Saturday, March 15, 2008

Initial Commentary on the Skilling Supplemental Brief

Obviously, we can expect that the government will take issue with the contents of the Skilling brief (for the brief see here).  The brief even states that when questioned with a discovery issue the

"Task Force merely reverted to its blanket assertion that the 'notes are "not materially inconsistent" with information already in your possession."

But there is an important question that goes beyond the Skilling case, and even beyond the cases such as the Nigerian Barge cases, that are implicated by the Fastow notes.  That question is -- how much discovery should prosecutors give to defense counsel.

Clearly in cases where individuals can be injured, there is a need to make certain that the discovery will not result in the commission of additional crimes.  But what is oftentimes a problem seen in drug cases, is seldom a concern in a white collar case.

So why shouldn't the government give all materials to the defense in a white collar case. This is an important question and my answer would be that the government should provide complete and full discovery in white collar cases, unless they can show to a court that the release of the information will have a detrimental effect on a pending case or will be physically harmful to an individual.   And in situations when there are these possible ramifications, the court needs to find a way to allow defense counsel needed information so that the accused is not deprived of his or her due process rights.

The easiest way for the government to protect the record and case is to provide everything to defense counsel, and in some jurisdictions we find expansive discovery practices for just this reason.  Providing this information not only protects the record and the case, but also serves a judicial economy in that having the information may provide earlier pleas.  After all - if the accused sees that the evidence is there to convict him or her, there is a desire to find a lighter sentence through a plea.  On the other hand, providing selected materials opens the prosecutor to claims that exculpatory material was not disclosed.  Even the best of prosecutors, with the best of motives, may not know the direction of the defense and therefore not be able to ascertain the importance of certain documentation.  Providing everything precludes this later argument of non-disclosure, and precludes the risk of a claim of a Brady violation.   

The Skilling brief highlights the need to provide all notes, even the raw ones, to the defense pre-trial. From the prosecutor's perspective -why risk a retrial, and if you give everything the plea may add an economic benefit.  And more importantly, trials demand fairness.  The stakes are high and sending an innocent person to jail should be avoided at all costs.  The best way to prevent this from happening is to provide full and complete discovery.  The faults of the existing discovery process are not merely claims heard in death cases or ones voiced by the "Innocent Project."  The discovery process also needs to be examined in the context of white collar cases. 


Addendum - See Austin Criminal Defense Lawyer here.

March 15, 2008 in Enron | Permalink | Comments (5) | TrackBack (0)

The Falling of the Enron Case House of the Cards

The first card in the falling of the government's house of Enron cases occurred yesterday, as Jeffrey Skilling's supplemental brief was unsealed. And one finds within this brief a shocking display of alleged government misconduct. The brief and some commentary can be found over at Tom Kirkendall's Houston ClearThinkers here. For openers, here is but one example of what can be found in the introduction in the brief.  Commentary on this brief will follow in later posts.

Task Force prosecutors called the "Global Galactic"document "three pages of lies" and the "most incriminating document" in Skilling’s entire case. Op.Br.196; R:36538-39. At trial, Fastow testified Skilling knew about Global Galactic because Fastow "confirmed" it with him during a spring 2001 meeting. Skilling denied knowing anything about Global Galactic. Op.Br.32-36. To bolster Fastow’s testimony and impeach Skilling’s, the Task Force introduced a set of handwritten "talking points" that Fastow said he prepared in anticipation of his meeting with Skilling. R:22287-88. At trial, Fastow swore he "went over" the talking points with Skilling, including the crucial point "Confirmation of Global Galactic list." Id. In closing, the Task Force relied heavily on this document to corroborate Fastow’s testimony that he discussed Global Galactic with Skilling. Id.

The raw notes of Fastow's interviews directly impeach Fastow's testimony and the Task Force's closing arguments.  When shown and asked about the talking-points document in his pr-trial interview, Fastow told the Task Force he "doesn't think [he] discussed list w/ JS." AE-27-381. (footnote omitted).

