Saturday, September 6, 2008

En Banc Mail Fraud Case

Initially the Eleventh Circuit Court of Appeals in United States v. Svete reversed and remanded 5 counts in a case where the defendants were "convicted of conspiracy, mail fraud, money laundering, and interstate transportation of money obtained by fraud, all charges being related to their dealings with viaticals." (see here) But an en banc court granted a rehearing. (see here) The briefs are now starting to be filed.

A key issue in the case revolves around the prior case of U.S. v. Brown. In Svete the defense argues that "the district court abused its discretion by refusing to charge the jury, pursuant to U.S. v. Brown, on the requirement of ordinary prudence." The defense also emphasizes that "[t]his court’s 1996 decision in U.S. v. Brown should not be overruled, because a "scheme or artifice to defraud," as that term was understood when the mail fraud statute was enacted, encompasses only conduct that is reasonably calculated to deceive a person of ordinary prudence and comprehension." The defense is represented by Peter Goldberger and Michael Pasano (Carlton Fields).

An amicus brief for the National Association of Criminal Defense Lawyers has also been filed by attorney Paul Monnin (DLA Piper) and Donald Samuel (Garland, Samuel & Loeb).

Defendant-Appellant's Brief - Download 11SVETEB.pdf

Amicus Brief in Support of Appellant - Download svete_brief.pdf


September 6, 2008 in Fraud | Permalink | Comments (0) | TrackBack (0)

Friday, September 5, 2008

Wecht - New Trial Allowed, But New Eyes to Oversee

The Third Circuit Court of Appeals issued its opinion in the Cyril Wecht case refusing to accept the defense double jeopardy argument, but using its supervisory powers to provide for a new judge to hear the case.  The court stated:

"Our holding today that there is no constitutional bar to retrying Dr. Wecht does not stand for the proposition that he must be retried. That is a decision that rests with the Government. Indeed, Wecht’s prosecution is one that already has spanned more than thirty months. It has resulted in numerous appeals and emergency motions to this Court and, with the filing of this opinion, three lengthy precedential opinions.

If the Government chooses to proceed with a retrial, our view is that both sides and the interest of justice would benefit from a reduced level of rancor in the courtroom, fresh eyes on the case, and fewer forays to this Court by the parties, including intervening parties. This has been a highly charged, lengthy, and complex case involving serious criminal charges brought against a prominent public figure. The trial judge has been the referee in a heavyweight fight, and, as we have ruled, has generally made the correct calls, with some exceptions."


September 5, 2008 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Thursday, September 4, 2008

In the News & Around the Blogsphere

Abramoff Sentenced

The Reward for Cooperation is four years.  Perhaps the most important reward here was that his sentence would be served concurrently with his prior sentence (see here).

See Wall St Jrl (AP), Lobbyist Abramoff Faces Sentencing

Neil Lewis, NYTimes, Abramoff Is Sentenced to 4 Years in Prison

Doug Berman, Sentencing Law & Policy, Jack Abramoff getting cooperator's benefit

Del Quentin Wilber & Carrie Johnson, Abramoff Sentenced to 4 Years in Prison for Corruption

Mike Scarcella, The BLT: The Blog of the Legal Times, Abramoff Sentenced to 4 Years in Prison


September 4, 2008 in Sentencing | Permalink | Comments (0) | TrackBack (1)

Detroit Mayor Pleads - Commentary

The media is reporting that Detroit Mayor Kwame Kilpatrick will plead guilty (see below). Looking at the plea reported by the press, one can understand why he would plead guilty.  The risk of trial can be enormous, both in possible punishment, cost of legal counsel fees, and personal family and psychological costs.  This plea offers finality to the situation - something that will probably help the mayor and those around him move on with their lives.  It removes the uncertainly that has probably been hanging over his head for some time now. For the government, the resolution allows them to move onto the next case and report a statistic of conviction.

Some will likely claim the sentence is too light, and others will argue that the conviction he now bears is too heavy. But even when the judicial system offers some precision, such as the cases operating under the federal sentencing guidelines, many are unhappy.

