White Collar Crime Prof Blog

Mary Schapiro Named to Lead the SEC

Will investors now feel more comfortable and will there be increased oversight and regulation over at the SEC? That, of course, remains to be seen.  But the person at the top with the power to influence this happening will be Mary Schapiro.  For background on her see:

Caren Bohan, Reuters, Obama picks new head of SEC

Forbes, Profile - Mary L. Schapiro

WSJ - Marketwatch, EQUITIES Magazine Congratulates Mary Schapiro, First Woman to Head SEC

Financial Industry Regulatory Authority, Mary L. Schapiro - Chief Executive Officer - bio

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Verdicts in KPMG Related Case

The KPMG related case has had a history like none other (for background see here).  Although nineteen individuals were initially accused, Hon. Lewis Kaplan issued an opinion that dismissed many because of government conduct that placed pressure on the company to withhold payment of attorney fees for employees charged with criminal conduct, when the company's past practice was to pay these fees. This decision was upheld by the Second Circuit Court of Appeals (see here). Two defendants had initially plead guilty, which left four for trial.  The trial of these four individuals has now concluded and press reports on the verdicts are below:

See Ashby Jones, WSJ, Breaking: Jury Convicts Two Ex-KPMGers, One Lawyer on Tax Charges; Mark Hamblett, NYL.J., Former Attorney, Two Others Convicted of KPMG Tax Shelter Charges; Lynnley Browning, NYTimes, 3 Convicted in KPMG Tax Shelter Case.

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Addendum - Martha Graybow, Reuters, Guardian UK - U.S. jury convicts three in tax shelter trial

In the News & Around the Blogosphere

BLT Blog, Mike Scarcella, Prosecutor Disputes Claim of Coached Testimony at Stevens Trial

DOJ Press Release, Chief Executive Officers of Two Los Angeles-area Medical Companies Indicted for Medicare Fraud

DOJ Press Release, Ex-Houston Auto Executive and Former Skydiving Company Owner Sentenced to Prison for Tax Fraud

ChicagoBreakingNews, Michael Madigan launches impeachment inquiry

Bebra Cassens Weiss, Gov Hires ‘Courtroom Bulldog’ as Ill. House Launches Impeachment

Dan Levine, Legal Pad (law.com), An In-House Lawyer's Wild Backdating Ride

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Others on Madoff

Lauren Cox, ABC News, What Was Madoff Thinking? Former Con Artist, Psychologists Explain What Drives People to High-Stakes Fraud

John Pacenti and Bud Newman, Daily Business Review, law.com, Lawyers Summoned to Salvage Fortunes for Madoff's Investors

Beth Healy, Boston Globe, Group's clients lose $3b in fraud -Now-confessed swindler got MassMutual funds; Investors told 'we were all victimized' by Madoff

Julie Kay, National L Jrl, Lawyers from Florida to New York besieged by Madoff investors -New strategy emerges — suing third parties

Jane Musgrave, Palm Beach Post, Madoff's arrest in billion-dollar fraud case shocks Palm Beach investors

Stephanie Strom, NYTimes, Wall St. Fraud Leaves Charities Reeling

Larry Ribstein,  Ideoblog, Why the SEC missed the Madoff fraud

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Sentencing - General Re Exec

The Hartford Courant reports on the sentence of a former General Re executive.  See Convicted Gen Re Executive Gets 2 Years In Prison.  See also Colleen McCarthy, Business Insurance, Ferguson gets two-year sentence for finite fraud. For background see here and here.  Doug Berman over at Sentencing Law & Policy here also presents thoughtful comments on the sentence.  Dan Slater at the WSJ Blog discusses who represented this individual. (see Former GenRe CEO Gets Off With a Mere Two Years)

The government's sentencing memo looked at a significant loss figure (see here)  There was also the judge's conclusion on the loss figure  - "30 levels will be added to the defendants’ guidelines for loss of more than $400 million, 6 levels will be added for more than 250 victims, and no restitution will be ordered."  There was the possibility of an extremely long sentence based upon this loss figure.

