Saturday, January 26, 2008

Technology Does It Again - The Mayor of Detroit

This time the technology provides text messages that prove problematic to the Mayor of Detroit. The messages relate to his relationship with a member of his staff. But what may be even more devastating is that a prosecutor is now investigating whether these messages prove prior lying that may have been under oath. (NYTimes here; AP here)  The Detroit Free Press has extensive press here including some of the text messages between the mayor and this member of his staff. And you have a prosecutor promising a full investigation (see here).  One has to wonder if the "shaming" punishment has already occurred in this case.

(esp)

January 26, 2008 in Investigations | Permalink | Comments (0) | TrackBack (0)

Responding to the Massive Fraud at Société Générale -- A Study in Contrasts

Legal cultures respond differently to reports of wrongdoing, and the disclosure of the massive fraud in France perpetrated by a "rogue trader" identified as Jérôme Kerviel shows how different things can be.  One of France's oldest banks, Société Générale was chartered in 1864 by Napoleon III and is now the country's second largest publicly traded financial institution, well-known for its extensive and heretofore sophisticated derivatives trading operation.  The controls on the trading desk were somehow circumvented by Kerviel, described as a mid-level trader, whose transactions in European stock index options and futures totaled as much as €40 billion and ended up down over €2 billion when discovered on January 19.  Société Générale secretly began to unwind the trades over three days beginning on Monday, January 21, in the midst of a market meltdown that may have been exacerbated by its transactions.  The sales triggered even greater losses for the bank, with the total estimated at €4.9 billion, or about $7.2 billion, from Kerviel's investments.  This surely ranks among the largest financial frauds ever, and raises serious concerns about Société Générale's internal controls -- how do you not notice positions as large as €40 billion in your portfolio, even if computer programs to flag these types of risk were circumvented?

The interesting point is not so much the size of the losses, but the response of the bank and French authorities, in contrast to how U.S. regulators and prosecutors would have acted when informed of similar conduct.  As an initial matter, it appears that Société Générale informed very few officials in the French government of the problem.  While the governor of the Banque de France, Christian Noyer, was kept abreast of the issues, upper levels of the French government did not learn of the problem until the day before its disclosure (see Bloomberg story here).  Meanwhile, Société Générale tried to get out of the investments without making any disclosure to protect itself from even greater losses, which could be viewed as favoritism by the Banque de France.  I suspect that a U.S. bank could not get away with disclosing such problems to only one banking regulator, such as the Comptroller of the Currency or the Federal Reserve, while keeping the rest of the government in the dark about transactions involving this type of misconduct.  When the news emerged, neither Société Générale nor the Banque de France issued any statement, or at least there's nothing on either's website discussing Kerviel's fraud (see here and here).  It is hard to imagine federal regulators not taking the lead on such an issue to explain how the government will respond.

The biggest question, however, is where are the prosecutors?  The French system is obviously quite different in its approach to criminal investigations, with magistrates conducting investigations.  But according to news reports (see Bloomberg here), Kerviel is "on the run" and not in custody, seemingly having slipped away.  Société Générale interviewed him on January 19 to figure out what he had done, and Kerviel was around at least in the early part of this week.  In the United States, there is no doubt that a trader accused of such conduct would have been in custody the moment the government learned of the fraud.  Indeed, the banking regulators would likely have contacted prosecutors before doing anything on the case, assuming they found out first, and not kept the Department of Justice in the dark.  Kerviel's motive for engaging in the transactions is unknown at this point, and it does not appear he was an embezzler or somehow sent the money abroad, at least to this point.  His disappearance, however, raises questions about the handling of the case, and I suspect the French authorities hope he does not show up in Namibia or a like jurisdiction. (ph)

                                                                                                    

UPDATE: An AP story (here) states that Kerviel is now in custody as part of the criminal investigation of his trading. (ph)

January 26, 2008 in Fraud, International | Permalink | Comments (0) | TrackBack (0)

Friday, January 25, 2008

Collateral Consequences?

