Thursday, April 10, 2008

Post Wecht Trial Conduct by the FBI

Cyril Wecht's trial ended with a hung jury (see here), and it was a relatively long trial at that (see here).  Jonathan Silver at the Pittsburgh Post-Gazette, in an article titled Many Questions Surround Wecht Retrial, Set for May, provides an interesting description of the government's desire to proceed in a retrial against this 77 year old man, including some statements from former AG and Governor Dick Thornburgh.

But the government has not stopped at just saying they want to retry this case.  According to an article by Carl Prine and Jason Cato in the Pittsburgh Tribune-Review, (see here) the FBI is calling the jurors in the prior trial. Check out a prior article titled Majority Thought Wecht Was Innocent, Juror Says.

Perhaps the irony here is that Wecht's charges relate to his alleged use/misuse of public funds.  But the government's use, and perhaps continued use, of public funds to continue this prosecution might be questioned by some as beyond what is necessary. 

(esp)

Addendum - Steve Benen - Salon.com

April 10, 2008 in Prosecutions | Permalink | Comments (1) | TrackBack (0)

AOL Executives SEC Trial

Hearing "not guilty" from a jury may not always end the case. AOL executives were acquitted of criminal conduct after a lengthy jury trial (see here).  A behind the scenes look at the trial is portrayed in an article in the American Lawyer (see here).  But the next phase in now underway as the SEC trial is nearly finished.  The evidence has been presented and now closings are set for April 21-22. 

White collar cases are somewhat unique in that the criminal trial is not the only matter that may be facing the accused.  Often parallel proceedings may mean that the government has multiple chances to obtain some relief from the accused.

(esp)

April 10, 2008 in SEC | Permalink | Comments (0) | TrackBack (0)

Plea in Public Procurement Fraud Case

A press release from the Antitrust Division states that "a U.S. Department of Defense (DOD) contractor from Baltimore pleaded guilty ... to conspiring to steal competitive information concerning contracts to supply fuel to DOD aircraft at locations worldwide."  The prosecution of this case came from the "creation of the National Procurement Fraud Task Force, " an "initiative announced in October 2006 [that] is designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in contracting activity for national security and other government programs."

(esp)

April 10, 2008 in Fraud | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 9, 2008

In the News & Blogsphere

SEC Press Release - SEC Action Returns Former Gemstar CEO's Pending Severance Payment to Company and Shareholders -  The Securities and Exchange Commission today announced a court ruling that successfully concludes its effort to stop a $29.5 million severance package from being paid to the former CEO of Gemstar-TV Guide International ....  (see also LATimes here)

Wall Street Jrl (AP) - Hung Jury in Boeing Leak Trial

Heritage Foundation - The Foundry - -NYT's Latest Catty Swipe at the Justice Department

Liz Coffy  - Medill Reports - Savvy and Sorry: Web Fraud on the Rise

DOJ - US Attorney's Office New Jersey  - Press Release - "The former chief financial officer of defunct cheese manufacturer Suprema Specialties, Inc. was sentenced ... to eight years in prison for his conviction on charges of conspiracy, bank fraud, mail fraud, wire fraud, and making false statements to the Securities and Exchange Commission...."

(esp)

April 9, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Response to NYTimes Article on Deferred Prosecution

Guest Blogger - Stephanie Martz, White Collar Crime Project Director - NACDL - writes:

I think that a lot of us are admirers of Eric Lichtblau, who after all won a well-deserved Pulitzer for his coverage of the "TSP," or whatever name the administration is currently giving it.  Therefore, I was saddened when I read -- and re-read, because I couldn't believe my eyes -- his surprisingly unsubstantiated piece on deferred prosecution agreements that appeared on A1 of the April 9 NY Times (here).

For starters, I couldn't find any, well, facts.  To start with, the headline – "Corporate Deals Replace Trials" – is not actually supported in the piece.  Neither Mr. Lichtblau nor anyone he quoted seemed to have tried to figure out whether, based on past conviction rates or even actual "trials" (which are always few and far between in the corporate context), prosecutions have actually been "replaced."  In the second paragraph, he makes the unattributed assertion that Monsanto "would have been prosecuted" in an earlier era.  Really?  Maybe, but not a very supportable assertion.  Monsanto involved a few hundred dollar bills being passed by an employee of  a subsidiary in a foreign country.  In the spirit of supposion, I feel like this case would have resulted in a CIVIL settlement with the SEC, rather than criminal charges.  And nowhere does he acknowledge that deferred prosecution agreements require that charges be filed with a U.S. District Court.  They are then dismissed IF the company complies with the terms of the DPA.

Let's continue:  "In many cases, the details are kept secret."  Really?  They can be hard to find because DOJ hasn't compiled them or made them available anywhere.  But two law review authors in the last 6 months alone have gathered more than 80 of them and analyzed them.  I'm not sure why Mr. Lichtblau didn't interview them, since they are the actual experts in this area. (McConnell/Finder piece and Joe Warin's piece).