This obviously exculpatory statement was not included in the Task Force's "composite" Fastow 302s given to Skilling.  Nor was it included in the "Fastow Binders" the Task Force assembled for the district court's in camera review of the raw notes.

See also Houston Chronicle here.


Addendum - Larry Ribstein's Ideoblog here; the Wall Street Jrl here

March 15, 2008 in Enron | Permalink | Comments (0) | TrackBack (0)

Friday, March 14, 2008

Richard F. "Dickie" Scruggs Plea

A few weeks ago, Professor Peter Henning questioned whether there might be a plea by one of the defendants in the Scruggs case.  (see here)  He stated,

"Senior U.S. District Judge Neal Biggers rejected the remaining motions filed by Dickie Scruggs and his two co-defendants, son Zach and Sidney Backstrom, clearing the way for trial at the end of March on the charges related to an alleged attempted bribe by confederate Tim Balducci.  With that goes the best chance Backstrom may have of avoiding a trial in which the spillover from the government's Rule 404(b) bad acts evidence is likely to paint the defendants as three peas in a corrupt pod."

Henning stated, "[s]o the question now is whether Backstrom will break ranks and agree to cooperate against Dickie and Zach."

Well Backstrom did break ranks, but the unexpected part is that Dickie Scruggs decided to tag along.  In a surprising move, "Dickie"Scruggs entered a plea.  The document is a short one - all of four pages - and it is a plea agreement with few strings attached.

Scruggs will plead guilty to one count - conspiracy to corruptly influence a state court judge, a charge that carries a maximum of five years.  In return the government will dismiss the remaining five counts (Counts Two - Six).  There is no agreement as to sentencing, there is no agreement as to cooperation, and there is no agreement with regard to other jurisdictions proceeding against him. The agreement boldly states that "[t]he defendant is pleading guilty because defendant is in fact guilty of the charges."

Why?  Well for one, Scruggs' admission provides a basis for arguing that he should receive a decrease in sentence for acceptance of responsibility. With new Supreme Court decisions like Gall and Kimbrough, Scruggs has the ability to try and convince the court to give a sentence below the guidelines.

Plea Agreement -  Download scruggs_plea_agreement.pdf

(esp) (w/ thanks to Stetson's Whitney Curtis)

March 14, 2008 in Settlement | Permalink | Comments (0) | TrackBack (0)

Scruggs Pleads Guilty

See Wall Street Jrl. here; New York Times (AP) here.  More to follow. 


March 14, 2008 in Prosecutions, Settlement | Permalink | Comments (0) | TrackBack (0)

Deferred Prosecution Agreements & Spitzer

The FCPA Blog appropriately notes we haven't being seeing many deferred prosecution agreements these days (see here).  As the FCPA Blog points out, there have been no reported agreements since Flowserve on February 21.(see here).  It is probably a wise move for the government to lay low on deferred prosecution agreements right now with the microscope focused on how monitors are being appointed on the agreements, and also looking at issues of who should have oversight - prosecutors or the courts.

And then to hear discussion of the possibility of former NY Governor Spitzer obtaining a deferred prosecution agreement sends an interesting message.  One finds this mention noticeably in an article in the Wall Street Journal by Laurie P. Cohen, Glen R. Simpson and Amir Efrati. (see here). In the corporate setting, it is rare that we see an individual obtaining a deferred prosecution agreement.  The last ones of major significance were Former Monster Worldwide CEO Andrew McKelvey (see here) and Frank Quattrone (see here). Now if they decide upon a deferred prosecution agreement with Spitzer, what kind of terms will they include, and will it include a clause used in the Quattrone agreement requiring that he "can only associate with law-abiding persons." 


March 14, 2008 in Deferred Prosecution Agreements, FCPA | Permalink | Comments (1) | TrackBack (0)

Thursday, March 13, 2008

In the News: National Republican Congressional Committee Needs SOX?

