Saturday, March 29, 2008
Tampa Bay Biz Journal - Title Agent Sentenced in Fraud Case
Wall Street Journal - Lehman May Be Victim of Fraud
Wall Street Journal Blog - DOJ Meets Setbacks in Case Against Former Bistol Exec
Christopher J. Gunther & Robert M. Pollack, National L. J. - Scrutiny of Corporate Monitors is on the Rise
One of the hardest criminal activities to investigate and prosecute are cybercrimes and other activities that may be occurring via the WorldWideWeb. The identity of the perpetrator can be difficult to discern. Some of these crimes involve Intellectual Property. In 2007, the DOJ filed 217 Intellectual Property cases. This fact was brought out by AG Mukasey would gave a speech this past week, in California, emphasizing that intellectual property crimes will be a major focus in the DOJ. Mukasey stated:
"To put it simply, the continuing worldwide escalation of counterfeiting and piracy poses a threat to both our economy and public safety. Since that threat comes from so many different directions, our response has to proceed on several fronts. We need strong and coordinated law enforcement efforts, both at home and abroad; we need robust intellectual property laws; and we need adequate resources devoted to IP law enforcement."
The DOJ has moved beyond its role as prosecutors to become teachers, as Mukasey states:
It's imperative that countries work together on cases like these to ensure strong enforcement worldwide. To enhance that kind of cooperation, Justice Department lawyers have provided training and technical assistance to thousands of foreign prosecutors, investigators, and judges in more than a hundred countries.
Hopefully, there has been or will be comparable training to those who will be defending individuals charged with these crimes.
Thursday, March 27, 2008
Gov. Don Siegelman was ordered released from prison on bail pending appeal. This is in sharp contrast to his being taken immediately to prison as opposed to other white collar and not-likely-to-flee offenders. The court did not give the same relief to Richard Scrushy. Birmingham News here.
There was no question - Siegelman was not a flight risk - so the first prong of the test for bail pending appeal was easy. The second prong was also met as the court held that he "specifically met his burden of showing that his appeal raises substantial questions of law or fact." The court did not provide explicit language as to what the substantial questions were.
Interestingly, this all happened around the same time as the judiciary committee wanted Siegelman released to testify before Congress. See here. There is no doubt that this will be a hearing to watch. Key issues likely to be discussed will be whether politics ruled this prosecution, why was the former governor prosecuted while others were not, and was this prosecution in some way related to the "attorney firings."
Aníbal Acevedo Vilá, Governor of Puerto Rico, along with 12 other individuals, were indicted. The charges pertain to campaign financing. (see here) Carrie Johnson and Matthew Mosk at the Washington Post report on the corruption charges brought against the governor and it appears to be "conspiracy, fraud, false-statements and tax charges." (see here). But many (commenter's on Huffington Post here) seemed to be more concerned about his endorsement of Senator Obama as a super-delegate.
DOJ Press Release states in part:
"According to the indictment, the defendants conspired to defraud the United States and violate various Federal Election Campaign Act provisions by having Puerto Rico businessmen make illegal and unreported contributions to pay off large and unreported debts stemming from Acevedo Vilá’s 1999-2000 and 2001-2002 campaigns for Resident Commissioner of the Commonwealth of Puerto Rico. Payments were made principally to the public relations and media company for the campaigns. The illegal actions continued into 2003, due to the significant debt accumulated by the campaigns, some of which was also concealed from the FEC and the public."
Addendum - Indictment - Download vilaindictment.pdf
(w/ a Stetson hat tip to Whitney Curtis)
Pittsburgh Post Tribune - Wecht Jury at Impasse?
Freep.com - Will Beaty Make a Plea Deal (she is the former chief of staff to Detroit Mayor Kilpatrick).
