White Collar Crime Prof Blog

In The News & Around the Blogosphere

John Pacenti, Daily Business Review, law.com, Tough Questions for Government in Attorney Money-Laundering Case

Marcy Gordon, law.com, (AP), SEC Watchdog Pushes Changes After Failure to Detect Madoff Fraud

Benjamin Weisner, NYTimes, Democratic Fund-Raiser Gets 24-Year Term for Fraud

Mark Hamblett, NYLJ, law.com, Former Paul Hastings Tax Associate Spared Prison for Insider Trading

Tom Fowler, Houston Chronicle, Fall of Enron: Former Broadband CEO given 16-month sentence

(esp)

NACDL's 5th Annual Defending the White Collar Case Seminar - "Perfecting Your Panel--Tips from the Experts on Jury Consulting & Selection," Friday, October 2, 2009

Guest Blogger:  Shana-Tara Regon, Director, White Collar Crime Policy, National Association of Criminal Defense Lawyers

Moderator:  Abbe David Lowell

Panelists:  Julie Blackman, Hon. Noel Hillman, William H. Kettlewell, Deborah Starr

Picking up where he left off in the hypothetical from yesterday’s panel on public corruption cases, Abbe David Lowell closed NACDL’s 5th Annual White Collar Crime conference by moderating a panel on jury selection.  Joining Mr. Lowell was Julie Blackman, Deborah Starr, the Hon. Noel Hillman and William Kettlewell.

Panelists first addressed the issue of a defense lawyer’s desire to prevent or reverse bad publicity in the broad sense, as opposed to a more focused approach on learning all that is possible about the actual people who are prospective jurors.

Judge Hillman discussed what might be his response to hypothetical leaks in a grand jury investigation, outlining what kinds of factors would lead him to judicially intervene, while Mr. Kettlewell addressed the pros and cons of engaging in a war of motions related to grand jury leaks.  

Panelists specifically addressed the issue of whether and how to have aggressive “dueling” press conferences or other press strategies after the public announcement of an indictment of your client.  Ms. Starr discussed the value of assessing how to engage with “social media” to help shape a counterattack, in order to help manage public perception.  Drawing a laugh, Julie Blackman pointed out how judges are now instructing jurors “not to Google, not to blog and not to Twitter”—even when those judges don’t even understand what any of those terms mean.

The panelists pondered how a lawyer can assess whether their client is capable of getting a fair trial in a particular jurisdiction and when and how to consider moving a trial.  Specifically, there was a discussion involving the use of email or phone community attitude surveys or mini “mock trials” that set forth the specific facts of your case, and how such tools can help assess the strengths and weakness of your case. 

Ms. Blackman explained that these kinds of surveys are very helpful in helping a lawyer prepare arguments and witnesses for cases and have proven to be as predictive as political polling.  Judge Hillman discussed the circumstances under which he might be willing consider a venue change.  Mr. Kettlewell discussed the use of written questionnaires and the benefits of attorney voir dire, with Judge Hillman weighing in on the different ways that a court handles such matters, including what he perceives to be the benefits and efficiencies of a judge conducting individual voir dire in criminal cases.  Judge Hillman prefers to conduct his own voir dire, as informed by questions that lawyers have previously submitted to him.  He likes to do his questioning and stated:  “I worry about people who want to be on a jury.” Ms. Blackman and Ms. Starr discussed how particular questions are useful in elucidating a potential juror’s prejudices and personality, as well as questions that might be useful in predicting outcomes.   

Judge Hillman discussed how he might respond in a hypothetical situation involving a prosecutor’s claim that the defense was attempting to “taint” a jury pool by using community attitude surveys or trial simulations.  He expressed the view that if such efforts were being conducted by defense lawyers, he’d like to know about it so that he can be sure that no one who communicated with the defense ultimately made it onto the jury.

Ms. Starr discussed the incredible depth of information available about potential jurors now—including social views, voting records etc.  Ms. Blackman discussed how this specific information about your jurors can be entered into a sophisticated algorithm that correlates to the results of your telephone survey or trial simulation, resulting in highly predicative information.  Judge Hillman expressed a concern about the mining of so much information about individuals and whether that will further discourage jurors from fulfilling a very important constitutional role in the process.

Questions and comments from the audience helped tease out the panelists’ views on which tools are the most effective if costs preclude the use of the full toolbox, and also touched upon the possible danger of information learned in the various polling processes from being leaked to the prosecution. This panel brought a close to a day and a half of incredible presentations by an unparalleled faculty.  If you weren’t able to join us this time, I certainly hope you will consider joining us next year.  And if any of the particular panels that have been blogged about sound like they address issues that you are dealing with in your practice, don’t despair—high quality audio recordings will be shortly available for purchase here.  Stay tuned for future programming news at www.nacdl.org.

(str)

NACDL's 5th Annual Defending the White Collar Case Seminar - "Getting Paid, Not Charged--Avoiding Indictment by Collecting Fees Ethically," Friday, October 2, 2009

Guest Blogger:  Jon May, Chair, White Collar Crime Section, National Association of Criminal Defense Lawyers

Panelists:  Jane Moscowitz, Martin Pinales

Over the last ten years, and particularly as a result of the indictment of prominent Miami Attorney Ben Kuehne, criminal defense counsel have had cause to be concerned that they could be the subject of prosecution solely for taking a legitimate legal fee. In this morning’s presentation by Jane Moscowitz and Martine Pinales, lawyers found reasons to be hopeful that such fears may be overblown, at least as to potential prosecution. Forfeiture of fees, on the other hand, remain a significant concern.

