Saturday, February 28, 2009
Karen Gullo, Bloomberg, Bonds Steroids Trial Postponed as U.S. Appeals Evidence Ruling
DOJ Press Release, Stanford Financial Group Chief Investment Officer Charged with Obstruction
William Bender, Philly.com, Another Delco exec accused in swindle
Sanjay Bhatt, Seattle Times, Mortgage-fraud defendant sentenced to seven years in prison
Mike Anton, LATimes, About to do time? Meet your best pal
The message is loud and clear - the DOJ has a growing number of alleged fraud cases dropping in its lap. The cases in some instances show an unraveling of a house of cards. And in many ways, the initial recent case - Madoff - can be seen as the impetus for people to start asking questions about their investments. (see discussion of Madoff here and here), It is no longer acceptable to just invest and be secure that the investment is safe. But the asking of questions, results in new cases (e.g., Arthur Nadell here), as people begin to find that there are no acceptable answers. See also Tom Hays & Larry Neumeister, AP, 2 major fraud cases in NY federal court; Julie Creswell & Clifford Krauss, NYTimes, Stanford Accused of a Long-Running Scheme
Former Chicago Alderman Edward Vrdolyak received a sentence of five years probation. See Chicago Tribune, No jail for Vrdolyak; Carol Marin, Chicago Sun Times, Fast Eddie and justice -- hard to reconcile. Vrdolyak plead guilty to a conspiracy to commit mail/wire fraud. See Martha Nell, ABA Jrl Law News Now, Chicago Attorney and Ex-Alderman Ed Vrdolyak Pleads in Kickback Case; Huffington Post (AP), Vrdolyak to Plead Guilty: Judge. He was represented by Attorney Michael Monico.
Wednesday, February 25, 2009
The Tenth Circuit en banc reinstated the convictions of former CEO of Qwest Communications International, Inc. (See opinion) A prior panel had found it improper to exclude defense expert testimony. In a 104 page decision (52 page majority), 5 judges on the Tenth Circuit held that "the district court's exclusion of the testimony was not arbitrary, capricious, whimsical, or manifestly unreasonable: nor are we convinced that the district court made a clear error of judgment or exceeded the bounds of permissible choice in the circumstances."
Four members of the court dissented. The dissent states, "[t]he flaw in the government's argument is that the rules of criminal procedure, unlike the rules of civil procedure, do not require a criminal defendant to establish the foundation for expert testimony through advance written submissions." Circuit Judge Kelly, writing an additional dissent has a classic opening line - "[i]t is indeed unfortunate that the court chooses expediency over due process."
The real question may be whether the Supreme Court grants a request to review, and whether they find that due process requires the defense be given the opportunity to present
their its case. I can't help but remember these words from the case of Washington v. Texas, 388 U.S. 14, 19 (1967):
"The right to offer the testimony of witnesses, and to compel their attendance, if necessary, is in plain terms the right to present a defense, the right to present the defendant’s version of the facts as well as the prosecution’s to the jury so it may decide where the truth lies. Just as an accused has the right to confront the prosecution’s witnesses for the purpose of challenging their testimony, he has the right to present his own witnesses to establish a defense. This right is a fundamental element of due process of law."
See also Dionne Searcey, WSJ Blog, Tenth Circuit Upholds Nacchio's Conviction; Prison Time Likely Awaits ; Andy Vuong, Denver Post, Full Court Upholds Nacchio Insider Trading Conviction
(esp)(w/ a hat tip to Peter Henning)
Monday, February 23, 2009
This blog has previously noted the problems with section 1346 of the mail fraud statute (see here). The "intangible rights" doctrine has been the subject of much concern.
But Justice Scalia, in a dissent to a denial of certiorari, voiced a strong opposition to the progression of the intangible rights doctrine in a direction that needs correction. Although the Court did not accept cert in the Sorich case, a case involving "city employees who engaged in political-patronage hiring for local civil-service jobs," Justice Scalia noted that the "28 words" in the statute had "been invoked to impose criminal penalties upon a staggeringly broad swath of behavior, including misconduct not only by public officials and employees but also by private employees and corporate fiduciaries." He stated that "[w]ithout some coherence limiting principle to define what 'the intangible right to honest services" is, whence it derives, and how it is violated, this expansive phrase invites abuse by headline-grabbing prosecutors in pursuit of local officials, state legislators, and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct." Justice Scalia concludes his dissent by stating that "it seems to me quite irresponsible to let the current chaos prevail."
