White Collar Crime Prof Blog

In the News & Around the Blogosphere

FBI Press Release, Former CEO of Comverse Technology, Inc. Settles Civil Case with U.S. Attorney's Office and Forfeits Over $46 Million

Sue Reisinger, Corporate Counsel, law.com, Ex-Gen Re Lawyer Argues on Appeal That General Counsel Wasn't Allowed to Testify

Jonathan Saltzman, Globe -Boston.com, Wilkerson sentencing on federal corruption charges set for Dec. 22

James C. McKInley Jr., NYTimes, DeLay Is Convicted in Texas Donation Case

Sito Negron, El Paso Inc., Pena asked for kickback, filing says Faces two trials on local charges in December

AP, Big New York insider trading probe spawns another

Marietta Cauchi, WSJ, White-Collar Clampdown As U.K.'s FSA Charges Five

Chicago Press Release Services (originally reported Chicago Public Radio), Gov. George Ryan hoping to get out of prison

Mike McIntyre, Winnipeg Free Press, Broker gets eight years in swindle

AP, Wash Post, People caught in up the Abramoff corruption probe

(esp)

In the News & Around the Blogosphere

Richard A. Serrano, LA Times, Extensive insider trading investigation drawing to close, official says

R.G. Ratcliffe, Houston Chronicle, Testimony ends in DeLay's money-laundering trial

FBI Press Release, Former Societe Generale Trader Found Guilty in Manhattan Federal Court of Stealing High-Frequency Trading System Code

FBI Press Release, Former New York Con Edison Manager Pleads Guilty to Fraud, Bribery, and Tax Charges

FBI Press Release, Former Doral Senior Executive Sentenced to 60 Months in Prison for Securities Fraud Scheme That Caused Approximately $4 Billion Decline in Shareholder Value

Peter Grier, Christian Science Monitor, Is Charles Rangel Corrupt?

 DOJ Press Release, California UBS Client Charged with Hiding Assets in Secret Swiss Bank Account

(esp)

 

Upcoming Conferences

20th Annual National Seminar on the Federal Sentencing Guidelines -  May 4-6th - Buena Vista Palace Hotel & Spa in Orlando, Florida here

ABA Criminal Tax Fraud Conference, Dec. 2-3, 2010, San Francisco here

ABA Environmental Compliance & Criminal Enforcment, Pittsburgh, Dec. 9 here

ABA 25th National White Collar Crime Institute, San Diego, March 2-4 here

(esp)

Kevin Ring Convicted Yet DOJ Wants More in an Honest Services Statute

According to a DOJ Press Release, "a federal jury in Washington convicted Kevin A. Ring, a former lobbyist who worked with Jack A. Abramoff, on five counts related to a scheme to corrupt public officials by providing a stream of things of value."  The Press Release states that:

"The jury found Ring guilty on one count of conspiring to corrupt congressional and executive branch officials by providing things of value to them and their staff in order to induce or reward those who took official actions benefitting Ring and his clients.   In addition, Ring was convicted of one count of paying a gratuity to a public official and three counts of honest services wire fraud for engaging in a scheme to deprive U.S. citizens of their right to the honest services of certain public officials.   The jury acquitted Ring on three counts of honest services fraud.   A previous federal jury failed to reach a verdict in the case and the court declared a mistrial."

Interestingly, this verdict comes on the heels of a response by Assistant AG Lanny Breuer to a question by Senator Patrick Leahy, where Breuer claims that there is a need to revise the honest services statute post Skilling. The Court's decision in the Skilling case had limited honest services to "bribery and kickbacks."  Breuer's first answer to a question posed to him tells of two cases where honest services premised on self-dealing was charged - but in both instances he says that it was in addition to bribery charges.  If bribery was present in these two cases, then why should Congress revise the mail fraud statute?  DOJ fails to present a specific need for this legislation.

