January 5, 2008
Schwarzenegger Terminating Identity Theft
The San Jose Mercury News here, notes that Governor Arnold Schwarzenegger has opened an office in California focused on fighting identity theft. The new office combines two existing offices - the Office of Privacy Protection and the State Security Office, with the new office being called "Information Security and Privacy Protection."
This is an important step in recognizing that identity theft has a significant effect on a large number of people. As noted on the new website, "[o]ver 8,000,000 U.S. residents were victims of identity theft in 2006. That represents about 4% of adults, including more than a million Californians." A 2003 DOJ advisory states that this is "one of the fastest growing crimes in the U.S. and Canada." (see here)
Hopefully combining these two offices will allow for increased resources to fight identity theft. It is good to see a state official recognizing the importance of stopping identity theft.
We Want Roger!
The next step in Roger Clemens' offensive to clear his name of steroids and HGH use may well take him to Capitol Hill. The House Oversight and Government Reform Committee has issued an "invitation" (here) to Clemens and two of his former Yankee teammates, Andy Pettitte and Chuck Knoblauch, both of whom are mentioned in the Mitchell Report, to testify at hearings on steroid usage in major league baseball. But the real drama will come if Clemens appears next to Brian McNamee, the source of the information against the three Yankees. Pettitte has already admitted to receiving HGH from McNamee, who served as the trainer for both pitchers. The sight of Clemens and McNamee squaring off would be compelling, although how it relates to the work of Congress is beyond me -- unless being a publicity hound is now part of the duties of our national legislature.
I speculated earlier (see previous post here) that a Congressional hearing looks like a sure perjury trap for Clemens because he will be placed under oath, something that Sixty Minutes cannot do as part of its interview with him. Clemens' attorney, Rusty Hardin, is quoted in an AP story (here) stating, "Roger is willing to answer questions, including those posed to him while under oath . . . We hope to determine shortly if schedules and other commitments can accommodate the committee on that date." Of course, any scheduling difficulties would have to yield to a subpoena if Clemens does not appear voluntarily, at which point only an assertion of the Fifth Amendment can block the testimony. To go with the sports analogy, Clemens facing McNamee may be the toughest match-up he will have faced in a very long time. (ph)
January 4, 2008
What Kind of a Deal Could Bonds Get?
While the odds of this happening are probably no better than 10,000-1, there is always the possibility that home run king Barry Bonds might decide to work out a plea agreement to limit his potential punishment from the perjury and obstruction of justice charges he faces. The prosecution of former Olympic gold medalist Marion Jones may give something of a guide to how Bonds could resolve the case, if prosecutors we willing to go along. Jones agreed to plead guilty to one count of making a false statement in connection with the Balco (Bay Area Laboratory Co-operative) investigation, and she has filed a brief (available below) requesting a sentence that will involve no prison time, only probation. Under the Federal Sentencing Guidelines, the sentence range is 0-6 months, a position the government agrees with. In her filing, Jones' lawyer argues that the District Court should take into consideration the substantial collateral consequences of her guilty plea on her reputation:
The guilty plea in this matter and the circumstances surrounding it have been a very painful and life-changing experience for Marion Jones-Thompson. She has been cast from American hero to national disgrace. This part of her story will forever be one of personal tragedy. To be clear, the public scorn, from a nation that once adored her, and her fall from grace have been severe punishments. She has suffered enormous personal shame, anguish, and embarrassment. She has been stripped of her gold medals, her accomplishments, her wealth and her public standing.
The Supreme Court's recent decision in Gall emphasizing the discretion district judges have to fashion individualized sentences makes this type of argument potentially persuasive, and it would not be a surprise if Jones received probation or, at worst, home confinement. While prosecutors have only recommended that the judge sentence within the Guidelines range, they have not taken any position on the actual sentence, and I suspect they would have no objection to straight probation for Jones.
