gen Re Executive Gets 2 Years In Prison. See also Colleen McCarthy, Business Insurance, Ferguson gets two-year sentence for finite fraud. For background see here and here. Doug Berman over at Sentencing Law & Policy here also presents thoughtful comments on the sentence. Dan Slater at the WSJ Blog discusses who represented this individual. (see Former GenRe CEO Gets Off With a Mere Two Years)
The government's sentencing memo looked at a significant loss figure (see here) There was also the judge's conclusion on the loss figure - "30 levels will be added to the defendants’ guidelines for loss of more than $400 million, 6 levels will be added for more than 250 victims, and no restitution will be ordered." There was the possibility of an extremely long sentence based upon this loss figure.
But now seeing the sentence imposed and the amount of loss previously stated, it appears that the court used reason in imposing a sentence that not only meets the offense, but more importantly focuses on the offender. It is good to see a movement away from using strict mathematical computations to determine a sentence, and to see that it is important to remember that it is an individual being sentenced.
Addendum, Chad Hemenway, Bestweek/Bestwire, Feds in Ferguson Case: Former Gen Re Chief Executive Sentence Sends Message
- Unlike many cases involving a company, this does not appear to be a deferred prosecution agreement - but rather is a plea agreement with specified terms.
- The fine is huge, but it allows the company to resolve the case and move forward and the plea is not to an anti-bribery act, but rather the reporting provisions.
- The timing on this resolution is interesting - before the new administration takes over, before the end of the year - or is that reading too much into this.
- Unlike the deferred prosecution agreement in KPMG (here -p. 26) there is no explicit statement in the agreement precluding debarment. Also in Titan (FCPA case) there was a statement by the company that spoke to there being no debarment. One can find a reference to that here:
"Titan announced that it had reached a settlement to avoid debarment from work on U.S. government contracts. Avoiding debarment was particularly important to Titan, which is a leading provider of information and communications systems to U.S. government agencies."
But here again, we are only discussing reporting provisions and not anti-bribery. And certainly no one should want to hurt innocent people associated with the company.
- At the government press conference it was stated - "Siemens' cooperation, in a word, has been exceptional. Siemens has faced facts, accepted responsibility, retained experienced counsel to conduct thorough internal investigations, and has implemented real reforms." And in the sentencing memo of the government there are repeated references to the extraordinary cooperation of the company. For example, it states "[t]he reorganization and remediation efforts of Siemens have been extraordinary and have set a high standard for multi-national companies to follow." The sentencing memo has an incredible description of the internal amnesty program of the company.
- DOJ has a website that provides the FCPA, a lay person's guide, etc. A key problem one finds is that because most of the cases are resolved, one is unlikely to find a significant body of reported decisions resolving issues involving companies who were alleged to violate the FCPA. And as for individuals - the DOJ website lists 2 cases, but notes that they last updated the website in 2004.(here)
- The plea agreement letter provides for cooperation, but does not call for providing any privileged material - something that is good to see on the part of DOJ. (See FCPA Blog here)
- The agreement does limit the ability of the company from disseminating information regarding this matter without first obtaining the approval of DOJ. It states:
"Press Releases: Defendant agrees that if Siemens AG or any of its direct or indirect affiliates or subsidiaries issues a press release in connection with this agreement, defendant shall first consult the Department to determine whether (a) the text of the release is true and accurate with respect to matters between the Department and defendant; and (b) the Department has no objection to the release. Statements at any press conference concerning this matter shall be consistent with this press release."