Breuer then proceeds to state that "without a legislative fix, it will be more difficult and, in some instances, impossible to prosecute federal officials, as well as state and local officials for significant corrupt conduct."  See letter -Download Breuer_Answers  But he can provide no cases and his reasoning for not using existing statutes like section 208 is because this statute is not a predicate for a RICO charge, while mail fraud does serve this function. Is Assistant AG Breuer telling us that he can't circumvent the limits of RICO without this mail fraud fix? Is he saying that Congress should extend a statute so that he can get around congressional intent in the RICO statute?  It's also, he says, because he needs honest services as a predicate for Title III wiretaps. Here again is he saying that he can't circumvent the limits of Title III wiretaps without having a loose mail fraud statute that allows DOJ to use and abuse their discretion. 

With a conviction in the Ring case, it is hoped that the Senate will look closely at the rationale offered by DOJ for needing to expand the honest services provisions of the mail fraud statute. It is also hoped that DOJ will think twice about allowing the possible use of mail fraud to circumvent the existing RICO and wiretap mandates. It is a sad day when prosecutors ask for more power in a statute so that they can use it to circumvent existing laws. 

(esp)

DOJ Settles Seven FCPA Cases and Announces New Minimum Standards for Corporate FCPA Compliance Programs

Michael Volkav of Mayer Brown writes:

The Department of Justice and Securities and Exchange Commission (SEC) resolved seven FCPA cases last week involving the oil and gas industry.  The cases involved bribes to numerous foreign officials relating to the import of goods and materials in foreign jurisdictions.  To resolve the investigations each company entered into a deferred prosecution agreement and a total of nearly $122 million in fines were paid. 

Each of the Deferred Prosecution Agreements included an attachment entitled “Corporate Compliance Program,” which reflect DOJ’s current position on minimum standards for FCPA compliance programs.  The standards require, among other things,

i.       clearly articulated and visible policies against violations of the FCPA,

ii.      visible corporate support of such policies,

iii.     implementation of compliance standards and procedures designed to reduce FCPA violations, and

iv.     the assignment of responsibility for the implementation and oversight of such policies, standards and procedures to “one or more senior corporate executives.”

 (mv)

Picking the Wrong Person - Palin's Email Account

According to a DOJ Press Release, after a trial by jury the court issued a sentence of "one year and one day in prison for intentionally accessing without authorization the e-mail account of former Alaska governor Sarah Palin." The sentence was also for a misdemeanor obstruction of justice conviction premised upon his "deletions of records and documents with the intent to impede an anticipated FBI investigation."  This individual was found not guilty of wire fraud and the jury failed to "reach a verdict on the identity theft charge."

It is good to see a prosecution and punishment for computer related offenses for activity that infringes on the computer privacy of another. But one also has to wonder if there would have been any case but for the fact that the victim was Sarah Palin.

(esp)

In the News & Around the Blogosphere

AP, Houston Chronicle, Appeals denied in Dallas schools corruption case

AP, Mercury News, Bell mayor in corruption case says DA bilked him

DOJ Press Release, Manhattan U.S. Attorney Charges 17 People with Participating in $42.5 Million Fraud on Organization That Makes Reparations to Victims of Nazi Persecution -Six Corrupt Insiders Allegedly Processed Thousands of Fraudulent Applications for Payments Meant for Actual Victims of the Holocaust

DOJ Press Release, Former Atheros Executive Sentenced in Manhattan Federal Court to 18 Months in Prison in Galleon Insider Trading Case

 DOJ Press Release, Pharmaceutical Company Lawyer Charged with Obstruction and Making False Statements

(esp)

In the News & Around the Blogosphere

Alex Bunin has resigned as Federal Public Defender for the Northern District of New York as of Nov. 26th, and accepted the position as the Chief Public Defender for Harris County, Texas.

DOJ Press Release, Three Former Executives Indicted in Color Display Tube Price-Fixing Conspiracy - Global Price-Fixing Scheme Involves Tubes Used in Computer Monitors

Ashby Jones, WSJ Blog, When a (Relatively) Small Loss Amounts to Big Time

DOJ Press Release, Principal of A&O Entities Pleads Guilty for His Role in $100 Million Fraud Scheme Involving Life Settlements

(esp)

SEC Weighs In With Proposed Dodd-Frank Whistleblower Rules

The SEC has issued SEC Proposed Dodd-Frank Whistleblower Rules in order to implement Section 21F of the Exchange Act. Section 21F, entitled Securities Whistleblower Incentives and Protection, was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC is seeking public comments on the proposed rules, which comments are due by December 17. Some commentators believe that the generous bounty provisions of Dodd-Frank will undermine the many corporate compliance programs put in place or strengthened in the wake of Sarbanes-Oxley.