Could Bonds get the same deal? The indictment in his case involves perjury and obstruction, and if convicted the base offense level under Sec. 2J1.3 of the Guidelines would be 14 rather than the 6 that Jones began with under Sec. 2B1.1. Jones also received the benefit of the two-level downward adjustment for acceptance of responsibility, which kept her in the lowest sentencing range. If Bonds is convicted, he faces a minimum Guidelines range of 15-21 months. A plea bargain could be fashioned to have him plead guilty to making a false statement under Sec. 1001 rather than perjury because his grand jury testimony would come within that statutory provision. As such, he could also be in the same position as Jones, assuming prosecutors were willing to make such a deal and, more importantly, Bonds agreed to it. There might even be the possibility of a nolo plea to a single Sec. 1001 charge, or perhaps even a criminal contempt that could involve a deferred prosecution agreement, similar to the resolution of perjury charges against NBA star Chris Webber, who only paid a fine. Unlikely, to be sure, but possible.
Bonds, however, is fighting to do more than just avoid a conviction, but also to save his legacy as a baseball player. When that consideration gets thrown into the mix, the potential ppunishment diminishes in importance. Nevertheless, the Jones sentencing provides an outline as to what Bonds' lawyers might be able to negotiate, especially because the U.S. Attorney's Office for the Northern District of California signed off on the Jones plea agreement and sentencing. (ph)
Last Minute Withdrawal From Election by Texas DA
An earlier post (here) discussed some problematic e-mails between Harris County (Texas) DA Charles Rosenthal and his administrative assistant-- which were a bit steamy -- that had been inadvertently disclosed during discovery in a federal civil rights lawsuit against the sheriffs department. The intrigue has now grown with Rosenthal's withdrawal from the race for re-election in a terse letter (available below) time-stamped a whole three minutes before the deadline for candidates to be included on the primary ballot. The e-mail controversy gets even more interesting because, according to a story in the Houston Chronicle (here), right after Rosenthal announced his withdrawal the federal judge in the civil rights case scheduled a hearing on the issue of 2,000 e-mails that had been deleted over a weekend from his computer. While the e-mails were eventually recovered, the district judge probably has a few questions regarding the timing of the attempted removal and the reason for it. Once again, remember that hitting the "Delete" button does not really mean the file is gone, and that it's not what you did, it's the cover-up that gets people in trouble. (ph -- with thanks to an Austin reader)
January 3, 2008
DOJ Opens a Criminal Investigation of the CIA's Destruction of Interrogation Tapes
Washington, D.C. has been riveted on the CIA's destruction of videotapes of interrogations of two detainees despite judicial directions that they be preserved. After a preliminary inquiry by the National Security Section of the Department of Justice, Attorney General Mukasey announced (here) that he directed the opening of a full-scale criminal investigation of the decision to destroy the tapes. The interesting part of the announcement was that the investigation will be led by the First Assistant U.S. Attorney for the District of Connecticut, John Durham, although not as a special counsel along the lines of Patrick Fitzgerald's appointment to investigate the leak of Valerie Plame's identity as a CIA operative. Durham will be the Acting U.S. Attorney for the Eastern District of Virginia, which has jurisdiction over CIA matters because the agency's headquarters is in Langley. According to a statement issued by AG Mukasey, Durham's appointment came about because "in an abundance of caution and on the request of the United States Attorney for the Eastern District of Virginia, in accordance with Department of Justice policy, his office has been recused from the investigation of this matter, in order to avoid any possible appearance of a conflict with other matters handled by that office."
Durham will have the same authority as any U.S. Attorney, which means his investigation is subject to the normal supervision by the Attorney General as in any other case. Fitzgerald, on the other hand, had a broader grant of authority, as outlined in a letter (here) dated December 30, 2003, from Acting Attorney General James Comey: "I hereby delegate to you all the authority of the Attorney General with respect to the Department's investigation into the alleged unauthorized disclosure of a CIA employee's identity, and I direct you to exercise that authority as Special Counsel independent of the supervision or control of any officer of the Department." Durham certainly does not have that measure of independence, and he is not a "special counsel" or otherwise outside the normal chain-of-command at the Department of Justice.
The Attorney General's announcement notes that the entire U.S. Attorney's Office is recused, and not just U.S. Attorney Charles Rosenberg. That office was responsible for the prosecution of Zacarias Moussaoui, a case involving issues related to detainee interrogations, so that may be the source of the recusal decision. Durham will likely draw on Assistant U.S. Attorneys from Connecticut to assist him, and perhaps attorneys from the National Security Section at Main Justice.