See also Lyle Denniston, Scotus Blog here
(esp)(w/ a hat tip to Peter Goldberger)
An executive business meeting is set for the Senate Judiciary Committee for February 26, 2009. On the agenda are S. 386 - Fraud Enforcement and Recovery Act and S. 49 - Public Corruption Prosecution Improvements Act (see here). The most troublesome aspect of this latter bill is its attempt to provide increased prosecutorial power on mail and wire fraud offenses. Section 3 is titled, "Application of Mail and Wire Fraud Statutes to Licenses and Other Intangible Rights." It looks like an attempt to circumvent the Supreme Court ruling in United States v. Cleveland, where the Court held that licenses were not property for purposes of mail fraud. Imagine this scenario - a person answers a question incorrectly on their mailed application for a fishing license. Assuming other aspects of the statute being met, the government would now be able to prosecute them federally for mail fraud. Adding the words "or any other thing of value" might not include licenses, but the title of this provision sure is an attempt to try to increase prosecutorial power to include them. There needs to be some limits to this already near limitless statute, and this provision is not moving in the correct direction.
(esp)(w/ a hat tip to Tiffany Joslyn of NACDL)
Sunday, February 22, 2009
ABA, 23rd Annual National Institute on White Collar Crime, March 4-6, San Francisco
Strafford, CFIUS Regulations for Foreign Investment in the U.S., March 25, telephone conference
ABA, Internal Corporate Investigations and In-House Counsel, May 7-8, Washington D.C. here
Eighteenth Annual National Seminar on the Federal Sentencing Guidelines, May 21-22, Clearwater Beach, Florida (details down the road)
ABA, 19th Annual National Institute on Health Care Fraud, May 13-15, Phoenix, Arizona
Bob Mook, Denver Business Jrl, Dryer Sentenced to 132 years ("one of the harshest given for a white-collar crime in Denver District Court")
Henri E. Cauvin, Washington Post, More Muscle Against Mortgage Fraud - U.S., State, Local Agencies Form Task Force
Clifford Krauss, Julie Creswell & Charlie Savage, Fraud Case Shakes a Billionaire’s Caribbean Realm
Michael Braga, HeraldTribune.com, Lawyer passes buck in real estate fraud trial
R. Robin McDonald, Fulton County Daily Report, law.com, Ex-Prosecutor Sued Over Suicide of Defendant's Wife (w/ a hat tip to Bill Olis)
Adrian Walker, Boston Globe, Witness stops cooperating in sting case -Says FBI used him to topple Turner and Wilkerson
Matthew Goldstein, Business Week, Stanford: Signs That Should Have Worried Investors - The Stanford scandal also raises questions as to whether the SEC, which had been investigating the firm for three years, should have acted sooner
Simon Kennedy, WSJ- Marketwatch, UBS slumps after U.S. seeks data on 52,000 clients - U.S. lawsuit seen as challenge to Swiss private banking model;
Karen Gallo, Bloomberg.com, Judge Orders Bonds’s Former Trainer to Appear for Hearing
Ieva M. Augustums & Stephen Bernard, law.com (ap), Bank of America CEO Subpoenaed Over Bonuses
Shannon P. Duffy, The legal Intelligencer, law.com, Fumo: Bush Justice Dept. Was Out to Get Me
Mike Scarcella, BLT Blog, Energy Company, Former Employee & DOJ Spar on Appeal (this is definitely a case to follow as it is the DOJ saying they shouldn't have to turn over the attorney-client material they received from a company as part of a deferred prosecution agreement) (w/ a hat tip to Tiffany Joslyn)
Friday, February 20, 2009
Will the government finally get the message that this prosecution just wasn't meant to be? The court dismissed the case against a co-defendant (see here), dismissed Court One against Kuehne (see here), and now Court Seven is dismissed. The most recent dismissal is yet more evidence of the government's stretching to make this prosecution.
The court ruled that "the government has cited no court decision in either the United States or Columbia that recognizes a property right in potentially forfeitable property without first obtaining a judgment." The court dismissed count seven because "the Columbian government's 'right' to seek forfeiture" does not "constitute[ ] a cognizable 'property' right under the mail and wire fraud statutes." Although the opinion only mentions the Cleveland case, where the Supreme Court found that "licenses" did not constitute property, it seems obvious that without a property interest, one does not have property.
See Order - Download order_dismissing_count_7_2.20.09).pdf
See also David Oscar Markus, Southern District of Florida Blog, Another one bites the dust
Deferred prosecution agreements can have ramifications to many. A DOJ press release states that "UBS AG, Switzerland’s largest bank, has entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS), the Justice Department..." The press release further states:
"As part of the deferred prosecution agreement and in an unprecedented move, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), has agreed to immediately provide the United States government with the identities of, and account information for, certain United States customers of UBS’s cross-border business. Under the deferred prosecution agreement, UBS has also agreed to expeditiously exit the business of providing banking services to United States clients with undeclared accounts. As part of the deferred prosecution agreement, UBS has further agreed to pay $780 million in fines, penalties, interest and restitution..."