Here, this state case provides a resolution that demonstrates that a state can investigate and prosecute state officials. The federal government should take note of this, as they are often quick to step in and prosecute state corruption. 

The case also demonstrates the importance of the press and investigative reporting.  Without the press, one has to wonder the extent to which this case would have happened. With a diminishing press nationwide, it raises concerns about the future of the ability of the people to have a watchdog on certain government conduct.

Cory Williams & Ed White, Atlanta Jrl Constitution, Detroit mayor agrees to plead guilty, resign

M. L. Elrick, Jim Schaefer, Joe Swickward, Ben Schmitt, Detroit Free Press, Mayor: 'I Lied Under Oath' - He'll resign, serve 120 days in jail, pay $ 1 M restitution


Addendum - Susan Saulny, New York Times, Detroit Mayor Pleads Guilty, Agrees to Resign

September 4, 2008 in Settlement | Permalink | Comments (7) | TrackBack (0)

Wednesday, September 3, 2008

Response to Frank Bowman

Guest Blogger - Stephanie Martz - Senior Director, White Collar Crime Policy, National Association of Criminal Defense Lawyers (NACDL)

Professor Frank Bowman’s piece in The Legal Times ("Somebody Has to Cry Foul," August 18, 2008) is geared towards a singular thesis – that "the decline of civil regulation makes open-ended criminal statutes necessary." As a philosophical matter, I do not think that open-ended criminal statutes are ever a good idea. They fail to put American citizens on notice that certain behaviors – especially in the white collar area – are in fact against the law. We are supposed to be particularly concerned about this in the criminal, as opposed to civil or regulatory, context because of all of the consequences that are uniquely attendant to criminal prosecution, such as the deprivation of liberty and the lifelong deprivation of civil rights, the social stigma associated with conviction and incarceration, and the singular moral force and deterrent effect of the criminal law. This is why we have the "rule of lenity," in which ambiguous criminal statutes are supposed to be strictly construed by courts. As Justice Scalia wrote just this term in United States v. Santos:

Under a long line of cases, the tie must go to the defendant. The rule of lenity requires ambiguous criminal statutes to be interpreted in favor of the defendants subjected to them. 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.

How does this principle comport with Professor Bowman’s praise for "flexible" and "open-ended" criminal laws? It doesn’t, I’d venture. Let’s take honest services mail fraud as a prime example of a flexible and open-ended criminal law. This law prohibits schemes or artifices to defraud another of your "honest services" – basically, it criminalizes deceit. As numerous courts and commentators have observed, this could conceivably turn taking home a couple of reems of paper from your office into a federal felony. The statute has no built-in limits on how it can be used, and courts have struggled to come up with a coherent set of them. At base, it’s unconstitutional for Congress to permit "a standardless sweep [that] allows policemen, prosecutors, and juries to pursue their personal predlictions" (Smith v. Goguen, 415 U.S. 566, 574 (1974). Professor Bowman seems comfortable with the standardless sweep, as long as it’s in the name of filling in for absentee civil regulators.

Indeed, Professor Bowman seems willing to elide the fundamental point about the due process and notice requirements of criminal law for a hodgepodge of pragmatic reasons, which can all be filed under the rubric of ‘our last worst hope.’ (My words, not his.) "Ideally," he writes, "most of this sort of [mis]behavior would be deterred or dealt with by public and private civil regulatory mechanisms, but those mechanisms have conspicuously atrophied over the past several decades." He argues that "textual flexibility" and "broad prosecutorial discretion" are necessary because civil regulatory bodies "cannot keep pace with the rapid evolution of modern business and finance." Professor Bowman makes no case, however, for why prosecutors are any better at sussing out complicated and often highly technical misconduct than the expert regulators. In fact, criminal prosecutors are far less likely to know the industry, the accounting rules, the compensation regimes, and all of the other details that make climbing the learning curve very difficult to do in each new case. He not-so-subtly accuses civil regulatory officials of capture—calling federal prosecutors "visitors from the normal world who apply ordinary understandings of right and wrong to what they find." But he declines to acknowledge that the flipside of capture is expertise, ability, and the institutional knowledge and perspective that help to ensure against overly aggressive (or overly lenient) enforcement decisions. The "commonsense judgments of prosecutors" that Professor Bowman extols are not, put simply, universally experienced by potential criminal defendants.