Some in the media have speculated that Attorney General Mukasey's announcement shows he is independent of the White House -- the whole "loyal Bushie" issue that plagued his predecessor. This announcement does not necessarily establish such independence, unless the bar has been lowered to such a degree that a routine decision to follow normal Department of Justice protocol for dealing with a case somehow shows the AG is beyond the reach of political pressure. Once the National Security Section made its recommendation to upgrade the case to a full-scale investigation, AG Mukasey had little choice but to move forward. Independence is more a matter of support, and allowing those leading the investigation to see the through to its proper conclusion, not just picking someone experienced to lead it. Durham is well-regarded as a career prosecutor, but dealing with the CIA and issues related to a political hot potato will require special skills. Time will tell. (ph)
New Sarbanes-Oxley Article
Lisa H. Nicholson (Louisville) has a new article posted on SSRN's White Collar Crime list. It is titled, "Sarbanes-Oxley's Purported Over-Criminalization of Corporate Offenders" and is printed in 2 Journal of Business & Technology Law 43 (2007). The abstract states:
The Sarbanes-Oxley Act of 2002 and its enhanced criminal penalties, which increase both the monetary fines and terms of imprisonment, were enacted at least in part to aid the SEC and to fill the perceived enforcement gap in combating corporate fraud. Congress, in so legislating, enlisted a criminal law behavioral model to induce law-abiding corporate behavior. In other words, Congress presumes that people will comply with the law after a conscious evaluation of the risks associated with disobeying the law. Deterrent-based punishments, however, may yield less effective outcomes for corporate fraudsters since some actors do not engage in the requisite cost-benefit assessments before acting. Moreover, even if everyone undertook such an assessment, their subjective beliefs will vary the outcomes. Indeed, a corporate offender's attitude toward risk will differ according to the type of criminal penalties that could be imposed, thereby implicating differing levels of marginal disutility.
This Article analyzes whether this tactic - that of enacting increasingly lengthier prison sentences and imposing higher fines alone - will have the desired effect of deterring potential offenders, and punishing wrongdoers. As will be demonstrated below, reliance on the Act's enhanced criminal penalties to deter wrongdoing may not yield the desired result in light of the many uncontrollable factors that may undermine both the imposition of lengthy sentences and higher fines, and the impact of such penalties on convicted wrongdoers. Consequently, the punishment prong of the costs-benefits analysis must fully extinguish all benefits of the unlawful act in order to fill in the gaps that arise from a sole reliance on deterrent-based punishment. The asset forfeiture sanction effectively removes the economic motive for the criminal conduct from the potential offender's 'benefits' calculation. Any purported benefit from the criminal scheme will be wiped out if the offender is caught. This sanction which removes the economic incentive for the fraudulent scheme also punishes those individuals who either engage in a faulty cost-benefit analysis, or who fail to engage in such an analysis altogether.
January 2, 2008
DOJ Asks for Cert in Jefferson Office Search Case
The D.C. Circuit's ruling on the legality of the FBI's search of Representative William Jefferson's House office has caused the Department of Justice more than a little consternation, and the Solicitor General's Office filed a cert petition (available below) on December 19 to overturn the ruling. This issue is not so much that the government lost below because the materials seized do not appear to have had much significance in the case -- Congressman Jefferson was indicted and faces a trial currently scheduled to start on February 25, 2008. The problem for the government is how the D.C. Circuit construed the scope of the Speech or Debate Clause, which provides that "for any Speech or Debate in either House, [Senators and Representatives] shall not be questioned in any other Place." U.S. Const. Art. I, § 6, Cl. 1.
In its ruling in United States v. Rayburn House Office Building Room 2113 (available below), a majority of the panel essentially held that the Speech or Debate Clause affords members of Congress a privilege from having materials protected by the Clause being examined by members of the Executive Branch, and perhaps by anyone else for that matter. The D.C. Circuit stated that "[a]lthough in Gravel the Court held that the Clause embraces a testimonial privilege, to date the Court has not spoken on whether the privilege conferred by the Clause includes a non-disclosure privilege. However, this court has." The SG argues in the cert petition that this misconstrues the protection afforded by the Speech or Debate Clause, which the government claims is not designed to shield materials from any public disclosure but only to protect against a member of Congress from being questioned about it.