Deferred prosecution agreements can provide information to the government to proceed against individuals. It has been controversial when the agreement waived attorney client privilege, allowing the government in some cases to secure evidence against individual employees in a corporation. But this deferred prosecution could have ramifications to customers. The issue being whether their tax liabilities were properly paid.
A more recent DOJ Press Release tells more. See DOJ Press Release, United States Asks Court to Enforce Summons for UBS Swiss Bank Account Records. Here the release states that " [t]he government filed a lawsuit ... in Miami against Swiss bank UBS AG." "The lawsuit asks the court to order the international bank to disclose to the Internal Revenue Service (IRS) the identities of the bank’s U.S. customers with secret Swiss accounts. According to the lawsuit, as many as 52,000 U.S. customers hid their UBS accounts from the government in violation of the tax laws."
It sounds like some white collar and tax attorneys will be busy in the next few months.
(esp)(blogging from Louisville, Kentucky)
Addendum - Lynnley Browning, NYTimes, UBS Pressed for 52,000 Names in 2nd Inquiry
Wednesday, February 18, 2009
David Scheer & Alison Fitzgerald, Bloomberg, Stanford Attorney’s Withdrawal ‘Screams Fraud,” Spurred SEC
Clifford Krauss, Phillip L. Zweis & Julie Crewell, NYTimes, U.S. Accuses Texas Financial Firm of $8 Billion Fraud
Mike Scarcella, Legal Times, law.com, DOJ Prosecutors Replaced in Post-Trial Stevens Litigation
DOJ Press Release, Justice Department Receives $4 Billion in Grant Funding as a Result of the American Recovery and Reinvestment Act of 2009 -Funds for New Police Officers, Combating Violence Against Women and Fighting Internet Crimes Against Children Included in Act
Dan Slater, WSJ Blog, A Law Blog Q&A With Former Attorney General Michael Mukasey ; Joe Palazzolo, Legal Times, law.com, Mukasey to Join Debevoise & Plimpton
Jeff Coen, Chicago Tribune, Despite tearful plea, ex-Ald. Troutman gets 4 years
Steve Levin, Fraud With Peril, An Appeal to Remember, (discussing mail fraud appeal)
Ramon Bracamontes & Zahira Torres, elpasotimes.com - discussing possible plea in alleged public corruption case - here
Monday, February 16, 2009
Fionnan Sheahan, Independent.ie, Government refuses to ask fraud squad to investigate (concerning investigations in banking)
Michael O'Regan, Irishtimes.com, Irish white-collar criminals should be 'in handcuffs'
Hon. Marcia G. Cooke, of the Southern District of Florida, Miami Division, issued an Order dismissing a co-defendant in the case against Ben Kuehne. (For background on the Ben Kuehne case see here) This co-defendant had been charged with a "single count of conspiracy to commit money laundering." In dismissing the case, the court stated:
"Considering the Government’s substantial pre-indictment and post-indictment delay, the Government’s inability to present an adequate reason for the delay, the Government’s concession that Velez did not contribute in any way to the delay between October 2005 and October 2007, Velez’s timely assertion of her speedy trial rights, the actual prejudice she has shown, and the prejudice that should be presumed considering the length of the delay and the outcome of the other factors, these two counterbalancing factors are insufficient to support a conclusion that Velez’s speedy trial rights have not been violated."
The Order speaks directly to the reasons provided by the government for their delay in this matter. Each of these arguments is easily dismissed by the court. For example, the court states, "The Government’s argument, that it was necessary to sacrifice Velez’s Sixth Amendment rights so that it could engage in discussions with her co- defendants to ensure that all relevant facts were considered before returning an indictment, rings hollow considering that, at that point, Velez had already been indicted."
Sunday, February 15, 2009
James Glanz, C.J. Chivers, & William Rashbaum, NYTimes, Inquiry on Graft in Iraq Focuses on U.S. Officers
Lynnley Browning, NYTimes, U.S. Seeks New Powers to Fight Tax Evasion
The Crime Report, Nearly $4 Billion For Criminal Justice In Stimulus Package (w/ a hat tip to Ted Gest)
DOJ Press Release, Accounting Firm Attorney Pleads Guilty to Tax Fruad Related to Tax Shelters Claiming Over One Billion Dollars of Fraudulent Tax Losses (the plea calls for a plea to one count of conspiracy under 371 and count two of tax under 7201 - it calls for cooperation)
Tricia Bishop, Baltimore Sun, White-collar defendants are given some slack in reporting to federal prison (w/ a hat tip to Bill Olis)
Leo Strupczewski, Legal Intelligencer, law.com, Pa. Judges Plead Guilty in Cash-for-Kids Corruption Scandal
Pamela A. MacLean, NLJ, law.com, Next wave in Madoff mess: tax troubles
Mary Spicuzza, AssetForfeitureWatch.com, Contractor's plea in bribery case
leads to forfeiture and prison time
Clearly there is a need for increased regulation to stop fraudulent activities. In this past year, there have been too many innocent victims of fraud. The legislative response, however, is disappointing. As I told Chisun Lee at ProPublica, here, it uses a hammer to hit the wrong nail.