The Kuehne prosecution is an instance of ideology trumping common sense. Benedict P. Kuehne is the most unlikely of government targets. As Jane Moscowitz, who is one of his attorneys observed, Ben is the best of all of us. He is not just a leader of the bar—having been the President of the Miami-Dade County Bar Association and a member of the Board of Governors of the Florida Bar—he has devoted countless hours to pro bono activities on behalf of organizations representing the interests of African-Americans, Hispanics, Gays and others. He was also one of Al Gore’s principal attorneys during the Florida recount. Not surprisingly, he was Roy Black’s choice for counsel when Roy Black needed an attorney to vet the legal fees he was to be paid to represent notorious Colombian cartel leader Fabio Ochoa.

Roy Black was ultimately paid $5 million for his representation of Ochoa. Ben Kuehne earned approximately $175,000 for vetting this fee. Ben was indicted for conspiracy to launder, what the government recognized, and the indictment stated, was a bona fide legal fee.  This is despite the fact that the money laundering statute 18 U.S.C. Sec. 1957 contains a specific exemption for the receipt of funds necessary to preserve the Sixth Amendment. It was the government’s position before the District Court and just recently before the Eleventh Circuit in their appeal from the dismissal of this count, that the decision of the Supreme Court in Caplin and Drysdale nullified this exemption. The district court, however, was persuaded that it was the intent of Congress to protect counsel from prosecution, even if attorney’s fees could be forfeited. It appears from the tenor of the oral argument, which I was present to see, that the government’s theory is being met with the same level of skepticism that it received by Judge Cooke.

Martin Pinales discussed his experience dealing with government efforts to seize legal fees. Even in instances where the AUSA states that she has no intent to seize fees, counsel can be faced with a post trial effort by the government’s money laundering/forfeiture counsel to claw back those fees. Strategies were discussed for dealing with that problem. One way is to be paid by a third party from monies totally unconnected to any alleged criminal activity. Where money is obtained from the defendant, it is important to insure that the money did not come from any source named in a forfeiture count. And counsel should do due diligence even as to assets that could be later characterized as a substitute asset. It was also important to have your retainer agreement tie fees received to services provided. Where the funds are clearly substitute assets, counsel who takes these steps will have a better chance of demonstrating that they are bona fide purchasers for value in later forfeiture proceedings.

During the seminar, other important issues were raised. In many districts, counsel do not have to worry about their fees if their clients cooperate. Doesn’t that create a conflict of interest? You can charge a flat fee so long as you can demonstrate that it was earned. But don’t call it non-refundable (unless you practice in Florida, but it still has to be reasonable). The final irony, and outrage, discussed was the fact that the indictment against Ben also includes forfeiture count. The government is seeking to forfeit from Ben,  the $5 million that Roy Black received. 

(jm)

NACDL's 5th Annual Defending the White Collar Case Seminar - "Capitol Chaos--What's Happening in D.C.?," Friday, October 2, 2009

Guest Blogger:  Ross H. Garber, Shipman & Goodwin (Hartford, CT)

Panelists:  Shara-Tara Regon, Kathleen Sullivan

Legislative Update

Shana Regon, NACDL’s Director of White Collar Crime Policy, provided an update on NACDL’s efforts on Capitol Hill.  She began by talking about NACDL advocacy on attorney-client privilege and attorney work product protection issues, particularly related to DOJ policy on requesting waivers of the privilege and protection from cooperating companies.  She also talked about proposed legislation, HR 1947, that would regulate deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs).  Among the provisions of HR 1947 are those that would require court approval of DPAs and NPAs and require posting of all DPAs and NPAs on the DOJ website.  Shana also talked about NACDL’s efforts to educate Congress about overcriminalization including ambiguous mens rea standards, mandatory minimums, the federalization of criminal conduct and the adoption of overlapping statutes covering the same conduct.

Supreme Court Update

Kathleen Sullivan of Quinn Emanuel spoke about some recent white collar cases decided by the Supreme Court in the past session: Diaz v. Massachusetts; Yaeger v. United States; and Nijhawan v. Holder.  In Malendez-Diaz, the Supreme Court held in a 5-4 decision that the confrontation clause applies to an affidavit from a crime lab analyst because it is testimonial in nature.  Kathleen emphasized that this decision would apply to any forensic experts.  In Yaeger, the court held that when a jury acquits on some counts and hangs on others, the government may not re-try the defendant on any of the counts.  In Nijhawan the Court interpreted the deportation statute for aggravated felonies with respect to crimes of fraud or deceit involving more than $10,000.  The Court held that the $10,000 requirement is met based on the facts of the case, even if the underlying aggravated felony statute itself does not require a $10,000 loss

Kathleen noted that in this session, the Court is considering several honest services cases.  Among the issues the Court will tackle is whether the mail fraud statute criminalizes mere ethical missteps. Among the honest services cases are United States v. Weyrauch, in which an Alaska legislator was convicted of soliciting legal work from clients when he was in a position to benefit clients and not disclosing the work.  The question posed in this case is whether the government must prove violation of disclosure requirements otherwise required by state law. 

