Saturday, June 21, 2008

In the News and Blogosphere

Carrie Johnson, Washington Post, Justice Dept. Grant Overseer Subject of Criminal Probe

John Fritze, Gus G. Sentementes and Lynn Anderson, Baltimore Sun, State raids mayor's home

DOJ Press Release - "A former New York City engineer pleaded guilty . . . to participating in a conspiracy to commit bribery in connection with a project to repair New York’s Pier 86, the principal location of the Intrepid Sea, Air and Space Museum."

Instapundit - Sharpton Lawyers Up in Tax Probe

Jessica Gresko, AP, Ex-UBS banker pleads guilty in US tax evasion case

Larry Ribstein, Ideoblog, More on the Bear Indictments

William Rashbaum, NYTimes, Prosecutors Question Tests of Concrete in City Buildings (an investigation coming from Robert Morgenthau's Office - Mahattan District Attorney)

DOJ Press Release - Banker Pleads Guilty to helping American Real Estate Developer Evade Income Tax on $200 Million

DOJ Press Release - Chinese National Sentenced for Economic Espionage (the 3 year sentence is the first ever for a violation of 18 USC Section 1831)


Addendum -

Jenna Johnson, Washington Post - Corporate Espionage Detailed in Documents   (excellent article regarding corporate spying)

June 21, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Collateral Consequences of a Criminal Conviction & Martha Stewart

Sometimes the collateral consequences of a conviction make no sense.   Martha Stewart could not possibly hurt anyone or be a harm to the UK, yet the technicality of the conviction initially denied her receiving a visa. See CNN, Martha Stewart Denied UK Visa But Hopes to Visit Soon.


Addendum - There is certainly a question as to why Ms. Stewart needed a visa, and what legal provision in the UK looks at criminal convictions in other countries? Any readers know the answer here?

June 21, 2008 in Martha Stewart | Permalink | Comments (2) | TrackBack (0)

Friday, June 20, 2008

2008 Report - Corporate Fraud Task Force

The 2008 Report to the President of the Corporate Fraud Task Force is now available (see here).  And reading the many prosecutions with guilty pleas and convictions after trial, one would certainly think that this task force has been an incredible success.  After all the Report says that the DOJ "has obtained nearly 1,300 corporate fraud convictions."  It states that "[t]hese figures include convictions of more than 200 chief executive officers and corporate presidents, more than 120 corporate vice presidents, and more than 50 chief financial officers." The Report even goes so far as to supply successes with civil enforcement.

But there is something noticeably missing from this report. How about the not guilty verdicts?  Shouldn't a report of this nature present a fair assessment of what really happened with this Corporate Fraud Task Force? Back when they issued their 5 year report I wrote (here) -

But omitted from the list of companies and employees are numbers of those found "not guilty."  The report does not speak about the death sentence given to Arthur Andersen, LLP, a conviction that was later reversed by the Supreme Court.

It is important to remember that prosecutors are to be "ministers of justice."  And "win" or conviction records are not what counts.  What matters is whether the prosecutor has proceeded against criminality in a fair and professional matter.

The closest the latest Report comes to presenting a true picture of what happened, is on page 1.11 when discussing KPMG they say that "the Government is currently appealing an adverse ruling in connection with the remaining 13 individuals."

This Report should be sent back for a rewrite.  Lets see a Report that presents a true picture of what has been accomplished by the Task Force.  That picture may show that the government has been successful in many cases.  But it will allow the President to see exactly what has or has not been accomplished by this Task Force. 


June 20, 2008 in Think Tank Reports | Permalink | Comments (1) | TrackBack (1)

The Government Files Notice of Appeal in the Snipes case

Following the pre-appeal motions in the Wesley Snipes case is not easy.  The latest is that the government filed a Notice of Appeal in the 11th Circuit ( Download usnoa_061908.pdf) and one has to figure they must be contesting the bail order granting Wesley Snipes bail pending appeal. The court in the Middle District of Florida granted bail finding that Wesley Snipes was not a flight risk and that the court was "not prepared to say that the issues on appeal are patently frivolous or asserted merely for purposes of delay." (see here).  It seemed simple - some courts grant bail and some deny it (see here).  When it is denied, one sees the accused before the appellate tribunal asking for relief.  But could it possible be that the government is appealing a bail order of a case involving misdemeanor convictions?


