April 24, 2009
An upcoming panel at the ABA Litigation Section's Annual Conference on Friday, May 1 at 3:15 P.M. -"Is Your Data Secure? Responding to Next-Generation Computer Crimes." (see here) Panelists include Wesley Hsu (AUSA & Chief of the Cyber & Intellectual Property Crimes Section (C.D. Cal.), Susan Brenner (NCR Distinguished Professor of Law & Tech - U. of Dayton School of Law), Aaron Philipp(Navigant Consulting), and Aaron Danzig(Arnall, Golden & Gregory).
Senators Rockefeller and Snowe have proposed extensive legislation on Cybersecurity.
Legislation -Download S._773_Cybersecurity_bill
April 23, 2009
Lanny A. Breuer - Head of DOJ Criminal Division
Lanny A. Breuer was confirmed as Assistant Attorney General and will be heading up the DOJ's criminal division. The vote was 88 yea, 0 nays, and 11 not voting. See here. DOJ issued this press release here.
For an article by Mr. Breuer, see Lanny A. Breuer & Christopher J. Burke, Washington Legal Foundation, Lawyers, Accountants and Other Capital Market "Gatekeepers" Come Under Prosecutors' Scrutiny (2003); also see other information - Kenneth P. Vogel, Politico, Lanny Breuer's rogue's gallery.
In the News & Around the Blogosphere
Joe Palazzolo, BLT Blog, Stevens Six Lawyering Up -- Big Time
John Council, National LJ, law.com, Three former U.S. attorneys launch new law firm with John Ashcroft
Amanda Bronstad, National LJ, Former GC of Peregrine Systems Sentenced to One Day in Custody, Six Months of Home Detention
Robbie Brown, NYTimes, Mississippi Mayor Faces Re-Election and a Trial
Kate Phillips, NYTimes, Senate Approves Select Panel to Investigate Financial Crises
John Schwartz & Charlie Savage, NYTimes, Review of Governor’s Conviction Sought
Sarah N. Lynch, WSJ, Senators Seek To Boost SEC Enforcement Budget By $20M
Amir Efrati, WSJ, Post-Stevens, Other Defendants Trying to Join the Brady Bunch
Thomas Withers, Federal Criminal Defense Blog, Roy Black on the Castroneves Trial
Conference - NYC Bar Association
On May 12 at 6:30 pm, the New York City Bar Association’s Criminal Law Committee will present “Attacks on the Independence of the Judiciary: A roundtable discussion on the effects of press coverage of unpopular judicial decisions, and the intersection of the First Amendment and the Judicial Code of Conduct.” The panel includes several federal judges from the Southern and Eastern Districts of New York, as well as reporters from the New York Times, Wall St Journal, New York Post, and Newsday. The program is free and all are welcome. For more details see here - Download City_Bar_Crim_Law_Forum_-_May_12
April 22, 2009
NY Corruption Investigation
New York Attorney General Andrew Cuomo is in the middle of conducting a corruption investigation - a Pay-to-Play kickback scheme - with the past chair of the former state liberal party being mentioned in this investigation. In a press release by Cuomo's office it states that the individual allegedly "obtained over $800,000 in illegal fees on State pension fund investments as a reward for opening up a State Assembly seat . . .and for over 30 years of prior political endorsements." "Cuomo also announced that hedge fund manager and classical music impresario Barrett Wissman has pled guilty to a Martin Act felony for his role in the pay-to-play scheme and will pay $12 million in penalties and forfeiture to New York State over a period of three years." The SEC previously had complaints against two individuals in this matter, but added the former leader of the New York Liberal Party and Wissman to the SEC complaint. (see here) The New York Times reported on this recent investigation related to pension funds. See Danny Hakim & Mary Williams Walsh, NYTimes, In State Pension Inquiry, a Scandal Snowballs.
April 20, 2009
In the News & Around the Blogosphere
Alison Fitzgerald & Michaerl Forsythe, Bloomberg, Stanford Coaxed $5 Billion as SEC Weighed Powers
Karl Ritter, Law.com (AP), Four Convicted in Pirate Bay File-Sharing Trial
DOJ Press Release, Minnesota Man Pleads Guilty to Running Ponzi Scheme
(esp) (blogging from Washington, D.C.)
Kozlowski and Swartz File Cert Petition
L. Dennis Kozlowski and Mark H. Swartz, the former CEO and CFO of Tyco International were convicted in New York State court and are presently serving their prison sentences. (see here for background). They are now petitioning the Supreme Court for cert with the following question being presented for review:
Whether a criminal defendant's right to present a defense under the sixth and fourteenth amendments is violated when the court quashes his subpoena for the recorded, investigatory-stage statements of the key prosecution trial witnesses - statements which were found likely to be exculpatory - because the defendant did not seek to interview the witnesses himself before he had been accused of the crime for which he was tried.