A waiver of first amendment rights - is the government fearful of the company saying something? This may explain why the document on the Siemens website - to investors - is extremely brief -Download 20081215_settlement_eng.pdf
Addendum - Jordan Weissmann, BLT Blog, Siemens AG Lawyers View $800 Million Fine As a Victory
Law.com (AP), Pellicano Gets 15 Years for Wiretapping Scheme
Doug Berman, Sentencing Law & Policy, A thoughtful and theory-driven exploration of a parsimonious white-collar sentence
Amanda Bronstad, National LJ, Lawyer seeks to invalidate plea deal for client in Broadcom case -Prosecutorial misconduct alleged
Everyone is talking about this "alleged fraud" and about how massive it appears to be, who is Madoff - the individual accused, and yes - even his vast charitable giving. A sprinkling of articles that are out there are below:
- Alan Feuer & Christine Haughney, NYTimes, Standing Accused: A Pillar of Finance and Charity
- Marcy Gordon, Yahoo News (AP), Madoff fraud case raises questions about SEC
- Tom Lauricella, Aaron Lucchetti & Amir Efrati, WSJ, Madoff Ran Vast Options Game - Firm to Shut, Wife's Role Questioned; Volume Made Strategy Impossible, Traders Say
- Kara Scannell, WSJ, SEC Had Chances for Years to Expose Madoff's Alleged Ponzi Scheme
- Binyamin Appelbaum & David S. Hilzenrath, Washington Post, SEC Didn't Act on Madoff Tips
Many are asking questions - who is at fault, or who can we blame. And perhaps it isn't a simple answer like the SEC didn't provide enough oversight, or regulators dropped the ball, or investors weren't savvy enough to realize it wasn't all real, or just maybe it was a combination of all of these things, or none of them. For right now it means people are feeling pain from their losses. The court has appointed a receiver (see here) and in the days that follow more will come to light.
But what is perhaps something that needs to be included in the discussion is how one individual had such incredible social skills to secure the trust of so many influential individuals. And how one person could build an empire of people that built an ethos that stood as a stamp of approval to those who were considering dropping dollars. If only the movie could have a Disney ending.
Monday, December 15, 2008
A DOJ press release is titled - Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines - Coordinated Enforcement Actions by DOJ, SEC and German Authorities Result in Penalties of $1.6 Billion. At a press conference called to announce this settlement, Acting Assistant Attorney General Friedrich stated:
"Under the terms of the plea agreement announced today, first, Siemens AG will plead guilty and has pled guilty to one count of failure to maintain internal controls and a one-count books and records violation. In addition, three Siemens subsidiaries, those located in Bangladesh, Venezuela and Argentina, have pled guilty to conspiring to violate provisions of the FCPA.
"Second, Siemens will pay a criminal fine to the United States in the amount of $450 million. This is far and away the largest criminal fine in FCPA enforcement in U.S. history.
"Third, Siemens will retain an independent monitor for a period of four years and will continue to implement enhanced controls."
With regard to this last point, the press release states that:
"Under the terms of the plea agreement, Siemens AG agreed to retain an independent compliance monitor for a four-year period to oversee the continued implementation and maintenance of a robust compliance program and to make reports to the company and the Department of Justice. Siemens AG also agreed to continue fully cooperating with the Department in ongoing investigations of corrupt payments by company employees and agents."
See also FCPA Blog, Final Settlements for Siemens
David Ingram and Joe Palazzolo, Legal Times (law.com), GOP Signals Rough Path to AG Position for Holder
Mark Hamblett, NYLaw Jrl (law.com), Ex-Greenberg Traurig Partner Pleads Guilty in Tax Shelter Case
Josh Gerstein, Fitz Pushes Envelope With Bonds-for-Editorial-Scalps Charge
Mark Hamblett, NYLaw Jrl, (law.com), Dreier Stole $380 Million, Feds Say; Bail Denied due to 'Enormous' Flight Risk
Friday, December 12, 2008
Some additional thoughts and references on the Blogojevich case -
- It seems clear that US Attorney Patrick Fitzgerald is now presenting the case to a grand jury. See Todd Lightly & Robert Becker, Chicago Tribune, Tribune Co. subpoenaed in Blagojevich probe (it seems a bit odd to hear the CEO of the Tribune Co. saying to the press that he will not be interviewed)
- Howard Kurtz,Washington Post, Media Notes, discusses a point mentioned here regarding the appropriateness of Patrick Fitzgerald characterizing the evidence to the press. Kurtz notes that US Attorney Patrick Fitzgerald may have gone "beyond describing the allegations contained in the criminal complaint" - Kurtz provides a statement from the Illinois Disciplinary Rule concerning such statements. But to add to what Mr. Kurtz has written, there is also the ABA Prosecution Function Standards that instructs prosecutors not to make extrajudicial statements that "the prosecutor knows or reasonably should know ... will have a substantial likelihood of prejudicing a criminal proceeding," and the ABA Standards for Criminal Justice, Fair Trial and Free Press that question whether a prosecutor should make a statement that speaks to an "opinion of the lawyer on the guilt of the defendant, the merits of the case or the merits of the evidence in the case." (8-1.1). And we haven't even mentioned the internal guidelines of the DOJ on this issue. (see John Steele, Legal Ethic Forum here)
- And then there is the most important question of whether the evidence is really there that provides evidence of any crimes. See Mike Robinson, Houston Chronicle (AP), Are Blagojevich tapes enough evidence to convict?
