Tuesday, June 30, 2009
TBO.com (AP), 10 others to be charged in Madoff probe
DOJ Press Release, Former Social Worker Sentenced for Role in Scheme to Defraud Department of Veterans Affairs and Obstructing Justice (3 years)
Monday, June 29, 2009
Earlier this term, the Supreme Court granted certiorari in the Conrad Black case, a case premised upon the honest services intangible rights doctrine of the mail fraud statute (see here). Now a second case has cert granted - Weyhrauch v. United States - that also presents a question regarding section 1346. The question presented is: "Whether, to convict a state official for depriving the public of its right to the defendant's honest services through the non-disclosure of material information, in violation of the mail-fraud statute (18 U.S.C. Sec. 1341 and 1346), the government must prove that the defendant violated a disclosure duty imposed by state law." (see here). For the Petition for Certioriari, Brief in Opposition, and Petitioner's Reply, see Scotus Blog here.
Weyhrauch, a lawyer and former member of the Alaska House of Representatives was accused of mail fraud for his role with an oil field services company. The government proposed to introduce evidence that went to ethics violations and conflicts of interest in Weyhrauch's alleged conduct. The government argued "that the evidence should nonetheless be admitted because proof that a legislator knowingly concealed a conflict of interest may be used to support an honest services fraud conviction even if state law does not require disclosure of the conflict of interest." The district court granted the accused's motion, excluding the evidence. The government appealed to the Ninth Circuit, that after discussing the circuit split reversed stating that it "decline[d] to adopt the state law limiting principle." The court held that it could not "find any basis in the text of legislative history of section 1346 revealing that Congress intended to condition the meaning of 'honest services' on state law." The petitioner - defendant, is now asking the Supreme Court to review this ruling.
This case presents another opportunity for Justice Scalia to use his words from the denial of cert in the Sorich case, where he stated that the "28 words" in the statute had "been invoked to impose criminal penalties upon a staggeringly broad swath of behaviour, 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 in Sorich by stating that "it seems to me quite irresponsible to let the current chaos prevail." (see here)
Clearly Madoff's sentence is "symbolic." It symbolizes an incredibly long sentence being given to a white collar offender, something that has happened in the past but is not common, and hardly ever to this extent for a white collar individual. (see here)
But should a sentence be for a "symbolic" purpose? Clearly Madoff cannot serve 150 years in prison. And there are many others in the system who have likewise received sentences beyond their lifetimes - usually, however, we see such cases in the drug or violent crime realms.
But one wonders if sentences that exceed a person's lifetime are realistic and add credibility to our sentencing system. When the system allows and sometimes encourages a judge to issue a sentence that can never be served, does it defeat the validity of the sentencing structure? General deterrence is a valid punishment theory and sending a message to the community that criminal conduct will not be tolerated is likewise admirable. Some may see denunciation as an important aspect of correcting future criminal conduct. And clearly 18 USC 3553 provides that the sentence should "reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense." But all that said, should an individual - no matter how guilty and how extraordinarily evil - be given a sentence that is beyond the person's lifetime for "symbolic" purposes?
I keep thinking about the initial purposes of the sentencing guidelines where it states that " [t]he Act's basic objective was to enhance the ability of the criminal justice system to combat crime through an effective, fair sentencing system. To achieve this end, Congress first sought honesty in sentencing." (emphasis added). It states later, "[h]onesty is easy to achieve: the abolition of parole makes the sentence imposed by the court the sentence the offender will serve less approximately fifteen percent for good behavior." But in the back of my mind I keep wondering if Congress really achieves "honesty in sentencing" when it allows an individual to receive a sentence that exceeds the person's lifetime.
150 years (see here) - more than a lifetime is the sentence given to Bernie Madoff by Hon. Denny Chin. It was clear that the 12 years requested by defense counsel would never be a reality, and it was also clear that Madoff would likely spend the rest of his life in prison. But a sentence of 150 years sends a forceful message that white collar offenders can and will be punished harshly for fraud. Some interesting points about the sentencing -
- The NYTimes reports (here) that "Judge Chin pointed out that no friends, family or other supporters had submitted any letters on Mr. Madoff's behalf, attesting to the strength of his character or good deeds he had done." - Some white collar cases will have numerous letters showing the good qualities, charity work, and other deeds of the offender. But the usual letter-writers were the victims in this case. It is therefore not surprising that there would be none to present to the court.
