Thursday, May 28, 2009

Fraud Enforcement Recovery Act of 2009 - False Claims Act Provisions

FERA makes many changes to the False Claims Act, 31 U.S.C. ss 3729-3733. FriedFrank (with many thanks to John T. Bose) has done a wonderful analysis here (Download 090521), and has a redline copy here that lets one see the changes that were made to these statutes. Finally, the statute with the provisions incorporated is here (again, thanks to FriedFrank).  

When examining the money laundering statute changes (here), it was apparent that a key change was to address the recent Supreme Court ruling in the Santos case.  The changes in the False Claims Act also address some Court rulings, most noteably Allison Engine Co. v. United States ex re. Sanders.    FERA, overall, makes the government job of obtaining convictions and getting civil remedies easier. The False Claim Act provisions do that with a reduced intent requirement.  But the government and relators do not get everything here, as FERA provides for a materiality requirement.(see Download 090521, supra).


May 28, 2009 in Civil Enforcement, Congress | Permalink | Comments (1) | TrackBack (0)

Wednesday, May 27, 2009

Fraud Enforcement Recovery Act of 2009 - The Money Laundering Provisions

In recent years, some white collar cases have had money laundering charges included in the Indictment.  Some may believe that the addition of money laundering counts is used as leverage to secure a plea from the accused. The Fraud Enforcement Recovery Act of 2009 includes changes to both sections 1956 and 1957 of title 18, the money laundering statutes. The changes are as follows:


(1) MONEY LAUNDERING.—Section 1956(c) of title 18, United States Code, is amended—

(A) in paragraph (8), by striking the period and inserting ‘‘; and’’; and

(B) by inserting at the end the following:

‘‘(9) the term ‘proceeds’ means any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity.’’.

(2) MONETARY TRANSACTIONS.—Section 1957(f) of title 18, United States Code, is amended by striking paragraph (3) and inserting the following:

‘‘(3) the terms ‘specified unlawful activity’ and ‘proceeds’ shall have the meaning given those terms in section 1956 of this title.’’

It is obvious in reading the language that Congress was reacting to the Supreme Court decision in United States v. Santos, where a plurality (Scalia, Souter, Ginsberg, and Thomas) found that the rule of lenity applied because of a failure to define the term "proceeds" in the statute.  Justice Stevens went with these four justices, but limited his decision, saying he would not have ruled this way if the case involved contraband or organized crime.  The Court, therefore, held that "proceeds referred to "profits" and not "receipts."  A four person dissent (Breyer, Alito, Roberts, and Kennedy) believed that proceeds should include the total amount brought in.  This Congressional amendment to the statute endorses the position taken by the dissent and provides a definition of what is meant by the term "proceeds."  

But there are several points to note here.  Even though the new legislation clarifies the statute, thus voiding any need to resort to the Rule of Lenity in defining "proceeds" and also resolves future cases on which crimes are covered by the Santos decision (an issue that several district and circuit courts have had to contend with), it may still allow defense counsel to make merger arguments.  As stated by Justice Stevens in his concurring opinion in Santos

"Allowing the Government to treat the mere payment of the expense of operating an illegal gambling business as a separate offense is in practical effect tantamount to double jeopardy, which is particularly unfair in this case because the penalties for money laundering are substantially more sever than those for the underlying offense of operating a gambling business."

 It also leaves open the issue of how this statute applies to mail fraud when the crime is not complete and whether a sentence can be enhanced when the predicate offense and the money laundering merge.  Congress was clearly concerned about the merger issue as the amendment includes a specific statement "Sense of the Congress and Report Concerning Required Approval for Merger Cases" that states:  

(1) Sense of Congress - It is the sense of the Congress that no prosecution of an offense under section 1956 or 1957 of title 18, United States Code, should be undertaken in combination with the prosecution of any other offense, without prior approval of the Attorney General, the Deputy Attorney General, the Assistant Attorney General in charge of the Criminal Division, a Deputy Assistant Attorney General in the Criminal Division, or the relevant United States Attorney, if the conduct to be charged as ‘‘specified unlawful activity’’ in connection with the offense under section 1956 or 1957 is so closely connected with the conduct to be charged as the other offense that there is no clear delineation between the two offenses.

(2) REPORT.—One year after the date of the enactment of this Act, and at the end of each of the four succeeding one-year periods, the Attorney General shall report to the House and Senate Committees on the Judiciary on efforts undertaken by the Department of Justice to ensure that the review and approval described in paragraph (1) takes place in all appropriate cases. The report shall include the following:

(A) The number of prosecutions described in paragraph (1) that were undertaken during the previous one-year period after prior approval by an official described in paragraph (1), classified by type of offense and by the approving official.

(B) The number of prosecutions described in paragraph (1) that were undertaken during the previous one-year period without such prior approval, classified by type of offense, and the reasons why such prior approval was not obtained.

(C) The number of times during the previous year in which an approval described in paragraph (1) was denied.


