Thursday, July 3, 2008

Former CEO Refco Sentenced to Long Prison Term

Former CEO of Refco, Phillip Bennett, was sentenced today.  The Wall Street Jrl article by Chad Bray is titled, "Ex-Refco CEO Bennett Sentenced To 16 Years in Prison for Fraud." Bennett plead guilty (see here) to what the government called a 2.4 billion dollar fraud. Because loss is important in determining a sentence, the 60 year old man faced an enormous possible sentence.

The defense asked for a sentence "well short of the remainder of Mr. Bennett's life."  The government wanted a sentence comparable to that given to Samuel Israel (20 years); Bernie Ebbers (25 years); Steve Hoffenberg (20 years) and Patrick Bennett (22 years).  The government also referenced the sentences given to the Rigases, but the government memo was submitted prior to the three year reduction issued by the court (see here). Sentencing Memorandums for the parties in this case can be found here

This new sentence to the white collar sentencing world, and the ones mentioned above, again emphasize the fact that white collar offenders are being given long stiff sentences. With these recent stiff sentences being given for pleading guilty, more individuals accused of crimes may decide to risk trial. The government may start having second thoughts about their requests for long sentences. The six year sentence given to Andy Fastow for his plea and cooperation is not always being given to others.  This raises the question of what should be the value of cooperation.  When one receives an enormous value, as did Andy Fastow, one has to wonder how this disadvantages those individuals who may have nothing to offer in cooperation.

Indictment Part 1 - Download part_1_of_indictment.pdf

Indictment Part II - Download part_2_of_indictment.pdf

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

July 3, 2008 in Sentencing | Permalink | Comments (1) | TrackBack (0)

In the News

Amir Efrati, Wall Street Journal, has a fascinating piece titled, A Look at Judge in Bear Case:
He's Fair, Funny and Frank
.  Efrati looks at the judge that will preside over the case of the former Bears Stearns managers (see here).

DOJ Press Release, Owner of Medical Equipment Company Sentenced to 130 Months in Prison for Health Care Fraud

Chronicle of Higher Education, Diploma-Mill Operator is Sentenced to 3 Years in Prison (subscription required)

Marcia Coyle, 'McNulty Memo' Triggers an Ultimatum (subscription required)


July 3, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Samuel Israel III- "Alive and Well, and [Now] Living in" Prison

Samuel Israel III turned himself into authorities.  See David Abel & Todd Wallack, Boston Globe,  Swindler Who Faked Death Surrenders in Southwick, Judge Rejects Request To Go To Medical Center

Samuel Israel III, although now turning himself into authorities in Massachusetts, is accused of failing to report to prison three weeks ago. Judges in white collar cases, and other cases, sometimes allow the offender to voluntarily surrender to the prison. This is in large part because the facility may not have been determined at the time of the sentencing.  Thus, the court allows the person to wait and go directly to the facility where he or she will be doing the time. The accused avoids detention in temporary facilities and also keeps from being hopscotched across the United States.  If Israel is found to have failed to report, he can face the penalty of violating a court order. In addition to facing possible penalties for failing to report to prison, he also loses the ability to report directly to the institution.


July 3, 2008 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 2, 2008

Zach Scruggs Gets Time

Dan Slater's, Wall Street Jrl post is titled, Zach Scruggs Gets 14 Months, Though Gov’t Suggested Probation, and the title says it all.  Usually one receives a benefit for a guilty plea, and the prosecution wanted Zach Scruggs to receive that benefit when they asked that he receive a sentence of probation.  From the prosecution's perspective it becomes difficult to get individuals to plead to a charge if the penalty will be comparable to what might be received if the accused went to trial.  The value placed on giving up a jury trial is important to the prosecution as they are saving government resources through a plea. When individuals accused of crimes receive harsh penalties despite a guilty plea, they are more likely to risk a trial. But what isn't known in this specific case is what sentence the judge would have given Zach Scruggs if he had gone to trial and been convicted.  It is possible that he would have received the maximum penalty allowed under law.

This case is an example of the high price one pays for criminal activity when he or she is a member of the legal profession.  One is sometimes held to a higher standard.  One can also suffer collateral consequences. Bricklayers walk out of prison as bricklayers, as do plumbers, carpenters, and many other lines of work.  Lawyers seldom walk out of prison with a clear license to practice law.  The cost for a lawyer may not only be a higher prison sentence, but also serious consequences to their license to practice law.