In a case involving Conrad Black, the Supreme Court will evaluate whether there must be an intent to and likelihood of depriving a corporation of a business opportunity for an executive to be found guilty of the honest services provision of the mail fraud statute.  Kathleen said she expects these cases to be decided for the defendants on narrow statutory grounds.

(rhg)

NACDL's 5th Annual Defending the White Collar Case Seminar - "Financial Fiasco - Prosecutions & Lawsuits Stemming from the Securities Market Meltdown," Friday, October 2, 2009

Guest Blogger:  Ashish S. Joshi, Lorandos & Associates (Ann Arbor, MI / Washington, DC)

Moderator:  Gerald B. Lefcourt

Panelists:  Susan Brune, Hon. Lewis Kaplan, Walter Ricciardi, Ira Sorkin

This was one of the most anticipated panels of the program as the panelists included Hon. Lewis Kaplan who has been roundly applauded by the white-collar defense bar for his insightful and game-changing KPMG decision, Ira Sorkin, the attorney for Bernard Madoff, Susan Brune, who is shortly going to trial to defend Bear Stearns hedge fund managers Cioffi and Tannin, who have been accused of securities fraud, and former SEC Enforcement Director Walter Ricciardi to provide perspective on the major developments taking place at the SEC.
 
Walter Ricciardi talked about the recent changes in the SEC. With the appointment of Mary Shapiro as the Chair of the Commission, the SEC has sent out a signal that it’s the “tough cop on the beat.” The Commission has strengthened its enforcement division. The new subpoena power given to its enforcement division has also given the SEC more bite. Contrary to its earlier culture where “everybody does everything,” now the SEC has created Specialized Units. These Units – such as the Asset Management Unit – will have a unit head and staff who will focus their attention on the unit’s activities, full time. Ricciardi also mentioned that while the SEC earlier used to go after the entities and left out the individuals who had been accused of wrongdoing, going forward, this will not be the case.

After Ricciardi, it was Ira Sorkin’s turn to speak. Sorkin acknowledged that there has been a major change in white-collar investigation and/or prosecution since his early days at the SEC. Now, the SEC is increasingly reaching out and cooperating with the U.S. Attorneys’ office. The approach appears to be: “Talk to us about case A, we will talk to you about case B.”

Sorkin remarked that in the last 15-20 years, parallel proceedings in a white-collar prosecution have mushroomed. Every regulator, criminal or civil, now wants a piece of these white-collar cases. It’s prestigious, it’s sexy and it garners media attention. As a result, “co-operation agreements” have increased. Agencies and departments are cooperating with each other like never before.

Sorkin also commented on FINRA – a self-regulatory organization. FINRA, during its investigation apparently does not recognize the 5th Amendment privilege against self-incrimination. Your client calls you and tells you that FINRA wants to talk to your client. Basically, you tell your client that you have bad news and worse news in this situation. Bad news: if your client doesn’t testify before FINRA, it can bring a 82(10) proceeding and take your client’s license away. Worse news: if your client does testify, FINRA can then take the transcript and share it with the DOJ or district attorney’s office and your client may end up with a much worse problem.

Sorkin also commented on the SEC and DOJ’s “queen for a day” proffer agreements. These offers are meaningless. They provide nothing to the clients but a lot to the government – and, they are quite dangerous. If you believe that a proffer is necessary, it would be better to go down the road with Rule 410 protections in place.

Sorkin ended his discussion by stating that it was quite alarming that more and more defense lawyers are acting as “junior G-men” for the government to do internal investigations.

After Ira Sorkin, it was the turn of Susan Brune. Brune commented that in this economy, there’s a common perception: why haven’t been people been charged for the collapse of stock market? There is an assumption that just because the stock market went down, there has to be underlying criminality behind this.

Brune also acknowledged that a typical white-collar case is a “resource problem.” It requires tremendous resources. Emails, documents, reports, papers - millions of documents are involved in defending a white-collar criminal case. Just the resources needed to review emails alone are, at times, overwhelming.

Judge Lewis Kaplan stated that maybe the current debate concerning the attorney-client privilege should be re-focused. Judge Kaplan commented that the incessant talk about the Holder-Thompson-McNulty-Filip memorandums might be irrelevant. Instead, the focus should be on the underlying corporate criminal liability. When would a criminal investigation and/or prosecution of a corporate entity be appropriate? If a CFO commits fraud, there should be no issue when the company is made civilly liable for the CFO’s acts. But when the DOJ launches a criminal investigation, it raises other issues. The government often is in a place where it can make the corporations do things to the individual employees that the government otherwise is not in a position to do directly. Be it indemnification, attorney fees, advancement of defense costs… the list is endless.

Judge Kaplan stated that some legal commentators have justified the government’s actions by taking the position that: the society should not be made to expand its finite resources to root out criminal behavior when this burden could easily be shifted to the companies where the alleged criminal behavior has said to have occurred. But, the Judge stated, this was an empirical question.