HealthSouth was often in the news during the trials of former company CEO Richard Scrushy.  One trial ended with not-guilty verdicts, while the other found Scrushy guilty of charges of mail fraud, conspiracy, and bribery. (see here).  But whenever a CEO of a company like HealthSouth is facing charges, there are likely to be repercussions felt by many outside the sphere of the individual. It is therefore interesting to now see that HealthSouth is selling some Birmingham, Alabama property to a developer.  The Birmingham News speaks about this sale. (see here). Whether this is a collateral consequence of this investigation, however, is unknown.

(esp) (w/ a thank you to the person who called, and an apology for not being able to talk)

January 25, 2008 in HealthSouth | Permalink | Comments (0) | TrackBack (0)

Deferred Prosecution Agreement for Former Monster Worldwide CEO

Former Monster Worldwide CEO Andrew McKelvey entered into a deferred prosecution agreement with the U.S. Attorney's Office for the Southern District of New York (available below) related to options backdating at the company.  This is the second such deferral agreement involving an individual in a white collar crime case that I'm aware of, the other one involving former investment banker Frank Quattrone to settle obstruction of justice charges.  While the Department of Justice has entered into these agreements with corporations with increased regularity, they are uncommon for individuals, with both coming from the same office and each involving special circumstances.  For Quattrone, the government would have had to try him a third time, after the first proceeding ended with a hung jury and the conviction after the second trial reversed due to improper jury instructions -- and the case would be transferred to a new judge because of a perception of possible bias by the judge in the first two trials. 

The reason given for the DPA with McKelvey is that he is suffering from a terminal medical condition, so that it would be unlikely a trial could take place on the charges, and even if there was a conviction it would be unlikely to survive under the abatement doctrine applied in federal cases.  The DPA essentially requires McKelvey to obey the law for twelve months and restrict his travel.  He acknowledged his involvement in backdating options at Monster Worldwide from 1997 to 2003, and the company's former general counsel earlier entered a guilty plea to charges related to the backdating and was cooperating in the investigation.  A U.S. Attorney's Office press release (here) discusses the DPA, and the SEC also entered into a settlement with McKelvey that requires him to disgorge profits of $275,000 but does not impose a civil penalty due to his illness (see SEC Litigation Release here). 

The disposition in this case appears to be based on the unique situation of the defendant, and does not seem to signal a trend toward using DPAs to resolve cases involving individuals involved in corporate misconduct.  I suspect, however, that defense lawyers may try to push for such dispositions in the future for individual clients in addition to corporations, and it will be interesting to see if these agreements become more common. (ph)

Download mckelvey_deferred_prosecution_agreement.pdf

January 25, 2008 in Deferred Prosecution Agreements, Prosecutions, Securities | Permalink | Comments (0) | TrackBack (0)

Thursday, January 24, 2008

Onto the Amici Briefs in the KPMG case

After a long list of briefs by many of the individuals in the KPMG related matter, things are now turning to the briefs of the amici.  We have three to report on here:

1) Brief of Amici Former Attorney General and U.S. Attorneys in Support of Affirmance.

Clearly this is an extremely strong brief.   Having Walter Dellinger as counsel of record and names like --Dick Thornburgh, Edwin Meese III, William Weld, and Stuart Gerson -- as some of the amici, certainly doesn't hurt.  This brief is also powerful in its content.  A sampling of the brief can be seen in this passage below:

"First, based on their experience in the Department, amici believe the prosecutors’ conduct in this case, in addition to violating the Fifth and Sixth Amendments of the Constitution, was inconsistent with the high standards of conduct that should be expected of lawyers at the DOJ. Department lawyers of course should not use tactics that deprive defendants of their constitutional rights. Nor should they seek to gain litigation advantage by attempting to undermine a defendant’s legal representation."

The amici show their disagreement with DOJ's tactic here:

"the tactics at issue in this case, in addition to being inappropriate, are wholly unnecessary to the prosecution of corporate crime."