In the News: National Republican Congressional Committee overstated cash in a report by $740,000 -

Minneapolis Star-Tribune - Republican Campaign Committee Says It Was Betrayed By Treasurer

Yahoo (AP) -Apparent Fraud Costs GOP Group Heavily

Fox News - Official: Former Treasurer 'Betrayed' Republican Election Group - Apparent Fraud Costs GOP Group Heavily

Now if the SOX amendment applied here, one has to wonder whether this could have ever happened.


March 13, 2008 in Fraud, News | Permalink | Comments (0) | TrackBack (0)

Greenberg Traurig & the Guam Attorney General

The law firm of Greenberg Traurig seems to be recipient of charges filed by the Attorney General's Office in Guam. The case clearly emanates from the days of Jack Abramoff, as he too is included as a defendant and the times of the alleged activity dates back a good number of years. There are 10 charges, some of which are felonies and some are misdemeanors.  They include: unlawful influence, official misconduct, and theft.  See ABA Jrl Law News Now here; WSJ here; Miami Herald here

Indictment can be found here.


March 13, 2008 in Legal Ethics, News, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Skilling & The Fastow Notes

Kristen Hays of the Houston Chronicle's article, Skilling Seeks to Use Fastow Notes As Part of Appeal and Tom Kirkendall's Houston ClearThinkers (here) discuss the recent happenings in the Skilling appeal. If it is shown that the government failed to disclose exculpatory material to the defense in the Skilling case, it could prove enormously detrimental to the government's ability to have the conviction affirmed on appeal.  Because Andrew Fastow played a crucial role in the government's case, items within the government's possession that they may have failed to provide to defense counsel may send this case in a whole new direction. The question remains as to whether the Fastow Notes will be the card that causes the house of cards (this time the government prosecution of Enron cases) to start falling. (see here and here)


March 13, 2008 in Enron | Permalink | Comments (2) | TrackBack (0)

Medicare Fraud Strike Force - One Year Later

The Medicare Fraud Strike Force was formed in March 2007 and since starting, the Strike Force has brought charges against 120 defendants, resulting in 101 convictions. An initial press release notes that [t]he strike force is able to identify potential fraud cases for investigation and prosecution quickly through real-time analysis of billing data from Medicare Program Safeguard Contractors (PSCs) and claims data extracted from the Health Care Information System." During the first phase of the Medicare Fraud Strike Force in Miami, teams "identified two primary schemes that defrauded the Medicare program – infusion therapy and durable medical equipment (DME) suppliers."  One of the most convictions of the Strike Force involved "[a] federal jury in Miami convict[ing] a physician and the owners and operators of two durable medical equipment companies and a home health care agency of Medicare fraud (see here).


March 13, 2008 in Fraud | Permalink | Comments (0) | TrackBack (0)

Thank You - Peter

It is with sadness, but understanding, that I see my co-blogger Peter Henning leaving the white collar crime prof blog.  And although I considered folding up this shop,  I have made the decision to move forward with some occasional guest bloggers and your assistance.

I will be adding a few new items to the blog in the next couple of weeks, such as a spotlight on a lawyer (USA, AUSA or defense attorney) or professor who teaches in the white collar area. If you have someone you would like me to consider here, send it my way -   I also appreciate when you send pleadings from your cases, court decisions, and other happenings that you hear about. Receiving these items will make my job significantly easier - so please send all the news you have to offer.  Your readership is appreciated, and I hope you will continue to check out this blog.

With many many thanks to Peter. 


March 13, 2008 in About This Blog | Permalink | Comments (0) | TrackBack (0)


Nixon_farewell Just like President Nixon leaving the White House with arms raised high and head unbowed, so too am I leaving the White Collar Crime Prof Blog -- how's that for a final image.  I guess I could have used Eliot Spitzer as my model for a quick exit. 