(asj)

NACDL's 5th Annual Defending the White Collar Case Seminar - "More Jail, Less Justice - White Collar Sentencing Unhinged From Reality," Thursday, October 1, 2009

Guest Blogger:  Ellen C. Brotman, Montgomery McCracken (Philadelphia, PA)

Moderator:  Gerald Goldstein

Panelists:  Ellen C. Brotman, Evan Jenness, Hon. Jed Rakoff, Alan Vinegrad

The panel started with Evan Jenness who made the important point that we must push back against the government’s loss numbers in complicated financial crimes cases and focus on how to calculate the “realistic economic loss proximately caused by your client’s criminal conduct.” Arriving at this number and persuading the government to accept it before the charges can be critical. Primarily, this strategy permits the sentencing hearing to focus not on the Guidelines calculations but on the characteristics of your client that properly mitigate the harshness of the sentence. Evan focused on United States v. Nacchio, Olis, and Kosky as cases which support a nuanced approach to loss calculations. These cases look at external factors affecting loss including market fluctuations, third party conduct, and residual value in assets.

Alan Vinegrad spoke next about whether there has been a real change post-Booker in sentencing. He had some “scary and sobering statistics” -- fraud sentences are up 69%; bribery sentences are up 150%; tax sentences are up 78%; overall sentencing considerations for economic crimes are up 38%. He explained this based on two phenomena: the increase in the fraud loss table and the new discretionary nature of the Guidelines.

Ellen C. Brotman (me) pinch hit for Amy Baron Evans who was on the injured list but will be back in the rotation any day. I described the process of deconstruction and discussed the NACDL Amicus Brief in United States v. Tomko. The Tomko brief  posits the radical but rational and well reasoned theory that, because the Commission’s review of past practices did not include any cases that resulted in probation, thus ignoring approximately 40% of all past cases in the relevant time frame, the Guidelines are not based on empirical evidence as they apply to first time non-violent offenders. I urge everyone to read the brief and the articles that Amy has published, found on the wonderful, amazing and inspiring Defender website: www.fd.org.

Judge Rakoff spoke next and agreed that Booker has made it harder to sentence but has created a more rationalized process. The judge said that reducing individualized sentencing with its myriad factors to an arithmetic process was “absurd.” He also speculated that the early adherence to the guidelines post-Booker was motivated by fear that the Bush administration would somehow create a legislative backlash. However, the Judge also felt that, for whatever reasons, there was more comfort level with variances now and that issue was where the sentencing energy should be focused.
The panel then turned its attention to the hypothetical and had a lively discussion that fleshed out the issues raised above.

(ecb)

NACDL's 5th Annual Defending the White Collar Case Seminar - "Choppy Waters - The Ethics of Privilege and Disclosure," Thursday, October 1, 2009

Guest Blogger:  Peter D. Hardy, Post & Schell, P.C. (Philadelphia, PA)

Moderator:  Gerald B. Lefcourt

Panelists:  Robert Cary, Hon. Nancy Gertner, Prof. Bruce Green, Paul Shechtman, Larry Thompson 

Gerald Lefcourt noted that it has been over 46 years since the Brady decision was issued, yet we still have no firm definition of Brady that most federal prosecutors can follow.  There are varying and conflicting practices amongst prosecutors in regards to definitions and the proper time frame for disclosures.  Moreover, incidents of Brady violations or potential violations are not uncommon.

Robert Cary represented Senator Ted Stevens.  The heart of the defense was a note that Senator Stevens had sent to Bill Allen, the key government witness and the builder making improvements on the Senator’s chalet, which stated in part that the Senator wanted to make sure that Allen got fully paid, and that “friendship is one thing, but compliance with these ethics rules is another[.]”  The government responded to this note by eliciting testimony from Allen that the note was just the Senator trying to concoct a cover story.  After the guilty verdict, the second FBI agent on the case filed a self-described whistleblower complaint regarding conduct by the prosecution team.  The Court ordered the government to provide discovery regarding the complaint, and a new prosecution team was put in place.  New discovery contradicted directly the government’s theory and evidence at trial that Allen regarded the note as a mere cover story.  Carey described the Attorney General as a hero for moving to dismiss the case.  All of this happened only after a long trial and post-trial process (as well as Senator Stevens losing his re-election bid).  Judge Sullivan, who oversaw the case, is to be commended for being careful and not simply taking the government’s word.

So, what should be done?  Judge Gertner explained that the solution needs to involve the rules (ethical, court, and criminal procedure).  The case law has slid into an outcome-determinative approach, which makes it very hard for the prosecutor to predict.  The materiality standard is colliding with the harmless error doctrine.  Brady had more to do with a failure to turn over evidence impugning the system, rather than predictions regarding potential outcomes.  The definition of Brady should be re-assessed, and there also should be deadlines set for when information should be turned over:  for example, 28 days before.

Professor Green described how the ABA code of ethics set forth in the 1970s a discovery rule for prosecutors:  you must turn over information that would tend to negate the guilt of the accused.  Everyone had assumed that this rule overlapped with Brady.  But, the rule is not co-extensive with Brady – for example, it does not have a materiality standard.  Rather, it categorically requires the disclosure of favorable information, or information which might lead to favorable evidence.  A materiality test is really directed at post-conviction review, and is not well suited to govern the conduct of prosecutors at the time they are making their discovery decisions.  Defense attorneys also need to know about exculpatory information in order to assess a case and decide whether or not to proceed to trial.