See Brief here -

Download 20080123_former_ag_amici_brief_tj252.pdf

2) Brief of the Washington Legal Foundation.

If anyone had any question as to whether an alleged error here might have been harmless, they need only read this brief. The brief advocates for the dismissal granted in this case.

See Brief here -

Download 20080123_wlf_amicus_brief_tj252.pdf

3) Brief of the Securities Industry & Financial Markets Association -

This brief was submitted "to address the principles supporting the common practice of companies advancing attorneys' fees to their officers, directors, and employees."

See Brief here -

Download 073042cr_usa_v. Stein, et.pdf

(esp)

January 24, 2008 in KPMG | Permalink | Comments (1) | TrackBack (0)

Headlines

Bonds Moves to Dismiss the Indictment

Home run king Barry Bonds moved to dismiss the perjury and obstruction of justice indictment (brief available below), asserting that the charges are duplicitous -- one of my all-time favorite legal arguments -- and that the questions posed were so ambiguous that his answers were not false as a matter of law.  A count of an indictment is duplicitous when it charges two crimes in a single charge, which is to be distinguished from multiplicity, which is charging the same crime in two different charges.  The more common duplicity claim involves two separate crimes charged in one count, but here the claim is that there are different responses that may be untruthful, so that the government has too many potential instances of perjury in each count. 

The four perjury counts contain a number of questions and answers, so it is difficult to identify any one with particularity that is perjurious.  The problem posed by a duplicitous charge is that there is no way for a jury to convict on one offense and acquit on another offense contained in the same count.  Similarly, because the jurors have two crimes to consider in a single count, they may convict without reaching a unanimous agreement on either.  For example, if some jurors believe one response by Bonds was untruthful while others believed a second response in the same count was a lie, then they could all agree that he committed perjury but not based on the same answers.  The problem a defendant faces when there is duplicity in the charges is that it's not clear which of the statements the prosecution will focus on, and indeed the government could shift its theory in response to the defense.

While Bonds raises a valid point about the number of questions and answers in each count, in the government's defense I suspect prosecutors wanted to provide the context for his answers, many of which are fairly clear denials (i,e. "no" in some instances).  Moreover, even if the district court found that the perjury counts were duplicitous, the remedy is usually not dismissal but an order to the government to seek a superseding indictment from the grand jury that cleans up the charges or perhaps a bill of particulars to identify one specific answer in each count that it will prove as perjury.  It may be that the government will seek more charges by breaking up the counts, so that rather than facing four counts of perjury, Bonds will face eight or twelve.  The motion also attacks the obstruction charge on essentially the same ground.

Bonds' second argument goes to the heart of a perjury charge -- the ambiguity in the questions means that he did not answer the questions untruthfully, or at least did not know his answers were false.  The key perjury case is Bronston v. United States, 409 U.S. 352 (1973), in which the Supreme Court held that "the perjury statute is not to be loosely construed, nor the statute invoked simply because a wily witness succeeds in derailing the questioner-so long as the witness speaks the literal truth. The burden is on the questioner to pin the witness down to the specific object to the questioner's inquiry."  If the questions are ambiguous and the prosecutor does not ask a clear question or seek to clarify the answer, then the defendant cannot be convicted for the responses.  Thus, compound questions, and questions using broad terms or imprecise dates, can open the door to a "not guilty" verdict.  The problem for Bonds is that the ambiguity defense is usually one left to the jury, and it is the rare case in which a court decides as a matter of law that the questions were so defective that no rational jury could find the answer was untruthful.  While this gives us a preview of where the defense is headed at trial, it is unlikely to succeed at this stage of the proceedings.