May 27, 2009 in Congress, Money Laundering | Permalink | Comments (2) | TrackBack (0)

Monday, May 25, 2009

In the News and Around the Blogosphere

Fraud Enforcement Recovery Act of 2009

Passed by both the House and Senate, the Fraud Enforcement and Recovery Act of 2009 (FERA) was signed it into law by the President with the following statement -

Today I have signed into law S. 386, the "Fraud Enforcement and Recovery Act of 2009." This Act provides Federal investigators and prosecutors with significant new criminal and civil tools to assist in holding accountable those who have committed financial fraud. These legislative enhancements will help the Department of Justice to combat mortgage fraud, securities and commodities fraud, and related offenses, and to protect taxpayer money that has been expended on recent economic stimulus and rescue packages. With the tools that the Act provides, the Department of Justice and others will be better equipped to address the challenges that face the Nation in difficult economic times and to do their part to help the Nation respond to this challenge.

Section 5(d) of the Act requires every department, agency, bureau, board, commission, office, independent establishment, or instrumentality of the United States to furnish to the Financial Crisis Inquiry Commission, a legislative entity, any information related to any Commission inquiry. As my Administration communicated to the Congress during the legislative process, the executive branch will construe this subsection of the bill not to abrogate any constitutional privilege.

May 20, 2009.

There are many important provisions related to white collar crime in this new law, including changes in the Civil False Claims area, changes to the money laundering statute, areas related to TARP, and changes to a host of statutes like 18 U.S.C. ss 1014, 1031, 1348, and 1956.  Over the next week I will be offering commentary on what FERA says and how it changes the prosecution and defense of white collar matters. 


May 25, 2009 in Congress | Permalink | Comments (4) | TrackBack (0)

Sunday, May 24, 2009

Memorial Day Thanks

Thanks to all who have served our country.


May 24, 2009 in About This Blog | Permalink | Comments (1) | TrackBack (0)

18th Annual National Federal Sentencing Guidelines Seminar

The 18th Annual National Federal Sentencing Guidelines Seminar was held in Clearwater, Florida this past week. After opening comments from Kevin Napper (Carlton Fields), there was a lively panel titled Developments and a View from the District Court Bench,a panel moderated by Kevin Napper and Norman Reimer (Executive Director of NACDL)  The panelists included Brian Albritton (US Attorney from the Middle District of Florida), Hon Fred Block (District Court Judge, Eastern District, New York), Hon. Steven Merryday (District Court Judge, Middle District of Florida); Hon. Robert Pratt (District Court Judge, Southern District of Iowa), and Hon. Ruben Castillo (Vice Chair, US Sentencing Commission).  Judge Block noted that older judges (those on the bench longer, not age) may feel more comfortable taking the risk of going outside the guidelines, while the younger ones may be more concerned about going above or below the guideline range.  He gave a preview of his approach to "interactive sentencing."

The Fraud/Theft breakout session was moderated by Michael Horowitz (Cadwalader, Wickersham & Taft).  He provided important statistical material on white collar sentencing. His Powerpoints (Download FBA_Guidelines_Program_2009) noted how judges were sentencing in white collar cases post Supreme Court decisions in Booker, Gall, Rita, and Kimbrough. One interesting slide presented the medium loss amount for white collar offenders from 2000 to 2008. For 2008 the amount was $40,499.  Benton Campbell, U.S. Attorney for the Eastern District of New York, and former ex officio member of the Sentencing Commission, remarked how this amount would not even be sufficient for a prosecution in his district.  This comment demonstrates clearly that there are real differences - geographic ones - that demonstrate the importance of having judicial influence in sentencing. Benton Campbell also remarked how he liked the guidelines, but did say that the fraud losses will likely grow in future years. Mark Harrisof Proskauer, Rose, LLP, and a former Supreme Court Clerk to both Justices Powell and Stevens, in addition to Judge Flaum of the 7th Circuit, emphasized that "advocacy begins over fighting over loss."  He provided some wonderful advice on offense specific arguments that can be made, such as motive and whether the defendant personally profitted. Athena Macinnis, Senior U.S. Probation Officer, Southern District of Mississippi, reminded everyone to consider the victims.  

Also on this same panel, besides myself, was Hon. Ruben Castillo, district court judge from the Northern District of Illinois and Vice-Chair of the Sentencing Commission.  He remarked how Congress, when they passed SOX, paid no attention to what the commission had done. By ignoring what the Commission had done, some sentences today could be "off the charts."

This panel talked about the Tomko decision (here) from the third circuit (see discussion here), and Judge Block's Parris decision (here) (see discussion here).

There were also wonderful panels that included Hon. Robin Cauthron, Micheal Dreeban, Beryl Howell, Gregory Poe, Elaine Terenzi, Hon. Paul Borman, Barry Boss, Robert O'Neil, Ted Simon, James Felman, and so many others.   This was clearly a top-of-the-line seminar with a wealth of information.  Other than the poor weather of Clearwater, Florida, truly not the norm, this was one of the best seminars of the year.  


May 24, 2009 in Conferences | Permalink | Comments (1) | TrackBack (0)