Friday, June 13, 2008

Former Refco CEO: What Will the Sentence Be?

Former CEO of Refco, Phillip Bennett is set for sentencing on July 3rd.  He plead guilty (see here) to what the government called a 2.4 billion dollar fraud. With white collar sentences often determined by the amount of loss, this figure raises questions of whether this guilty plea will match a sentence with a comparable loss figure and whether consideration will be given for his individual circumstances. Clearly as noted in the brief of the defense, there are strong factors for a lower sentence for this 60 year old man.  For example, the brief presents a strong section on his "kind works and charitable deeds."  Martha Graybow (Reuters) provides a wonderful analysis of the issues to expect in this forthcoming sentencing in an article titled, Prosecutors Seek Stiff Jail Term for Ex-Refco CEO.

Below are the Defense and Government Sentencing Memorandum -

Defense - Download bennett_sentencing_memo.pdf

Government -Download usa_sentencing_memo.pdf

(esp) (w/ a hat tip to Whitney Curtis for her wonderful assistance)

Addendum - See Tom Kirkendall's Houston CleakerThinkers here.

June 13, 2008 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Thursday, June 12, 2008

Mortgage Fraud: A US Attorney's Office Shows the Strength of a Coordinated Effort

Without doubt, mortgage fraud is a top concern these days.  The FBI is making it a key focus (see here; see also Robert Schmidt, Bloomberg, FBI Halts Some Cases to Investigate Mortgage Frauds).  Attorney General Mukasey has opted against setting up a separate task force to handle these cases. (see here).  Thus, U.S. Attorney offices have to proceed without a central task force. 

In the U.S. Attorney's Office for the Middle District of Florida we see a coordinated effort by several entities in the prosecution of a mortgage fraud case. A Press Release of this office describes their Mortgage Fraud Task Force, "formed in January 2008," that "include[s] the United States Attorney’s Office; 25 local, state, and federal law enforcement agencies; three State Attorney’s Offices (6 , 10 and 13 Circuits), the Florida Office of Statewide Prosecution, and eight non-law enforcement partners."  The result of the coordinated effort in one case was a plea agreement where the individual received a sentence of "eight and a half years' imprisonment for one count of wire fraud affecting a financial institution and one count of aggravated identity theft."  The individual also had a sentence of mortgage related activity in Illinois. (see Elaine Silverstrini, - Mortgage Scam Artist Who Helped Authorities Gets Prison) Which makes one wonder if a national effort is needed.

The Tampa case was handled by Thomas N. Palermo, an Assitant United States Attorney in the MIddle District of Florida.

Press Release - Download uribe_tpa_mtgfraudsentencelea202.pdf


June 12, 2008 in Fraud | Permalink | Comments (1) | TrackBack (0)

In the News

Bob Martin, The Montgomery Independent, U.S. Attorney Offices in Northern Middle Districts are being probed by the Justice Department for possible political prosecution in the Siegelman cases (previously discussed here, here and here)

DOJ Press Release - Ex- Finance Director of Soka University of America Pleads Guilty in $1.7 Million Embezzlement

DOJ Press Release -Santa Barbara County Man Surrenders in Federal Fraud Case Alleging $ 6 Million in Losses to Victims Across U.S.

DOJ Press Release - Second Former Home Depot Employee Charged in Alleged Kickback Scheme

Chris Ornelas KOB-TV, and Joshua Panas, Businessmen implicated in travel scam

Linda Stamato,, Corporate wrongdoing and deferred criminal prosecution: An issue that won't go away 

Michael Stanton, Providence Jrl,  Judge rejects Licht affidavit ("Robert A. Urciuoli, the former president of Roger Williams Medical Center, is trying to convince a judge that he should not be retried on federal corruption charges because prosecutors improperly pressured the hospital to fire him and stop paying for his legal defense.') 


June 12, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 11, 2008

In the News

Laurel Brubaker Calkins, Bloomberg, Ex-Merrill Banker Asks U.S. to Probe Enron Prosecutor

Mike Robinson, USA Today (AP) - Corruption fighters find Chicago a challenge

DOJ Press Release - San Gabriel Valley Woman Arrested on Federal Fraud Charges for Defrauding Medicar out of $12 Million

DOJ Press Release - Three Miami Area Brothers and Physician’s Assistant Charged in $110 Million Health Care Fraud Scheme

NYTimes, Grim Clues as Bayou Founder Goes Missing

Ben Schmitt, Detroit Free Press, City hires lawyer to fight council's ouster of mayor (discussing the hiring of Professor Robert A, Sedler from Wayne State Law School) (see prior posts on the text message scandal here)

Johanna Newman, LA Times, Barack Obama advisor Jim Johnson quits under fire ("The former chairman of Fannie Mae was one of three advisors considering vice presidential candidates. He resigns after questions are raised about favoritism he may have received from Countrywide.")