Mr. Lichtblau also quotes a former prosecutor, apparently without asking  that person for supporting information, as saying that the DPA fines are "peanuts" compared to fines imposed by a criminal conviction.  Really?  Has Mr. Lichtblau actually looked at these agreements?  I think that Purdue Pharmaceuticals, Reliant Energy, and Vetco would disagree.  Again, the actual facts do not bear this out.  Around 85% of companies that are actually sentenced in federal court pursuant to plea OR trial are small, privately held companies that would be ruined by multi-million dollar fines.  We don't even have a good "set" to compare with the big publicly traded companies that are doing these DPAs.  I might add that if "peanuts" means that companies get to live but pay tons of money to the government under DPAs or die under indictment, I think "peanuts" might be in the public interest.

In short, I suspect that an accurate assessment of DPAs would indicate that they are representative of more, rather than less, government oversight of companies; or at least a shifting focus at DOJ from prosecution to reform, which traditionally has been the bailiwick of the SEC.  Even if that proves to be untrue, any conclusion should be based on facts rather than unfounded speculation. Don't you think?

(sm)

April 9, 2008 in Deferred Prosecution Agreements | Permalink | Comments (1) | TrackBack (0)

Tuesday, April 8, 2008

In the News

Five Former San Diego City Officials Face SEC Charges

A Press Release of the SEC states that they

"filed securities fraud charges against five former San Diego city officials who played key roles in the city’s inadequate municipal securities disclosures in 2002 and 2003. The SEC charged the former officials for failing to disclose to the investing public buying the city’s municipal bonds that there were funding problems with its pension and retiree health care obligations and those liabilities had placed the city in serious financial jeopardy."

(esp)

April 8, 2008 in SEC | Permalink | Comments (0) | TrackBack (0)

Wecht Trial Over - Mistrial

In some ways there is relief for the defense when a mistrial occurs - at least it isn't a conviction. In another respect, it is an added weight - they have to go through it again.  The court has reset 77 year old Wecht's re-trial for May 27th, although the defense will likely present motions to dismiss in the interim.  Some of the problems that a defendant faces after a mistrial are -

  • The prosecution has heard the cross-examinations and the theme of the defense case.
  • The defendant will not only be paying for one trial, but now for a second one. (Prosecutor's work on the public payroll and don't have to worry about this aspect - although maybe they should have to answer to whether the expenditure of money is a worthwhile one)

One question prosecutors should be asking now is whether this case is really worth a re-trial.  This is where DOJ Criminal Division oversight should be used, as often an individual USAttorney's office is so invested in a case that they can't properly compare this case with those across the country.  It is interesting that USAs want uniformity in sentencing, but when it comes to selection of charges they seem to want the individual office making a decision, except in the unusual cases that require DOJ approval like RICO cases.  Maybe it would be good to require DOJ Criminal Division oversight in all cases that resulted in a mistrial, to ascertain as to whether valuable resources should be spent on a re-trial. After all the defendant has suffered by payment of attorney fees, by publicity, and most of all by the strain and pressure that comes in being a defendant facing many years in prison. 

Pittsburgh Post Gazette - Mistrial declared in Wecht case; new trial set for May 27

Pittsburgh Post Tribune - Wecht trial over; feds to try again

(esp)

April 8, 2008 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Monday, April 7, 2008

In the News & Around the Blogsphere

Wecht Jury - Up to 11 days

The  Pittsburgh Tribune Review here and the Pittsburgh Post Gazette here report that there is still no verdict in the Wecht trial (see here for background).   So the question is - how long do you wait for a jury to decide?

Lets look at former Governor of Illinois Ryan's case, a case in which the jury eventually convicted.  The court seated the alternates in that case - here in Wecht's case they went with 11 jurors. But juror errors played a prominent role on Ryan's appeal.  Unfortunately for the defense, the 7th circuit affirmed (here) - although there was a strong dissent and that case has a petition for cert. pending (here) in the Supreme Court. 

In the Wecht case the jury is having a leisurely deliberation.  Interestingly this is a sharp contrast to some other juries -

(esp)

April 7, 2008 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

More on the Team Communications Fraud Case

Guest Blogger - Professor J. Kelly Strader writes -

As previously reported here and in the Los Angeles Times (here), the U.S. Attorney’s Office in Los Angeles recently announced the indictment of Drew Levin, the founder and former President and CEO of Team Communications Group, a television production and distribution company. Levin’s alleged co-conspirator has pleaded guilty and is scheduled to be sentenced in January 2009, according to the government’s press release (here). One Hollywood blog (here) juicily reports on Levin, an Emmy-winning producer.

The indictment (see below) reads like a classic Enron-era scheme to cook the books to inflate stock prices. In short, Levin allegedly conspired to create sales of phony license and fee agreements to bolster Team’s reported income. The indictment describes a scheme that lasted from June 1999 to February 2001, when the fraud was revealed and Levin resigned. Team filed for bankruptcy in June 2002. The SEC filed a civil suit in 2005. The delay in filing the indictment presumably created some serious statute of limitations issues for the government.