(wisenberg)

In the News & Around the Blogosphere

Ramit Plushnick-Masti, law.com (AP), Enron's Skilling Asks 5th Circuit for New Trial

John Dorschner, Miami Herald, Pacemaker firm to pay $9.2M

DOJ Press Release, Securities Attorney and Former Stock Broker Each Sentenced to More Than 12 Years in Prison for $43 Million Pump-and-Dump Stock Manipulation Scheme

Main Justice, Former Tampa U.S. Attorney Starts at Phelps Dunbar

DOJ Press Release, Fugitive Ohio Executive Previously Convicted for Role in $2.8 Billion Fraud Arrested in Mexico

FBI/DOJ Press Release, Fraudsters Behind Multi-Million-Dollar Advance-Fee Scheme Found Guilty in Manhattan Federal Court

FBI/DOJ Press Release, Westgate Capital Fund Manager Sentenced in Manhattan Federal Court to 40 Years in Prison for $133 Million Ponzi Scheme

Frank Eltman, AP, law.com, N.Y. Businessman Pleads Guilty in $413 Million Ponzi Scheme

Linda Friedman Ramirez, -Extradition from Canada, Ask the Expert, Karen Molle - Extradition and Cross Border Criminal Defense News

(esp)

Albuferon Insider Trading Criminal Complaint

Here is the Yves Benhamou Criminal Complaint, out of SDNY, alleging insider trading violations (under Rule 10b-5 and 15 U.S.C. Section 78ff) by a French doctor. Doctor Benhamou purportedly tipped off a hedge fund employee about negative results from the Albuferon clinical trial. The WSJ story, by Jenny Strasburg and Jean Eaglesham, is here. The SEC's civil complaint, via the WSJ, is here

(wisenberg)

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 5 of a 5-Part Series

Guest Blogger - T. Markus Funk

OECD Report's Targeted Recommendations

Transitioning from the descriptive to the proscriptive, the October 21, 2010, OECD Phase 3 report also contains a number of specific reform recommendations:

• Continue transnational law enforcement cooperation and evidence-sharing to up transnational gains in the global anti-bribery fight.
• Consider extending the FCPA's statute of limitations to 10 years to permit adequate time for investigation and prosecution of these complex financial cases.
• Reduce business and legal-community uncertainty by more clearly defining what qualifies as a "facilitation payment," spelling out that the term covers not only bribes for obtaining and retaining business, per se, but also improper payments to secure foreign licenses, permits, etc.
• Boost transparency, public understanding, and compliance by explaining when, how, and why DOJ and SEC use plea agreements, deferred-prosecution agreements, and non-prosecution agreements, and what circumstances trigger the decision to require corporate monitors.
• Increase use of debarment and arms export license denials (that is, increase use of "Excluded Parties List System") to punish companies engaging in foreign fraud.
• Consolidate, summarize, and make publicly-available information on the real-world application of FCPA, including on affirmative defense of reasonable and bona fide expenses.
• Revise Criminal Resource Manual to explicitly state that the "business nexus test" includes bribes to foreign public officials to (1) obtain or retain business or (2) gain some other improper advantage in the conduct of international business.
• Increase efforts to raise FCPA awareness, and increase deterrence and bribery-detection, among small-to-medium size businesses.
• Boost awareness of need to pursue books and records violations under the FCPA, including offense of misreporting facilitation payments.
• Clarify that state-owned or state-controlled enterprises, persons holding judicial offices in a foreign country, and persons or institutions, such as state-controlled or state-owned enterprises, exercising a public function for a foreign country qualify as "foreign officials" for FCPA purposes.
• Consider subjecting deferred-prosecution agreements to greater judicial scrutiny, and provide mechanism for judicial screening of non-prosecution agreements.