June 20, 2008 in Celebrities | Permalink | Comments (0) | TrackBack (0)

Do We Need A Scoreboard to Keep Track of Prosecutions

Amir Efrati and Tom McGinty  of the New York Times have a must-read article titled, Youz Indictin' Who? A Rivalry Grows For Stock Cops in Brooklyn, Manhattan.  Although it is good to see that two offices in New York are going to be strong in bringing white collar cases, it is pretty frightening to think that a rivalry may be in the making. It is hard to imagine that a prosecutor's office might become like the end-of-the-month street cops, trying to arrest people to keep the numbers high. They may all be speeding, but there is something bothersome about such an investigative and prosecution philosophy, especially in the white collar sphere. 

This article made me remember a 1986 article in the NYTimes by Arnold Lubasch, titled Lindenhauer Pleads Guilty as Officials Debate Subpoena (sorry no link available).   The article talked about how a normally "routine arraignment procedure was marked by a behind-the-scenes conflict between Rudolph W. Giulianai, the United States Attorney in Manhattan, and Robert M. Morgenthau, the Manhattan District Attorney."  In this article it was a federal-state rivalry.  How interesting to now see it as a federal-federal one.


June 20, 2008 in Prosecutors | Permalink | Comments (1) | TrackBack (0)

Operation Malicious Mortgage

U.S. Attorney's Offices throughout the United States are going to be busy prosecuting mortgage fraud cases in the next few months as Operation Malicious Mortgage brought numerous arrests this past week. An FBI Press Release noted that:

"Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged. Yesterday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges in Operation Malicious Mortgage cases were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneys’ Offices based upon the law enforcement and investigative efforts of participating law enforcement agencies. The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases."

AG Mukasey has not provided for a separate task force to investigate and prosecute mortgage fraud cases, (see NYTimes here) although some individual U.S. Attorneys Offices have created such a task force. (see here) The FBI Press Release does note that "The President’s Corporate Fraud Task Force, chaired by Deputy Attorney General Filip, is also responding to issues raised by mortgage fraud in the corporate sector."


Addendum - Remarks of Deputy Attorney General Mark R. Filip at Press Conference Announcing the Results of Operation Malicious Mortgage here

June 20, 2008 in Fraud | Permalink | Comments (0) | TrackBack (0)

Former Bear Stearns Managers Indicted

The founder and former senior portfolio manager of two Bear Stearns hedge funds, and a former portfolio manager of the funds were indicted for conspiracy, securities fraud, and wire fraud. One of the individuals was also charged with insider trading. The case is the classic case of the funds going down and everyone then looking for someone to blame.

The DOJ Press Release states that

"[T]he defendants believed that the Funds were in grave condition and at risk of collapse. However, rather than alerting the Funds’ investors and creditors to the bleak prospects of the Funds and facilitating an orderly wind-down, the defendants made misrepresentations to stave off withdrawal of investor funds and increased margin calls from creditors in the ultimately futile hope that the Funds’ prospects would improve and that the defendants’ incomes and reputations would remain intact. The subsequent collapse of the Funds during the summer of 2007 resulted in losses to investors totaling more than $1 billion."

This is likely to be yet another case in which emails will be used to try and show knowledge of problems with the funds and lack of honesty in reporting these problems to investors.   Clearly honesty in the market is important.  But one also has to wonder if the use of criminal charges is appropriate in cases that would not have occurred but for the poor economy. It is also a concern that the government is using overly broad statutes to criminalize an alleged lack of honesty.

See also:

Kate Kelly, Wall Street Jrl, Two Ex-Managers At Bear Indicted Over Hedge Funds

Landon Thomas Jr., New York Times,  Prosecutors Build Bear Stearns Case on E-Mails

Felix Salmon, Market Movers, Conde Nast Portfolio,com, Hedge Funds: The Legal Risks


Addendum - Indictment - Download indictment.pdf

(w/ a hat tip to Whitney Curtis)

June 20, 2008 in Prosecutions | Permalink | Comments (1) | TrackBack (0)