Martha Neill, ABALaw JrlNewsNow - 20-Year Texas Prosecutor Convicted of Stealing Office Funds
Houston Chronicle - Plea Deal for former Texas Southern University President Priscilla Slade - she will pay the fine and do no time ($127,672.18 fine) here (represented by Mike DeGeurin)
(esp) (w/ a Stetson Hat Tip to Frank Klim on the last)
Wednesday, March 26, 2008
Jeffrey Skilling filed a supplemental brief discussing the failure of the government to provide exculpatory material, specifically items now discovered as a result of the release of the Fastow Notes (see here, here, and here). The government has now responded with an 83-page brief that challenges the defense position. Perhaps the paragraph that sums up the government position best is seen here -
"At trial, the government provided the district court with the rough notes underlying those 302s so that the court could monitor Fastow's testimony and disclose to Skilling any information in the notes that could be used to impeach Fastow. Now, having obtained those notes while his conviction is on appeal, Skilling argues that they contain undisclosed exculpatory information and show that the government presented false testimony to the jury. As explained in detail below, Skillings' claims rely on isolated snippets culled from 420 pages of handwritten notes and stripped of their context. Put in its proper context, and divorced from Skilling's hyperbolic rhetoric, each portion of the notes on which Skilling relies contains information that Skilling possessed prior to trial or that would have had minimal value in impeaching Fastow. "
So the government is claiming that the items would have "minimal value." If that's the case, why didn't they just give them to defense counsel? Why should we have after-the-fact discussions of whether an item was disclosed and whether it would have made a difference? When an individual is being given a sentence of 24 years, shouldn't the accused be allowed to have everything to properly present a defense to the jury?
Later in the government response they state:
"Finally, if the government had disclosed the information in the February 4, 2004 note, Skilling could not have profitably used it to impeach Fastow. If Skilling had impeached Fastow with the note, the government would have been entitled to rehabilitate Fastow with the notes showing that on two later occasions he recalled Skilling knew of the quid pro quo."
Should the government be deciding the value of impreachment and rehabilitation evidence? Isn't that a role we leave to juries?
Addendum - Government's Brief -
(w/ a Stetson hat tip to Whitney Curtis)
The Eleventh Circuit Court of Appeals in United States v. Svete reversed and remanded 5 counts in a case where the defendants were "convicted of conspiracy, mail fraud, money laundering, and interstate transportation of money obtained by fraud, all charges being related to their dealings with viaticals." Additionally, the court sent the entire case back for resentencing as a result of this holding. The court stated:
"In this Circuit, mail fraud requires the government to prove that the defendant intended to create a scheme 'reasonably calculated to deceive persons of ordinary prudence and comprehension.' . . .This burden is not reflected in the current Eleventh Circuit pattern jury instruction for mail fraud. Pattern Instruction 50.1 merely states that a 'scheme to defraud' is 'any plan or course of action intended to deceive or cheat someone out of money or property by means of false or fraudulent pretenses, representations, or promises.' Pattern Jury Instructions (Criminal Cases), No. 50.1 (11th Cir. Jud. Council 2003 rev.) (Mail Fraud). Because the definition does not include the reasonable person standard as articulated in Brown, Pattern Instruction 50.1 is deficient. (some citations omitted)."
(esp)(w/ congratulations to Attorney Peter Goldberger)
Addendum - July, 2008 - The 11th Circuit vacates this decision for en banc review. (see here)
Philly.Com (AP) - Fifth Day of Deliberations End in Wecht Fraud Trial; Pittsburgh Tribune Review - Wecht Deliberations to Resume Thursday
Wall Street Journal - Paulson Joins Advocates of Wider Fed Oversight
Just wanted to notify everyone that I have been made aware that one link on the blog was hijacked. The matter is being corrected and the blog is being examined to avoid this problem in the future. I appreciate being notified of any problems you find. Thanks.
Tuesday, March 25, 2008
The Second Circuit Court of Appeals heard oral arguments on the KPMG related case (Stein). Amir Efrati of the Wall Street Journal provides a detailed description of this hearing in an article titled KPMG Prosecutors Come Under Scrutiny. For some of the background, briefs, and more see the entries in this index here and the government's brief can be found here.
(esp)(w/ a hat tip to Bill Olis)
Financial Week - Former Pharma CFO Faces Fewer Charges - Bristol-Myers' Frederick Schiff set to go on trial today, but not for failing to correct misstatements
Darryl Fears, Washington Post - Refusal Keeps Terrorism Convict in Prison - Former Professor Fights Attempts to Force His Testimony Against Muslim Charities
Wall StreetJournal (AP) - Prosecutor's Need More Time to Rework Bonds Indictment
Law School Rankings are about to be released and the ABA Journal is ready and waiting. The ABA Journal sent out an email and asked that bloggers pass it along to readers. It begins by telling of the recent article on the cover of the ABA Journal that talks about U.S. News & World Report’s law school rankings. (see here) Edward A. Adams, Editor and Publisher of the ABA Journal, states that "Morse will be taking questions from the public on ABAJournal.com on Friday, April 11, from 3 to 4 p.m. ET. We hope you and your readers will participate."
