June 6, 2008
Conrad Black Appeal Heard by 7th Circuit
The Seventh Circuit Court of Appeals listened to arguments in the Conrad Black appeal. The panel included Hon. Richard Posner. Here are stories describing the oral argument -
Chicago Tribune (AP) - Black's attorneys tell court his trial wasn't fair
Susan Chandler, Chicago Tribune - Judges appear cool to Black appeal - Media baron didn't steal, attorneys says
In the News
Stephen Labaton, NYTimes, Intel Facing Antitrust Investigation
DOJ Press Release - Oregon Corporation and Its President Sentenced for Hazardous Waste Violations
Non-Prosecution Agreement in FCPA Matter
Who gets prosecuted, who gets a deferred prosecution agreement, and better yet - who gets a non-prosecution agreement? Prosecutorial discretion plays an enormous role in answering this question. And in many ways this is good when prosecutors are factoring in human aspects such as trying to avoid harm to innocent third parties. But many in the world would like the guidance of how to better their case to receive the least damaging result to their company when conduct within the company crosses the line.
Continuing to provide transparency to the process appears to be the best way to discern the nuances that allow for the differing results. But this can be difficult.
DOJ just announced in a press release the agreement by Faro Technologies Inc. to a non-prosecution agreement. "Faro Technologies Inc. (Faro), a public company that specializes in computerized measurement devices and software, agreed to pay a $1.1 million criminal penalty in connection with corrupt payments to Chinese government officials in violation of the Foreign Corrupt Practices Act (FCPA)." The non-prosecution agreement has a two year term and includes an agreement for an independent corporate monitor.
On its website, the company describes the resolution of this matter and also notes that "[w]ith approximately 17,000 installations and 7,600 customers globally, FARO Technologies, Inc. designs, develops, and markets portable, computerized measurement devices and software used to create digital models -- or to perform evaluations against an existing model -- for anything requiring highly detailed 3-D measurements, including part and assembly inspection, factory planning and asset documentation, as well as specialized applications ranging from surveying, recreating accident sites and crime scenes to digitally preserving historical sites." (see here)
As with so many white collar matters, there is also a parellel proceeding here. "[T]he Securities and Exchange Commission (SEC) today instituted a settled enforcement action against Faro. Faro consented to the entry of a cease and desist order and agreed to pay approximately $1.85 million in disgorgement and prejudgment interest . . ." (see also SEC here)
June 5, 2008
In the News
Russell Hubbard, Birmingham News, Scrushy must return to Birmingham to testify in civil suit, order says
Paul Waldie, GlobeandMail.com, Black's lawyers headed to court for 'long-shot' appeal
Corporate Legal Times, Paul Weiss Adds Partner From SEC's Enforcement Division
DOJ Press Release - Former New York City Employee Indicted in Conspiracy to Commit Bribery (was a former NYC engineer)
DOJ Press Release - FBI Employee Pleads Guilty to Illegally Accepting Gratuity
DOJ Press Release - Walgreens to Pay $35 Million to U.S., 46 States & Puerto Rico
to Settle Medicaid Prescription Drug Fraud Allegations (civil settlement)
Former CEO and CFO of Broadcom Indicted
A DOJ press release tells that Henry T. Nicholas III, co-founder and former CEO of Broadcom, who also served as co-chair of the board of directors of Broadcom, and William Ruehle, the former CFO were indicted on charges that they allegedly engaged "in a stock-option backdating scheme that forced Broadcom to write-down $2.2 billion in profits." A second indictment against the former CEO related to drug charges including accusing "Nicholas of using ecstasy to spike the drinks of industry executives and employees of Broadcom customers."
It sounds like the evidence to be used against these individuals may have come from a cooperating witness as "the former executive vice president of Human Resources at Broadcom, pleaded guilty to obstruction of justice charges and agreed to cooperate." (see here)
It's a massive 21 count, 65 page indictment that includes a host of criminal charges like "conspiracy, securities fraud, false certification of financial reports, false statements in reports filed with the SEC, lying to accountants, falsification of corporate books and records, and honest services mail and wire fraud."
The government also has a parallel proceeding in a pending SEC civil action. (see here) (Note that general counsel was listed on SEC matter).