While I didn't last quite as long on the blog as "Tricky" Dick, a bit less than three-and-a-half years, but I was around longer than Spitzer's sixteen months as Governor of New York.  And I'm not leaving as an unindicted coconspirator either, at least not as far as I know.  But seriously, folks . . .  it has been a great deal of fun to write on this blog, and I've made a number of new friends and contacts over the last three years.  More importantly, I've learned quite a lot about the law, some of it from looking up cases, statutes, and court documents to figure out what was going on to compose a post, and more than a few times from the helpful comments of readers correcting my many mistakes.  Over the course of a couple thousand posts -- and way too many words in most of them -- I hope I've become a better writer and a bit more observant.  One of the joys of doing the blog is following cases on a regular basis, which gives me a much better understanding of how they unfold.

I owe a significant debt of gratitude to Ellen Podgor, my co-editor of this blog and co-author on more than a few projects.  We got into this endeavor almost on a whim, talking about it for a few minutes during one of our many telephone conversations and basically diving into the blog without knowing where it would go.  At one point we said we'd consider it a major achievement to have 500 viewers in a day -- we now average over 1,000 on weekdays, and your reading what we write is much appreciated.  Ellen and I disagreed about .1% of the time about items in the blog, and even then it was a principled difference, and she has been terrific to work with.  She plans to continue the blog, so it remains in good hands.

For those worried that I may be out roaming the streets looking to create mischief without the blog, fear not -- I have more than enough to keep me busy.  For those who forwarded items from various cases, please stay in touch because I plan to continue to follow developments in the field.  White collar crime is now much more than just a niche, what with all those politicians with their assignations and CEOs looking to inflate revenue and earnings, so I suspect it will remain that way. 

Thanks again, and as Steely Dan once sang, "Sue me if I play too long," but don't try it as a civil RICO claim.  Aloha!

-- Peter Henning

March 13, 2008 in About This Blog | Permalink | Comments (6) | TrackBack (0)

Extradition Denied in Antitrust Case

The House of Lords denied a request by the United States to extradite a defendant from England to face an antitrust charge related to price fixing in carbon products.  The basis was the lack of dual criminality, that price fixing was not made a criminal offense in the United Kingdom until the adoption of the Enterprise Act of 2002.  The Lords' decision (available below) rejected the argument that a conspiracy in restraint of trade was an offense at common law:

The common law recognised that an agreement in restraint of trade might be unreasonable in the public interest, and in such cases the agreement would be held to be void and unenforceable. But unless there were aggravating features such as fraud, misrepresentation, violence, intimidation or inducement of a breach of contract, such agreements were not actionable or indictable.

While the defendant cannot be extradited on the antitrust charge, he was also indicted in the United States on obstruction of justice charges related to destroying documents.  For those counts, he argued that because price fixing was not a crime in England at the time of his conduct, then he could not obstruct an investigation of such a charge because there could not be an analogous criminal investigation in the U.K.  On that issue, the Lords took a different approach:

Destroying documents to prevent them falling into the hands of the investigators may well affect the outcome of that investigation and is, indeed, intended to do so. So the mere fact that the result of the investigation in Mr Norris’ case was a charge of simple price fixing, which does not constitute an offence under English law, is no reason to hold that it would not have been an offence under English law to obstruct the progress of an equivalent investigation by the appropriate body in this country.

The Lords remanded the case to the trial court, however, to consider the defendant's argument that to extradite him now for conduct that took place years earlier would violate his rights under the European Convention on Human Rights.  So there will be no extradition quite yet, and the lower court's decision would be subject to appeal, so it may be years before there is a final decision on extradition. (ph)

Download norris_v_united_states_house_of_lords_decision_march_12_2008.pdf

March 13, 2008 in International, Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 12, 2008

Spitzer Quits -- Will Charges Follow?

Eliot Spitzer resigned as Governor of New York, issuing a statement (here) declaring that "I have begun to atone for my private failings with my wife, Silda, my children, and my entire family. The remorse I feel will always be with me."  The resignation came only two days after the public revelation of his philandering, and whether he will face any federal charges for his conduct remains to be seen.  As discussed in earlier posts (here and here), the U.S. Attorney's Office for the Southern District of New York could conceivably pursue potential violations of the Mann Act or the anti-structuring statute.  An interesting question is whether prosecutors might have sought Spitzer's resignation as a condition for not filing charges, or as part of an as-yet undisclosed plea agreement. 