Paul Shechtman described federal plea agreements in New York which require waivers by the defendant of either impeachment and/or all exculpatory information.  These plea waivers apparently run afoul of the rules just described by Professor Green.  Current cases strongly suggest that prosecutors need more education regarding their obligations under Brady, in order to be better able to appreciate the exculpatory value of evidence.  We need to reassess Brady, which has been hijacked by the materiality doctrine.  The burden now is on the defendant to show materiality.  In Brady, Justice Marshall wrote in dissent that the test instead should be harmless error, in which the government has the burden to show that the conviction should not be reversed.  The materiality requirement invites courts to preserve convictions, despite poor decisions and poor decision-making processes by prosecutors.

Larry Thompson described a case in Detroit in which the prosecutor made false statements to the Court, and actually was prosecuted himself.  Judge Gertner noted that part of the problem here is lack of meaningful remedies.  There is professional discipline, but discipline is unlikely.

The panel then turned to attorney client privilege.  Gerald Lefcourt noted that internal investigations, performed not by agents but corporation lawyers, can be disastrous for employees.  No company wants to go to trial and become the next Arthur Anderson, so companies will go out of their way to avoid prosecution.  The DOJ in effect has “outsourced” its investigations to corporation lawyers.  Indeed, at least one employee has been prosecuted for obstruction of justice for allegedly lying to corporate counsel performing an internal investigation.

Larry Thompson stated that the strict application of the doctrine of respondeat superior is a problem for both employees and companies.  If just one person acts as rogue employee, then all of the training and compliance efforts by the company may be for naught.  Corporations really cannot go to trial, because the collateral consequences can be terrible.  In an investigation, as corporate counsel, you need to find out what happened and you need your employees to talk to you.  In the wake of the dismissals in the US v. Stein case (the KPMG criminal tax case), DOJ will be reluctant now to get involved in how a corporation deals with its own employees during its internal investigations.

The DOJ has changed what it has said about what constitutes cooperation by a corporation.  Knowing or feeling that it has all the power, DOJ has imposed great demands upon corporations and its employees, and threatened the corporation with its own destruction.  Gerald Lefcourt asked, is the government thereby coercing employees to speak, sometimes against their own interest?  Are the protections provided by the warnings under Upjohn sufficient?

Paul Shectman represents many high-level employees of corporations.  When he is asked to represent an employee, he sometimes finds that his client already has incriminated himself.  The question is, does the employee know at the time that he is making statements that anything he says can be turned over by the corporation, and therefore nothing is confidential? 

Judge Gertner asked about waiving the privilege for one purpose, but not for another.  The panel responded that the doctrine of selective waiver is dead.  So, if no privilege attaches, what is the purpose of hiring outside counsel?  

Gerald Lefcourt asked, shouldn’t the employee be told by the corporation that he should obtain his own lawyer, now, because anything he says can be turned over later and used (by prosecutors, regulators, and civil litigants).  Sometimes employees hire their own “shadow counsel,” because they want their own lawyer, but are reluctant to say “no” to the lawyer recommended by the corporation.

Robert Cary stated that the hardest decision for an individual is whether to cooperate or not during the first interview with corporate counsel.  There is also a question regarding how many documents an employee can or should obtain from the corporation, particularly before any interview.

A question was posed:  now that internal investigation lawyers in effect have been “deputized,” are there conflict of interest issues because the lawyers should advise the employees that they can turn over the information to the government.  Paul Schectman suggested that statements/warnings by the corporation’s attorneys to interviewed employees that the information is covered by privilege (held by the corporation), and that the information might be disclosed by the company, likely gives employees a false sense of comfort, because the company may have decided long ago that any notable information will be turned over.

Professor Green argued that you cannot look to the court or ethics rules to solve this problem, because enforcement is rare.  Echoing the comment above, the problem with the warnings is the “delusion” by an employee that, at the end of the day, the corporation or its lawyers will care about the employee’s interests.

The Filip Memo of the DOJ now provides that, in lieu of an impermissible request by the government for a company to waive privilege, the company can cooperate by providing the facts obtained during an internal investigation.  This is a thin line.  Is it purely semantics?  Is it “incoherent?”  Larry Thompson, however, noted that shareholders of a corporation expect cooperation with the government.

Gerald Lefcourt wrapped up by asking how a fair trial for an individual can take place when a cooperating company retains all of the potentially exculpatory documents?  In KPMG, the defense theory was that the company was an instrument of the government, and therefore the government’s own disclosure obligations required KPMG to disgorge its documents to the individuals.

(pdh)

NACDL's 5th Annual Defending the White Collar Case Seminar - "Keynote Address: Lanny A. Breuer, Assistant Attorney General, Criminal Division, U.S. Department of Justice," Thursday, October 1, 2009

Guest Blogger:  Ivan J. Dominguez, Assistant Director of Public Affairs & Communications, National Association of Criminal Defense Lawyers

Keynote Address:  Lanny A. Breuer, Assistant Attorney General, Criminal Division, U.S. Department of Justice*

Assistant Attorney General of the Criminal Division Lanny A. Breuer traveled from Washington, D.C., to deliver a lunchtime address to NACDL’s 5th Annual White Collar Seminar at Fordham Law School in New York City.