But now seeing the sentence imposed and the amount of loss previously stated, it appears that the court used reason in imposing a sentence that not only meets the offense, but more importantly focuses on the offender. It is good to see a movement away from using strict mathematical computations to determine a sentence, and to see that it is important to remember that it is an individual being sentenced.

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Addendum, Chad Hemenway, Bestweek/Bestwire, Feds in Ferguson Case: Former Gen Re Chief Executive Sentence Sends Message

More on Siemens

Initially discussed here, the Siemens plea is an interesting one. The go-to place for information on this case is the FCPA Blog here. Some observations -

• Unlike many cases involving a company, this does not appear to be a deferred prosecution agreement - but rather is a plea agreement with specified terms.
• The fine is huge, but it allows the company to resolve the case and move forward and the plea is not to an anti-bribery act, but rather the reporting provisions.
• The timing on this resolution is interesting - before the new administration takes over, before the end of the year - or is that reading too much into this.
• Unlike the deferred prosecution agreement in KPMG (here -p. 26) there is no explicit statement in the agreement precluding debarment. Also in Titan (FCPA case) there was a statement by the company that spoke to there being no debarment. One can find a reference to that here:

"Titan announced that it had reached a settlement to avoid debarment from work on U.S. government contracts. Avoiding debarment was particularly important to Titan, which is a leading provider of information and communications systems to U.S. government agencies."

But here again, we are only discussing reporting provisions and not anti-bribery.  And certainly no one should want to hurt innocent people associated with the company.

• At the government press conference it was stated - "Siemens' cooperation, in a word, has been exceptional.   Siemens has faced facts, accepted responsibility, retained experienced counsel to conduct thorough internal investigations, and has implemented real reforms."  And in the sentencing memo of the government there are repeated references to the extraordinary cooperation of the company.  For example, it states "[t]he reorganization and remediation efforts of Siemens have been extraordinary and have set a high standard for multi-national companies to follow."   The sentencing memo has an incredible description of the internal amnesty program of the company.
• DOJ has a website that provides the FCPA, a lay person's guide, etc.  A key problem one finds is that because most of the cases are resolved, one is unlikely to find a significant body of reported decisions resolving issues involving companies who were alleged to violate the FCPA.  And as for individuals - the DOJ website lists 2 cases, but notes that they last updated the website in 2004.(here)
• The plea agreement letter provides for cooperation, but does not call for providing any privileged material -  something that is good to see on the part of DOJ. (See FCPA Blog here)
• The agreement does limit the ability of the company from disseminating information regarding this matter without first obtaining the approval of DOJ. It states:

"Press Releases: Defendant agrees that if Siemens AG or any of its direct or indirect affiliates or subsidiaries issues a press release in connection with this agreement, defendant shall first consult the Department to determine whether (a) the text of the release is true and accurate with respect to matters between the Department and defendant; and (b) the Department has no objection to the release. Statements at any press conference concerning this matter shall be consistent with this press release."

A waiver of first amendment rights - is the government fearful of the company saying something?  This may explain why the document on the Siemens website - to investors - is extremely brief -Download 20081215_settlement_eng.pdf

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Addendum - Jordan Weissmann, BLT Blog, Siemens AG Lawyers View $800 Million Fine As a Victory

In the News & Around the Blogosphere

Law.com (AP), Pellicano Gets 15 Years for Wiretapping Scheme

DOJ Press Release, California Executive Pleads Guilty to Fraud in Connection with Sales of Parts from China

DOJ Press Release, Former Executive of Soil Remediation Sub-Contractor Pleads Guilty to Defrauding the U.S. Environmental Protection Agency

DOJ Press Release, Former Head of Human Resources at KB Agrees to Plead Guilty to Conspiracy to Obstruct Justice in Connection with  Internal Investigation of Backdating of Stock Options

Doug Berman, Sentencing Law & Policy, A thoughtful and theory-driven exploration of a parsimonious white-collar sentence