Wednesday, June 18, 2008

Commentary on Safavian Reversal

It all started back in September of 2005 when David Safavian, " [a] former General Services Administration (GSA) official was arrested on charges of making false statements and obstructing an investigation by the GSA’s Office of Inspector General (GSA-OIG)." (press release).  And it all pertained to Jack Abramoff and a golf trip.  (see here and here).  At the beginning Karl Rove's name was mentioned, and one wondered whether there was a desire to have Safavian implicate someone high-up in the administration. (see here).  But early on it was easy to discern that the source of the information for bringing the Safavian case was from Abramoff -- and he was talking. (see here)

The government did some unusual things in the course of this case - they went so far as to release emails between Safavian and Abramoff (see here).  And one had to wonder if they were looking for a quick plea or someone who might talk and give them information in support of Abramoff. As opposed to investigating any possible real conduct, the government opted for the "shortcut" using so-called easier to prove crimes like obstruction of justice. (see here).  But taking shortcuts does not always work.   Safavian instead decided to take the government on - he went to trial.  He was convicted and did not join the "Abramoff Club" as a cooperating witness.(see here).  The government wanted a guideline sentence of 30-37 months and the defense wanted home confinement or probation. (see here).  The judge went for the middle-ground and entered an 18 month sentence for Safavian. (see here).  Interestingly, Safavian was not willing to offer the remorse needed for perhaps a lower sentence, but in retrospect one sees he made a good choice.

Fast forward to this week. The D.C. Circuit Court of Appeals reversed some of the counts, and vacated and remanded some other counts. Some thoughts:

  • Even when you win, you lose.  One can't bring back the years of turmoil and uncertainty caused by waiting for this case to be resolved.  Those around him have probably suffered with him. And the attorney fee bills have probably added up throughout this process. The golf trip of August 2002 has been a costly one for David Safavian, irrespective of this recent judicial support.
  • It seems bizarre to say that "once an individual starts talking, he cannot stop."  The court reinforces the position that absent a legal duty to disclose there can be no concealment. The D.C. Circuit Court of Appeals even goes so far to say that there are no cases that support the government's position here.
  • The exclusion of evidence was found to be improper.  The district court was afraid the evidence would confuse the jury - and in white collar cases that can easily happen. But on the other hand experts are needed in these cases because there are difficult matters that a jury needs to understand in order to determine whether conduct should be considered criminal.
  • The court leaves open the option for a new trial on some of the counts. But one has to wonder if this golf extravaganza is really worth any more taxpayer time and money. The game is over.

Opinion - Download Safavian.pdf

(esp) (blogging from Baltimore)

June 18, 2008 in Judicial Opinions | Permalink | Comments (1) | TrackBack (0)

Safavian Conviction Overturned

Matt Apuzzo, AP   - Conviction Thrown Out in Abramoff Scandal

Commentary to Follow.


June 18, 2008 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 17, 2008

In the News and Blogsphere

David Marcus, SDFL Blogspot, Former Atlanta Mayor Bill Campbell  (provides thoughtful commentary to Bill Rankin's AJC Article - Ex-mayor misled officials to enter rehab program, documents say)

Brian Baxter, AMLaw Daily, Former Bear Stearns Managers Could Face Securities Fraud Charges

Carrie Johnson, Washington Post, Ex-Civil Rights Official's Testimony Under Review

DOJ Press Release - German-Based Operator of Ship and Chief Engineer Plead Guilty to Falsifying Records

Larry Ribstein, Ideoblog, Insurance and the Criminilization of Agency Costs

NYTimes Editorial, A Case of Politics (discussing the Don Siegelman case)

Washington Post, National Republican Congressional Committee (NRCC) to Reveal Embezzlement Details

The BLT - Blog of Legal Times, House Panel Subpoenas Valerie Plame Records

Dan Slater, WSJ Blog, It’s Official: Feds Call Former Bayou CEO a Fugitive from the Law

Davide Beretta, WSJ, Former EADS Executive is Detained

Tenth Circuit Rules in Wittig  (former CEO of Western Resources, Inc. - now Westar) - opinion here (court affirms sentence with the exception of the "special condition of supervised release") See Doug Berman's Sentencing Law & Policy - Third time's (almost) the charm in Tenth Circuit sentencing case for an excellent discussion and commentary.