Viewed from the DOJ and SEC's perspective, the landmark OECD report provides welcome external validation of the effectiveness of their mounting anti-corruption efforts. The U.S., in short, has not only complied with the OECD Anti-Bribery Convention, but has done so to an extent that, according to the report, deserves to be emulated worldwide. U.S. diplomatic pressure, surely buoyed by the OECD's encouraging findings, signals an era of continued domestic and international efforts to stem the tide of global corruption. Companies that fail to appropriately adapt to this new enforcement reality risk exposure not only to massive fines and financial penalties, but also to stiffening criminal sanctions. As the OECD report vividly illustrates, this is a risk increasingly difficult to justify.

For the full text of the OECD Phase 3 report: http://www.oecd.org/dataoecd/10/49/46213841.pdf

The corresponding USDOJ press release can be found at http://blogs.usdoj.gov/blog/archives/1020 

By T. Markus Funk (mfunk@perkinscoie.com). Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at www.perkinscoie.com/mfunk

(tmf)

Happy Birthday Blog

It is hard to imagine that the white collar crime blog is six years old.

(esp)

An Overlooked Key to Combating Overcriminalization: Reflecting on a Decade of Supreme Court Decisions Disfavoring Overly-Expansive Interpretations of Criminal Statutes

Guest Blogger - Dane C. Ball - Gerger & Clarke

Federal courts often make an understandable mistake when faced with issues of statutory interpretation in criminal cases, focusing only on precedent that is directly on point.  As a result, courts sometimes miss important trends that are broader than a specific statute or case.  The fight against overcriminalization—which in part stems from overly-expansive readings of criminal statutes—is one such trend.  By reflecting on a decade of Supreme Court decisions invalidating overly-expansive readings of criminal statutes, lower courts might notice the trend and avoid repeating previous mistakes that led to overcriminalization. 

Since 1999, and in the midst of stiff opposition from prosecutors and lower courts, the Supreme Court has spend much of its effort curtailing the seemingly-limitless reach of various federal criminal statutes. 

1. Mail and Wire Fraud:  In Neder, the Supreme Court rejected the argument that the federal fraud statutes contain no “materiality” requirement in relation to misrepresentations or omissions.  In Cleveland, the Court rejected the position that a State’s “right” to truthful information in a license application is “property” protected by the fraud statutes.  And most recently, in Skilling, the Court limited the honest-services fraud statute to “bribe and kickback” schemes, rejecting a more expansive interpretation extending the statute to undisclosed “conflicts of interest” and “self dealing.”
2. Money Laundering:  In Cuellar, the Supreme Court disagreed that the federal money laundering statutes criminalize the act of concealing money merely to transport it, rather than transporting  money to conceal it.  And in Santos, the Court held that the term “proceeds”—at least when applied to illegal gambling—means “profits,” not “gross receipts.” 
3. Bribery:  In Sun-Diamond Growers of California, the Supreme Court determined that, contrary to the government’s position, bribery under 18 U.S.C. § 201 requires a quid pro quo—i.e., a link between a “thing of value” and a specific “official act.”

 Read in isolation, each decision addresses a specific statute and utilizes—in addition to common canons of statutory interpretation—specific principles to narrow the statute (e.g., fair notice or federalism).  But when courts read these cases in isolation, they inevitably end up watering down their true meaning and intended effect.  For example, after Neder, courts so broadly interpreted the “materiality” element that misrepresentations and omissions rarely are deemed immaterial; after Santos, lower courts overwhelmingly refused to apply the decision’s definition of “proceeds” outside the gambling context (and Congress later amended the definition to expressly include “gross receipts” in all cases); after Sun Diamond, most courts have refused to require a specific quid pro quo under bribery statutes similar to section 201, such as section 666; and after Skilling, at least one court (the Northern District of New York, in a case called Queri) has allowed the government to repackage invalidated honest-services theories as “intangible property” theories.

If the Supreme Court cases are read together, on the other hand, they show a decade-long trend disfavoring overly-expansive readings of criminal statutes, which contribute to overcriminalization.  Equally important, when read together the cases provide all the tools needed to avoid expansive interpretations and overcriminalization, rather than one tool discussed in one case addressing one statute.  Lower court’s should keep this Supreme Court trend in mind in future cases. 

Dane C. Ball is a Houston-based criminal defense attorney with Gerger & Clarke.

(DCB)