Wednesday, December 9, 2009

In the News & Around the Blogosphere

DOJ Press Release, Former NFL Player Sentenced to Nearly Five Years in Fraud Scheme that Cost Victims Over $5 Million

Michael F. Perlis & Wrenn E. Chais, Forbes, Investigating The FCPA

Ben Hallman, AmLawLitigationDaily, SEC to Insider Traders: Watch What You Say

John Pacenti, law.com, Daily Business Review, Why Suspicions About Fla. Firm's Alleged Ponzi Scheme Weren't Voiced

Letter of Apology, Memo To Holder: Broadcom Trial Shows Need For More Ethics Training

Mark Fass, NYLJ, law.com, Defense Attorney Gets 14 Years in Prison for Conspiring to Threaten Witnesses

Eric Lipton & Eric Lichtblau, NYTimes, Rules for Congress Curb but Don’t End Junkets

Chicago Breaking NewsCenter, Blagojevich evidence stolen from his lawyers' offices

Amanda Bronstad, National L J, law.com,  Ex-Broadcom GC Avoids Criminal Charges Amid Claims of Prosecutor Misconduct

Hank Grezlak and Leo Strupczewski, The Legal Intelligencer, law.com, Feds Charge Third Luzerne County, Pa., Judge With Fraud

Grits for Breakfast, Parole Board: Texas Created 59 New Felonies This Year

Florida Attorney General, Statement from Attorney General on Supreme Court's Order to Convene a Statewide Grand Jury (pertains to public corruption)

Press Release, Two Florida Executives, One Florida Intermediary and Two Former Haitian Government Officials Indicted for Their Alleged Participation in Foreign Bribery Scheme

Matt Ackermann, OnWallStreet, SEC Settlements Fall For Second Year

Jeff Jeffrey, BLT Blog, Two Top SEC Officials Leave For Private Practice

(esp)

December 9, 2009 in News | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 8, 2009

Highlights From the Black and Weyhrauch Oral Arguments

Reviewing the transcripts of today's Oral Arguments in the Black and Weyhrauch cases (for background see here), here are some additional highlights:

Black

  • Justice Scalia - "you speak as though it is up to us to write the statute. We can make it mean whatever it - you know, whatever would -- would save it or whatever we think is a good idea, but that's not our job."
  • Chief Justice Roberts -"I don't know where the concept of 'right' comes in, which is in the statute." ...."The right is not limited to specific legal obligations, but to a developing Federal common law of criminal liability?"
  • Justice Alito - "Well, since the -- since the body of pre-McNally lower court cases was hardly completely consistent, do you think this is a workable approach?

Weyhrauch

  • Justice Ginsburg - "The real problem with your approach, which I take it is you have to find these duties in State law, is that some States will classify the same conduct as a felony that another will classify it as a misdemeanor. So that line won't work. And then some States will make something criminal that other States won't.   So you are going to have, depending on geography, people potentially subject to a 20-year term because of the particularities of -- of a -- the State law."
  • Chief Justice Roberts - "Well, that is a familiar common law term (referring to the phrase 'malice aforethought'). Honest services is not."

One of the most interesting aspects of the argument was to hear the government using "materiality" as their claim for protecting the statute from the host of problems being raised.  It was an argument in their brief, so this was no surprise.  But hearing this argument and noting what Conrad Black's attorneys point out was said by the Government in the Neder case, the case where the Court found the requirement of materiality, has a certain irony. (see here).  

Weyhrauch Argument here

Black Argument here

Guest Blogger Timothy O'Toole provides commentary on the oral arguments here. Scotus Blog commentary can be found here.  Mark Sherman, USA Today (AP), Court Reviews Law Used Against Abramoff, Skilling, Others

(esp)

December 8, 2009 in Fraud | Permalink | Comments (0) | TrackBack (0)

Oral Arguments: Black v. US and Weyhrauch v. US

Guest Blogger - Timothy O'Toole - Miller & Chevalier

This morning's arguments before the Supreme Court raised important questions related to a species of federal mail and wire fraud known as "honest services" fraud.  The statutory basis for this theory is 18 U.S.C. 1346, a 28 word law passed in 1988 that essentially says that depriving someone of the intangible right of honest services can be a form of wire or mail fraud. The law has engendered considerable confusion in the federal courts of appeal, but the Supreme Court had never interpreted the statute before this term.  This morning's arguments were the first glimpse into what the Supreme Court's thinks the honest services fraud statute means and whether the Court thinks that the statute is unconstitutionally vague.  

