Saturday, March 1, 2008

Mukasey Refuses to Proceed Against Bolten & Miers

Professor Peter Henning here, had raised the issue of whether AG Mukasay would issue a contempt citation against Bolten and Miers. And we now know the answer. Dan Eggen of the Washington Post writes, Mukasay Refuses to Prosecute Bush Aides. It seems that Attorney General Mukasey is taking the position that Bolten and Miers refusal to comply with a congressional subpeona does not constitute a crime.

Check our Scotus Blog - Congress's Contempt Power: Law, History, Practice and Procedure

Talkleft in July wrote here

This places the ball back in the Congressional hands - and the issue will be whether they force the issue with Mukasey or move onto the courts for a remedy.


March 1, 2008 in Congress, Contempt, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Plea in Writer's Guild Conspiracy Case

A press release of the U.S. Attorneys' Office of the Central District of California tells that "[a] former assistant administrator of a Writers Guild fund and another woman were charged" "with conspiring to embezzle $17,228.61 by creating a bogus beneficiary of a union fund that paid union members for their works that were sold, distributed and aired abroad."  The charges were by a one count information and were followed with a plea agreement.


March 1, 2008 in Fraud, Prosecutions, Settlement | Permalink | Comments (0) | TrackBack (0)

Scruggs Finally Gets a "W"

To say things have been going downhill for famed torts lawyer Dickie Scruggs over the past few months is quite an understatement.  His legal entanglements began with a criminal contempt charge in the Northern District of Alabama for his handling of documents subject to a judicial order, and then got a whole lot worse with his indictment in the Northern District of Mississippi, along with his son, for an alleged attempted bribe of a state court judge.  Two co-defendants have pleaded guilty and agreed to cooperate, and tapes of various conversations have been released that do not put Scruggs in a very flattering light.  Virtually all of his pre-trial motions have been denied, and the government will introduce evidence of a second alleged influencing of a state court judge.  Finally, though, a ray of sunshine, if you will: Senior U.S. District Judge Roger Vinson dismissed the criminal contempt charge (see opinion below).

The criminal contempt charge arose out of litigation involving State Farm, the object of Scruggs' Hurricane Katrina law suits, that was before U.S. District Judge William Acker, who has been after Scruggs for giving documents sealed in that litigation to Mississippi Attorney General Jim Hood to conduct a criminal investigation of State Farm.  Judge Vinson certainly didn't give Scruggs a free pass in dismissing the charge, noting that "there is a cloud of impropriety surrounding what Scruggs did and the nature of his eleventh hour agreement with Hood. It is certainly understandable that Judge Acker would attempt to hold him accountable. Perhaps there are ethical issues that should be examined. But, the question is not whether Scruggs acted ethically; the question is whether he can be held criminally responsible in a contempt proceeding."  Getting mad is one thing, but getting even through a criminal contempt doesn't cut it when the person is not a party to the underlying lawsuit nor counsel in the litigation.  Judge Vinson determined that "[f]or jurisdictional purposes, the undisputed facts are that Scruggs was not a party, nor was he an attorney-of-record or at any time make an appearance in the Renfroe case , , , it is axiomatic that courts only have power and jurisdiction to enjoin parties before the court."  Federal judges may well view their power as reaching the blue sky or the ends of the earth, but it doesn't always work that way.

While this is certainly good news for Scruggs, it probably only eliminates a case that was not much more than a distraction compared to the attempted bribery trial.  The criminal contempt statute, 18 U.S.C. Sec 402, limits the prison term for out-of-court violations to no more than six months, along with a $1,000 fine, which does not compare to the longer sentence Scruggs could receive in the Mississippi case.  Al Davis is famed for intoning "Just win, baby!" but this one is only the JV game -- or the undercard for fans of the sweet science.  The WSJ Law Blog has the background here. (ph)

Download us_v_scruggs_contempt_dismissal_feb_29_2008.pdf

March 1, 2008 in Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Friday, February 29, 2008

Conrad Black Off to Prison

Conrad Black was ordered to prison and denied bail pending appeal.  After receiving a sentence of 6 1/2 years, and being given 12 weeks before having to report to prison (see here), Conrad Black will now enter a prison facility in Florida. The appellate court denied the newspaper leader bail pending appeal, although the Chicago Tribune notes here that the court acknowledged that a substantial question was raised. Conrad Black's two co-defendants were granted bail pending appeal.