June 17, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Monday, June 16, 2008

Milberg - Non Prosecution Agreement

A DOJ Press Release reports that the Milberg law firm will receive a non-prosecution agreement at a cost to them of $ 75 million.  "The Justice Department has agreed not to pursue criminal charges against the law firm, which has agreed to employ a compliance monitor and enact “Best Practices Program” for two years." See Press Release Here - Download milberg_firm_settlement.083.pdf 

Milberg's Press Release reads as follows -

"Milberg LLP announced today that federal prosecutors have agreed to dismiss all charges against the firm as part of a comprehensive settlement relating to the misconduct of certain former senior partners. The non-prosecution agreement provides that the government will promptly move to dismiss the indictment of the firm, and eliminates any plea or trial.

"Sanford Dumain, a member of the firm's Executive Committee, stated: 'We are pleased that the government specifically recognizes that none of the lawyers now at the firm was involved in any of the misconduct, and that in fact our former partners who were prosecuted were deliberately concealing their illegal activities from us. This favorable outcome now allows us to put a painful chapter behind us so that we can resume building one of the best known plaintiffs firms in the country.'

"'This settlement enables us to move forward with our continuing representation of investors and consumers in class actions and other important lawsuits, and allows us to capitalize on the tremendous talents of the lawyers at the firm,' he continued.

"The firm will make payments to the government totaling $75 million over the next five years as part of the settlement. Regarding the amount, Dumain stated: 'The firm risked having to pay forfeitures and penalties of many hundreds of millions of dollars if the criminal case against the firm had gone forward. We wanted to avoid that enormous risk, which we faced solely because of the misconduct of certain of our partners who are no longer with the firm.'

"The firm plans to make the settlement payments out of firm resources and income, and is evaluating pursuing claims against responsible parties. The firm also agreed to expand its 'best practices' compliance program, which it instituted prior to indictment.

"Dumain reiterated the firm's apology, based on the former partners' misconduct, to 'all judges, lawyers, clients and class members who deserve full and complete adherence to all legal and ethical norms. We pledge to faithfully comply with those standards as we rebuild our practice.'

"Management of the firm was taken over last year entirely by partners who were neither engaged in nor aware of the misconduct charged by the government, thereby clearing the way for the firm to expand its retention by top-tier clients and its appointment as lead or co-lead counsel in prominent cases. Recent new matters include securities cases in the fields of subprime mortgage and auction-rate obligations, and other ERISA, consumer, and antitrust cases. The firm has over 65 lawyers and 130 staff employees in New York, Los Angeles and Tampa.

"Recognizing the start of a new era for the firm, Dumain added: 'Even during our darkest times, our talented team of lawyers continued to achieve significant results for our clients. Now, with the non-prosecution agreement, we are prepared to re-affirm our position as the nation's leading class action law firm.'"


Addendum - Agreement - Download Agreement.pdf   (w/ a hat tip to Peter Henning)

June 16, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Rove Willing to Talk About Siegelman, But Not the Others

In a letter to Karl Rove's attorney we see John Conyors, Jr., Chair of the Subcommittee on Commercial and Administrative Law saying that "[a]s Committee staff made clear, and as we indicated in our May 1 letter, the proposal that we somehow seek to separate the Siegelman matter from the broader issue of politicization of the Justice Department is unacceptable." 

The letter lets Rove know that he needs to appear on July 10th, and that if he has specific objections to questions, he can make the objections at that time. But the letter also states to Rove's attorney that, " [w]e remain very willing to meet with you and your client to discuss this matter."

In the meantime, DOJ's Office of Professional Responsibility and the Inspector General are also conducting an investigation into specific cases and looking perhaps at whether politics may have entered into the DOJ. (see here).  Dan Slater, over at the Wall Street Jrl Blog, reports on some recent events in the investigation of the "attorney-firings" in his blog entry,  U.S. Attorney Mess: DOJ Files First Grand-Jury Referral.

Although it it good to see Congress stepping in to provide some oversight, there is still one item missing here - where is the appointment of a special prosecutor to investigate whether politics improperly entered into the decision-making process in DOJ?   Should DOJ be handling this investigation, or isn't this a conflict?


June 16, 2008 in Investigations | Permalink | Comments (0) | TrackBack (0)

Sunday, June 15, 2008

In the News