- Madoff was given no credit for his remorse and no credit for pleading. He saved the taxpayers the cost of a trial, and clearly spared everyone the pain and time of making the government prove the case against him. The penalty of going to trial was imposed in this case, despite the fact that a trial did not happen.
- Giving Madoff the maximum sentence is not a punishment based upon rehabilitation or specific deterrence. Being 71 years and being given a prison sentence of 150 years leaves little chance that he will ever exit prison a free man. This is clearly a punishment grounded in retribution. From a general deterrence standpoint, a much lesser punishment could have been used for sending the message that this conduct will not be tolerated.
- Madoff was different from the usual white collar offender (see here), and that needed to be factored into the sentence, as Judge Chin did.
- But the remaining question still stands - how could this fraud have gone on unnoticed for so long, and why did it take government authorities 20 years to finally do something about it.
The Hon. Denny Chin gave a sentence of 150 years to Bernie Madoff, a number a far cry from the 12 years asked for by defense counsel. (see here)
Jack Healy, NYTimes, Madoff Sentenced to 150 Years in Prison for Ponzi Scheme
Chad Bray, WSJ, Madoff Sentenced to 150 Years
Washington Post, Madoff Sentenced To Maximum 150 Years In Jail
Doug Berman, Sentencing Law & Policy Blog, Madoff gets sentenced to max of 150 years in federal prison!
Commentary to follow.
Addendum, Doug Berman,A new white-collar benchmark: the main reason the number 150 matters in Madoff
Sunday, June 28, 2009
Andrea Chang, LATimes, 3 acquitted in Ralphs lockout case -A federal jury finds the supermarket executives not guilty in a scheme to rehire locked-out workers using false Social Security numbers. The chain and other managers have previously pleaded guilty. (w/ hats off to Attorney Evan A. Jenness for her successful representation)
Jim Schaefer, Ben Schmitt, Tammy Stables Battaglia & Cassandra Spratling, Detroit Free Press, [Detroit City Councilwoman Monica] Conyers [Pleads] Guilty in Bribery Case (yes - she is the wife of Rep. Conyers)
David Kocieniewski, NYTimes, In Testy Exchange in Congress, Christie Defends His Record as a Prosecutor
Mike Scarcella, BLT Blog, DOJ Announces Commitment to Public Defenders, Legal Aid
DOJ, June 22- Three Defendants Enter Pleas in BETONSPORTS PLC case (here)
Doug Berman, Sentencing Blog, Feds seeking the max for Bernie Madoff; Joanna Chung & Brooke Masters, Financial Times, Madoff sentence to determine more than just jail time
William L. Watts, Marketwatch WSJ, U.S. may drop tax case against UBS: report
Martha Brannigan, Miami Herald,Boca Raton accountant pleads guilty in UBS tax fraud case -In the latest sign that Swiss banking secrecy isn't so secret anymore, a wealthy Boca Raton-based UBS client pleaded guilty to filing a false tax return
Press Release,The Society of Corporate Compliance Ethics Introduces Certified Compliance and Ethics Professional-Fellow (CCEP-Fellow) Advanced Certification for Compliance and Ethics Professionals (see here)
DOJ Press Release, Former Contracting Officer Pleads Guilty to Filing False Tax Returns
University Business (Boston Globe), Grand Jury Indicts 65 in Arizona Fraud Scheme (w/ a hat tip to Dean Darby Dickerson)
Carrie Johnson, Washington Post, 53 Indicted in Medicare Fraud Sting
Actor Wesley Snipes has been granted oral argument in the 11th Circuit Court of Appeals. Snipes was convicted of misdemeanor tax counts and found not guilty of other conspiracy and tax fraud counts following a jury trial (see here). The oral argument is scheduled for November 2009. Last year (September - September reporting period) less than 16% of all Eleventh Circuit criminal appeals were disposed of on the merits following oral argument (1258 total criminal cases, 1059 terminated after submission on the briefs, and 199 terminated after oral argument see here). Representing Snipes are Philadelphia area Attorney Peter Goldberger, former president of the National Association of Criminal Defense Lawyers Carmen Hernandez, Daniel Meachum (of Atlanta), and Linda Moreno (of Tampa). For a discussion of one of the issues likely to be raised on appeal, see here.