1.    In both cases argued this morning, the Court had granted review on fairly narrow questions, but the real issue at both arguments was whether the Court could "save" the statute from constitutional challenges by narrowing its reach.  In Black, the Court had granted certiorari to decide the question of whether a private individual could be prosecuted for honest services fraud without any proof that his allegedly deceitful conduct economically harmed his employer.  In Weyhrauch, the question presented was whether a state public official (an Alaskastate legislator) could be prosecuted for honest services fraud for failing to disclose a conflict of interest, even though he had no duty under state law to disclose the conflict.  Both grants, however, were made against the backdrop of an opinion by Justice Scalia in February suggesting that the statute was invalid because there was no way to meaningfully distinguish lawful conduct from unlawful.   

2.    In both arguments, at least 8 justices (Justice Stevens dissented from a1987 decision striking down a prior version of the law, and he seemed the least troubled by the current statute) seemed to want to focus on the constitutional question Justice Scalia had identified, and all seemed to be really struggling with how to make sense of the vague statutory text.  Most justices expressed some discomfort with having the Court identify a "core" of conduct that the statute outlaws when Congress utterly failed to do so.  In the Black argument, counsel for Petitioner focused directly on this constitutional vagueness problem even though his briefing did not.  In the Weyhrauch argument, counsel for Petitioner tried mightily to avoid the constitutional issues, arguing that he should win the case regardless of whether the statute was constitutional because any sensible view of the statute would require a state law-based disclosure duty, and he had none.  The government sought to avoid the constitutional issues in both cases, faulting petitioner in Black for raising the question at argument, and repeatedly pointing out that Weyhrauch had not pursued the constitutional issues either.   Amicus briefs in both cases, by the NACDL and by the Chamber of Commerce (in Black only) had squarely challenged the statute on vagueness grounds. 

3. Ultimately, most members of the Court seemed resigned to the fact that the constitutional issue is one that cannot go away because it is an essential prerequisite to the statutory interpretation issues, and because it is raised in another pending case involving Jeffrey Skilling.   Justice Kennedy described the issue as "lurking."  The Chief Justice at one point noted the unfairness that would occur if the Court said to Mr. Weyhrauch and Mr. Black, no disclosure duty is required and no economic harm is required, and then held in Skilling that the statute was unconstitutional.  Justice Sotomayor kept wanting to discuss the Skilling scenario, particularly with the Solicitor General.  Justice Scalia told the Solicitor General that he didn't think that the Court's hands would be tied if it tried to find a limiting construction of the statute but could not do so because the statute was unconstitutional; under those circumstances, Justice Scalia suggested that the Court could act to strike down the statute.  Justice Breyer repeatedly asked the Solicitor General in both cases whether it would like the opportunity to fully brief the constitutionality of the statute, in order to address any concerns raised by the failure to squarely address the issue in the question presented.  

4.    Two primary concerns stand out from today's argument:  (1) all justices expressed unease with identifying what sort of "bad conduct" is covered by the statute in the absence of any meaningful guidance from Congress; and (2) the Solicitor General's proposed test is not going to sufficiently narrow the statute.  No one, in fact, seemed particularly inclined to adopt the SG's interpretation of the statute.  At one point, Justice Breyer suggested that 140,000,000 people throughout the country had probably violated the honest services law as the SG described it, by fibbing to an employer in order to do something his or her boss wouldn't like.  Justice Scalia described a similar scenario in which an employee tells the boss he is going to work hard all afternoon if the boss leaves him alone, but makes this misstatement so the boss will go away and he can sit at his desk and read the racing form.  The government had a very hard time explaining why this conduct would not fall within the statute as it had defined it, and ultimately suggested that prosecutors wouldn't bring those sort of cases and/or jurors wouldn't convict.  That answer did not engender a positive response.  No one seemed comfortable with leaving such broad, undefined discretion in the hands of prosecutors and juries. 