To obtain bail pending appeal, the accused needs to show that he or she is not a flight risk and not a community danger.  It is also required that the defendant show that the case raises a "substantial question." The substantial question test is somewhat amorphous and courts are left to provide order in using this standard.   And although the court did not rule in favor of Conrad Black, they allowed him some time prior to ordering him to report to prison.

Conrad Black will be reporting to Coleman - here.


February 29, 2008 in Sentencing | Permalink | Comments (1) | TrackBack (3)

Thursday, February 28, 2008

This is News?

FBI Probing Whether Clemens Lied to Congress (AP) -- What a shocker!

House Ethics Committee Launches Investigation Into Conduct of Rep. Renzi (AP) -- The 35-count indictment came out almost a week ago, so this surely ranks as a "rapid response."

Pelosi Calls For Grand Jury Investigation Of Bolten, Miers (The Politico) -- Talk about falling on deaf ears, and this one took two weeks to formulate.


February 28, 2008 in Congress, Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)

Two More Plead Guilty to Insider Trading

Two more defendants, one an officer at UBS, pleaded guilty to insider trading.  According to a press release (here) issued by the USAO for the Southern District of New York:

Between December 2001 and August 2006, GUTTENBERG repeatedly sold to TAVDY and another individual material,nonpublic information regarding upcoming upgrades and downgrades in UBS analysts’ securities recommendations. Investors, including institutional investors and professional money managers, regularly relied on UBS analysts’ ratings of public companies’ securities.  As a result, changes in UBS analysts’ recommendations regarding a particular company’s securities were material to investors and often had a direct effect on the trading price of that company’s stock.

The two defendants were among thirteen charged with insider trading that included employees from Bank of America, Morgan Stanley, and Bear Stearns in addition to UBS.  Only one defendant is still awaiting trial as all the others have now entered guilty pleas. (ph)

February 28, 2008 in Insider Trading | Permalink | Comments (1) | TrackBack (0)

Springing the Perjury Trap on Roger Clemens

House Oversight and Government Reform Committee Chairman Henry Waxman and ranking member Representative Tom Davis sent a letter to Attorney General Mukasey asking for an investigation of possible perjury by Roger Clemens about his use of steroids and HGH -- and his attendance at a party in 1998 at Jose Canseco's house.  The letter (available below) does not come out and explicitly accuse Clemens of being a liar while under oath during his February 5 deposition or February 13 Congressional testimony, but it does say that "Congress cannot perform its oversight function if witnesses who appear before its committees do not provide truthful testimony. Perjury and false statements before Congress are crimes that undermine the integrity of congressional inquiries. For these reasons, we take evidence that a witness may have intentionally misled the Committee extremely seriously."  Of course, Representative Waxman said after the hearing that he regretted even holding it, and nothing of any legislative importance occurred during the session, but thos minor annoyences won't stand in the way of a criminal referral.

What started out as a perjury trap has now been sprung on Clemens, with the FBI sure to begin an investigation because Congress wants one.  It was clear that either Clemens or his former trainer, Brian McNamee, was lying because they told diametrically opposed stories.  But the question now is whether a federal prosecutor could prove Clemens committed perjury, a much more difficult task than just saying "I don't think he's telling the truth."  The Committee also released a memorandum (available below) from the staff that outlines the various contradictions in Clemens' testimony, based largely on the testimony of McNamee and former teammate Andy Pettitte, who discussed two conversations with Clemens about using HGH.  The memo contains no new surprises, and sets forth the inconsistencies in Clemens' testimony in great detail. 