Wall Street Jrl (AP) - China Hackers Hit U.S. Congress

Peppi Kiviniermi, Wall Street Jrl, EU Launches Probe of Alitalia Loan

Nathan Koppel, Wall Street Jrl Blog, More Details on Expected Milberg Settlement


June 11, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 10, 2008

Appellate Counsel for Wesley Snipes

Actor Wesley Snipes has hired Philadelphia lawyer Peter Goldberger as his appellate counsel. In addition to entering his appearance, Goldberger filed a Motion to Stay Further Appellate Proceedings arguing that the "Court should cancel or suspend the briefing schedule pending the entry by the district court of an amended or supplemental judgment containing all elements of the sentence to be imposed, including any imposition of costs of prosecution."

Motion - Download 11MCANBR.pdf


June 10, 2008 in Celebrities | Permalink | Comments (0) | TrackBack (0)

Stringer: What Are Others Saying

In United States v. Stringer, the Ninth Circuit held that "[t]here is nothing improper about the government undertaking simultaneous criminal and civil investigations." The court reversed a district court opinion that had held that "that the government had engaged in deceitful conduct, in violation of defendants' due process rights, by simultaneously pursuing civil and criminal investigations of defendants' alleged falsification of the financial records of their high-tech camera sales company."

Many have commented on this decision. (see, e.g., here and here).  And now there are additional individuals talking about what will ultimately be the effect of this Ninth Circuit reversal.

Jeffrey B. Coopersmith and Patrick T. Jordan, DLA Piper, Stringer May Not Be Dead Yet, Securities Law 360 - Download stringer_article_final.pdf  (This article was first published in Securities Law 360 and blogged with permission).

Dechert Sent out a Notice to It's Clients titled, Ninth Circuit's Decision Raises Critical Issues for Companies and Individuals Confronted with a Government Civil Investigation.


June 10, 2008 in Civil Litigation | Permalink | Comments (0) | TrackBack (0)

Commentary on Bridge Case

The Supreme Court ruled in  Bridge et al. v. Phoenix Bond & Indemnity Co. et. al., on the role of reliance when RICO is premised on a predicate act of mail fraud (see here).  The Court's opinion is not surprising. Here are some thoughts -

  • Since its passage in 1970, the Court has been reluctant to restrict the reach of the RICO Act. And although the statute has long left its initial roots as a tool to combat organized crime to become a statute that is regularly used by both prosecutors and civil litigants in common cases of fraud, the Court has reigned it in.
  • Even when interstate commerce was restricted in Lopez, the Court came back in the Robertson decision and held that RICO had an alternative way of proceeding - either "engaged in" or "substantially affect" interstate commence.
  • The two key cases that restricted RICO, H.J. Inc. v. Northwestern Bell Telephone Co. and Reves v. Earnst & Young, both were interpreting the statutory language.
  • The Court has ruled in several cases to restrict the constantly expanding mail fraud statute.  Mail fraud is a commonly used predicate offense in RICO.
  • Although the Court often refers to common law  concepts when discussing fraud statutes, it won't help the party being subjected to a RICO claim as the Court firmly notes that "Congress chose to make mail fraud, not common-law fraud, the predicate act for a RICO violation."
  • The Court sends a clear message to Congress that if you don't like this decision, then its up to you to correct it.  And Congress may want to consider this challenge as this decision opens the door to increased civil litigation using RICO.


June 10, 2008 in Judicial Opinions, RICO | Permalink | Comments (0) | TrackBack (0)

Monday, June 9, 2008

Supreme Court Rules in RICO Mail Fraud Case

In a unanimous opinion delivered by Justice Thomas in the case of Bridge et al. v. Phoenix Bond & Indemnity Co. et. al., the Supreme Court stated:

"The Racketeer Influenced and Corrupt Organizations Act (RICO or Act), 18 U. S. C. §§1961–1968, provides a private right of action for treble damages to "[a]ny person injured in his business or property by reason of a violation" of the Act’s criminal prohibitions. §1964(c). The question presented in this case is whether a plaintiff asserting a RICO claim predicated on mail fraud must plead and prove that it relied on the defendant’s alleged misrepresentations. Because we agree with the Court of Appeals that a showing of first-party reliance is not required, we affirm."