Federal prosecutors seeking the resignation of an elected state official, or conditioning charges on such a decision, could raise significant federalism concerns.  Moreover, the political overtones of a Republican-selected U.S. Attorney seeking (or demanding) the resignation of a Democrat from elected office in an election year would only add to the concerns.  The U.S. Attorney's Manual in Sec. 9-16.110 addresses the issue of seeking the voluntary resignation of a non-federal elected official (here):

GENERAL RULE: Resignation from office, withdrawal from candidacy for elective office, and forbearance from seeking or holding future public offices, remain appropriate and desirable objectives in plea negotiations with public officials who are charged with federal offenses that focus on abuse of the office(s) involved. Where the office involved is not one within the Legislative or Judicial Branches of the federal government, such negotiated terms may be also be enforced involuntarily against the will of the defendant by a sentencing judge pursuant to the Federal Probation Act.

While not stated explicitly in the USAM, resignation does not seem to be an "appropriate or desirable objective" when the charges are unrelated to the official's exercise of authority.  To this point, Spitzer's tryst with the prostitute "Kristen" seems to be an entirely personal act, and the funds involved apparently came from personal accounts.  Thus, it would seem that the resignation should not connected to any charging decision, at least if the U.S. Attorney's Office acts in accordance with Department policy.  Should the use of government funds for the assignations have occurred, then Spitzer's resignation could be tied to a charging decision.  Of course, a decision to abjure filing charges is not subject to any outside scrutiny, so we would never know -- at least not officially -- whether his decision was in response to a request from the federal prosecutors.  (ph)


UPDATE: The U.S. Attorney's Office for the Southern District of New York issued a press release after Spitzer's resignation that states in its entirety: "In response to press speculation, MICHAEL J. GARCIA,the United States Attorney for the Southern District of New York,said: 'There is no agreement between this Office and GovernorEliot Spitzer, relating to his resignation or any other matter.' "  (ph)

March 12, 2008 in Investigations, Money Laundering, Prosecutions | Permalink | Comments (3) | TrackBack (0)

Tuesday, March 11, 2008

Monitors in Deferred Prosecution Hearings

The hearing on monitors in Deferred Prosecution Agreements was held yesterday.  To listen and view a video webcast of the hearing go here.  It is 2 hours and 54 minutes, but there is a long break between the two sessions.

In his opening comments, Hon. John Conyors, Jr. called for judicial oversight of these agreements. He stated as his second point that "despite the guidance the Department released just yesterday regarding use of corporate monitors in these agreements, this guidance still fails to ensure uniformity in the agreements themselves. Indeed, some agreements require the implementation of compliance programs, restitution and fines, while others do not."  His fourth point was that "there should be independent judicial oversight of corporate settlement agreements because currently there is no transparency and no requirement that they be made public."  Additionally he stated,

"Judicial oversight would help to ensure greater legitimacy of these agreements by providing a neutral decision-maker to prevent abuses and improper politicization, as well as ensure proper completion of the terms of the agreements. Judicial oversight would also provide some currently lacking public exposure of some aspects of the agreement process itself."

Former AG John Ashcroft's written testimony can be found here. From the DOJ, David Nahmais, (see written testimony here), noted the recent adoption of new DOJ guidelines.  A few interesting items discussed in the hearing:

  • Ashcroft was hit with questions such as - "who besides yourself was considered for the Zimmer Case?"  He admitted that he did not know who else was considered for this position, and he did not know if the appointment of the monitor was bid out for others to be considered.
  • As one might suspect there was discussion of the ethics chair being given to a U.S. Attorney's alma mater.  A comment was made that another law school had been approached first, but that they already had a business ethics chair.   This listener was wondering - should that have precluded them from receiving this new chair, and aren't there other law schools out there - even in this same state or close by in an adjoining state?
  • There was also discussion of the transparency problems when there are non-prosecution agreements. After all, these agreements bypass the court system.
  • There were also comments on whether these agreements should even be allowed.
  • It was brought out that there have been over 80 agreements.