As often happens when a sports figure is involved in a case, the temptation is to toss in an analogy (or perhaps a simile) to the athlete's sport is just too hard to resist, even if it only causes the reader to groan.  In the brief, the attorneys write with regard to the duplicity in the indictment, "Even Barry Bonds cannot be expected to make contact with a fastball, slider, and knuckler thrown him simultaneously."  Please, no one this side of Tim Wakefield throws a knuckle ball any more, and the best sucker pitch in baseball is the splitter.  Let's hope the government does not respond by likening the defense filing to the typical defensive shift put on when Bonds comes to bat. (ph)

Download us_v_bonds_motion_to_dismiss_jan_23_2008.pdf

January 24, 2008 in Obstruction, Perjury | Permalink | Comments (0) | TrackBack (0)

An Invitation That's Not Really an Invitation

in·vi·ta·tion (nv-tshn):

  1. The act of inviting.
  2. A spoken or written request for someone's presence or participation.

I've always taken the word "invitation" to mean something that a person can turn down, but apparently that's not the case when it comes from a Congressional Committee.  The House Oversight and Government Reform Committee asked three former New York Yankees, Roger Clemens, Andy Pettitte, and Chuck Knoblauch, along with two admitted steroids suppliers, Brian McNamee and Kirk Radomski, to testify about steroid use, but Knoblauch didn't respond to the "invitation."  Aside from a brief appearance before reporters outside his Houston home to assert his ignorance about the issue, Knoblauch has not been heard from.  He will have to respond now, however, because the Committee announced (here) that it would issue a subpoena to him: "The Committee has taken this step because Mr. Knoblauch failed to respond to the invitation to participate voluntarily in a deposition or transcribed interview and the February 13 hearing."  How Knoblauch responds to the more compelling subpoena remains to be seen, but at least it's clear that an "invitation" is not something one is free to ignore when the envelope comes from Congress. (ph)

January 24, 2008 in Congress, Investigations | Permalink | Comments (1) | TrackBack (0)

Could Scruggs Lose His Tobacco Settlement Fees?

A reader sent a question asking whether, in light of all the bribery allegations leveled against famed plaintiffs lawyer Dickie Scruggs, the government could seek to forfeit the reputed $1 billion fee he received for his role in the state tobacco litigation that resulted in a $248 billion settlement.  We certainly aim to please here at the White Collar Crime Prof blog, so I will give a shot at answering it.  Forfeiture involves the government taking the "proceeds" of criminal activity, and the current charges against Scruggs do not involve the tobacco settlement or his fees from those cases.  The bribery allegations have involved disputes over attorney's fees, but not regarding the disposition of the underlying litigation.  The current indictment of Scruggs and two other remaining defendants does not contain a forfeiture count, and the alleged offense is an attempted bribe, so there are no proceeds of the criminal activity.  The civil asset forfeiture statute, 18 U.S.C. Sec. 981(a)(2)(A), defines proceeds as "property of any kind obtained directly or indirectly, as the result of the commission of the offense giving rise to forfeiture, and any property traceable thereto, and is not limited to the net gain or profit realized from the offense."  While the Sec. 666 charges against Scruggs can trigger forfeiture, they do not allow the government to seek assets that are not generated by the violation, or substitute assets if it is a criminal forfeiture.  Thus, while some might question whether the fees Scruggs received from the tobacco litigation were fair, that money is not directly at risk in a forfeiture action because there is no claim that I'm aware of regarding bribery or other violations in the conduct of that litigation.  The cost of his defense is another issue, and his attorney, John Keker, was viewed by Barry Bonds as being on the expensive side, but then I doubt Scruggs will struggle to pay these costs given the strong reputation of Keker and his firm.  So the short answer is "no" regarding whether the government can seek to forfeit the tobacco fees as part of the current prosecution. (ph)

January 24, 2008 in Corruption | Permalink | Comments (0) | TrackBack (1)

Houston Grand Jury Went Bad

The controversy over the indictment and subsequent dismissal of charges against a Texas Supreme Court Justice and his wife in Houston (see earlier post here) took another bizarre turn when it was discovered that the grand jury was without authority to act for over two months.  According to the Houston Chronicle (here), Harris County DA Chuck Rosenthal's office filed improper paperwork to extend the grand jury's term past its expiration in early November 2007, so all of its work, including the now-dismissed indictment, was for naught because its term had expired.  A grand jury only sits for a designated period, and once its term ends it must be disbanded.  The extension was supposed to be to complete a large mortgage fraud case in which indictments were returned, but those and others are now gone.  An assistant DA took the blame, but the conspiracy theorists out there are certainly wondering if there was something more sinister afoot.  Needless to say, the grand jury problem is black eye for the Harris County DA's office.