The 13-count indictment charges conspiracy, three counts of maintaining false books and records, ten counts based on false filings with the SEC, two counts of making false statements during sworn testimony before the SEC, and obstruction of an agency proceeding. It is interesting to note what the indictment does not contain – perjury charges (instead of the false statements charges) based on the SEC testimony, or mail and wire fraud charges.

Indictment - Download team_comm_stock_fraud_indictment.pdf

(jks)

April 7, 2008 in Fraud | Permalink | Comments (0) | TrackBack (0)

Sunday, April 6, 2008

Commentary on Stringer - Another Blow to SEC Investigations

What does the Ninth Circuit Stringer opinion mean, besides the fact that it reversed the lower court decision (see details here)? Does this decision grant new abilities to the government in conducting parallel proceedings and using that information between the two entities? Here are some of my thoughts?

  • In many ways this is a very narrow decision in that it emphasizes SEC Form 1662 was provided to the witnesses here and that this fact alerted them that information produced by the SEC could be used in a criminal proceeding. Thus, parallel proceedings that do not involve a situation where the accused had been provided with this form could arguably not be covered by this decision. But this is not likely to assist defense counsel as the form appears to be a routine SEC one.
  • The decision is also limited in that it restricts the use of the information to situations when the SEC proceeded prior to the DOJ criminal investigation.  The court finds that when the civil investigation begins first, there is less likelihood of bad faith.  Again, little assistance to the defense here, as it seems likely that most civil investigations precede the criminal matter.
  • The case reminds us that there has not been Supreme Court case-law on the dynamics between parallel proceedings since Kordel in 1970.  This is a well written invitation to the Court to speak clearly on this matter.  And the U.S. Supreme Court should accept this invitation as increased agency enforcement warrants careful scrutiny of what is and what is not permitted by prosecutors who are a part of a parallel investigation.
  • The court using Kordel  states that the government cannot act in bad faith 1) "if it brings a civil action solely for the purpose of obtaining evidence in a criminal prosecution" and 2) "does not advise the defendant of the planned use of evidence in a criminal proceeding." (Stringer, p. 3558) The court does not provide an explicit test to be used to determine when the government acts in bad faith in using a civil parallel proceeding to obtain criminal matter, leaving the question open in cases beyond those with an SEC Form 1662.
  • This case could easily go in the opposite direction in an en banc hearing.  And, absent a Supreme Court voice here, there are a lot of questions that remain open.

But the bottom line here is that the SEC suffers from this ruling, just as they did from the Martha Stewart case.  At first blush it might appear that the DOJ will have increased ability to obtain and use information from a parallel proceeding.   But the truth is more likely to be that those accused of crimes or issued a letter saying that they might be subject to an Indictment, may just refuse to provide information.  This decision, like the Martha Stewart prosecution, may just send the message not to talk with the SEC.  Knowing that information may be the basis of a criminal investigation will mean that investigations may present additional challenges to the SEC.

(esp)

Addendum - John Wesley Hall's - FourthAmendment.com

Stuart Gittleman, Complinet - Appeals court okays parallel SEC-DoJ investigations

April 6, 2008 in Judicial Opinions | Permalink | Comments (1) | TrackBack (0)

Is Blogging Hazardous to Your Health?

Checkout this NYTimes story here. I think there is some truth to this piece, especially when it's not your full-time job.  The law prof who takes on  blogging finds him or herself glued to the computer more hours than prior to taking up blogging.  Weight gain -  yes! Loss of Sleep - yes!  But in the end,  I would have to say that blogging results in better teaching, as the material learned while blogging significantly enhances the classroom experience.

I am hitting Paul Caron at TaxProf, Dan Solove at Concurring Opinion, Dan Filler at Faculty Lounge, Ann Bartow at Feminist Law Professors, Glenn Reynolds at InstaPundit, Paul Butler at BlackProf, and Doug Berman at Sentencing Law & Policy.  What do you think? 

(esp)

Professor Doug Berman - Sentencing Law & Policy - "I agree on all fronts.  I probably work more, but I also know I know more and do more.  And if I am putting myself closer to an early grave, at least I will leave a lot behind to cite..."

Joe Hodnicki - X.O Law Professors Blog  "Hazardous? Yes. Two herniated discs in my neck from toiling over a keyboard (bad posture) last year! Joe"

Professor Ann Bartow - Feminist Law Professors Blog - "I definitely spend too much time at the computer, which can't be good. Of far more concern to me, though, are the agressively nasty e-mails and (attempted) comments I receive as a result of the blog. They add a lot of stress." 

Professor Dan Fuller - Faculty Lounge - "Since law teaching is already a full-time job when you're not blogging, it's inevitable that blogging will eat into the rest of your life.  But for me, I've come to accept that it is a work-related hobby, and a great way to indulge in one of my personal love/hate passions: writing.  I agree with Ann - nasty responses are no fun.  But it only adds an incentive to write precisely, so that the nasty folk are at least responding to something I actually intended to say!"

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