March 11, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Spitzer and the Southern District of New York

The fact that federal prosecutors from the U.S. Attorney's Office for the Southern District of New York pursued the investigation of New York Governor Eliot Spitzer's use of large amounts of cash for transactions that turned out to involve the services of one or more prostitutes means he could be looking at federal charges for his conduct.  Blog co-editor Ellen Podgor has already discussed (here) the possible application of the Mann Act to Spitzer's involvement in the interstate transportation of a person for prostitution, which in fact is among the charges against the leaders of the Emperors Club service Spitzer used (criminal complaint and affidavit below -- the juicy "Client 9" material begins in paragraph 73 for those with their minds in the gutter).  The investigation began because of Suspicious Activity Reports filed by banks because Spitzer purportedly made large cash withdrawals, and while the initial focus was for possible public corruption, the case turned out to involve a more mundane, albeit considerably salacious, prostitution ring.

While Mann Act charges against Spitzer certainly would be quaint, a criminal structuring charge may be more likely.  The applicable statute is 31 U.S.C. Sec. 5324(a), which provides:

No person shall, for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—

cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by an order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508 . . . .

If Spitzer split deposits or withdrawals in his accounts to stay below the $10,000 threshold for filing a Currency Transaction Report by the bank, then he could be guilty of structuring.  The predecessor to this provision was the subject of the Supreme Court's decision in Ratzlaf v. United States, 510 U.S. 135 (1994), in which the court interpreted the "willfully" element to require proof that the defendant knew there was a legal duty to report the transactions and sought to have the bank violate the law by structuring his transactions.  As the Court explained, "Undoubtedly there are bad men who attempt to elude official reporting requirements in order to hide from Government inspectors such criminal activity as laundering drug money or tax evasion.  But currency structuring is not inevitably nefarious." (Italics added)  In response, Congress sought to overturn Ratzlaf by removing "willfully" as an element of the crime.  Thus, all the government must prove is that the person intended to structure the transactions, not that the person intended to commit a crime by violating the provision.  So while structuring is not always nefarious, it is a crime regardless of the desire to violate the law.

The Second Circuit rejected a fall-back argument that the statute requires that the money that is the subject of the structuring must be tainted and not just funds properly controlled by the defendant.  In United States v. MacPherson, 424 F.3d 183 (2d Cir. 2005), the court stated, "The anti-structuring law may well have been intended to prevent criminals from concealing their illicit profits, but that is not the limit of its reach. Section 5324 makes no reference to the source of the monies at issue or to the reason why a person seeks to avoid CTR filing. Its singular focus is on the method employed to evade that filing requirement, i.e., structuring."  (Italics in original) Spitzer could not avoid a structuring charge by arguing that the money was his, or at least he had lawful access to it, so he could do with it as he wanted.  Moreover, an ignorance defense would be difficult to offer for a former state Attorney General who fancied himself the Sheriff of Wall Street.  The structuring provision is different from the money laundering statute, which reaches the proceeds of "specified unlawful activity," even though it reaches similar activity and often involves conduct by people who are trying to hide criminal activity.

An interesting question is whether any other federal criminal charges could come out of the cash transactions.  The old adage is to "follow the money," and here it may be to trace the dollars backward to find out where they came from and how they traveled, and not so much where they ended up.  Spitzer is a fairly wealthy man, so he probably has access to a sizable pool of money.  Yet, according to the criminal complaint, he did not want to make a wire transfer, even though Emperor's Club employed a shell corporation that could be used to hide the true nature of the payments.  If Spitzer was trying to hide what he was doing from his family, then large cash withdrawals might have raised just as many questions as wire transfers.  It would not surprise me that federal investigators were looking into whether any campaign money was involved in the transactions, or at least campaign bank accounts, that could be used so that it was not as apparent when slugs of cash were used for personal purposes.  Whether that violates any federal laws is an open question, but I suspect the U.S. Attorney's Office is going to take a very close look at the flow of the money to see what roads it traversed. (ph)