The problem is that the standard used by the Committee staff is not what a prosecutor must use to decide whether to pursue a case.  The analysis points out places where what Clemens said was "implausible" or that certain facts "bolster" McNamee's statements.  But a perjury prosecution that will ride on the credibility of McNamee will involve much more than just whether there is a rational basis to believe him rather than Clemens.  A criminal prosecution will involve asking a jury to believe that McNamee is truthful, not just plausible.

McNamee admitted during the Committee hearing that he has made a number of inconsistent, or even false statements, in addition to not disclosing the syringes and gauze pads he claims were used to inject Clemens until well after his interview for the Mitchell Report.  Pettitte is a more credible witness, but he only remembers two conversations, one of which took place nearly ten years ago.  Will Pettitte bring down his old friend, or will he waffle just enough that his testimony might not be sufficiently credible to a jury?

Perjury is among the most difficult crimes to prove because the government must establish that the defendant told an outright lie, and not just that the person dissembled or made statements that seem implausible.  The standard for sending a referral to the Department of Justice is quite low, basically something doesn't look right, and an investigation can be initiated just to placate Congress.  Even sending out grand jury subpoenas and calling witnesses to testify does not require anything more than a suspicion that wrongdoing occurred, which is certainly the case with the Clemens-McNamee smackdown.  But the leap to proving perjury is significant, and as I've said before, if McNamee is the linchpin of the case then it will be a very difficult one to win.  (ph)

Download oversight_government_reform_committee_letter_clemens_feb_27_2008.pdf

Download oversight_government_reform_committee_memo_clemens_feb_26_2008.pdf

February 28, 2008 in Congress, Investigations, Perjury | Permalink | Comments (2) | TrackBack (2)

Wednesday, February 27, 2008

With the Defense Motions Gone, Will There Be a Plea in the Scruggs Case?

Senior U.S. District Judge Neal Biggers rejected the remaining motions filed by Dickie Scruggs and his two co-defendants, son Zach and Sidney Backstrom, clearing the way for trial at the end of March on the charges related to an alleged attempted bribe by confederate Tim Balducci.  With that goes the best chance Backstrom may have of avoiding a trial in which the spillover from the government's Rule 404(b) bad acts evidence is likely to paint the defendants as three peas in a corrupt pod.  The decisions are available below.

The key ruling by Judge Biggers was the rejection of the defense motion to exclude evidence related to a benefit provided to another state court judge -- a potential offer of a seat on the U.S. District Court by Dickie's brother-in-law, Senator Trent Lott (see earlier post here) -- that the government will use to show that Dickie and Zach engaged in a pattern of corruption under.  As described by the court:

There is no question that the extrinsic evidence offered in the present case constitutes a similar alleged act within the meaning established by the aforementioned case law. The 404(b) evidence reveals (1) the employing of a person not an attorney of record to approach a state court judge (2) with the intent to corrupt the state court judge in regard to (3) a fee dispute (4) involving two of the defendants herein as well as two others who have already entered guilty pleas in this case – all substantially the same elements as charged in the conspiracy count before the court in the present case.

This leads to the second rejected motion, the request by Zach and Backstrom to have their trials severed from Dickie's.  Judge Biggers accepted the government's assertion that Zach was also implicated in the other instance of corruption, and found that Backstrom can be protected by a jury instruction.  Unfortunately for Backstrom, the spillover effect may be significant because this appears to be particularly potent evidence.  While Backstrom has no direct connection to it, the impact may be substantial despite any instructions to the jury to consider the evidence only against his two co-defendants. The old "birds of a feather flock together" problem for the uninvolved co-defendant.