How can the government get the Supreme Court to take a case in which the lower court's ruling does not appear to have had any effect on the underlying prosecution? The tried-and-true method of "waving the bloody flag" by arguing that the decision will have a deleterious impact on a range of corruption investigations. That claim may not be completely fanciful because one Congressman, Representative John Doolittle, has already raised questions about subpoenas and searches in an investigation of his dealings with former superlobbyist Jack Abramoff. The cert petition argues:
The court of appeals' absolute rule against compelled disclosure of Speech or Debate material to the Executive Branch calls vital investigative techniques into immediate and serious question with respect to public cor ruption probes. Although this case involves a search of a Capitol Hill office (a concededly extraordinary event), the court's decision threatens to impede searches of Members' homes, vehicles, or briefcases. Also important are the potential implications for wiretaps and pen registers directed at Members. Even using techniques designed to minimize the interception of privileged conversations, officers typically hear privileged communications or identify calls pertaining to legislative acts while seeking unprivileged evidence of crime.
This Court's guidance is needed. The District of Columbia Circuit denied rehearing en banc by a 5-4 vote, and clarification or reversal of its erroneous decision at some indefinite time in the future cannot alleviate the immediate cloud over ongoing public corruption investigations. The court of appeals' decision affects all congressional investigations because it governs investigations in the District of Columbia -- the seat of our Nation's government. The decision also has a chilling effect in other jurisdictions, because the Department of Justice must weigh the need for evidence in those jurisdictions against the potential that courts will hold that investigations were tainted by the use of previously uncontroversial investigative techniques. The petition for a writ of certiorari should therefore be granted.
The SG's office does not always get its cert petitions granted, but it has a pretty good track record and the Supreme Court may well have to step in to decide the issue because of the delicate issues related to relations between the Executive and Legislative Branch the search raises. The D.C. Circuit denied rehearing en banc by a 5-4 vote, and there was a dissent from the panel, so this is obviously a close case, which probably enhances the likelihood the Court will get involved by granting the cert petition. Opposing the Department of Justice will be both Representative Jefferson and, more importantly, the House and Senate, which filed briefs before the D.C. Circuit. The search caused a great deal of discomfort in Congress, and the real fight will be between the two branches if the case comes before the Supreme Court.
To avoid any mootness claims if the prosecution of Representative Jefferson is concluded before the Court reaches the issue, the SG asserts that
the investigation underlying this very case has not yet concluded, because the government continues to investigate other participants in Representative Jefferson's schemes. Thus, the evidence seized in the search at issue here is relevant not only to the prosecution of Representative Jefferson, but also to the ongoing investigation and potential prosecution of other individuals. For that reason, the importance of the question presented is not limited to the government's case against Representative Jefferson and will continue regardless of whether he is convicted.
January 1, 2008
Buffett and Upcoming General Re Related Trial
Karen Richardson's Heard on the Street Column in the Wall Street Journal, "Reinsurance Trial May Ask: What Did Buffett Know" - see here.
December 31, 2007
Happy New Year - Meet the Bloggers
We wish everyone a happy, healthy, and peaceful new year.
We will be at the CALI Bloggers Booth at the AALS Conference on Thursday, January 3rd at 3 P.M. Stop by and say hello. (ph & esp)
December 30, 2007
What's Coming in 2008
The New Year will deliver a variety of interesting cases and issues in the white collar crime field, and here are a few developments (and predictions) that may be of interest in 2008 (in no particular order):
- Supreme Court decisions on whether to grant certiorari in the appeals of John and Timothy Rigas (Adelphia Communications) on fraud charges and former Illinois Governor Ryan on RICO/corruption charges.
- Appellate court rulings on the convictions of former CEOs Jeffrey Skilling (Enron) and Joseph Nacchio (Qwest). Skilling is likely to have at least some of the counts of conviction reversed due to problems with the honest services fraud theory, while Nacchio could well be looking at a new trial on a variety of grounds.