Breuer, who was confirmed almost six months ago, repeatedly emphasized his admiration for the professionalism and commitment of career prosecutors. He shared his perspective that, as a general proposition, career law enforcement officials have an “abiding commitment to the highest standards of ethical conduct.” He also told of how he recently returned from Mexico City where he met with a U.S. resident legal adviser and said that it is his goal to meet all resident legal adviserss around the world. 

The focus of his talk was an overview of some of the DOJ’s, and specifically the Criminal Division’s, law enforcement priorities, stating that “the risks we face from white collar criminals have never been greater.” This is so, he said, because of the ever-growing sophistication of white collar criminals combined with a financial intervention by the government “on a massive scale…unparalleled in our history.”  “We’ve already seen egregious instances of fraud and abuse on the road to [economic] recovery,” he said.

Breuer specifically identified the “unprecedented amounts” that Congress has made available to facilitate recovery as giving rise to the government’s focus here. Indeed, he further explained that Congress has expressed its concern that government be vigilant as it guards against those who would take advantage of the $787 billion American Recovery and Reinvestment Act. In order to accomplish its goals in the face of these challenges, Breuer explained that his mantra is that the Department be “smart, nimble and focused” in fighting white collar crime. Specifically, throughout his speech he emphasized (i) the importance of interagency cooperation and collaboration and (ii) the value of using vast storehouses of data to drive the Department’s work.

Breuer also individually explored the following “white collar crime priorities”: health care fraud, financial fraud (including mortgage fraud) and public corruption.

On the topic of health care fraud, which he called “particularly severe,” Breuer said that much of the $800 billion dollars per annum that the government spends on Medicare and Medicaid is lost to “waste, fraud and abuse,” which he estimated at a minimum of 3% of those expenditures. In this context, interagency efforts are being pursued in what he characterized as an “innovative, data driven approach.” For example, pointing to multiple recent indictments in Detroit, Mich., he said that government investigation is driven by data such as information about which geographic areas have higher Medicare billing. He promised that such enforcement action will be spreading to new cities, explaining that government data shows that Medicare billings go down after the strike force goes into cities.

“Nowhere do you see [interagency] collaboration as much as in [financial fraud] arena,” Breuer said. In the area of mortgage fraud, he said that the Department is focused on those exploiting the most vulnerable homeowners among us.” He pointed to the National Mortgage Fraud team’s access to a “warehouse” of FBI data to aid in their work, explaining that the team at the FBI has developed sophisticated techniques with the data and that law enforcement is using this intelligence to combat mortgage fraud in “a very targeted” way.

On the specific subject of the $787 billion American Recovery and Reinvestment Act, Breuer pointed out that more than 20 federal agencies are slated to receive these funds. Early detection “is absolutely critical,” he said, explaining that the Inspector General is monitoring where the recovery money is going. He also spoke of how future public access to the data concerning where these funds are going will enable the government to enlist the aid of private citizens, journalists and others in monitoring whether the money is going where intended.

As a general proposition, Breuer emphasized that all Criminal Division prosecutors must discuss the possibility of forfeiture in every case because “history has taught us time and again that forfeiture is a powerful tool.”

The final specific area of enforcement focus that Breuer discussed was public corruption. He explained that the Department will continue to pursue violations of the Foreign Corrupt Practices Act (FCPA) and to know that the Department does not simply react to disclosures. “As in many other areas, the Department is being proactive and aggressive,” he said, adding that it is using all available law enforcement tools on this front. Breuer “fully expects” that FCPA prosecutions will continue to rise, as well as the level of cooperation with foreign officials. He also said that there will be a future focus on international organized crime, in which the Federal Trade Commission will also play a role. He emphasized that the Department strives to be “careful and deliberate,” but will bring cases whenever they are “deserved,” with a “consistent, non-partisan and absolute highest degree of professionalism and ethics.”

Upon concluding his presentation, Breuer made himself available to answer questions from the audience. Those questions ranged from topics such as private contractor corruption in foreign wars to renditions and torture. One questioner asked about whether the enforcement focus is disproportionately on smaller cases, “minnows” as she referred to them. Breuer said that is not the case, leaving all categories of potential wrongdoers on notice, adding, though, that “We are not going to charge you criminally if we have doubts about it.”

No subject, however, generated as many questions as that of prosecutorial violations of Brady disclosure obligations. While he acknowledged that “sometimes there are mistakes....They are not meant with intent,“ adding, “I don’t accept that there is a massive abuse of Brady" afoot. He said that the Attorney General is currently considering an internal memo on the broad subject of federal discovery obligations.

Finally, there was the question about rendition- and torture-related allegations concerning Alberto Gonzales and other former administration officials. Breuer said that those matters are “clearly the province of the Independent Counsel” and that the Criminal Division is not dealing with those issues.

During the question and answer period, Breuer explained that the Department is committed to indigent defense, re-entry programs and alternatives to incarceration. In addition, he re-emphasized the Attorney General Holder’s recognition of the terrible effect of the crack/cocaine disparity on minority communities. He also said that he welcomes an “open dialogue” with the criminal defense bar.