Petition for Cert - Download Kozlowski_Cert_Petition_April_2009
(esp)(w/ a hat tip to Peter Henning)(blogging from Washington, D.C.)
Minor Denied the Right to Be At His Wife's Funeral
Paul Minor was denied the right to be at the funeral of his wife of 41 years. The press reports that the reason given was that he had visited her prior to her death. The Legal Schnauzer blog reports that prosecutors filed a lengthy response to the request. See here. Sentenced to 11 years in prison, Minor's case is pending in the Fifth Circuit Court of Appeals.
At oral argument there was an interesting exchange about the wording of the instruction regarding section 1346, the honest services aspect of the case. The state law alleged is bribery, and the question becomes as to whether the standard McCormick quid pro quo requirement needs to be adhered to when bribery is used as the state law for 1346. After all, campaign contributions are given all the time and 1346 is an enormously broad statute.
It was surprising the see such opposition on the part of the government to allowing Minor to be with his children at his wife's funeral.
(esp)(blogging from Chicago)
April 19, 2009
Wire Fraud is Not Limitless - It Requires "in Furtherance"
The Ninth Circuit Court of Appeals in U.S. v. Lazarenko tells the story of an international money laundering, wire and mail fraud, and transportation of stolen property case that is much reduced from the original charges/convictions brought by the government. It started as a 53-count indictment, but after the government dismissal of some, and the court dismissal of others, what remained was 14 counts. This decision brings it even lower.
The facts of this case present a unique international flavor, in that Ukrainian law is the specified unlawful activity for the money laundering charges. The breadth of the money laundering statute is clearly reaching international levels when a US jury is being asked to determine whether there has been a violation of another countries laws. Although the Ninth Circuit upholds the money laundering convictions, the court does reverse the interstate transportation of stolen property count.
But the more fascinating part of this decision relates to the wire fraud counts. In reversing the convictions here, the court focuses on the "in furtherance" element of wire fraud. The court states:
"If the government's theory were correct, then it would be possible for an ordinary fraud to be converted into wire fraud simply by the perpetrator picking up the telephone three years later and asking a friend if he can store some fraudulently obtained property in his garage before the police execute a search warrant or later taking the proceeds of fraud and transferring them to another bank. The government's theory extends an already broad statute too far."
It is good to see a court requiring strict adherence to the "in furtherance" element.
(esp) (w/ a hat tip to Evan Jenness)
Sentencing - Tomko
Only one day after a panel of the Third Circuit reversed a sentence as substantively unreasonable in US v. Olhovsky, No. 07-1642 (3d Cir. April 16, 2009) (a holding in favor of the defendant), the Third Circuit issued today its en banc opinion in US v. Tomko, No. 05-4997 (3d Cir. April 17, 2009), in which it upheld a sentence which the government had described as substantively unreasonable. In Tomko, a divided three-judge panel originally reversed, as substantively unreasonable, a sentence of probation in a tax evasion case. The defendant had pleaded guilty to tax evasion and stipulated to a tax loss of $228,557 resulting from his use of false invoices to disguise work done on his home as being expenses of his company. The Sentencing Guideline range was 12 to 18 months of incarceration, but the district court imposed a sentence of probation, with a special condition of one year of house arrest; however, the court ordered an above-Sentencing Guideline range fine of $250,000. The government appealed, and the divided panel reversed the sentence as unreasonable. One interesting fact about the case was that the defendant's year of house arrest was to be spent in the defendant's luxurious home, built in part through his tax evasion scheme. The defendant obtained his downward variance by arguing that his incarceration could lead his employees to lose their jobs; he had performed exceptional charitable acts and good works; and he had demonstrated an extraordinary degree of acceptance of responsibility.
In a lengthy and detailed opinion, the Tomkoen banc court vacated the panel decision and upheld the sentence on the basis of Gall. The government had argued strongly that the sentencing court had made a procedural and substantive error by failing to properly address or give weight to the sentencing factor of deterrence: a critical consideration for the government in criminal tax cases, because such cases are rare and the national tax gap -- the amount of taxes collected vs. the amount of taxes truly due -- is enormous. The court, after noting that most of the appellate judges personally disagreed with the sentence imposed, rejected that concern by observing in part that the typicality or uniqueness of a case does not alter the deferential standard of review. The court also observed that a concern relating to sentencing disparities "is not new," and that the Supreme Court recognized and accepted that sentencing disparities would increase when it rendered the Sentencing Guidelines advisory in Booker. Ultimately, and in light of Gall, the grounds provided for the downward variance reflected that the district court did not abuse its broad discretion, in part because the difference between the actual sentence and the low end of the Guidelines range was only 12 months.