Saturday, June 27, 2009
Who gets bail and who remains in jail has been interesting to watch. The question is not limited to one stage of the criminal process, as the issue arises 1) upon indictment and arrest, 2) after a guilty finding at trial, 3) after sentencing, and 4) after an initial appellate ruling.
The first stage - upon indictment and arrest - is often one of the easier ones for obtaining release as there is no conviction and being charged with a white collar crime, there is little chance of the accused using violence to harm others. In this stage Madoff, Snipes, Lay, and most other white collar individuals were released pending their trial. So it is not surprising to see that R. Allen Stanford is being given bail pending his trial.
So knowing the likelihood of bail, is it really proper for the government to parade Stanford in a jumpsuit in front of the media. Check out the picture with this article:Mauricio Guerrero, NYTimes, Stanford Enters Plea; Bail Is Set at $500,000 It's all well and good if Stanford is found guilty. But if he is not convicted - the picture of the escorted man in an orange jumpsuit will forever remain. The problem here is not the press. The problem is the government's misuse of its power to taint an individual who has not been proved guilty.
Thursday, June 25, 2009
The talk of the town is Madoff, assuming one is limited to discussions in the white collar area. With some comparisons and non-comparisons to Stanford, (see here) and others looking at Skilling's case. (See Business Week here). The sentencing is set for Monday, and the latest is that Bernie Madoff will be allowed to appear in civilian garb. (See here)
Not surprisingly, defense counsel for Madoff filed a sentencing memo asking for 12 years, a number that some victims are not happy with. Will the sentence be higher because cooperation has not reached a level of assisting the government in providing information (if it exists) on others close to him? See David Glovin & Thom Weidlich, Madoff’s Failure to Name Accomplices Cripples His Leniency Bid
Or maybe it will be higher than the amount requested by defense counsel, for the reason that the fraud involved here is not what is seen in many white collar cases. In white collar cases, especially ones coming from the corporate sector, we often see the accused arguing that he or she did not know the conduct was illegal. Some will argue that admitting the wrongdoing and accepting responsibility should be credited as the Sentencing Guidelines advise. Others, however, may wonder if this is the perfect example of a case that demonstrates why one should not be penalized for going to trial. Maybe it is easy to say one is guilty when they are the sole person who committed the crime. But when the acts of others are involved, or the crime involves ambiguous business conduct, it becomes more questionable. So, the real question here is not whether Bermie Madoff should receive 12 years, but whether this sentence is proportionate to others who went to prison for longer amounts of time for conduct they believed was not illegal or for which they should not be held accountable. It is normally the government that argues that the lesser sentence should go to the one who pleads and cooperates. But will the government really take that position when the case involves Bernie Madoff?
Madoff''s Sentencing Memo - Download US_v_Madoff_Sentencing_Letter_June_23_2009 ( w/ a hat tip to Peter Henning)
(esp) (blogging from Tuscon, Arizona)
Sunday, June 21, 2009
Angela Delli Santi, phillyburbs.com (AP), Christie to testify on monitor deals
Sam Wood, Philadelphia Inquirer, Shakeup in roster at U.S. Attorney's Office
(esp) (blogging from Atlanta airport)
Friday, June 19, 2009
Robert Standard, chair of Stanford Financial Group, along with three executives from the company and one "former chief officer of the Antiguan bank regulatory agency" were indicted. A DOJ Press Release states:
According to the indictment, Stanford and his co-defendants engaged in a scheme to defraud investors who purchased approximately $7 billion in certificates of deposit administered by Stanford International Bank Ltd. (SIBL), an offshore bank controlled by Stanford and located on the island of Antigua. Stanford and his co-defendants allegedly misused and misappropriated most of those investor assets, including diverting more than $1.6 billion into undisclosed personal loans to Stanford himself, while misrepresenting to investors SIBL’s financial condition, its investment strategy and the extent of its regulatory oversight by Antiguan authorities.