Meanwhile, over in federal court in Houston, DA Rosenthal is facing a contempt hearing related to his attempt to delete e-mails that were to be produced in a civil rights suit against the sheriff's office.  The inadvertent disclosure of the messages, some of which were a bit on the salacious side involving Rosenthal's assistant, were the start of a series of events that led to Rosenthal dropping his bid for re-election.  The plaintiff's attorney in the civil rights cases plans to call a number of witnesses related to the e-mail issue at a hearing set to begin on January 31, so the cascade of negative publicity for the DA probably won't end any time soon.  Another Houston Chronicle story (here) discusses this portion of the saga. (ph)

January 24, 2008 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 23, 2008

Wilkes May Get Whacked

Brent Wilkes, the former owner of defense contractor ADCS, was convicted for paying bribes to former Congressman Randy (Duke) Cunningham to obtain contracts for his company.  The Presentence Report filed in the case recommends a 720-month sentence -- that would be sixty years for those who (like me) are a bit math challenged.  Wow!  That is by far the longest prison sentence I've ever seen recommended for a corruption defendant, and dwarfs the extensive sentences seen in corporate fraud cases, like those received by former CEOs Bernie Ebbers (25 years) and Jeffrey Skilling (24+ years).  Cunningham received a 100-month prison term, and Wilkes will definitely pay the price for going to trial if he receives anything close to the PSR recommendation.  Moreover, note that this is the Probation Office's recommendation in the PSR and not the position of the U.S. Attorney's Office, which can be expected -- despite the unseemliness of this approach -- to seek the highest potential sentence, thus fulfilling its role as an advocate.  Recommendations in the PSR usually carry great weight with the court, and even if U.S. District Judge Larry Burns does not accept the entire set of suggestions under the Sentencing Guidelines, I suspect Wilkes is looking at a sentence that may well put him in jail for much of the rest of his life.

How did the Probation Office get to this point?  The sentencing recommendation is discussed in a filing by Wilkes (available below).  Under the Guidelines, Sec. 2C1.1 governs bribery cases, and the starting point is an offense level of 18 because the bribe was paid to an elected official.  The bulk of the sentencing increase comes from the estimation of the gain from the bribe, which requires application of the fraud loss table of Sec. 2B1.1.  The PSR recommends a twenty-level enhancement, which means the gain to Wilkes and ADCS from the bribes was between $7 million and $20 million.  Throw in a two-level increase for obstruction of justice -- Wilkes testified at trial and was convicted on all counts by the jury, so there's a decent ground for this enhancement -- and another four levels for leadership role, and you've got the very top of the Guidelines (it only goes to 43) that calls for a life sentence

The sentencing was originally set for January 28, but the PSR did not arrive in time so Judge Burns has pushed it back to February 19, thus meeting the statutory 35-day period between receipt of the Report and the sentencing.  Wilkes' counsel, Mark Geragos, will have to take aim at the gain amount, and unless that figure is reduced substantially, Wilkes is looking at a sentence that could be greater than any we've seen to date in a federal white collar crime case.  In its response to the defense motion for a delay in sentencing, the government asked the district court to take Wilkes into custody on the original sentencing date because he is likely to receive a prison term and does not meet the requirements for bail pending appeal.  If Judge Burns does sentence Wilkes to a significant prison sentence, it would not surprise me if Wilkes was ordered to be taken into custody immediately because of the severity of the punishment and possible concerns about flight in light of the sentence.  (ph)