With the former CEO and CFO indicted together, one has to wonder if the government will be seeking to obtain a plea to secure testimony from one of these individuals to be used against the other. Based upon recent cases, it seems we often see the CFO providing the testimony against the CEO. But on the other hand, the government may feel it has sufficient evidence in the documents and the testimony of the human resources VP and maybe they have others who have agreed to cooperate. How these individuals will hold up under cross-examination also remains to be seen. But the real question may be whether DOJ should be spending tax dollars on this type of prosecution.
Nicholas-Ruehle Indictment - Download broadcom_nicholasruehle_indictment.pdf
Nicholas Indictment (Drug Related) -Download broadcom_nicholas_drug_indictment.pdf
June 4, 2008
The press is reporting on the conviction of Antoin Rezko:
Bob Secter & Jeff Coen, Rezko Convicted of Corruption
Peter Slevin, The Trail Blog, Washington Post - Rezko Convicted of Influence Peddling
Catrin Einhorn & Susan Sauley, NYTimes - Fund-Raiser Convicted in Illinois Bribery Scheme
Ilan Brat & T.W. Farnam, Wall St Jrl, Fund-Raiser Rezko Found Guilty in Illinois Corruption Trial
The case drew national attention when the names of Obama and Blagojevich surfaced during the trial. For background see here, here, here, here and here. The initial DOJ Press Release can be found here.
(esp)(blogging from Atlanta)
Government Has Second Thoughts in Siegelman/Scrushy Appeal
The government filed a Motion for Voluntary Dismissal of Government's Cross Appeals in the case involving former Alabama Governor Don Siegelman and former CEO of HealthSouth Richard Scrushy. The cross-appeal had been premised on the sentences given to the pair - the government wanted higher.
So why would the government drop this appeal. Some possibilities, although whether any of these ideas have merit will only be seen down the road:
- The government realized that the sentences were appropriate and didn't want to hurt their chances on appeal with a frivolous issue?
- Higher-ups said no dice on going forward with this cross-appeal?
- DOJ's internal investigation is not going particularly well for the DOJ?
- Asking for draconian sentences will add pressure for Congress to look closer at why this case was originally brought?
Although the government is dropping the cross-appeal, they still want the same amount space/words allowed in their brief as if this issue were before the court. The Eleventh Circuit Court of Appeals has yet to rule on whether this dismissal warrants a modification of the brief length.
(esp) (blogging from Atlanta, Georgia)
Addendum - Scott Horton, Harper's Magazine - Siegelman Prosecution Continues to Unravel
June 3, 2008
AGA Medical Corp. Gets Deferred Prosecution Agreement on FCPA Matter
A DOJ Press Release reports that "AGA Medical Corporation (AGA), a privately-held medical device manufacturer, has agreed to pay a $2 million criminal penalty in connection with corrupt payments to Chinese government officials in violation of the Foreign Corrupt Practices Act (FCPA)." The 2 count Information filed by the government "charges AGA with one count of conspiring to make bribe payments to Chinese officials and one count of violating the FCPA in connection with the authorization of specific corrupt payments to officials in China."
Not Guilty for 2 Former CVS Vice-Presidents
W. Zachary Malinowksi over at Projo.com reports (here) on the not guilty verdicts entered against the two former VPs from CVS. Perhaps the most amazing aspect here is that the jury issued the verdict in 90 minutes. This is particularly noteworthy as one often does not find the quick verdict in white collar cases. And although this case was not a heavy document case, it still involved allegations of fraud. The accused individuals had been charged with bribery, conspiracy, and mail fraud (see here). The case was built largely with testimony of a cooperating witness. One of the individuals in this case was represented by David B. Fein and Scott Corrigan of Wiggin and Dana.
Even though successful in court, it is never really a "win" for a criminal defendant who goes to trial. One cannot bring back the agony of facing the charges, the strain of the trial, and the personal costs one faces in maintaining innocence.