- Politicians face additional issues when under investigation or when charged with a crime. The parallel proceeding may be an impeachment process. See Ray Long, Chicago Tribune, Quinn: Impeach Rod, let me pick Obama replacement
- One thing is certain - this case will continue to be in the news over the next month.
(esp)(w/ a hat tip to Mark Johnson for the Howard Kurtz piece).
Pamela A. MacLean, NLJ, In upholding Impath exec's sentence, court bolsters discretion of trial judges (discussing the Second Circuit affirming the Adelson case) The decision - the court stated "[b]ut the record demonstrates that the District Court’s decision to impose a below Guidelines sentence was not a failure or refusal to recognize the Guidelines, but rather a carefully considered reliance on the Section 3553(a) factors." - for background see here and here).
Kayce T. Ataiyero, Chicago Tribune, 'The Sopranos,' and other shows Gov. Rod Blagojevich apparently learned nothing from
Karen Sloan, National L J., In Dreier fallout, some of firm's attorneys make a public disavowal ; Amanda Bronstad; Shockwaves from Dreier hit the west coast; William K. Rashbaum & Alison Leigh Cowan, NYTimes, Lawyer Is Accused in Massive Hedge Fund Fraud
Vesna Jaksic, National L J., Piece of Puerto Rico governor's criminal case — involving an attorney — moved to Philadelphia
(esp) (w/ a hat tip to John Wesley Hall)
Thursday, December 11, 2008
Fish & Richardson, PC has a client alert authored by Matthew L. Levine, William B. Mateja, and Franceska O. Schroder titled, "Justice Department Report Shows Enforcement of Export Controls," and has an opening statement - "The Justice Department announced last month that it had filed criminal charges against more than 145 defendants for its Fiscal Year 2008."
David Voreacos and Jane Mills (Bloomberg) have a must-read article in Monrad Regrets Not Testifying on GenRe Fraud as Prison Looms.
What struck me in this article was Monrad's claim of innocence and the consequences she faces as a result of asserting that claim. I was at a criminal discussion forum at Emory Law School yesterday and talked about my draft paper, White Collar Innocence: Irrelevant in the High Stakes Risk Game. Those facing white collar crime charges, who claim innocence, often are faced with the testimony from cooperating witnesses who will receive substantially reduced sentences in return for their testimony. The assertion of innocence can carry a "trial penalty" that can be enormous. But the more important question is whether our legal system should allow this to happen.
John Caniglia, FBI raids downtown Cleveland office in mortgage fraud probe
Chronicle of Higher Education, U. of Akron Trustee Is Indicted in Ethics Case
DOJ Press Release, Japanese Executive Pleads Guilty, Sentenced to Two Years in Jail for Participating in Conspiracies to Rig Bids and Bribe Foreign Officials to Purchase Marine Hose and Related Products
John Fritze, USA Today, North Dakota tops analysis of corruption
Alex Bunin, of the Federal Public Defender's Office in New York puts out a wonderful publication on federal convictions that are reversed. His latest update can be found at -
In the white collar area you'll find cases on mail fraud/ RICO/perjury/false statements, etc.
Tuesday, December 9, 2008
The arrest of Illinois Governor Blagojevich raises some interesting questions. Here are some very preliminary thoughts (for backgound see here):
- Clearly the selling of a Senate seat and the other remaining allegations in the Complaint are appalling and if the Governor is found to have done this, it is something that needs immediate correction. But it is also important to remember that this is not an Indictment coming from a grand jury and he has not been proved guilty after a trial by jury. Unlike some countries, we are not a country that convicts a person without first affording them a right to a trial by jury.