Download us_v_wilkes_motion_for_production_of_documents_jan_15_2008.pdf

January 23, 2008 in Corruption, Sentencing | Permalink | Comments (1) | TrackBack (0)

Tuesday, January 22, 2008

Post Stoneridge

Check out the Enron Related Cases Here-

WSJ - Jess Bravin & Mark H. Anderson, Justices Rebuff Enron Holders

Chicago Tribune (AP) - Supreme Court Refuses to Review Enron Investors' Lawsuit

But Stoneridge did have influence in another case, unrelated to Enron, as the Court in Avis Budget Group, Inc., et. al. v. Ca. State Teachers' Retirement granted a petition for a writ of certiorari vacating the judgment and remanding the case to the U.S. Court of Appeals for the 9th Circuit "for further consideration in light of" Stoneridge. (see here)

(esp)

January 22, 2008 in Enron | Permalink | Comments (0) | TrackBack (0)

Proportionality in Sentencing - Padilla versus Ebbers, Skilling, and McFarland

A federal judge in Miami sentenced Jose Padilla to 17 years and 4 months today.  (see WSJ here; Miami Herald here).   The judge decided to give a lesser sentence because of the harsh conditions previously experienced by Padilla in his prior designation as an "enemy combatant." This below guideline sentence was for "terrorism conspiracy charges." (see AP here)  For complete coverage of the sentencing see Professor Douglas Berman's Sentencing Law & Policy Blog here and here and Howard Bashman's How Appealing Blog here.

But the question that we need to examine from the eyes of one examining white collar sentences is whether this sentence is proportional.  Should Padilla receive a lesser sentence than Bernie Ebbers (25 years), Jeff Skilling (24 years) and Chalana McFarland (30 years)?  Should these three white collar offenders be sent to prison for a greater period than someone who commits a crime related to "terrorism conspiracy?"  Perhaps the problem here is not the length of the sentence that Padilla received, but the draconian sentence being given to first offenders who commit economic crimes. (See Podgor, Yale Pocket Part here). Is this proportional, and if not which sentence(s) should be modified?

(esp)

January 22, 2008 in Sentencing | Permalink | Comments (2) | TrackBack (1)

Monday, January 21, 2008

Honest Services Fraud Convictions Overturned

The First Circuit overturned the convictions of two former senior officers at Roger Williams Medical Center in Providence, Rhode Island, because the jury instructions allowed the honest services theory of mail fraud to roam a bit too far from the core of the statute.  The case highlights, once again, that honest services is among the most slippery of concepts in the federal criminal code, and any claim that it can be defined is a chimera.  The statute, Sec. 1346, says only that "the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services" but no where does it try to explain what that means.  Courts have struggled with it ever since Congress adopted the provision to overturn McNally because there is virtually no legislative history and the government has not been shy about using one of its most potent anti-corruption statutes in a variety of contexts.

The First Circuit decision, United States v. Urciuoli (available below), concerns the hiring of an influential Rhode Island state Senator, Joseph Celona, for what the government claimed was a sham job on behalf of a subsidiary of RWMC when in fact he was using his position to help out the hospital in the state Senate.  The government alleged three activities that aided the deprivation of honest services owed by Celona: influencing legislation to help RWMC, pressuring local mayors to use RWMC for ambulance services on so-called "rescue runs," and pressuring an insurance company to settle a dispute with the hospital favorably.  The First Circuit found the first activity clearly violative of the honest services fraud provision because it was a misuse of office of personal gain by Celona.  The third activity also can be the basis for a mail fraud conviction because Celona brought representatives of the insurer into his office and implied -- rather pointedly -- that things would not go well in the legislature if RWMC didn't receive a favorable resolution. 