Conclusion:  In the end, its really hard to tell how the cases will come out because, while there was general consensus that the Court has a mess on its hands, there was not much seeming consensus on how to fix it.  One interesting thing to note is that, just yesterday, the Court denied certiorari in an honest services fraud out of Las Vegas (United States v. Kincaid Chauncey), which may provide some indication that it is not inclined to invalidate the statute entirely.  But the Court is clearly struggling with how "save" what on its face is an utterly standardless law, and nothing that it heard at argument seemed to provide a way out.  It would not be surprising if the Court's next step after argument is to ask for additional briefing aimed directly at the Constitutional issues that were the focus of today's argument.  

(to)

December 8, 2009 in Fraud | Permalink | Comments (0) | TrackBack (0)

Monday, December 7, 2009

Honest Services Day - Preview

The media and blogs have been buzzing for the last few days, all discussing the big oral arguments of today.  For at long last, the Supreme Court will examine the "honest services" statute (18 U.S.C. 1346), a statute that claims itself to be a definition statute for use with many of the fraud statutes.  Defendants in mail and wire fraud cases have long argued issues of vagueness with respect to the statute that allows for prosecutions for a deprivation of an intangible right to honest services. 

Up today for discussion is the Conrad Black case  (for background see here) and the Bruce Weyhrauch case (for background see here).  The Court will look at whether section 1346 requires that the defendants “reasonably contemplated identifiable economic harm" and "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."  And in the backdrop we have Justice Scalia's pronouncement 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 makes it clear that "it seems to [him] quite irresponsible to let the current chaos prevail."  (See discussion of Sorich here) On the government side, will likely be arguments on the necessity of having a "stopgap device" in the statutes to criminalize conduct prior to Congress acting. (Maze)

This is not the first time that the Court will examine "intangible rights."  It's 1987 decision in McNally tossed out cases that failed to be premised on "money or property" a requirement of the mail fraud statute according to the Court.  Congress came back in response to the McNally decision with section 1346, the statute now under review in these two cases and also in the forthcoming Skilling case.

The issue raises an interesting question of how specific a statute needs to be. In 1999, I wrote an article titled Criminal Fraud that emphasized the need to have fraud statutes that clearly outlined the criminal conduct. On the other hand, in an essay a year later, Do We Need A Beanie Baby Fraud Statute, I noted how there are limits to how much specificity should be required for a fraud statute. The line between letting the public know what is criminal and yet also allowing the government some leeway is at stake here. But that said, my own bias is that the existing statute - 1346 -  allows for absurd applications.  The net result is that prosecutors have greater power to pick and choose who they want to prosecute and for what acts.  The absurd example I use is whether a potential President could be prosecuted for saying "read my lips, no new taxes" and then raising taxes (see here) - of course using the mails or wires in disseminating the political message.  Will every dishonesty, or statement later found to be untrue, be the subject of criminal conduct?  And if intent can be inferred from the circumstances, will it allow for absurd examples such as this one to be the subject of a prosecution? Will  prosecutors have the power to decide what is and is not subject to criminal charges?  And how best to balance the three branches of government in stopping criminal conduct. (see here) Stay tuned for a discussion of the Court arguments.

(esp)   

December 7, 2009 in Fraud | Permalink | Comments (0) | TrackBack (0)

Bruno Convicted on Two Counts - Not Guilty on Five Counts

Nicholas Confessore, NYTimes, Bruno, Former Albany Leader, Convicted of Corruption; Irene Jay Liu, TimesUnion.com, Bruno convicted on 2 counts, not guilty on five

But the interesting question is what will happen in the next months regarding section 1346 of the mail/wire/other fraud statutes.  Tomorrow the Supreme Court will hear oral arguments in Black and Weyrauch, cases that look at different issues regarding this definition section - a statute that many argue provides little guidance to individuals is discerning what is legal and what is not.  Additionally, the Skilling case later this term also concerns section 1346. The bottom line is that although Bruno stands convicted of two counts, the case is far from over.