The Indictment does not include allegations related to section 1346, the honest services clause (is the government shy to use this statute in light of the pending case before the Supreme Court). The indictment does, however, include fraud charges and conspiracy to commit money laundering against some of those accused. There will be many interesting questions on the conduct of the government that may arise from this prosecution. (see Attorney Dick DeGuerin'sStatement here as posted on the WSJ site - left hand side of page under Stanford Press Statement here)
Perraud Indictment here
Stanford Indictment here
Davis Information here
See also Evan Perez, WSJ, U.S. Files Criminal Charges in Stanford Case ;Matthew Goldstein, Stanford 'Is Not Madoff'; Mary Flood, Tom Fowler, & Jennifer Dlouhy, Stanford and 4 others indicted -Feds say holders of $7 billion in CDs bilked; Stanford attorney proclaims innocence;Clifford Krauss, NYTimes, Texas Financier and Antiguan Official Charged With Fraud
Thursday, June 18, 2009
Carrie Johnson, Washington Post, After Stevens Case, Justice Dept. Corruption Unit in Disarray
Chronicle of Higher Education, Federal Investigators Subpoena Admissions Records at 3 Illinois Universities (subscription only)
law.com, (AP) Investigated DOJ Prosecutor Removed From Corruption Case
Steve Levin, Fraud With Peril, Stephanie's Fresh Perspective
Yahoo Finance, Judge orders Scrushy to pay $2.9B to shareholders
Craig McCoy, Philly.com, Judge rebuffs Fumo's bid to delay sentencing
Shannon P. Duffy, Legal Intelligencer, law.com, Grand Jury Indicts Medical-Device Companies for Defying FDA Safeguards
(esp) (blogging from Denver)
The Yeager decision (see here) by the Supreme Court is an important decision for those handling both white collar and non-white collar cases. Some thoughts on the decision:
- Just because it is a hung jury on some counts, doesn't mean the government can rrepackage it and try again calling it something else. If it is the "same offense" it will not be allowed. Here the conduct forming the basis for the "insider trading" was the same as the "fraud" offense.
- The doctrine set forth in Ashe v. Swenson controls - even when dealing with a multi-count case.
- The government practice of filing multiple counts for the same conduct, hoping that something will stick, doesn't provide them with multiple trials when it is the same conduct and the jury has acquitted on that conduct. As stated by the Court -
Because a jury speaks only through its verdict, its failure to reach a verdict cannot - by negative implication - yield a piece of information that helps put together the trial puzzle. A mistried count is therefore nothing like the other forms of record material that Ashe suggested should be part of the preclusion inquiry.
- In deciding whether a retrial should be allowed, look at what the jury decided, not at what they failed to decide. Thus, if they decided that the defendant had no material inside information, then clearly he could not be reprosecuted for conduct that was premised on his having material inside information.
- This decision will assist defendants who suffered multiple trials at enormous costs to them and their families. The Supreme Court is sending a strong message that the government only has one bite of the apple for the same conduct.
- The Court leaves a door slightly open for the government to relitigate the fact issue in the lower courts, but one hopes that the government will use taxpayer money wisely and move forward with prosecutions where the jury has not spoken.
- This decision reaches far beyond the white collar world and offers defendants who have been subjected to multi-count indictments- set forth in multiple different ways - with increased finality should there be a hung jury on some of the counts in the Indictment. The breadth of many federal criminal statutes allow for prosecutors to bring the same conduct under different statutes. If there is an acquittal on the conduct - it really means not guilty.
(esp)(blogging from Boulder, Colorado)
Addendum to Bullet One - Yeager speaks to cases when there is a "not guilty" on some counts and a hung jury on others. Obviously, it would be a different situation if there were a hung jury on all counts.
The Supreme Court ruled today on the case of Yeager v. United States, a case from the Enron Broadband cases. For background see here. Basically, defendant, who was an employee at Enron Broadband Services ("EBS"), was acquitted on some of counts but the jury was hung on others. The government indicted Defendant on some of these hung counts and the issue was whether collateral estoppel can apply to hung counts. The decision has six on the majority and three dissenting, with Justice Stevens writing the majority opinion. Justices Roberts, Souter, Ginsberg, and Breyer joined in this opinion, and Justice Kennedy joined in parts I - III and V of the opinion, and he also filed a separate concurring opinion. Justices Scalia, Thomas, and Alito provide the dissents with two separate opinions that are each joined by the others.
The holding of the decision is summarized in the following statement:
The question presented in this case is whether an apparent inconsistency between a jury's verdict of acquittal on some counts and its failure to return a verdict on other counts affects the preclusive force of the acquittals under the Double Jeopardy Clause of the Fifth Amendment. We hold that it does not.
Commentary on this decision to follow. See also Scotus Blog here.
