Friday, July 3, 2009
Chronicle of Higher Education, Former Professor Gets 4 Years for Allowing Unauthorized Access to Sensitive Technology
Laura Sullivan, NPR, Madoff Likely Won't Be Serving Time in 'Club Fed'
David Scheer, Bloomberg.com, SEC Names Ex-Prosecutor Reisner Deputy of Enforcement
ACFE Press Release,$65 Billion Stolen by Madoff? Not Hardly
Daniel Wise, law.com, NYLJ, Judge Names Receiver in Madoff Feeder Fund Suit
Thursday, July 2, 2009
The Lori Drew case was scheduled for a hearing today and the question was whether she would be sentenced or perhaps the case dismissed. According to press reports it looks like it may be the latter, although everyone is calling it a "tentative" ruling pending the court's written order. A key issue in the case was whether the computer statute that was used was appropriate for these alleged acts. (see here) The State where the alleged act took place - Missouri - did not have a cyberbullying crime at that time, although one has since been passed. Federal prosecutors in California brought this case, a case with a keystroke in Missouri, premised upon the contractual agreement one clicks with MySpace. They also used the conspiracy statute as it allows for a wide jurisdictional base, although Drew was not convicted of conspiracy. If the final decision is to dismiss the case, it would not be surprising.
See Alexandra Zavis, LATimes, Judge tentatively dismisses case in MySpace hoax that led to teenage girl's suicide ; Gina Keating, Reuters, MySpace suicide conviction tentatively dismissed; Linda Deutsch, AP, Judge tentatively acquits woman in MySpace case
Beazer Homes USA, Inc. entered into a deferred prosecution agreement with the US Attorney's Office for the Western District of North Carolina. The company issued the following release for investors (see here). The agreement calls for an immediate payment of 10 million dollars in restitution (actually 7.5 million since it already paid 2.5 to North Carolina victims), with additional funds down the road. Additional payments to the FHA include an immediate payment of 4 million.
It is good to see that this agreement does not explicitly include a waiver of attorney client privilege. But there are two provisions in this agreement that cause concern. First is a statement that says that "BEAZER expressly agrees that it shall not, through its present or future attorneys, board of directors, officers, or any other person authorized to speak for the company, make any public statement, in litigation or otherwise, contradicting BEAZER'S acceptance of responsibility set forth above or the factual allegations in the criminal information filed in conjunction with this Agreement, except insofar as BEAZER contests the applicability of the factual allegations in the criminal information and/or this Agreement to a specific private civil litigant or class of litigants...." It later states that "[t]he decision of whether any public statement by any such person contradicting a fact contained in the criminal information will be imputed to BEAZER for the purpose of determining whether BEAZER has breached this Agreement shall be in the sole discretion of the United States." (emphasis added)
A second concern with this agreement also pertains to who has the authority to determine a breach of the agreement. The Agreement states "BEAZER agrees that the decision whether conduct and/or statements of any individual will be imputed to BEAZER for the purpose of determining whether BEAZER has knowingly, intentionally and materially violated any provision of this Agreement shall be in the sole discretion of the United States." (emphasis added) And later the same issue, "It is further agreed that in the event that the United States, in its sole discretion, determines that BEAZER has materially breached or violated any provision of this Agreement...." (emphasis added).
It's good to see DOJ no longer seeking a waiver of attorney-client privilege, but they also need to pay closer attention to contracts and provide a fairer agreement if there is a breach by a party to the agreement. A neutral party, as opposed to one of the parties to the agreement, should be making this call. See Candace Zierdt & Ellen S Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing
For discussion of the deferred prosecution agreement, see also Harry R. Weber, Houston Chronicle (AP), Charges filed against Beazer; Settlement reached ; Reuters, Beazer Homes agrees to settle mortgage fraud case; Wallace Witkowski, Marketwatch WSJ, Beazer settles with North Carolina, feds.
Beazer Settlement - Download BEAZER SETTLEMENT
Bill of Information - Download Bill of Info
Deferred Prosecution Agreement - Download Deferred Prosecution
James Barron, NYTimes, Assemblyman Steps Down and Admits Guilt in Scheme
Mike Scarcella, BLT Blog, [Earl] Silbert Named President of Council for Court Excellence
Kevin McCoy, USA Today, Appeal of Madoff's 150-year sentence wouldn't matter
Martha Neil, ABA Jrl Law News Now, Ex-Latham Practice Head Gets 15 Months in Client Expense Fraud Case
Zachery Kouwe, NYTimes, S.E.C. Previews Its Madoff Report
Amanda Bronstad, NLJ, The anatomy of an acquittal in the W.R. Grace asbestos trial
Harry Weber, Breaking News 24/7, SEC Charges former Beazer Homes Chief Accounting Officer With Fraud
Stacy-Marie Ishmael & Brooke Masters, Financial Times, Stanford CFO intends to admit fraud charges
Wednesday, July 1, 2009
Blogged here was the jumpsuit walk of R. Allen Stanford following the ordering of bail by a magistrate judge. But the bond was short-lived as the federal judge overseeing the case revoked his bail. A key test for securing bail pending trial is whether the accused will flee. The court, concerned with the possibility of Stanford fleeing, decided he should stay incarcerated. But even with this decision, I have to question the jumpsuit walk. Our system is premised on innocence until proved guilty. Parading an innocent person in front of cameras implicates that individual prior to any finding of guilt. See Juan Lozano, Huffington Post, Stanford's Bail Revoked By Judge; Clifford Krauss, NYTimes, Judge Revokes Bail for Billionaire Accused of Fraud.
The criminal forfeiture order, negotiated between the defendant and the government w/o input from the victims as guaranteed by the CVRA (see 18 USC 3664(d) and FedRCrimP 32(i)(4)(B)), ensures Mrs. Madoff a couple of million to live on for the rest of her lonely life. It takes all of the defendant's assets and makes them property of the United States. (It also disregards the binding Santos definition of "proceeds," but never mind that.) By leaving the defendant with nothing, it prevents him from making restitution to any victim (although he can and will be ordered to make restitution, he won't have a penny other than prison earnings with which to comply). While a victim can apply to the Attorney General for a partial "remission" of the forfeiture (see 21 USC 853(i)(1)(incorporated by reference into other forfeiture laws), there are no governing standards, no due process, and no judicial supervision -- it is 100% in the discretion of the DOJ. Section 3572(b) of title 18, however, prohibits the judge from ordering any "financial penalty" (which would include criminal forfeiture) if doing so would impair the ability of the defendant to pay restitution. On that basis, I believe the forfeiture order in Madoff's case is illegal. I wonder if any victim will take that position and file a mandamus under the CVRA ((3771(d)(3) & FedRCrimP. 60 (b)(5)(B)) against it?
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.