White Collar Crime Prof Blog

Court Affirms Kozlowski & Swartz Convictions

The New York Court of Appeals, the highest state court in New York, affirmed the convictions of L. Dennis Kozlowski and Mark H. Swartz. The former  CEO and CFO of Tyco received sentences of 8-25 years, despite being first offenders. (see here, here) The decision, included the question of "whether the admission of an attorney's testimony concerning certain facts related to a corporate internal investigation improperly conveyed to the jury an opinion regarding defendants' guilt." The Court found that the testimony and prosecutor comments "did not convey such an opinion." The Court also held that there was no abuse of discretion "in quashing defendants' subpoena duces tecum, which sought the factual portions of certain interview notes and a memorandum prepared during the course of the internal investigation." 

The decision does reference the Stein case in saying:

"While collaboration between prosecutors and attorney investigators may provide a public benefit through the more efficient detection and punishment of corporate wrongdoing, it may come at the expense of the proper safeguarding of the rights of individual corporate employees (see Stein, 2008 US App LEXIS at *66-69). Courts must be sensitive to these competing considerations and endeavor to strike an appropriate balance between the rights and interests of law enforcement, corporations and their employees, and the accused. We cannot say that the balance struck by the trial court here amounts to an abuse of discretion as a matter of law."

See also Joel Stashenko, NYLJ, Law.com, Former Tyco Executives' Convictions, Fines Upheld by N.Y. High Court

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In the News & Blogosphere

• Ashby Jones, WSJ Blog, In Wake of Financial Meltdown, Heads Might Roll. But Should They? (w/ a hat tip to Bill Olis)
• DOJ Press Release, Buford, Georgia, Man Sentenced to 18 Months in Prison for Rolling Back Odometers in Scheme That Defrauded Local Car Buyers
• DOJ Press Release, New Orleans Area Hospital to Pay $3.3 Million to Resolve Medicaid Fraud Allegations
• Pamela A. MacLean, National L.J., Corporate liability key in Chevron case - Focus on protest deaths at Nigerian facility.

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In the News and Blogosphere

Tom Hays and Jesse J. Holland, Washington Post (AP), Colleague calls Stevens one of Senate's true lions

Brian Katkin, Legal Times, A White-Collar Windfall, But Where's D.C.? As probes begin, lawyers jockey for roles (w/ a hat tip to Whitney Curtis)

Del Quentin Wilber, Washington Post, Stevens's Reputation 'Sterling,' Powell Says

Law.com (AP), Paralegal Pleads Guilty to Taking $1.7 Million From Firm

Norma Love, law.com, Tyco, Investors Want Judge to Freeze Assets of Former CEO Kozlowski

FCPA Blog, What's the Count (also check out the blog comments for this entry)

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In the News and Blogosphere

• Paula Reed Ward, Pittsburgh Post-Gazette, Federal jurors' names no longer to be kept secret (related to Wecht case)
• ALI-ABA, Attorney-Client Privilege and Work Product, Webcast -- Attorney-Client Privilege and Work Product Protection 2008
• New York Times (AP), Broadcom Co-Founder Bets He Can Still Avoid Prison (w/ a hat tip to Mark R. Johnson)
• Kristen Hays, Houston Chronicle, Former Enron broadband executive pleads guilty (w/ a hat tip to Bill Olis)
• Marcia Coyle, National Law Journal, The SEC directs staff not to ask parties to waive attorney-client or work-product privileges
• Amanda Bronstad, National Law Journal, Federal prosecutors oppose new trial for Christensen over removed juror

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The Boyle Case & RICO Enterprises

Although the Racketeer Influenced and Corrupt Organization Act (RICO), enacted in 1970, was focused on organized crime, its use in the white collar sphere is common. One finds RICO charges in many corruption and fraud prosecutions. The United States Supreme Court recently accepted on certiorari a RICO case that will hopefully resolve one of the nagging issues that pervades this area of the law. The Court, in the case of Boyle v. United States, will look at the issue: "does proof of an association-in-fact enterprise under the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. §§ 1962 (c) - (d), require at least some showing of an ascertainable structure beyond that inherent in the pattern of racketeering activity in which it engages?"

The federal circuits have been all across the board on what is required for a 1961(4) enterprise. If it is a legal structure, person, or corporation, the process is easy. In this regard prosecutors have used an Office of a Governor, Prosecutor’s Office and other entities as the enterprise for a RICO prosecution.

Less clear is when the prosecution is premised upon "any union or group of individuals associated in fact although not a legal entity."