- One has to wonder whether Governor Blagojevich will be able to obtain a fair trial. Even if what the USAttorney heard on tapes was as outrageous as he claims, is it proper for a United States Attorney to make comments that characterize the alleged conduct? See Chicago Sun Times here; NYTimes here.
- Mail and wire fraud are statutes with enormous breadth. Using the "intangible right to honest services" under section 1346 extends it even further. After all, what isn't "honest services?" Now put it all together under a conspiracy statute (1349) and the question becomes - how far can prosecutorial power go? (e.g. - the hypo I use in this older article is whether a political falsehood is therefore a dishonest service - see here). One question the defense may raise is whether there was a violation of state law that can serve as the basis for the deprivation of an intangible right to honest services.
- There are no allegations of Hobbs Act violations in the complaint. Interestingly this approach would require a quid pro quo - an important requirement when political contributions are involved. Is the use of the mail/wire fraud statutes an attempt to find an open back-door? Is it being used as the "stopgap" (a term once used in the Maze case).
- Many of the people listed in the Complaint are named as "A", "B", etc. Are any of these unnamed individuals cooperating, and if not, will they soon be?
- The federal government has been obtaining information from wires on a state official as high as the governor. The press release states:
"On October 21, the Government obtained a court order authorizing the interception of conversations in both a personal office and a conference room used by Blagojevich at the offices of Friends of Blagojevich. The FBI began intercepting conversations in those rooms on the morning of October 22. A second court order was obtained last month allowing those interceptions to continue. On October 29, a court order was signed authorizing the interception of conversations on a hardline telephone used by Blagojevich at his home. That wiretap was extended for 30 days on November 26, according to the affidavit.
what does this say about the appropriate balance between the state and federal government?
- Most USA's resign when a new president comes into office. Unlike the civil service employees who work in the office, the US Attorney's serve as a presidential appointment. Will the new DOJ approve this case? Will Patrick Fitzgerald be there to prosecute this case?
- The Complaint alleges that the arrestees had "corruptly solicited and demanded the firing of Chicago Tribune editorial board members" - but some in the press seem to say the opposite (see here).
- Will all this "news" help the Chicago Tribune - Tribune Co. files for Chapter 11 bankruptcy protection. But can we count on them to report all the news (see Chicago Tribune Editor Kern's admission to withholding items here - an interesting issue in itself considering that this information does not appear to be related to national security).
- Would everyone be best here if an agreement is reached that takes this matter off the front page? In this regard perhaps the Governor of Illinois should call former Governor Spitzer for advice. (see here)
- And yes, if these allegations all turn out to be true - then maybe we need some basic ethics tests before a person can hold political office.
(esp)(blogging from Atlanta)
U.S. Attorney Patrick Fitzgerald, the same man who handled the case against Governor Ryan, has now had Governor Rod Blagojevich of Illinois arrested. Also arrested and released was his chief of staff John Harris (See Chicago Tribune here). A press release of the US Attorney's Office for the Northern District of Illinois states that:
"arrested today by FBI agents on federal corruption charges alleging that they and others are engaging in ongoing criminal activity: conspiring to obtain personal financial benefits for Blagojevich by leveraging his sole authority to appoint a United States Senator; threatening to withhold substantial state assistance to the Tribune Company in connection with the sale of Wrigley Field to induce the firing of Chicago Tribune editorial board members sharply critical of Blagojevich; and to obtain campaign contributions in exchange for official actions – both historically and now in a push before a new state ethics law takes effect January 1, 2009."
The Criminal Complaint alleges violations of the mail and wire fraud statute using the intangible right to honest services for allegations of conspiracy under section 1349. There is also a claim under section 666 of title 18 of the federal criminal code. Commentary to follow.