Download us_v_brener_criminal_complaint_spitzer_march_2008.pdf

March 11, 2008 in Corruption, Money Laundering, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (1)

Commentary on Government's Last Effort to Save Face on Corporate Monitoring

Today is the Subcommittee on Commercial and Administrative Law hearing on "Deferred Prosecution: Should Corporate Settlement Agreements Be Without Guidelines?" (see here)  And on the eve of this hearing, the DOJ has issued a new memo on the selection and use of monitors in deferred prosecution agreements.(see here).  But what exactly does this new memo do, and does it alleviate the issues that have arisen with respect to these agreements.

Clearly this memo provides some internal oversight by main justice when a monitor is being appointed. Perhaps the best aspect of this memo is that it provides that the Deputy AG must approve a monitor. It also creates a standard of a "reasonable person to question the monitor's impartiality"  and precludes an association between the monitor and corporation for a period of time following the completion of the monitoring relationship. Clearly these provisions are a step in the correct direction.

But the memo fails to go far enough in many respects. For example:

  • The memo emphasizes that it is merely internal guidance, and outside parties have no ability to enforce the statements in the memo. Like most DOJ guidelines, there is no remedy when the government fails to abide by its internal guidelines.
  • The choice of the monitor, the control of the monitor, and the communication by the monitor is all within the government.  Perhaps in the case of a non-prosecution agreement an argument can be made that there is no body for oversight.  But when a case has been filed in the courts, and a deferred prosecution agreement is reached, it seems fairer to have the neutral magistrate in the role of selecting the individual for this position.
  • Monitors should not be seen as working for the DOJ, yet the memo even goes so far as to say that "the agreement should provide for an extension of the monitor provision(s) at the discretion of the Government in the event that the corporation has not successfully satisfied its obligations under the agreement."

This memo emphasizes a basic flaw in many deferred prosecution agreements.  In many instances, the agreements are not contractually valid and are lopsided agreements that basically provide for the corporation becoming an investigator and agent of the DOJ. Deferred prosecution agreements contain terms that place exclusive power in the hands of the government, even for determining whether a breach of the agreement has occurred. (See Zierdt & Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing, 96 Kentucky LJ (2007)) 

Congress is right to be holding hearings here.  If the best that the government can offer is more DOJ control, then Congress needs to intervene with legislation.


March 11, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Monday, March 10, 2008

Sex or Crime, Spitzer Has Been Punished?

Four individuals had a criminal complaint filed against them.  Two were charged with a conspiracy to violate federal laws related to prostitution.  The other two face charges of prostitution and money laundering. (See NYTImes here) Enter client 9 - an individual unnamed in the charges. The details of the D.C. meeting involving client 9, and how the woman meeting him was to arrive are outlined in the NYTimes here.  Some of the questions that are likely to be explored in the upcoming days are:

  • Did Spitzer violate the Mann Act?  The Mann Act, 18 U.S.C. Sec. 2421, provides: "[w]hoever knowingly transports any individual in interstate or foreign commerce, or in any Territory or Possession of the United States, with intent that such individual engage in prostitution, or in any sexual activity for which any person can be charged with a criminal offense, or attempts to do so, shall be fined under this title or imprisoned..." Even if this did amount to a technical violation, one has to seriously question whether consensual acts warrant prosecution.
  • Will Spitzer need to be a witness in the case against the four individuals charged with conspiracy, prostitution, and money laundering?  Will he be given immunity?  In the federal system this would be "use" immunity as opposed to "transactional immunity,"  which means that anything he said or derived from what he said could not be used against him. 
  • Was it really necessary to include all of these acts in the charging instrument? Prosecutors, obviously, knew who they were dealing with in this case.  But, on the other hand, did fairness require this to happen - should any one person be protected here more than others?