The Second Circuit has permitted prosecutions that have an "association-in-fact" form of enterprise that merely uses the predicate acts. Other circuits have required some "ascertainable structure." In some cases they require that the ascertainable structure be "distinct from the pattern of racketeering," with other cases looking at whether it is "an on-going structure."

Hopefully, the Supreme Court will offer some guidance on how to interpret this aspect of the RICO statute.

Question Presented - here

See Scotus Blog for Petition for Certiorari here

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The New SEC Enforcement Manual

As previously posted, here is the new SEC Enforcement Manual. Check out this webpage at Gibson, Dunn, and Crutcher, LLP that provides highlights from this new manual.

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The Ring Case

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

Here’s an evergreen issue that was just brought to my attention – United States v. Kevin A. Ring, 1:08-cr-00274, assigned to D.C. District Court Judge Ellen Huvelle as part of the Jack Abramoff series of defendants:  an obstruction charge based on Ring’s alleged lying to private counsel retained to conduct an internal investigation.  (By the way:  Ring has moved for Huvelle to recuse herself on the grounds that having taking 13 guilty pleas in this case and presided over it for five years has compromised her ability to remain impartial.)

Ring was, among other things, a Greenberg Traurig lobbyist along with Abramoff and seems to have been the point person in the lobbying team’s contact with several Hill offices, including that of former Rep. Istook of Oklahoma (through his now ex-chief of staff, John Albaugh, who faces a stiff prison sentence thanks to a guilty plea). 

Ring was indicted on charges that he conspired to bribe public officials (18 USC 201, 18 USC 371), committed honest services wire fraud, and violated both 18 USC 1512(b)(3) and (c)(2).  The first two sets of charges are alleged through a series of emails which purport to show  Ring promising and delivering tickets to everything from Tim McGraw to the Redskins to the Wiggles (this appears to have been changed to a horse event, but anyway) in exchange for various nods to clients in transportation appropriations bills. 

The obstruction charges are very interesting, especially for those who have followed the Computer Associates indictments (U.S. v. Kumar, U.S. v. Richards) and the El Paso Gas indictment (U.S. v. Singleton).  In those previous three cases, the defendants were all charged with violating 1512(c)(2), which forbids corruptly obstructing, influencing, or impeding any official proceeding, or attempting to do so.  In Kumar and Richards, the government alleged that the defendants had all but real knowledge that their (false) statements would be turned over to the government by the lawyers who had been hired to conduct CA’s internal investigation, thus suggesting  but not stating outright that the private lawyers were mere conduits for information to the government.  In Singleton, the nexus between the lawyers conducting El Paso’s investigation and the government – and therefore the conduit of information—was more tenuous; there was no reference in the indictment to any agreement by the company that statements and information would be turned over to the government as part of a formal or informal cooperation agreement, and the suggestion was that Singleton should have assumed as much. 

Here are some very interesting observations, in light of this, about the Ring indictment:  First, there is the most specific and clear allegation that I have seen so far that paints a real nexus between a private firm and the government.  According to the indictment, Ring was SPECIFICALLY told that his statements would likely be turned over to DOJ and/or the U.S. Senate Committee that was investigating the matter. If this is true, kudos to the lawyers who were ethical enough to admit outright this development in the culture of internal investigations, and to inform employees accordingly.  As a result, my guess is that this indictment will send fewer chills through the corporate bar than Singleton, in particular.

Second, the Kumar, Richards, and Singleton indictments did not employ 1512(b)(3), which is the only obstruction provision that specifically criminalizes using an intermediary to commit obstruction, and does not require an existing proceeding.  Georgetown Law Professor Julie O’Sullivan observed that this may be because (c)(2) carries with it a massive 20 year maximum, and was therefore a bigger hammer. 

O’Sullivan also observed, though, that in bringing indictments like these, DOJ risks killing the goose that laid the golden egg.  DOJ is happy to reap the benefits of a culture of cooperation in which enforcement agents and the private corporate bar are partners in crime-fighting, but these benefits will diminish over time as indictments are brought that turn the private bar into de facto government agents.   The use of 1512(b)(3) in addition to (c)(2) might make a difference – or it might have the same chilling effect. 

Ring Indictment - Download ring_indictment.pdf

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New Scholarly Articles

Wendy Gerwick Couture, White Collar Crime's Gray Area: The Anomaly of Criminalizing Conduct Not Civilly Actionable, available at SSRN here

Adam J. Kolber, The Comparative Nature of Punishment, available at SSRN here

Geraldine Szott Moohr, Another Limitation on Honest Services Fraud?, available at SSRN here

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