June 2, 2008
Scrushy Files Appellate Brief
Richard Scrushy, former CEO of HealthSouth, filed his appellate brief in the 11th Circuit Court of Appeals (for background see here) The 118 page brief is detailed, with key arguments focused on the following areas:
- No quid pro quo on the campaign contribution that is alleged to be related to an appointment & refusal by the court to give an instruction on the McCormick quid pro quo requirement
- Juror misconduct including juror use of the Internet
- Judicial conflict and failure to disclose the alleged conflict
- Jury composition challenge
- Admission of hearsay testimony
- Statute of limitations problem with one count
Scrushy also joins in the arguments raised by former Alabama Governor Seligman in his brief (see here). As with Seligman's brief, the fascinating issue is the lack of a showing or a quid pro quo when a campaign contribution formed the essence of the alleged criminality. It seems likely that the government will respond that the McCormick case should not extend beyond Hobbs Act cases, and therefore should not apply to the Scrushy/Seligman cases. But without seeing the government's brief, the defense argument seems like a strong one - since without a quid pro quo requirement we might find all campaign contributions being considered criminal activity.
In the News - Fieger Acquitted; Weiss 30 Months; Brocade Pays; Another Fall From Abramoff
Ashby Jones, Wall Street Jrl Blog, Mel Weiss Gets 30 Months in Prison
Ashby Jones, Wall St. Jrl. Blog, Brocade Pays $160 Million to Settle Options-Backdating Suit
DOJ Press Release - Former Congressional Chief of Staff Pleads Guilty to Public Corruption Charge - ("former chief of staff to a former Member of the U.S. House of Representatives has pleaded guilty to conspiracy to commit honest services wire fraud" - this is yet another case related to former lobbyist Jack Abramoff)
Supreme Court Rules Against the Government in Two Money Laundering Cases
One would not normally think of money laundering in the same sentence as white collar crime, since one usually considers the money laundering statutes in the context of drugs or gambling. But the reality is that "[t]here are more than 250 predicate offenses for the money-laundering statute," (J. Scalia, Santos) and often one sees money laundering added in white collar cases. (see here) It is a crime facing Attorney Ben Kuehne of Miami (see here). Thus, the Supreme Court decisions against the government in money laundering cases are important to the white collar area.
In Cuellar v. United States, the Court reversed a Fifth Circuit decision. The Court held -
"The provision of the money laundering statute under which petitioner was convicted requires proof that the transportation was "designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control" of the funds. §1956(a)(2)(B)(i). Although this element does not require proof that the defendant attempted to create the appearance of legitimate wealth, neither can it be satisfied solely by evidence that a defendant concealed the funds during their transport. In this case, the only evidence introduced to prove this element showed that petitioner engaged in extensive efforts to conceal the funds en route to Mexico, and thus his conviction cannot stand."
In United States v. Santos, the Court affirmed a Seventh Circuit decision. The Court held -
"From the face of the statute, there is no more reason to think that "proceeds" means"receipts" than there is to think that "proceeds" means"profits." Under a long line of our decisions, the tie must go to the defendant. The rule of lenity requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them. See United States v. Gradwell, 243 U. S. 476, 485 (1917); McBoyle v. United States, 283 U. S. 25, 27 (1931); United States v. Bass, 404 U. S. 336, 347– 349 (1971). This venerable rule not only vindicates the fundamental principle that no citizen should be held accountable for a violation of a statute whose commands are uncertain, or subjected to punishment that is not clearly prescribed. It also places the weight of inertia upon the party that can best induce Congress to speak more clearly and keeps courts from making criminal law in Congress’s stead. Because the "profits" definition of"proceeds" is always more defendant-friendly than the"receipts" definition, the rule of lenity dictates that it should be adopted."
In the News
International Herald (AP) - Former Credit Suisse banker gets 10-year sentence
June 1, 2008
Former Governor Don Siegelman's Support
The latest press reports on the Siegelman case -
Newsday (AP) - Ex-Attorneys General File Brief Supporting Siegelman
Ala.com (AP) - List of Former Attorneys General Signing Siegelman Brief (provides the list of 54 Former Attorney Generals Who Signed the Brief)
It is not surprising to see Former Governor Siegelman receiving significant support as the case is clearly one that needs scrutiny - even the DOJ is examining it (see here). And although the courts will scrutinize this case in the normal review process, more is needed here. An independent review is necessary to determine if politics in any way entered into the decision-making process. With enormous prosecutorial discretion provided to prosecutors, it is important for there to be accountability.
(esp) (blogging from Firenze, Italy)
Addendum - Amicus Brief - Download amicus.pdf