(esp)(blogging from Atlanta)
Monday, December 8, 2008
Martha Graybow, Reuters, September trial set for ex-Bear Stearns executives
Kevin McDermott, St Louis Dispatch, A reprieve for former Gov. George Ryan would join a long list of controversy
R. Jeffrey Smith, Washington Post, The Politics of the Federal Bench
Sunday, December 7, 2008
The American Bar Association - Criminal Justice Section and the Alabama State Bar Association - Ethics – Politics and Public Corruption - April 3, 2009 Ross Bridge Golf Resort and Spa, Birmingham, Alabama - here (corrected link has been inserted)
National Institute on White Collar Crime - March 4-6, 2009 -Westin St. Francis, San Francisco, CA -here
Washington Legal Foundation, FCPA Enforcement & Financial Crisis: How World-Wide Government Intervention Affects Foreign Corrupt Practices Compliance - December 10, 2008 - webcast
Friday, December 5, 2008
Paula Reed Ward, Pittsburgh Post-Gazette, Buchanan doesn't plan to step down as U.S. attorney
Harvey Silverglate, National Law Journal, Eric Holder - Remember the memo
Claire Cain Miller, New York Times, S.E.C. Charges a Venture Capitalist With Fraud
Emily Bazelon, Slate, Lori Drew Is a MeanieThe problem with prosecuting cyber-bullying ( w/ a hat tip to Tiffany M. Joslyn)
Michael Sasso, Tampa Tribune, Lawyers Help U.S. Millionaires In Swiss Bank Probe
Thursday, December 4, 2008
Many people are glued to the news watching to see who will receive the holiday pardons, and the commutations of sentences too, as President Bush leaves office. Many have their hopes up that their names will appear on the list. Will it be names that have appeared in the news like: Conrad Black, former Governor Ryan, Michael Milken, Bernie Ebbers, or Former Rep. Randy "Duke" Cunningham?
President Bush should not be ashamed to grant pardons and commute sentences as he leaves office. But which cases deserve this treatment is the question. Picking out friends and political cronies is just plain wrong.
Good candidates for a reduction of sentence are those who received harsher sentences because they were victims of a public cry for retribution in a time when people were reacting to extraordinary surrounding events. CEOs who received long prison sentences when the business took a downturn, those receiving astronomically high sentences in the mortgage fraud crisis, John Walker Lindh (one has to wonder what tactics were used when he was brought to the US), and others may fit this category as deserving of a reduction in sentence. But equally persuasive are those who have no constituency and remain in prison because of sentencing guidelines that did not account for their motive, or failed to notice that they received no benefit. The women who were carrying drugs out of a misguided love for someone who was using them as a mule, are among the cases that need examination.
It may be easy for President Bush to say, I don't need this hassle, and just leave without pardoning folks. But, hopefully, he will use his power wisely to correct injustices that remain on the books.
Check out this interview with Margy Love in the National L.J., See Marcia Coyle, A leading legal authority on pardons talks about the need for transparency — and how to get to the top of the list
Addendum, Yahoo News (Reuters) Martha Graybow & Randall Mikkelsen, Ex-WorldCom chief Ebbers seeks clemency from Bush
Wednesday, December 3, 2008
The National Association of Criminal Defense Lawyers (NACDL) filed an amicus brief in the RICO case, Boyle v. United States, a case before the Supreme Court. It is argued that,
"This Court should reverse and hold definitively that a RICO enterprise requires structure apart from a random association of individuals to commit crime. RICO did not and could not create a federal felony for “a pattern of racketeering activity.” If an alleged RICO enterprise need not have structure, then the statute’s explicit enterprise requirement is meaningless."
For background and commentary on this issue, see the prior post here.
CNN Money.com (Dow Jones) - Departing US Atty Garcia: Keep Focus On White-Collar Crime
Phillyburbs.com (AP), Wecht attorneys to ask judge for fraud dismissal
Kyle Whitmire & Adam Nossiter, NYTimes, Birmingham Mayor Accused of Trading County Deals for Cash and Clothes
Review & Outlook, WSJ, Tax Fraud Finale -Justice gives up its misbegotten tax case.
Kelly Thornton, Voice of San Diego.org, Without Lam, U.S. Attorney's Office Takes Different Tack