*Biography: Lanny A. Breuer was confirmed as the Criminal Division’s Assistant Attorney General on April 20, 2009. Mr. Breuer began his career in 1985 as an Assistant District Attorney in Manhattan, where he prosecuted various criminal cases, including murder, gang violence, armed robbery, child abuse, burglary, white collar crime and larceny. In 1989, he joined Covington & Burling LLP, where he became a Partner in 1995 and served as co-chair of the White Collar Defense and Investigations practice group. At Covington, Mr. Breuer specialized in white collar criminal and complex civil litigation, internal corporate investigations, congressional investigations, antitrust cartel proceedings, and other matters involving high-profile legal, political, and public relations risks. From 1997 to 1999, Mr. Breuer left Covington to serve as Special Counsel to President William J. Clinton. He has been recognized by numerous publications as a leading litigator, and he is a fellow of the American College of Trial Lawyers. Mr. Breuer received his B.A. from Columbia University in 1980 and his J.D. from Columbia Law School in 1985. (Source: U.S. Department of Justice Web site).

(ijd)

NACDL's 5th Annual Defending the White Collar Case Seminar - "Cyberspace - The Black Hole Where Ethics, Strategy, and Technology Collide," Thursday, October 1, 2009

Guest Blogger:  Cynthia Hujar Orr, President, National Association of Criminal Defense Lawyers

Panel Moderator:  Gerald Goldstein

Panelists: AUSA Joey Blanch, Blair Brown, Marcia Hofmann, Alexander Southwell

Gerald Goldstein grabbed the attention of the NACDL White Collar seminar telling us that each time we hit the send button on the internet a new government exhibit is created.

Blair Brown spoke about the Balco Investigation, Comprehensive Drug Testing, case and its ground breaking opinions.  They answered many previously unanswered questions regarding the operation of the plain view doctrine and appropriate limits and procedures for the execution for computer search warrants. The Baseball Players Association conducted anonymous testing in order to determine whether comprehensive drug testing should be imposed on the sport.  However, a search warrant issued for drug test results for specific athletes and promised to screen and limit the search of the computers to records of specific athletes through off site screening procedures.  The government rejected assistance on site to produce just the records that the government sought.  In fact, the case agent viewed all of the records under the theory that they were in "plain view."  Three separate district judges found the government acted in an outrageous fashion, executing general warrants.  Blair explained the appropriate limits and procedures that the Court held should have been followed instead.

Alexander Southwell explained the government's application of the Computer Fraud Abuse Act to the public's use of social networks in the context of the Laurie Drew case.  Drew had created a fake "my space" account culminating in the suicide of a young woman distressed by the postings from the fake site.  The government pressed charges for formation of a fake account, criminalizing the violation of the terms and conditions of a social network.  Drew was convicted and the court entered a judgment of acquittal from which the government has taken an appeal.  Therefore, the story has not been written on the sweep of the Computer Fraud Abuse Act (CFAA), 18 U.S.C. Section 1030.  He explained the difficulty of the criminal law to keep up with technology and the importance for criminal defense lawyers to push back when the government attempts to apply the criminal law to current social practices.

Marcia Hofmann working for the Electronic Frontier Foundation, a techie ACLU.  She encouraged defense lawyers to reach out to EFF when confronting technical issues in your criminal cases.  She discussed the evolution of the CFAA covering the cases that were the vehicles that expanded its use.  Her discussion opened eyes about conduct that was not traditionally addressed by the criminal law. 

AUSA Joey Blanch discussed child pornography in the age of the internet.  Cases are exploding and proliferating.  Every section of society in every walk of life ends up with people committing these crimes because people think they are anonymous on line.  Blanch told the white collar lawyers that they will have a client with a child pornography case and explained how it could arise. Importantly, she discussed the new child pornography offenses effective in October of 2009.  She also discussed the circuit split on the Mona Lisa defense.  One of the new crimes is the Child Pornography Enterprise offense which creates a 20 year mandatory minimum for participation in child pornography internet groups.  That was just the tip of the iceberg.

Using a hypothetical containing common real life circumstances the group guided the audience through what counsel should do in tough circumstances. 

(ceo)

NACDL's 5th Annual Defending the White Collar Case Seminar - "Pay to Play - The Current Wave of Public Corruption Cases," Thursday, October 1, 2009

Guest Blogger:  Linda Friedman Ramirez, P.A. (Tampa St. Petersburg, FL)

Panel Moderator:  Abbe David Lowell

Panelists:  Robert Trout, Karen Patton Seymour, Reid Weingarten, and Edward Genson

NACDL's 5th Annual White Collar Crime Conference kicked off today with the Pay to Play panelists jumping into a thorough discussion of the key issues in the defense of a public corruption case via a hypothetical created by panel moderator Abbe Lowell. 

Quick Overview of the Hypothetical - Alice Adams, the Democrat Maryland Speaker of the House, is also a civil attorney. Her firm Murphy andSchaeffer also has a lobbying practice. Her Chief of Staff Bruce Bannon is an attorney in private practice but has no office. Funhouse hires Murphy and Schaeffer to promote gambling legislation in Maryland. Alice earns a percentage of her law firms fees. She introduces and fast tracks legislation to legalize gambling. In an ethics form regarding outside employment, she discloses Murphy andSchaeffer but does not discuss specific clients. Funhouse CEO also hires Bannon for personal estate planning work and essentially pays him $50,000 for a will. There is a federal and state joint investigation and grand jury subpoenas are issued for records investigating allegations of bribe, theft of honest services, and wire fraud.