Commentary to follow.


June 9, 2008 in Judicial Opinions | Permalink | Comments (1) | TrackBack (0)

Getting an Indictment Instead of a Job

With unemployment high, with people desperate for jobs, we may be seeing more instances of alleged puffing or fraud in the job search process.  But one doesn't expect the government to be spending its time prosecuting individuals based upon alleged fraud in the job search.

But Martha Graybow, Reuters, U.S. Businessman Accused of Fraud in Job Search reports otherwise.  And to make matters even worse, the government wanted the job seeker detained.  The magistrate judge in Miami responded with a $25,000 bond, which the government then sought to stay. And when that was denied, the government headed to New York to secure a stay.  Again a denial for the government.  The accused is represented by David Oscar Markus, who blogs at the Southern District of Florida Blog.

The Motion to Dismiss this case - Download dismiss.pdf


June 9, 2008 in Fraud | Permalink | Comments (0) | TrackBack (0)

Court Instructions in a Section 1346 Case

Jury Instructions can be important in a trial.  In addition to serving as a basis for an appeal, they can also provide the jury with an understanding of the law.  The legal complexities often seen in a white collar case make jury instructions particularly important. 

In a recent case that alleged fraud, where the prosecution used 18 U.S.C. s 1346 the intangible right to honest services statute, the jury needed to consider state law in reaching its verdict (see here).  Specifically they had to examine the role of state law in a state like Rhode Island, that has a part-time legislature and permits its senators to work privately. The court gave the following preliminary and final instructions explaining this aspect of the law to the jury.  The jury returned not guilty verdicts for the two former CVS executives.

Preliminary Instructions - Download preliminary_instructions.PDF

Final Instructions - Download jury_instuctions_state_law.PDF


June 9, 2008 in Fraud | Permalink | Comments (0) | TrackBack (0)

Sunday, June 8, 2008

Re-evaluating Corporate Criminal Liability - Ionia

The briefs in the case of United States v. Ionia Management, S.A. are now starting to appear in the Second Circuit, where the case will be heard on appeal.  And although the case has worthwhile arguments related to statutory construction, sentencing, and procedure, the focus here is on the issue of whether there was sufficient evidence "to establish vicarious criminal liability for a corporate defendant under respondeat superior" and whether there was error in the "trial court's instructions on corporate liability." This case forcefully takes on corporate criminal liability both from a policy perspective and in its application.  This is clearly a case that needs to be watched.

The company, "a ship management company headquartered in Piraeus, Greece," was convicted of conspiracy, pollution (Act to Prevent Pollution from Ships), and obstruction of justice, following a jury trial.  The company was fined $4.9 million in addition to probation and assessments.

The amicus brief is written by Andrew Weissman (remember him from Enron), now at Jenner & Block, for a group consisting of the Association of Corporate Counsel, Chamber of Commerce, National Association of Criminal Defense Lawyers, National Association of Manufacturers, New York Association of Criminal Defense Lawyers, and the Washington Legal Foundation. This amicus brief examines the initial New York Central case that serves as the bedrock for corporate criminal liability.  But it places this decision in the real world of today where a corporation may be facing scrutiny, despite the utmost care, because of a lower-level employee's alleged failure to follow the law. The brief calls for the court to "adopt a standard for vacarious corporate criminal liability" . . . that limits "the application of respondeat superior."

There are many options available to the court to limit a doctrine that needs to be examined in the real world of today, a world with international dimensions resulting from corporations that have employees on more than one continent, where statutes omit mens rea terms, and where the trial penalties can destroy a company. My personal preference here is for the establishment of a "good faith defense" for a corporation being charged criminally for the acts of a rogue employee (see here). It is good enough in the civil context, so clearly this approach should be allowed here.

Appellant's Brief -Download ionia_mgmt.Appellant Open Brief.pdf

Amicus Brief - Download Ionia_Amicus_Brief.pdf


Addendum - See Tom Kirkendall's Houston's ClearThinkers here.

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