- The CEO trials just keep on coming, with former Reagan Administration budget whiz David Stockman facing charges related to his tenure at auto parts manufacturer Collins & Aikman and Phillip Bennett charged for his role in the collapse of futures broker Refco, perhaps the quickest demise of a public company -- only two months after the IPO.
- More defense procurement cases -- oops, we said that last year. This time around, the focus will be not only on contractors, especially Blackwater Worldwide, but also government officials charged with investigating corruption, such as former State Department IG Cookie Krongard.
- Foreign Corrupt Practices Act cases will continue to be the hot trend, with Siemens probably setting the record for largest fine assessed in an FCPA case -- perhaps as much as $500 million -- if it is able to settle wide-ranging criminal and civil probes of overseas payments currently estimated at $2 billion.
- Whether the Supreme Court's recent decisions in Gall and Kimbrough bring about changes in white collar sentencing, the most likely source of defendants who can make the case for individualized sentences and take advantage of the newly-restored discretion given to federal district court judges.
- The Barry Bonds perjury/obstruction prosecution will garner significant headlines whenever the home run king appears in court, and his trial will be the hottest ticket since the I. Lewis "Scooter" Libby case, with a different set of political overtones. It could even be a welcome distraction from the Presidential campaign if it occurs in the fall.
- The Second Circuit will decide whether to uphold U.S. District Judge Lewis Kaplan's ruling dismissing charges against thirteen former KPMG partners and employees due to interference with the payment of their attorney's fees by prosecutors. If the appellate court reinstates the indictment, then look for a prediction on when the trial will start in "What's Coming in 2009," unless it's headed to the Supreme Court, of course.
- The District of Columbia's decision on the search of Representative William Jefferson's office has caused the Department of Justice much consternation, so don't be surprised to see the Supreme Court grant the government's certiorari petition filed on December 19 (available here).
- The issue of parallel civil and criminal investigations is the subject of an important case before the Ninth Circuit in United States v. Stringer, argued on September 26, 2007. The opinion should be announced soon, and this is another case that may be headed to the Supreme Court.
- Mortgage fraud moves front and center as the hot focus of the Department of Justice. A sure sign that there is pressure to bring cases will be the formation of a Mortgage Fraud Task Force -- when in doubt, form a committee.
- As options backdating cases wind down, look for the SEC to begin pursuing disclosure investigations involving banks, brokerage firms, and other financial institutions regarding their exposure to subprime mortgages and the valuation of securities, such as CDOs. tied to that collapsing market. Not that any of it will ease the pain of collapsing house prices.
- Look for Kobi Alexander to be in Namibia fighting extradition back to Brooklyn to face securities fraud and obstruction of justice charges a year from now. Indeed, it's an open question whether there will even be a hearing related to the extradition as his attorneys have skillfully thrown up roadblocks to delay even the initial stages of the extradition process. The 2012 version of this list may well be saying the same thing.
- Look for more election fraud cases with the political season heating up, and the Attorney General might find this to be a good place to make an impression as a non-partisan leader of the Department of Justice.
Have a safe and happy New Year!
(esp & ph)
Fifth Circuit Rules on Executing Administrative Warrants
John Wesley Hall, at FourthAmendment.com tells of a recent OSHA case that held that "[t]here is no constitutional right to a pre-execution contempt hearing and that administrative warrants, like criminal warrants, can be executed by means of reasonable force." Attorney Hall talks about the recent Fifth Circuit decision in Trinity Marine Products v. Chao which held that:
"Over the objection of Trinity Marine Products, Inc. ("Trinity"), but pursuant to an administrative search warrant, compliance officers from the Occupational Safety and Health Administration ("OSHA") inspected a workplace owned by Trinity and issued citations. Trinity claims that the search violated the Fifth Amendment because OSHA threatened to arrest Trinity personnel who interfered with the search, but the constitutionally required method to execute administrative warrants when the targeted party refuses to acquiesce is to commence a civil contempt proceeding, which OSHA did not do.
An administrative law judge ("ALJ") heard and rejected Trinity’s argument. Trinity petitions for review. Because Trinity’s contention finds no support in the Constitution or precedent, we deny the petition."