The third defense motion that fell on deaf ears was a request to suppress the wiretap evidence because of alleged government misconduct.  Judge Biggers rejected the defense claims that the government's lead agent misled the magistrate in order to obtain the wiretap warrant, and sent a message regarding his perception of the evidence of the attempted bribe:

In this court’s opinion, to send an attorney to a judge to get him to rule in a certain way – when that attorney is not of record in the case and professes to be a friend of the judge and when opposing counsel has no knowledge of the visit – amounts to an effort to corrupt a judge. In the same meeting with Judge Lackey, Balducci offered Judge Lackey a job as “of counsel” in Balducci’s law firm when the judge chose to retire. These actions are certainly a clear and gross violation of all known codes of ethics applicable to attorneys and judicial officers.  Indeed, when an act such as this occurs, perceived by the judge possibly to be an attempt to corrupt or bribe, it is incumbent on the judge to report the matter to appropriate authorities, which is what Judge Lackey did.

I get the feeling that the three defendants are not going to have the friendliest of judges presiding at their trial.  So the question now is whether Backstrom will break ranks and agree to cooperate against Dickie and Zach.  While I doubt we've seen the last defense motion before trial, and the closer we get the more such missives we're likely to see, the issue now becomes whether one -- or even two or three -- of the defendants decide not to risk a trial and the likely substantial sentence a conviction would bring.  This case only gets more interesting. (ph)

Download us_v_scruggs_order_denying_motion_in_limine_feb_26_2008.pdf

Download us_v_scruggs_order_denying_motions_to_sever_feb_26_2008.pdf

Download us_v_scruggs_order_on_motion_to_suppress_feb_26_2008.pdf

February 27, 2008 in Corruption, Judicial Opinions | Permalink | Comments (0) | TrackBack (1)

Hedge Fund Founder Gets 5 Years

A press release of the U.S. Attorney's Office for the Central District of California states, "The founder of an investment firm that operated a hedge fund called the GLT Venture Fund was sentenced today to the statutory maximum penalty of 60 months in federal prison for lying to investors about his fraudulent operation that resulted in approximately $6 million in losses to investors."


February 27, 2008 | Permalink | Comments (0) | TrackBack (1)

Former AG Aschcroft Will Testify About His Monitorship

The controversy over the appointment of monitors under deferred prosecution agreements will be the subject of a hearing on Capitol Hill, and former Attorney General John Ashcroft has agreed to testify at the proceeding.  Ashcroft was appointed by Christopher Christie, the U.S. Attorney for the District of New Jersey, to serve as a monitor for Zimmer Holdings, the medical device manufacturer that settled charges that it made improper payments to doctors.  The company disclosed that the monitorship with Aschcroft's consulting firm would cost between $28 million and $52 million, which drew the attention of two New Jersey Congressmen who questioned the appointment by USA Christie of his former boss.  There were rumblings that the House Judiciary Committee would subpoena Ashcroft if he did not agree to testify, and that threat is now gone.  An AP story (here) discusses the former Attorney General's decision. (ph)

February 27, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (3)

Monday, February 25, 2008

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February 25, 2008 in About This Blog | Permalink | Comments (0) | TrackBack (2)

The Latest on Former Alabama Governor Siegelman

Washington Post (AP) reports in a story titled Ex Ala. Gov. Wants Special Prosecutor, on the latest development in Don Siegelman's case.  The former Alabama Governor received a sentence of 88 months and was ordered to go directly to prison (see here).  Serious concerns have now been raised about the testimony of one of the government witnesses and whether certain evidence was properly disclosed to the defense.  This is a case that is not likely to go away quietly.


February 25, 2008 in News | Permalink | Comments (1) | TrackBack (1)

Insurance Executives Convicted

Five former insurance company executives, four from General Re and one from American International Group, were convicted of conspiracy, securities fraud, false statements to the SEC, and mail fraud in connection with a "finite insurance" contract used to make AIG's reserves look stronger than they were.  The defendants include the former CEO of General Re, Robert Ferguson, the company's former CFO, senior vice president, and long-time assistant general counsel in addition to a vice president from AIG.  The case revolved around reinsurance transactions in 2000 and 2001 that helped AIG report an increase in its insurance loss reserves, something that analysts had been critical about, negatively affecting the stock price.  According to prosecutors, the contracts were a sham transaction because no real risk passed to General Re, so AIG's accounting for it as a reinsurance agreement was improper.