In contrast, the five-judge dissent found the sentence of probation quantitatively unreasonable, as well as qualitatively unreasonable when compared to the advisory Guideline range. The dissent wrote that Gall still envisioned appellate courts as having a meaningful role in reviewing for substantive unreasonableness, that the Guidelines continue to be a "vital force" in sentencing, and that the Guidelines "serve a particularly important purpose in the area of white-collar crime." According to the dissent, the defendant did not distinguish himself sufficiently from other tax evaders, and the sentence imposed sends the wrong message regarding tax evasion, which generally should receive sentences of imprisonment in order to create sufficient deterrence.
Both the majority and the dissent opinions in Tomko contain additional and very interesting discussions of the sometimes competing values of sentencing court discretion, the current role of the Sentencing Guidelines, and the government's desire for deterrence in tax and other white collar crime cases. The above is just a summary of some of the highlights.
U.S. v. Tomko - Download Tomko
Discovery, Deferred Prosecution Agreements & the Attorney-Client Privilege
The threat of indictment to a corporation is huge, and one need only look at what happened to Arthur Andersen LL.P to reach this conclusion. In the aftermath of Andersen, many corporations have entered into deferred and non-prosecution agreements with the government, paying huge fines but avoiding prosecution. With their "backs against the wall" the companies agree to many controversial terms, including in some cases the waiver of the attorney-client privilege. The net result to the government is not only money, but also evidence that can be used to proceed against individuals within the company.
But how does this scenario play out in the long run. The case of U.S. v. The Williams Companies provides an interesting glance at what can happen when the attorney-client privilege is violated by the company. Williams, an opinion issued this past week by the DC Court of Appeals has the individual asking for discovery in the criminal case, and wanting the government to produce the discovery they received from the company. The problem is that the company does not want the evidence to be produced to the defendant. So the court is left to rule on "a third-party appeal of a discovery order in a criminal case compelling the government to produce 'all materials disclosed' by the third party pursuant to its cooperation with federal investigators during a criminal investigation of the third party and others." The court remands the case to the district court to assess "which documents were material to the defense."
The moral of the story is - you may think that your back is against the wall to enter into a deferred prosecution agreement, but before you agree to waive the attorney-client privilege, be aware of the long-term ramifications of this decision.
(esp) (blogging from Chicago)
Northwestern University Law - Judicial Symposium - Criminalization of Corporate Conduct - April 20 - here
Georgetown Law Corporate Criminal Law Conference - Achieving the Right Balance: The Role of Corporate Criminal Law in Ensuring Corporate Compliance- April 21 - here
ABA - Insider Trading, April 29, webcast here
ABA - Internal Corporate Investigations and IN-House Counsel, May 6-8 here
ABA - 19th Annual Institute on Health Care Fraud, May 13-15 here
18th Annual Federal Sentencing Guidelines Conference in Clearwater, Florida, May 21-22 - Download 290200_09_guidelines_book
7th Annual OffshoreAlert Financial Due Diligence Conference, April 26 - here
Race Car Driver Not Guilty of Tax Evasion
Discussed here are recent DOJ press releases related to tax charges and pleas - all immediately prior to the April 15th tax deadline. But the government was fortunate that this result occurred after the 15th - Helio Castroneves was found not guilty of all six counts of tax evasion at his recent trial. See AP, Castroneves not guilty of tax evasion;Jay Weaver & David Ovalle, Miami Herald, Helio Castroneves found not guilty in tax-evasion trial
The government can use tax charges filed near the 15th to stimulate compliance with the law. It can serve as a general deterrence to future criminality. Having a "not guilty" of tax related offenses near this same time, certainly would not be beneficial to the government. But Castroneves' jury result of "not guilty" was immediately after the 15th.
The jury did not reach a verdict on the conspiracy charge against Castroneves, but the conspiracy charge was premised on the tax evasion charge so it presents difficult issues for the prosecution if they do decide to try again. The conspiracy count was worded "to defraud the United States for the purpose of impeding, impairing, obstructing, and deteating the lawful government functions of the Internal Revenue Service of the United States Department of Treasury in the ascertainment, computation, assessment, and collection of United States income taxes." (See Indictment) Hopefully prosecutors will not spend tax money trying to convince a jury that the inchoate crime of conspiracy does not require a completed act. Section 371 does require an overt act and the rejection of the substantive offenses sends a loud message to the government here.