Now back to white collar crime....
P.S. For those who don't know, Robert Morse is "the man who created the law school rankings for U.S. News." (per ABA email)
Monday, March 24, 2008
Tom Kirkendall's Houston ClearThinkers has the Motion to Dismiss filed on behalf of a former Merrill Lynch executive who is awaiting retrial (see here). As anticipated, the Fastow Notes - and the alleged failure of the prosecution to provide exculpatory material to the defense - may prove devastating to this prosecution. The Motion includes numerous references to the Model Rules of Professional Conduct, the ABA Standards for Criminal Justice, and the Restatement (Third) Law Governing Lawyers. Although ethics rules are usually not enforceable at law, they have been used to provide a standard for appropriate conduct in the community. In this case, the Motion alleges many different violations of ethics rules.
The key issues for the court will likely be: 1) did the prosecution withhold exculpatory material; and 2) what is the appropriate remedy. Both of these issues offer interesting aspects. On the first one, a question will be whether the Enron prosecutors will be testifying or is the paper trail sufficient to present each side of the argument. It is likely that the prosecution will vigorously argue the second issue (that a retrial cures this problem) in an attempt to avoid losing the case on a court dismissal. But the more important question remains - why are the Fastow notes so late in coming (see here).
A press release of the Department of Justice states that an individual was "found guilty by a federal jury in May 2007 of conspiracy, two counts of attempting to violate export control laws, failing to register as an agent of a foreign government and making false statements to federal investigators." The sentence imposed was 293 months in prison. The press release also states that the defendant is "[a]n engineer who conspired with family members to export United States sensitive military technology to the People’s Republic of China." White collar cases will sometimes implicate military and defense issues.
Perjury, obstruction, conspiracy, and misconduct, are the charges brought by the Wayne County prosecutor against the Mayor of Detroit and his former chief of staff. Dan Webb is representing the mayor and is calling this a "selective prosecution." The prosecutor in this case chose to respond to what was said by defense counsel.
The press reports that the basis for the "selective prosecution" claim is that the prosecutor has never charged anyone with the crime of perjury for statements made during a civil matter.
Selective prosecution claims are difficult to win in the pre-trial stage. Prosecutors have broad discretion in their charging powers and as long as there is probable cause of the commission of the crime charged, the decision "generally rests entirely within the prosecutor's discretion." See Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978). That said, if the prosecutor uses an impermissible factor, such as race or religion, it's a different story. Although selective prosecution claims may be difficult to prove in a pre-trial stage, if allowed into evidence it can make for an interesting jury consideration. Couple that with perjury, a difficult charge for prosecutors in that it requires clear questions with clear answers, and the case will be one to follow.
The fact that AB Volvo entered into a deferred prosecution agreement was previously discussed here. Based upon this agreement it seems unlikely that there will be a company statement, at least one that has not first been vetted through the DOJ. The deferred prosecution agreement in paragraph 14 states:
"14. Statements to the Media: In connection with this Agreement, AB Volvo, Renault Trucks and VCE shall only issue a press release if they first determine that the text of the release is acceptable to the Department."
And it further looks like some of the terms of the agreement seriously diminish the attorney-client privilege rights. The Department reserved the right to ask for attorney-client privileged material. And yes, the company can withhold them, but -
iii. In the event that AB Volvo, Renault Trucks and VCE withhold access to the information, documents, records, facilities and/or employees, the Department may consider this fact in determining whether AB Volvo, Renault Trucks and VCE has fully cooperated with the Department."
And breaches of the agreement, it looks like the Department gets to decide that also, and the company loses some of their statute of limitation rights. To view a copy of the agreement, see here -
If you find this agreement problematic from a contracts perspective, you'll probably be interested in this article by Professor Candace Zierdt (Stetson) and myself here.
(esp) (w/ a Stetson thank you to Librarian Whitney Curtis).