July 2, 2008 in Sentencing | Permalink | Comments (0) | TrackBack (0)

The Future of White Collar Investigative Reporting

The diminishing print media is pretty frightening. It seems like every day one opens the newspaper to find another paper laying off people, consolidating, offering buyouts, and basically cutting back.  The dismal economy coupled with decreased advertising in print has serious consequences to the dissemination of news.  Most importantly in hurting print media is the World Wide Web and the availability of news online.

Blogs like this white collar crime blog do not replace the press.  They offer transparency on some issues, and hopefully also offer explanation of the issues covered by the press. This blog also aims at providing links to the vast sources available on the distinct topic of white collar crime.  In a world of information overload, having a place to easily access materials in a particular area can hopefully be time-saving. And to the many who peruse this blog - I thank you for clicking this way as it is nice to know that the many hours of work that this takes is useful to some.

But this blog does not do something very important for people, and it is something that print media has provided - this is investigative reporting. Many a white collar case arose as a result of someone in the media culling through government documents and speaking with relevant people to find corruption, discrepancies, and criminal conduct. Likewise, it is print media that investigates and exposes government improprieties.  The small Watergates that occur throughout the world are brought to light by the hard work of investigative journalists.

With newspapers reducing personnel and the web being an insufficient substitute - at least at present - for advancing this form of reporting, it raises concerns about an important check on government.  It isn't likely that the government will be bailing out this industry, and certainly conflicts arise in even considering this option.  But one has to wonder if white collar crime prosecutions, and other prosecutions of this nature will decrease as the press will no longer be there to expose criminality that is often difficult to prove.  And more importantly, will there be an appropriate check on government conduct when print media becomes a mere skeleton.

(esp) (w/ disclosure that my partner is in print media)   

July 2, 2008 in About This Blog | Permalink | Comments (3) | TrackBack (0)

In the News & Blogosphere

Karen Donovan, Conde Nast, The Unknown Milberg 

Carrie Johnson, Washington Post, A Backlog Of Cases Alleging Fraud - Whistle-Blower Suits Languish at Justice

Chronicle of Higher Education, 2 Former Tufts Administrators Are Accused of Embezzling Nearly $1-Million

Eric Lichtblau, New York Times, New Scrutiny of Hiring at Justice Department 

Justin Scheck, Wall Street Jrl, Former H-P Executive Indicted in Email Case


July 2, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Monday, June 30, 2008

In the News

Day Two of the National Institute on Cyberlaw

Guest Blogger - Whitney Scott -  A 3L at Stetson University College of Law - 

Day two of this year's National Institute on Cyberlaw started with a very informative session on digital forensics, or what can be obtained from a computer and how that information links people to knowledge. The panel discussed the types of information such as structured and unstructured, various kinds of data, where it is stored on a computer or other device, and how it can be recovered. The uses of this data are also varied. Lawyers need to know about this topic because of evidentiary concerns such as admissibility and reliability, discovery requests and compliance, and client protection.

The next session was a very lively debate on the constitutionality of the President's authorization for the National Security Agency to monitor communications between foreign nationals outside the U.S. and people located in the U.S., to include U.S. citizens. The arguments integrated originalist interpretations of the Constitution, historical uses of presidential power in foreign relations, the Fourth Amendment, the balance of powers between the legislative and executive branches, and the role of the President as the Commander in Chief.

The afternoon breakout session I attended concerned pornography, sexual predators and the Internet. An interesting issue was presented as to whether images of child pornography present in a computer's cache, as opposed to its hard drive, was enough to allow prosecution for possession of child pornography. Both the FBI panelist and the panelist representing the U.S. Attorney's office said that they knew of no prosecutions for possession when the images were only in the cache. A 9th circuit decision (U.S. v. Romm, 455 F.3d 990) that was mentioned concerning such a situation said that there has to be intent to exercise dominion and control over the images for possession to occur.

The last session of the day addressed the downloading of copyrighted material from the Internet. A vice president of the RIAA and the lawyer involved in the only case (Virgin Records, Inc. v. Thomas) in which the RIAA was successful in suing a person alleged to have distributed copyrighted material were on the panel. Although the RIAA won in the jury trial, the judge in the case requested both sides to present briefs on their positions. There is a three-way split in the law the RIAA is using to sue people. The issue is whether simply making copyrighted material available on one's computer is enough to constitute distribution under 17 U.S.C. 106(3). Some courts say it is, some say it is not, and others say that it is if there is intent to make the copyrighted material available as shown by the way it is stored on the computer.