Parts of the new legislation are promising. For example, increased funding to monitor and detect fraud would be wonderful. Admittedly Senator Patrick Leahy when introducing the bill notes that "homes mortgages were packaged together and turned into securities that were bought and sold in largely unregulated markets on Wall Street." But the next paragraphs do not logically follow from this statement. That is, adding new federal legislation and increasing penalties are part of the proposed legislation. New laws, however, are not the answer - especially when there were already laws on the books to meet the alleged conduct. What needs to happen here is stopping this misconduct before victims suffer. There needs to be increased regulation and oversight of that regulation to stop those who try to engage in fraudulent activities.
It is interesting to see the National Association of Criminal Defense (NACDL) and Heritage Foundation issuing a joint statement to the Senate Judiciary Committee showing their opposition to the proposed expansion of federal criminal law in S. 386, the Fraud Enforcement Recovery Act.
Heritage-NACDL Letter -Download nacdlheritage_ltr_to_senate_judiciary__fraud_enforcement__recovery_act_s__386.pdf
Addendum - Rita Glavan, Acting Assistant AG- Criminal Division presents the government position here - Download 2009-3057-1.pdf
On February 13, 2009, Senator Arlen Specter introduced a bill "to provide appropriate protection to attorney-client privileged communications and attorney work product." (See Thomas here - go to S. 445) The bill:
"Prohibits federal prosecutors and investigators across the executive branch from requesting or conditioning charging decisions on an organization’s reasonable assertion of attorney-client privilege or decision to pay of attorneys fees for an employee. This bill emphasizes that the right to counsel is chilled unless the confidential communications between attorneys and their clients are protected by from compelled disclosure. The Department of Justice has changed its rules three times in the past few years, and attorneys and clients need clarity and an unchanging rule Cosponsors include: Senators Carper, Cochran, Kerry, Landrieu, and McCaskill."
(esp) (w/ a hat tip to Tiffany M. Joslyn)
Saturday, February 14, 2009
Grant McCool, Reuters, Indicted NY Lawyer Released on Bail into House Arrest
Hispanic Business.com, PR Wire, Sigue's Commitment to Industry Standard Compliance Program Results in Dismissal of Deferred Prosecution Agreement
Andrea Estes, Boston Globe, Two Top Patrick Aides to Testify - Pair subpoenaed in Cognos probe
Cynthia Burton, Philadelphia Inquirer, Fishman recommended for U.S. attorney in N.J.
Joe Palazzolo, BLT Blog, Judge Holds Prosecutors in Contempt in Stevens Case
Wednesday, February 11, 2009
Bob Keefe, AJC, Peanut Corp. president refuses to testify to Congress
Chisun Lee, Pro Publica, Senators Propose to Expand Financial Fraud Laws
Joe Palazzolo, BLT Blog, Feds Set Sights on 'Gatekeepers' in Fraud Investigations
Jordan Weissmann, BLT Blog, Tejada Pleads Guilty
Lynne Marek, NLJ, law.com, Ex-Illinois Governor Angling to Rehire Defense Attorney
Holbrook Mohr, law.com(AP), Scruggs Pleads Guilty to Mail Fraud
Anne Sutton, law.com (AP), Alaska's Attorney General Resigns in Wake of Troopergate Investigation
According to a DOJ Press Release "Kellogg Brown & Root LLC (KBR), a global engineering, construction and services company based in Houston, pleaded guilty today to charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts. . ." The company plead to a "five-count criminal information" and "agreed to pay a $402 million criminal fine." The company issued a press release that stated that:
"[u]nder the terms of the settlement announced earlier today, KBR will make payments totaling $20 million over the next eight quarters to the DOJ. The information contained in the DOJ and SEC settlements note aggregate financial penalties totaling $579 million. The remainder of the penalties will be paid by Halliburton pursuant to indemnities under the 2006 Master Separation Agreement between KBR and Halliburton."
KBR has also agreed "to retain a compliance monitor to review KBR's continued compliance with anti-corruption laws." See also the FCPA Blog here