The panel agreed that attorneys are needed for all individuals and entities subpoenaed. The first question is whether joint defense agreements are more problematic than helpful. There seemed to be a consensus that there might be some benefits, particularly when working with attorneys with whom there has been no prior experience or quirky clients, but most panelists expressed reservations about their use.

Next up - the panelists discussed the subpoena for records relating to the legislative process and the Speech and Debate privilege. Who asserts? The panel propounded on the importance of collaboration between the attorney for Alice and the attorney for House. Also, how to handle keeping back documents that may be privileged and the concept of using a privilege log? TheDOJ’s view of the Speech and Debate clause is in a great deal of flux, and DOJ’s view has changed radically. Further, if it is a federal subpoena does this change anything? And how does the counsel for Funhouse handle its own subpoena? The four panelists explored the issues relevant to subpoenas for contribution records and the intersection with the First Amendment.

Another important issue for practitioners is how to respond to precharge or pretrial publicity in high profile cases, including responding to questions by investigative reporters. Clients often have a strong desire to speak to the public. Different responses from the panelists: give clients a limited script; have the attorney act as spokesperson -- though that raises the concern for attorneys of moving into the realm of public relations; hiring surrogates.

Also, what happens if a client wants to make his case to the prosecutor? Is this a good strategy? Of course the most important issues are whether the facts are sufficient for a prosecution pursuant to 18 U.S.C. 1346?  Is conflict of interest + non-disclosure enough under this statute?  This was the meat of the panel and the discussion was exciting and demonstrated the knowledge of the panel.  Also, Moderator Abbe Lowell injected into the discussion 18 U.S.C. 666, which is the jurisdictional statute for prosecution of offenses committed by state public officials and the requirement of a connection with the receipt of federal funds 18 U.S.C 666 (b).

By the close of the panel it was clear that an hour and a half was not nearly enough time to explore this topic!

(lfr)

Beware of What You Say to Counsel Representing a Corporation

The Ninth Circuit Court of Appeals issued a decision in United States v. Ruehle,a case that opens by saying "[w]e here explore the treacherous path which corporate counsel must tread under the attorney client privilege when conducting an internal investigation to advise a publicly traded company on its financial disclosure obligations."  The lower court had suppressed "all statements from former CFO William J. Ruehle to attorneys from Irell & Manella LLP, Broadcom's outside counsel, regarding the stock option granting practices at Broadcom."  In reversing this decision, the Ninth Circuit, rejected the lower court finding that Ruehle "had a reasonable belief that Irell and Manella were his lawyers prior to the June 1, 2006 interrogation by Irell, and that he never gave informed written consent, either to the dual representation by Irell or the disclosure of privileged information to third parties..."  The Ninth Circuit found that the lower court had "applied a liberal view of the privilege that conflicts with the strict view applied under federal common law, which governs here."  The Ninth Circuit stated that it "reject[s] the district court's contrary finding that an expectation of confidentiality was established because, upon review of the record, we are left with the 'definite and firm conviction that a mistake has been committed' and thus we determine that this factual finding was clearly erroneous." Some thoughts on this decision:

• Although at first glance it may seem like the Ninth Circuit is usurping a factual finding of the lower court, there is more to this picture -  it is factual finding, yes, but one that had been determined by a different legal standard.  What is interesting here is that the Ninth Circuit chose not to remand to the lower court when changing the operative standard for determining the issue.  On the other hand, the court's decision implies that the evidence does not create a factual question.
• Every corporate officer needs to be aware that statements made during an internal investigation may end up in the government's lap. One can't always count on an attorney client privilege to protect these statements.
• Outside counsel's job in conducting internal corporate investigations may have just been made more difficult as one wonders if corporate officers will want to cooperate in corporate counsel's internal review.  

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Simpson - Corporate Criminal Intent

William A. Simpson, Corporate Criminal Intent - SSRN Abstract -

This paper is about the corporation as criminal defendant. In common-law legal systems a fully constituted criminal offence normally requires proof of both the proscribed action (actus reus) and criminal intent (mens rea). However, it appears highly artificial to describe corporate mens rea with ordinary language terms such as “knowledge,” “belief,” “desire,” or “intention.” After a review of common-law and philosophical approaches to imputing criminal intent to the corporate defendant, this paper proposes a behavioral approach to attributing mens rea to corporations and concludes with a review of the (UK) Corporate Manslaughter and Homicide Act 2007 which, it is submitted, adopts just such an approach.

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Schipani - Attorney-Client Privilege in Corporate Criminal Investigations

Cindy A. Schipani, The Future of the Attorney-Client Privilege in Corporate Criminal Investigations - SSRN Abstract -

This manuscript discusses how the Department of Justice (DOJ) has viewed waiver of the attorney-client privilege as an important factor evidencing cooperation when determining whether to enter non-prosecution or deferred prosecution agreements with firms allegedly involved in criminal activities. It further discusses recent changes to the DOJ's guidelines, purporting to take waiver out of the equation in deciding whether to prosecute. Questions remain as to whether the corporate attorney-client privilege is a relic of the past or whether the new guidelines, issued in August, 2008, have indeed restored the privilege to firms under federal investigation.

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