June 30, 2008 in Conferences | Permalink | Comments (1) | TrackBack (0)

Sunday, June 29, 2008

In the News & Blogosphere

Phillip Inman, Guardian, UK is weak on tackling white collar crime and short sellers, says HBOS chairman

Martha Neil, ABA Law Journal News, Ex- Prosecutor: DOJ Destroyed My Career

Lawrence Hurley, Washington Briefs, Leahy Reveals Discussions with DOJ Over McNulty

(esp) (blogging from Denver, Colorado)

June 29, 2008 in News | Permalink | Comments (0) | TrackBack (0)

Recent Scholarship

Plea Bargaining's Survival: Financial Crimes Plea Bargaining, a Continued Triumph in a Post-Enron World

Affiliation Unknown

Oklahoma Law Review, Vol. 60, No. 3, Fall 2007
This article examines the war on financial crimes that began after the collapse of Enron in 2001. Although many believed that the reforms implemented following this scandal led to greater prosecutorial focus on financial crimes and longer prison sentences, an analysis of data from 1995 through 2006 reveals that little has actually changed. The statistics demonstrate that the government's focus on financial crimes has not increased and prison sentences for fraud have remained stagnant. How could this be the case? It is this author's hypothesis that although prosecutors could have chosen to use new statutes and amendments to the United States Sentencing Guidelines passed in the wake of Enron to increase prosecutions and sentences, they did not. Instead, prosecutors are using their new tools to encourage defendants to accept plea agreements that include sentences similar to those offered before 2001, while simultaneously threatening to use these same powers to secure astounding sentences if defendants force a trial. The result is that the promises of post-Enron reforms aimed at financial criminals were hollow and served only to reinforce plea bargaining's triumph.

From Boardroom to Courtroom to Newsroom: The Media and the Corporate Governance Scandals

Washington University School of Law

Journal of Corporation Law, Vol. 33, p. 625, 2008
Washington U. School of Law Working Paper No. 08-05-01

Enron and its progeny spawned an unprecedented amount of press coverage. To its credit the press has, in the main, acquitted itself well. But media coverage of the ensuing investigations and trials also has raised a host of provocative questions about judgment, professionalism and restraint. Using five high-profile criminal trials arising out of recent corporate fraud scandals as a springboard, this article provides a critical analysis of how media coverage - and defendants' efforts to spin that coverage - can influence the course and outcome of a trial. Some, but not all of the mischief originates with the press. Ever conscious of the potential for media coverage to alter the outcome, defendants in high-profile fraud trials have increasingly orchestrated costly multi-media public relations campaigns that demonize prosecutors, witnesses, and the press to exonerate themselves. The five case studies in the article highlight growing points of tension between the media and the courts and provide a concrete context for exploring the extent to which we should be concerned about the potential for aggressive media coverage and media manipulation to undermine the legitimacy of the courts, to affect the outcome of lengthy criminal trials, to play on the passions of the community from which the jury will be drawn, to subvert journalistic credibility and independence, and to invite more restrictive court-imposed rules governing media coverage of high-profile trials. The article concludes that if the press is to effectively perform its watchdog role, it should be mindful of the need to watch itself. Three appendices at the end of the article provide a media-centric postscript on coverage of the corporate governance scandals.

The Changing Atmospherics of Corporate Crime Sentencing in the Post Sarbanes-Oxley Act Era

Wayne State University Law School

Journal of Business and Technology Law, Vol. 3, No. 2, March 18, 2008
Wayne State University Law School Research Paper No. 08-09
The Sarbanes-Oxley Act of 2002 has been viewed as a watershed event in dealing with corporate fraud. In addition to its extensive provisions dealing with internal controls and corporate accounting procedures, the law adopted new crimes and pushed the United States Sentencing Commission to enhance the Federal Sentencing Guidelines provisions for fraud and related offenses. Even before the adoption of the Act, the Commission had increased the potential punishment for white collar crimes by amending the loss table for fraud offenses. These two steps played a key role in the increased sentences imposed on defendants convicted for their role in corporate crimes, such as Bernie Ebbers (twenty-five years) and John Rigas (fifteen years). The Sarbanes-Oxley Act marked a change in the sentencing atmospherics for corporate crime that propelled judges to give out sentences that were unthinkable even five years earlier.

This article considers how the Sarbanes-Oxley Act changed the approach to sentencing of white collar defendants involved in corporate crimes. It uses a hypothetical case to illustrate how sentences under the Guidelines have tripled from what they would have been just a few years earlier. It then looks at the recent Supreme Court decision in Gall v. United States that emphasized the discretion federal judges have even under the Sentencing Guidelines to shape sentences that reflect the individual circumstances of the defendant. The change in sentencing created by the Sarbanes-Oxley Act may well be abating in the new era of discretion fostered by the Supreme Court.

(esp) (posting from Denver, Colorado)

June 29, 2008 in Scholarship | Permalink | Comments (3) | TrackBack (0)