The problem was the second activity, in which Celona had the mayors of local municipalities come into his office and urged them to follow the law by sending their ambulances to the hospital, even though he never disclosed his financial ties with RWMC.  The government called this the "cloak of office" misuse of public authority that constituted mail fraud.  The First Circuit described the weakness of this theory of honest services fraud:

The government says that a legislator's informal duties commonly extend to representing constituents with local officials and engaging in oversight functions and so to this extent should be regarded as official; but Celona's conduct falls in a borderland where analogies can easily be drawn both to public and private conduct and there is no indication that Celona invoked any purported oversight authority or threatened to use official powers in support of his advocacy. The government says the mayors can be affected by state legislation, but it did not show by context or threat that Celona sought deliberately to exploit this leverage.

Certainly his title and (possibly improper) use of senate letterhead assured him access and attention . . . ; but his position guaranteed that in any event and its invisible force would have existed even if he emphasized that he was present solely as a paid advocate. Indeed, even the legitimate work that Celona performed on behalf of [RWMC] traded in part on the reputation, network and influence that comes with political office. That much is an unavoidable result of Rhode Island's decision to retain a system of government in which legislators hold outside employment without very stringent restrictions.

The government's rationale for introducing this evidence is that having Celona advocating on behalf of the hospital worked to subtly -- or perhaps overtly -- put pressure on the mayors, who would want to curry favor with a powerful member of the state Senate.  But the First Circuit rejected this kind of "wink-and-a-nod" approach to honest services fraud as conduct that did not involve any misuse of office nor a clear violation of any state law prohibition that would take it beyond at most an arguable ethics violation.

While the government had two good theories and only one problematic one, the indictment and jury instructions did not distinguish among them, so that the jury simply convicted the defendants of mail fraud (and conspiracy to commit mail fraud).  Therefore, much like the convictions based in part on the private right of honest services theory in the Enron Nigerian Barge trial that were overturned in United States v. Brown, the presence of one bad theory taints the entire case and requires a new trial.  Whether the outcome will be any different remains to be seen, but the defendants will get a second bite at the apple. (ph)

Download us_v_urciuoli_first_circuit_opinion_jan_18_2008.pdf

January 21, 2008 in Corruption, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (1)

Student Loans to Study Abroad Programs

Attorney General Andrew Cuomo is not letting up on school-related investigations. His latest target appears to be summer abroad programs. Jonathan Glater at the New York Times reports in an article titled, "Investigation of Study Programs Widen" of recent schools receiving subpoenas. The focus is on whether there are perks related to these programs. Some thoughts:

  • There is an interesting aspect to this article in that one sees "a senior lawyer" in the office providing or confirming information. One does not - as of yet- see a press release on Cuomo's website. Should an attorney general be providing information to the public in the investigation stage?
  • And is it really necessary to issue subpoenas if the ultimate goal is to provide a code of conduct for study abroad programs.   
  • Should the investigators recognize that when dealing with foreign countries things might operate differently.  For example, even the Foreign Corrupt Practices Act (FCPA) recognizes that it is necessary to allow for payments that might be "lawful under the written laws and regulations of the foreign official's, political party's, party official's, or candidate's country;" and allows for "reasonable and bona fide expenditure(s), such as travel and lodging expenses."  And although we are not dealing with the FCPA statute here, it does present a thought process that might need to be considered when one operates outside this country.
  • And how far will this investigation go? Will he be looking at what top officials visit different programs (e.g., Supreme Court Justices visiting law school programs). 
  • And does the fact that nothing may be improper in all of this make a difference? 

Andrew Cuomo is certainly trying to set new ground, and it appears that one of his targets is the education world. 

(esp)

January 21, 2008 in Investigations | Permalink | Comments (1) | TrackBack (0)

Sunday, January 20, 2008

Lawyer Sentencings

Two lawyers received federal sentences this past week. The first, a former lawyer in the Western District of Louisiana entered a plea that will net him 41 months in prison.  A Press Release of the US Attorney's Office of the Western District of Louisiana states the attorney "pleaded guilty to one count of making false statements to a bank and one count of forging securities of private entities." The release states that:

"beginning in 2002 while practicing law in Lafayette, [the attorney] established attorney/client lines of credit at a local bank which he used to finance his personal injury lawsuits. [The attorney] was obligated to pay off the bank’s line of credit after receiving funds generated by settling civil cases. On numerous occasions, when settlement proceeds were received by [the attorney], instead of repaying the bank’s line of credit, he requested extensions of time with the local bank and gave false reasons as to why the extensions were needed. In some instances, [the attorney] never repaid the line of credit.