(esp)(blogging from Boulder, Colorado)
Wednesday, June 17, 2009
AG Holder testified this morning to the Senate Committee on the Judiciary (see here). In his prepared remarks (see here) he covered several items related to white collar crime. Two of the topics he focused on were: "Federal and State Partnerships Targeting Financial and Mortgage Fraud," and " Health Care Fraud." He stated in his prepared remarks the following:
"The Department, in partnership with the U.S. Department of Treasury, the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC) and the Attorney General of Illinois, will coordinate information and resources across agencies to maximize targeting and efficiency in fraud investigations, alert financial institutions to emerging schemes, and step up enforcement actions. As part of this multi-agency effort, the Department has outlined ways to crack down on mortgage fraud schemes. The FBI is investigating more than 2,500 mortgage fraud cases as of May 31, 2009. This number is up almost 400 percent from five years ago. The Bureau has more than doubled the number of agents investigating mortgage scams, created a National Mortgage Fraud Team at Headquarters, and is working hand-in-hand with other partnering agencies."
He also stated:
"We recognize that health care fraud has a debilitating impact on our most vulnerable citizens – the elderly and those in long-term care facilities. Our Elder Justice and Nursing Home Initiative coordinates the activities of our attorneys and agents throughout the country to better understand and address the abuse, neglect and financial exploitation of these victims, and to bring to bear the full weight of my Department to ensure that these types of crimes are prevented and/or prosecuted. We also look forward to working with Congress to identify and pursue legislative and regulatory reforms that are needed to prevent, deter, and prosecute health care fraud, such as additional preventative authorities, appropriate payment policies, and increased sanctions and penalties."
(esp) (blogging from the Atlanta airport)
Michael S. Rosenwald, Washington Post, Instead of Zen Dens, Starwood Builds an Espionage Case Against Hilton (w/ a hat tip to Dennis Beal)
Jordan Weissman, BLT Blog, Jefferson Day 2: Businessman Who Pleaded Guilty Testifies
Martha Greybow, Reuters, More financial fraud cases seen after US overhaul
Ron Scherer, Christian Science Monitor,Next target of Madoff case: his wife?
Sophia Lind, Legal Week, (law.com) DLA and White & Case Moscow Offices Raided in Fraud Investigation
Susan Beck, American Lawyer, (law.com), Mayer Brown Partner Gets New Judge in Refco Trial
Ted McClure, Administrative Law Prof Blog, What is changed in the Statutory Time-Periods Technical Amendments Act of 2009 (changes in RICO and Obstruction of Justice)
Lynn Marek, National LJ, DOJ may rein in use of 'honest services' statute
Richard Mauer, Anchorage Daily News, Kohring had a rude transition from freedom to prison (w/ a hat tip to Tiffany Joslyn)
Danny Hakim & Nicholas Confessore, NYTimes, Espada Faces State and Local Inquiries Into Finances (w/ a hat tip to Tiffany Joslyn)
Walecia Konrad, NYTimes, Medical Problems Could Include Identity Theft (w/ a hat tip to Tiffany Joslyn)
(esp)(blogging from the Atlanta airport)
A former General Re executive received a sentence of community service, a fine, and probation. A factor here is likely the cooperation provided to the government. See Matt Scroggins,Ex-Gen Re exec gets probation for finite fraud; Dave Collins, Houston Chronicle (AP), Former General Re executive given probation For background on other sentences coming from this investigation, see here.
Monday, June 15, 2009
Melanie Linder, Forbes, has an article titled, How to Foil a Corporate Fraudster. What is particularly unique about this piece is that it is coupled with pictures of seven different types of fraudsters. The different types (e.g., The Wannabe, The Survivor) really capture the sociology behind different types of individuals who commit white collar crimes. This article, with its pictures, presents an interesting perspective in deciding where along the spectrum a corporate fraudster belongs when it comes to sentencing. I highly recommend this piece in thinking about a sentencing hearing.
Jennifer Forsyth, WSJ Blog, Deal Talks for Indicted Judge With Ties to Scruggs?
Enrique Rangel, Amarillo.com, Mortgage fraud cases cover state, Texas AG confronts rising crime in Austin
Del Quintin Wilbur, Washington Post, Economic Downturn Accelerates Collapse of Ponzi Schemes
DOJ Press Release, Virginia Resident Pleads Guilty to Conspiring to Defraud the U.S. Navy
DOJ Press Release, Four Miami-Area Residents Sentenced in $10 Million Medicare Fraud Scheme