Amanda Bronstad, National LJ, Lawyer seeks to invalidate plea deal for client in Broadcom case -Prosecutorial misconduct alleged

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Madoff

Everyone is talking about this "alleged fraud" and about how massive it appears to be, who is Madoff - the individual accused, and yes - even his vast charitable giving.  A sprinkling of articles that are out there are below:

• Alan Feuer & Christine Haughney, NYTimes, Standing Accused: A Pillar of Finance and Charity
• Marcy Gordon, Yahoo News (AP), Madoff fraud case raises questions about SEC
• Tom Lauricella, Aaron Lucchetti & Amir Efrati, WSJ, Madoff Ran Vast Options Game - Firm to Shut, Wife's Role Questioned; Volume Made Strategy Impossible, Traders Say
• Kara Scannell, WSJ, SEC Had Chances for Years to Expose Madoff's Alleged Ponzi Scheme
• Binyamin Appelbaum & David S. Hilzenrath, Washington Post, SEC Didn't Act on Madoff Tips

Many are asking questions - who is at fault, or who can we blame.  And perhaps it isn't a simple answer like the SEC didn't provide enough oversight, or regulators dropped the ball, or investors weren't savvy enough to realize it wasn't all real, or just maybe it was a combination of all of these things, or none of them. For right now it means people are feeling pain from their losses.  The court has appointed a receiver (see here) and in the days that follow more will come to light.

But what is perhaps something that needs to be included in the discussion is how one individual had such incredible social skills to secure the trust of so many influential individuals. And how one person could build an empire of people that built an ethos that stood as a stamp of approval to those who were considering dropping dollars. If only the movie could have a Disney ending.

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Siemens AG & 3 Subsidiaries Plead

A DOJ press release is titled - Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines - Coordinated Enforcement Actions by DOJ, SEC and German Authorities Result in Penalties of $1.6 Billion.  At a press conference called to announce this settlement, Acting Assistant Attorney General Friedrich stated:

"Under the terms of the plea agreement announced today, first, Siemens AG will plead guilty and has pled guilty to one count of failure to maintain internal controls and a one-count books and records violation.   In addition, three Siemens subsidiaries, those located in Bangladesh, Venezuela and Argentina, have pled guilty to conspiring to violate provisions of the FCPA. 

"Second, Siemens will pay a criminal fine to the United States in the amount of $450 million.   This is far and away the largest criminal fine in FCPA enforcement in U.S. history. 

"Third, Siemens will retain an independent monitor for a period of four years and will continue to implement enhanced controls."

With regard to this last point, the press release states that:

"Under the terms of the plea agreement, Siemens AG agreed to retain an independent compliance monitor for a four-year period to oversee the continued implementation and maintenance of a robust compliance program and to make reports to the company and the Department of Justice.  Siemens AG also agreed to continue fully cooperating with the Department in ongoing investigations of corrupt payments by company employees and agents."

See also FCPA Blog, Final Settlements for Siemens

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In the News & Around the Blogosphere

Brian Baxter, The AmLaws Daily, Defense Lawyers Assess Case Against Blagojevich; Christopher Wills, Yahoo News (AP), Illinois legislators focus on ousting governor

DOJ Press Release,New Jersey Man Charged in Tomato Industry Probe with Racketeering, Money Laundering and Antitrust Violations

David Ingram and Joe Palazzolo, Legal Times (law.com), GOP Signals Rough Path to AG Position for Holder

Mark Hamblett, NYLaw Jrl (law.com), Ex-Greenberg Traurig Partner Pleads Guilty in Tax Shelter Case

Josh Gerstein, Fitz Pushes Envelope With Bonds-for-Editorial-Scalps Charge

Mark Hamblett, NYLaw Jrl, (law.com), Dreier Stole $380 Million, Feds Say; Bail Denied due to 'Enormous' Flight Risk

Jon Katz, Sentencing, ex post facto and conspiracy lifespans

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