(esp)

December 7, 2009 | Permalink | Comments (0) | TrackBack (0)

Death Penalty - ALI Withdraws Model Penal Code 210.6

What does the death penalty have to do with white collar crime?  Perhaps the most obvious item to those who practice white collar criminal defense work, is that many white collar attorneys handle or assist on capital cases.  It therefore seems important to notice the white collar attorneys of a recent American Law Institute change.

On October 23, 2009, the ALI Council voted overwhelmingly, with some abstentions, to accept the resolution of the capital punishment matter as approved by the Institute’s membership at the 2009 Annual Meeting in May. The resolution adopted at the Annual Meeting and now accepted by the Council reads as follows:
 
“For reasons stated in Part V of the Council’s report to the membership, the Institute withdraws Section 210.6 of the Model Penal Code in light of the current intractable institutional and structural obstacles to ensuring a minimally adequate system for administering capital punishment.”

See here. Now I can't say I am unbiased in this matter, as the initial motion seeking abolishment of the death penalty by the ALI was brought by myself and Professor Roger Clark (Rutgers- Camden).

See also Franklin E. Zimring, Pulling the plug on capital punishment -The American Law Institute withdraws approval for standards it created, raising doubts about the legitimacy of execution

(esp)

December 7, 2009 in Defense Counsel, Sentencing | Permalink | Comments (0) | TrackBack (0)

Saturday, December 5, 2009

False Statement Passport Statute Does Not Require Materiality

A defendant convicted of violating 18 U.S.C. 1542, a statute pertaining to a false statement in an application for a passport, argued unsuccessfully that materiality was required. The Second Circuit held that unlike section 1001, materiality was not an element of this particular statute. Authoring the opinion, Hon. Jose Cabranes noted that this issue was one of first impression for this circuit, the Second Circuit.  The court used statutory interpretation analysis to hold that the language of materially was not in this particular statute.  The court noted that its holding was in keeping with other circuits, citing to decisions from the 1st, 9th and 11th Circuits.

The element of materiality presents an interesting issue for courts. In some cases like the false statements statute (18 U.S.C. 1001), perjury (18 U.S.C. 1621), and false declarations (18 U.S.C. 1623), the statutes clearly require an element of materiality. In some cases the nature of the statute requires an element of materiality (See mail fraud, wire fraud, and bank fraud) (See Neder v. United States). 

Some, like myself, argue for requiring materiality with other statutes (arguing for an element of materiality in obstruction of justice cases- see here).  A benefit of requiring materiality is that it can serve as a check on prosecutorial discretion.  It can limit prosecutors who might try to proceed in trivial cases.

Opinion - United States v. Hasan

December 5, 2009 in Judicial Opinions, Obstruction, Perjury | Permalink | Comments (0) | TrackBack (0)

Thursday, December 3, 2009

Petters Guilty

Steve Karnowski, law.com (AP), Jury Finds Minn. Businessman Petters Guilty in $3.5 Billion Ponzi Scheme; Steve Karnowki, StarTribune (AP), Petters defense team plans appeal  It will be interesting to see if the sentences given to Petters is vastly different from those individuals who plead guilty and cooperated.

(esp)

December 3, 2009 in Verdict | Permalink | Comments (0) | TrackBack (0)

In the News & Around the Blogosphere

Houston Chronicle (AP),Lawyers wind down Enron shareholder lawsuit (w/ a hat tip to Bill Olis)

Mike Scarcella & David Ingram, National LJ, Deputy AG Ogden to Resign, Effective in February

David Ingram, BLT Blog, law.com, DOJ Official Headed to White House Post

(esp)

December 3, 2009 in News | Permalink | Comments (0) | TrackBack (0)

Site for Anti-Bribery Information

Interesting site - TRACE Compendium that catalogs Anti-Bribery Compliance Worldwide.  See here

(esp)

December 3, 2009 in FCPA | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 1, 2009

In the News & Around the Blogosphere