From a purely punishment perspective, and irrespective of Spitzer having any criminal culpability, it seems obvious that a "shaming" has occurred here.  Even if there was some criminal culpability, should taxpayer's dollars be spent on investigating and prosecuting this man. The higher the office holder, the longer the fall from power, and in this case it is pretty hard ground that Spitzer is landing upon.


Addendum - Check out Brian Baxter's piece at The American Lawyer here. Some thoughtful quotes from Associate Dean Patricia Salkin are in this article. 

March 10, 2008 in Celebrities, Money Laundering, News, Prosecutions | Permalink | Comments (6) | TrackBack (0)

DOJ Trys to Circumvent A Negative Result From Deferred Prosecution Hearing

A House Judiciary Committee hearing on deferred prosecution agreements issued its list of witnesses for the Tuesday, March 3, 2008 - 10:30 AM Subcommittee on Commercial and Administrative Law Hearing on "Deferred Prosecution: Should Corporate Settlement Agreements Be Without Guidelines?" The panelists are:

Panel I:
Hon. David E. Nahmais
The U.S. Attorney's Office
Northern District of Georgia
Atlanta, GA
Timothy L. Dickinson, Esq.
Paul, Hastings, Janofsky & Walker, LLP
Washington, DC
Hon. John D. Ashcroft
The Ashcroft Group, LLC
Washington, DC
George J. Terwilliger, III
White & Case, LLP
Washington, DC
Brandon Garrett
University of Virginia School of Law
Charlottesville, VA
Panel II:
Hon. Frank Pallone Jr.
Member of Congress
New Jersey, 8th District
Hon. William J. Pascrell Jr.
Member of Congress
New Jersey, 6th District

But just as this hearing is about to begin, we see the DOJ releasing a memo that attempts to alleviate the concerns and problems that are likely to be addressed in this hearing. The Memo from Craig S. Morford, Acting Deputy Attorney General, is titled, "Selection and Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements with Corporations."  The Memo is attached here, and analysis of this memo is forthcoming.

Download doj_principles.pdf


March 10, 2008 in Deferred Prosecution Agreements, Government Reports, News, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Spitzer Spitzered Again

Yet another time of Governor Eliot Spitzer finding the tables turned. (see here)

Wall Street Journal - Spitzer Linked to Prostitution Ring - New York Governor Sptizer Linked to Prostitution Ring

CNN - Spitzer Investigated for Allegedly Meeting With A Prostitute

NYTimes - Spitzer is Linked to Prostitution Ring


March 10, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Sunday, March 9, 2008

White Collar Crime Prosecutions Are Down

Criticisms previously levied against the  statistical reporting of white collar crime remain justified in that lacking a definition of white collar crime, it is impossible to discern what gets included and what doesn't. (See here and here) Whether one limits it to fraud, or includes money laundering and RICO, were concerns mentioned when evaluating studies that reported on increases and decreases in certain kinds of criminal conduct. Without a clear understanding of what crimes or conduct fit the white collar category, it seemed impossible to state with accuracy that it had in fact decreased.

But the latest study by TRAC, does provide clear evidence that agency referrals in many areas are significantly down, while others have increased.  For example, one finds that INS (and DHS Immigration Enforcement) is nearly 3 times what it was in 1987.  But one also sees that tax, postal, and the FBI referrals are significantly reduced. (see here)  TRAC notes that:

"A second possible explanation for the declining number of referrals being made by the agencies traditionally concerned about white-collar criminals is that there are fewer swindlers, anti-trust violators, tax cheats, fraudulent health care providers, etc. roaming the streets and the suites than there were in the past. Partly because such criminals try very hard to go unnoticed, however, criminologists have never been able to devise a good way to measure their presence in society. But given the vast size and booming nature of the American economy — at least until recently — and the growing complexity of federal law, the thought that white-collar criminals are an endangered species is hard to believe. "

And I have to agree with the last statement - white collar criminals are definitely still out there.  But perhaps the enforcement needs to turn to places like the Internet and to focus on the crimes of today - like Identity Theft. The investigation and prosecution here takes significant time and the statistics may be harder to grow.

(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

March 9, 2008 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)