An interesting twist in the case was the government's identification of former AIG CEO Maurice Greenberg as an unindicted co-conspirator, although he has never been charged with any crime.  Naming such a well-known executive as a member of the conspiracy may have been a means to undermine the defendants' "empty chair" defense that sought to blame the problems with the transactioin on Greenberg.  He was forced out of his position as CEO by then-New York Attorney General (and now Governor) Eliot Spitzer, who demanded Greenberg's termination on the threat of criminal prosecution of the company, an almost sure death sentence for an insurer.  General Re is a wholly-owned subsidiary of Berkshire Hathaway, whose CEO is Warren Buffett, once named as a potential witness in the case but never called by either side.

While the case is primarily an accounting fraud prosecution, it is different from more typical cases of this type because the main defendants were not from the company whose accounting was improper.  Indeed, there was no claim that General Re's recording of the transaction was improper, only AIG's.  In that sense, General Re was an enabler of AIG, the type of enterprise liability rejected by the Supreme Court in the Stoneridge case for private securities fraud actions.  One rationale for rejecting that theory of liability in Stoneridge was the presence of the SEC and federal prosecutors to crack down on companies that aid others in violating the securities laws.  An AP story (here) discusses the verdict, which the defendants have vowed to appeal. (ph)

February 25, 2008 in AIG, Fraud, Securities, Verdict | Permalink | Comments (1) | TrackBack (0)

Analyzing Rep. Renzi's Indictment

The indictment of Rep. Richard G. Renzi is 26 pages in length and has 35 counts.  There are two co-defendants also charged, although these two do not face all the charges levied against Renzi.

The opening passages of the Indictment are descriptive and include items such as the location of his law degree, something his law school may not be too happy about. This is interesting in itself as it shows that he graduated in 2001 and was elected to the house in November 2002, although he has an extensive background in Renzi Investments, since 1995, something that is also discussed in this charging document.

Count One charges conspiracy, with the substantive acts of Hobbs and mail and wire fraud being the essence of the illegal agreement. The government, despite recent losses in the honest services realm, uses section 1346 as an unlawful act which formed the conspiracy. There are 28 overt acts specifically outlined in the indictment.  Although the overt acts appear to be many, they could easily be collapsed into relatively few items as they include separate counts for when a check is written and when it is deposited.

Counts Two - Ten charge honest services wire fraud. They are the substantive acts and are very much repetitive of what was described in the conspiracy count.  Thus, the fax of July 6th appears in both places. This is not unusual as the federal system allows the government to charge both the conspiracy and substantive act for the same conduct.

Count Eleven charges conspiracy to commit money laundering with count twelve being the concealment of money laundering, and counts thirteen to twenty-five being transactions in criminally derived funds.

Counts Twenty-Six and Twenty-Seven present Hobbs Act charges.

Counts Twenty-Eight, yet another conspiracy count, presents a conspiracy to commit insurance fraud.

Counts Twenty-Nine through Thirty-Two are the substantive charges of insurance fraud.

Count Thirty-Three through Thirty-Five pertain to false statements to influence insurance regulatory investigations.

The Indictment then presents a claim for forfeiture.

This indictment, like so many, is a classic example of the discretion afforded the government in charging in that many different statutes will often fit the conduct alleged to have been committed. As one finds in many cases, the government uses a good number of the tools in its box when presenting the charges. This is contrasted against cases where there has been an agreement already reached and the government may use an Information to charge one or just a few counts.


February 25, 2008 in Celebrities, Congress, Money Laundering, News, Prosecutions | Permalink | Comments (0) | TrackBack (1)