In order for us to engage in a more intelligent discussion of the pragmatic aspects of civil versus criminal enforcement of business crimes, it would be helpful if we were working with a complete and illustrative universe of enforcement statistics. While Professor Bowman refers to the frequently cited fact that white collar enforcement is slightly down these days, the Federal Justice Statistics Resource Center’s information shows that the number of federal mail, wire, securities, and related crimes that have been charged each year has remained fairly steady in the last ten years. (See this blog’s "White Collar Crime Prosecutions - A Long Way to Go to Hit the Levels of 5 Years Ago, May 14, 2008, referring to TRAC statistics on white collar crime enforcement.)

On a concluding note,I do think that his thesis should serve as a cautionary tale to those who would rail against the civil regulatory state: In the absence of civil enforcement, criminal enforcement will undoubtedly, unequivocally step into the breach. It’s a zero-sum game for American business.


September 3, 2008 in Scholarship | Permalink | Comments (1) | TrackBack (0)

Tuesday, September 2, 2008

Reply Brief Filed in Ionia Case

The briefs are now all filed in the case of United States v. Ionia Management, the most recent being the Appellant's Reply Brief (see below). The briefs are:

Defendant-Appellant's Brief - here

Government-Appellee Brief - here

Amicus Brief - here

Defendant-Appellant's Reply Brief -

Download ionia_reply_final_82908.pdf

Although there are many worthwhile issues in this case, one particular focus is on 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 closely followed.


September 2, 2008 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Upcoming Sentencing of Goyal, former CFO of McAfee

Prabhat Goyal, former CFO of McAfee, will be sentenced in early October. Convicted in May 2007 for securities fraud and for making false statements to auditors, Goyal was found to have failed to recognize revenue generated by sales to a distributor using sell-in accounting.

Like the recent trials of the Rigases and Bernie Ebbers, the government failed to call an expert to testify on the alleged improper accounting. Although the trial court did not discard the verdict, the judge did acknowledge that at least one civil court had found that the SEC failed to meet its burden in a civil case when an expert was not used to provide an understanding of the alleged improprieties.

Although the defense argues differences with the Rigases and Ebbers cases, the fact that the same issue mentioned in their case is again being mentioned gives pause.  CFOs rely on accountants and auditors for guidance. When there is a showing that no material information was being withheld, one has to wonder if a higher standard, or at least the civil standard ought to be considered.

One also has to wonder if the Supreme Court will eventually consider whether it is proper for the government to not present experts of a GAAP violation, and proceed without this substantiation and deliberation.  For the time being,it looks like another appellate court will get to examine this issue.


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

Sunday, August 31, 2008

What Others Are Saying About the Stein (KPMG Related) Decision

The decision is here.

Commentary can be found here.

What others are saying:

Anthony Lin, New York Law Journal, 2nd Circuit Affirms Dismissal of Criminal Charges Against KPMG Staffers

Dan Slater, WSJ Blog, 2nd Circuit Upholds Judge Kaplan’s Dismissal of KPMG Indictments

New York Times (AP), Court Upholds Dismissal of Tax Case Against 13

Doug Berman, Sentencing Law & Policy, here

Christine Hurt, Conglomerate, here

Martha Graybow, Reuters, Court upholds dismissal of charges in KPMG case

Richard Janus, CATO, Deputizing Company Counsel as Agents of the Federal Government

Second Circuit Blog, Gimme Shelter


August 31, 2008 in Defense Counsel, Judicial Opinions, KPMG, Prosecutors | Permalink | Comments (0) | TrackBack (0)