Further investigation revealed that in 2003, [the attorney] opened several business accounts at another local bank, including a trust account, checking and payroll checking account, and personal accounts. [The attorney] admitted to forging the settlement checks from insurance companies received for certain clients and depositing the proceeds into his account without the client’s knowledge or consent.

The attorney was allowed to report to prison.  See also ABA Jrl here; Daily Advertiser here.

The second attorney received a sentence of 6 1/2 years. The ABA Jrl states that the accused had pursued "baseless diet drug litigation on behalf of clients." See ABA Jrl here and Mississippi Sun Herald here.

(esp) (w/ a hat tip to John Wesley Hall)

January 20, 2008 in Sentencing | Permalink | Comments (0) | TrackBack (0)

More Money to Prosecute White Collar Crime

The Seattle Times (here) reports on the need for more money and agents for the prosecution of white collar crime in the Seattle area. With increased focus on terrorism, white collar crime investigations are often placed on the shelf.  The article discusses crimes needing recognition, such as cybercrime and identity theft.

(esp)

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

Wesley Snipes Trial: A Week in Review

This past week was the first week of the Wesley Snipes trial.  The actor is being tried along with two other individuals on charges related to an alleged tax scheme. Because of the multiple number of people alleged to have participated in this conduct, the government is in part presenting this case through the conspiracy statute. Some key points so far:

  • Jury - Stephen Hudak of the Orlando Sentinel reported here that the jury pool was made up of 138 all-white jurors.  Caselaw is very clear that neither the prosecution nor the defense can strike jurors premised on race.  But when only one race is presented in the jury pool, the issue of improper strikes becomes moot.  And although Snipes loses the ability to challenge a prosecutor who might have tried to strike a juror based upon race, he probably strengthens his pre-trial claim that the venue could not provide him with a fair trial.  Because the court had denied his motion for a change of venue, the issue will only be one for him to argue if he is convicted, and it can be a tough appellate issue. Should he be convicted and this argument become necessary, the all-white pool presented here would enhance this argument. 
  • Venue - The jury pool also raises questions about the venue selected by the prosecution.  In conspiracy cases, prosecutors get to select venue premised on the place the alleged conspiracy was formed or where any alleged act occurred.  This prosecutorial power can be enormous when circuits vary on the law, as a prosecutor may seek to bring the charges in the jurisdiction with the most favorable position on an issue of importance to the government.  Although the prosecution has enormous prosecutorial power in selecting the venue, defendants do not have this same luxury. In this case, it is obvious that there was a choice of venue on the conspiracy charge as the Indictment states, "From in or about 1999 through the date of this Indictment, in Lake and Orange Counties in the Middle District of Florida and elsewhere,..." 
  • Opening Statements - see here and here.  Was Snipes a victim of tax schemers or was he a tax schemer - this may be a key question in the case (check out Scott Maxwell of the Orlando Sentinel's "Taking Names Blog").   And just how responsive was the IRS to questions by Snipes? (see here)
  • A Key Government Witness - The government presented Snipes' former tax adviser. (see here)  It is clear that this testimony was offered in an attempt to show that Snipes had "knowledge" of the illegality of his conduct. But whether Snipes had knowledge of the illegality of his conduct remains to be seen. When it comes time for determining what instructions will be given to the jury, the case of Cheek v. United States, 498 U.S. 192 (1991) may provide some support for Snipes. The Court in Cheek provides special treatment in tax cases "largely due to the complexity of the tax laws." 

For background on the indictment and pretrial motions see here and here.

(esp)

January 20, 2008 in Celebrities, Prosecutions, Tax | Permalink | Comments (0) | TrackBack (1)