Glenn R. Simpson, of the Wall Street Journal, has an article this morning titled, "U.S. Opens Alcoa Bribery Probe." Alcoa, a global company, clearly has internal rules related to the giving and taking of company gifts. For example, one finds this one on the company website:
"Gifts, favors and entertainment may be given at company expense or accepted by directors, officers or employees from a competitor or an individual or firm doing or seeking to do business with the company only if they meet all of the following criteria:
- they are consistent with customary business practices and do not violate applicable law or ethical standards;
- they are not excessive in value;
- they cannot be construed as a bribe, payoff or improper inducement; and
- public disclosure of the facts would not embarrass the company or the director, officer or employee.
Payments or gifts of cash (or of cash equivalents such as stocks or commodities) to or from a competitor or an individual or firm doing or seeking to do business with the company are never permitted and may not be solicited, offered, made or accepted by directors, officers or employees"
Although a big believer in the presumption of innocence, one has to wonder what could happen if this investigation turns up a bribe to a foreign official. The Foreign Corrupt Practices Act is easily explained in this DOJ Layperson's Guide discussed here. But one notices in looking at the results of a good number of cases (see here) against companies, that if the DOJ does decide to proceed, there is little likelihood of a trial. When a company is involved, the matter tends to end with a payment of a fine and in some cases a deferred prosecution agreement. In a post-Arthur Andersen world, this is easily explained as the cost of fighting can be a death sentence to a company. If the government does find something here, one has to wonder if this will be the result. But, on the other hand, if there is nothing to this investigation - it is hoped that the press received will not hurt the company.
Wesley Snipes is set for sentencing on April 24, 2008. (see here) Although found not guilty on the majority of counts against him, he was convicted of a couple of misdemeanor tax counts (see here). In addition to sentencing, it is likely that we will see an appeal down the road.
On March 19, 2008, the Supreme Court issued a decision in Synder v. Louisiana, a case that bears little resemblance to Wesley Snipes tax matters as it is a death penalty case. What perhaps might be relevant is that the Court struck down Allen Synder's conviction as a result of how the trial court handled jury strikes by the prosecution. The Court held that the rejection of a Batson claim as to one of the jurors was improper. In Synder, the accused ended up with an all-white jury. (see also Scotus Blog here)
Now lets look at the Snipes trial. Snipes did not even have an opportunity to contest prosecutor's striking of black jurors as there were no blacks on the venire.(see here). It will be interesting to see if the decision in Synder will make the rejection of Snipe's change of venue motion more powerful. (see here). It's not that Snipes was deprived of a chance of the prosecutor or judge making an error in violating Batson. Rather it's the fact that he has no claim whatsoever because of the venue where this case was prosecuted. The prosecutor did the striking by the selection of the venue.
News Update - Stephen Hudak, Orlando Sentinal story related to Snipes -IRS chases cheaters after figure in Wesley Snipes tax case gives up names
Addendum - Paul Caron's TaxProf Blog here.
Sunday, March 23, 2008
Deliberations in the Wecht trial resume on Tuesday. See Pittsburgh Post Tribune here
A decision on what happens to Detroit's Mayor Kilpatrick will likely be announced on Monday here
One interesting aspect about these two matters, is that Wecht is being tried by federal prosecutors for crimes that involve state conduct. (see here) In Kilpatrick's case, it is a Wayne County prosecutor who will be making the decision of whether to proceed criminally with any alleged matters. (see here)
These days the line between federal and state jurisdiction is very blurred. The dual sovereignty rule often permits both to proceed. It all depends on who has a criminal statute that can be applied to the specific situation, and which prosecutor wishes to proceed. It makes you wonder if individuals should have such extraordinary power to make these decisions. Overly broad criminal statutes drafted by the legislature allow prosecutors this discretion.
The Federal Bar Association and the US Sentencing Commission, with the ABA as a co-sponsor, is having its 17th Annual National Seminar on the Federal Sentencing Guidelines Conference May 21-23, 2008 in Orlando, Florida. For information, see here.
National Consitution Center - How to Conduct Internal Investigations - and Not Screw it Up. April 23 - audio conference For information, see here.
NACDL - 50th Anniversary - White Collar Crime Track- May 1-4th New York City here.