March 20, 2010
In the News & Around the Blogosphere
Tracie Mauriello, Post-Gazette Harrisburg, Political corruption trial gets new juror
Joe Ryan, Star-Ledger, Ex-Jersey City Deputy Mayor Asks Judge to Overturn Corruption Conviction
Liz Moyer, Forbes, The New Financial Crime Wave
Jason Trahan, Dallas News,2 Sentenced in Dallas City Hall Corruption Case
Brandon Bailey, MercuryNews.com, Attorneys for ex-Brocade CEO Reyes won't call defense witnesses
Daniel Woolls, LA Times, Ex-Spanish police chief convicted of embezzling millions leaves prison after serving 15 years
Mike Koehler, FCPA Professor, "It's Not Easy Being Under Investigation for Two Years..."
Mary Alice Robbins, Texas Lawyer, law.com, 2 Texas Attorneys Indicted in $20 Million Mortgage Fraud Case
John Cassidy, The New Yorker, The Lehman Report: Is It Time for a Special Prosecutor? (w/ a hat tip to Ivan Dominguez)
Colin Moynihan, NYTimes, Donor to Democrats Pleads Guilty to $292 Million Fraud; Stephanie Woodrow, Main Justice, Nemazee Pleads Guilty to $292 Million Bank Fraud Scheme
March 19, 2010
Wachovia Bank Deferred Prosecution Agreement
The Wachovia Bank deferred prosecution agreement can be found here. One finds the usual high fine ( $50,000,000 in this case), that is seen in many deferred prosecution agreements. Wells Fargo is said to have "repaid any and all funds that it received through" TARP. But Wachovia also has a forfeiture amount to pay and the agreed amount is $110,000,000. One also finds usual provisions on cooperation, and that a breach of the agreement rests with the government. The agreement states "[t]he parties further understand and agree that the United States' exercise of reasonable discretion under this paragraph is not subject to review in any court or tribunal." But what is missing from this agreement that is seen in many agreements is the appointment of a compliance monitor.
Criminal Defense Counsel - Business Should Be Picking UpAccording to the latest figures, white collar prosecutions are up. The December 2009 figures of Trac Reports here shows a 9.2 increase from last month and a 19.9 increase from 5 years ago including magistrate court and 1.8 increase excluding magistrate court. But again, these statistics need to be examined carefully. (see here and here), especially with regard to how the term "white collar crime" is defined.
(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports).
March 18, 2010
Innospec - FCPA Plea - But Hats Off to Hon. Ellen Segal Huvelle
The DOJ reports that "Innospec Inc., a Delaware corporation, pleaded guilty today to defrauding the United Nations (UN), to violating the Foreign Corrupt Practices Act (FCPA) and to violating the U.S. embargo against Cuba." The plea was to a "12-count information charging wire fraud in connection with Innospec’s payment of kickbacks to the former Iraqi government under the UN Oil for Food Program (OFFP), as well as FCPA violations in connection with bribe payments it made to officials in the Iraqi Ministry of Oil. Innospec also admitted to selling chemicals to Cuban power plants, in violation of the U.S. embargo against Cuba." The company agreed to pay $14.1 million and to retain an independent compliance monitor. It is interesting to see that the British subsidiary also plead guilty today in London and Innopec Ltd "will pay a criminal penalty of $12.7 million." It is also interesting to see the international cooperation in securing this result.
Innospec has a "Foreign Corrupt Practices Act Policy" online that is dated February 2010.
But Christopher Matthews. Main Justice, has an interesting story titled, Judge Blasts Compliance Monitors at Innospec Plea Hearing.
Many cases have deferred prosecution or non-prosecution agreements that allow the DOJ to oversee much of what happens, putting the companies at a disadvantage (see here). But it is nice to see, here, in this plea agreement that the judiciary is questioning the costs of compliance monitors.
See also The FCPA Blog here
In the News & Around the Blogosphere
Chicago Breaking News,Developer convicted of bribing alderman
John Heilprin, AP, Multimillion-dollar UN corruption case uncovered
Jeff Jeffrey, BLT Blog, Former Nixon Peabody Lawyer Settles With SEC in Insider Trading Case
DOJ Press Release, Wachocia Enters into Deferred Prosecution Agreement; Mike Scarcella, law.com, Wachovia Bank Agrees to Pay $160 Million in Deferred Prosecution Agreement
Christopher M.atthews, Main Justice, Thornburgh: Prosecutors Threaten Business Liberties (w/ a hat tip to Ted Gest)
NYTimes, Bloomberg News, Programmers Are Indicted in Madoff Case (w/ a hat tip to Ivan Dominguez)
Mark Rubinkam, Philly.com, Two Lackawanna officials indicted in corruption probe
Tresa Baldas, NLJ, law.com, Rep. Conyers' Wife Can't Afford a Lawyer for Sentencing Appeal
Portland Press Herald, AP, Feds use social media as friend to nab crooks (w/ a hat tip to Ted Gest)
Jeff Jeffrey, BLT Blog, Arent Fox Adds Four Partners to White-Collar Practice (hat tip to Whitney Curtis)
March 17, 2010
In the News & Around the Blogosphere
Mario F. Cattabiani, Philadelphia Inquirer, Jury begins deliberations in Pa. corruption case
Lanny Davis and Eileen O'Connor, Legal Crisis Strategies (McDermott, Will & Emery), The Need for Lawyers to Learn the Ground Rules of Talking to Reporters
March 16, 2010
In the News & Around the Blogosphere
Joe Ryan, Star-Ledger, Ex-Jersey City lawmaker says N.J.'s massive corruption probe was tainted
Tracie Mauriello, Pittsburgh Post-Gazette, Bonusgate Jurors End Day Without Verdict in Corruption Case
Jennifer Yachnin, RollCall, Renzi Corruption Trial Pushed to June
Mike Scarcella, BLT Blog, Arnold & Porter Picks Up Top DOJ Health Care Fraud Prosecutor
Marcia Coyle, BLT Blog, Internet Crime Complaints and Money Losses Soar; Stuart Pfeifer, LA Times, Internet fraud's U.S. price tag put at $550 million
Claire Spencer, Financier Worldwide, Anti-money laundering measures and tax fraud enquiries
March 15, 2010
"The Twilight of the Pardon Power"The title of this post is the title of this article from former US Pardon Attorney Margaret Colgate Love now available via SSRN. Here is the abstract:
Throughout our nation’s history, the president’s pardon power has been used with generosity and regularity, to correct systemic injustices and to advance the executive’s policy goals. Since 1980, however, presidential pardoning has fallen on hard times, its benign purposes frustrated by politicians’ fear of making a mistake, and subverted by unfairness in the way pardons are granted. The diminished role of clemency is unfortunate, since federal law makes almost no provision for shortening a prison term and none at all for mitigating the collateral consequences of conviction. It would be bad enough in these circumstances if presidents had made a conscious choice not to pardon at all, or to make only token use of their constitutional power. But what makes the situation intolerable is that, as the official route to clemency has all but closed, the back-door route has opened wide. In the two administrations that preceded President Obama’s, petitioners with personal or political connections in the White House bypassed the pardon bureaucracy in the Department of Justice, disregarded its regulations, and obtained clemency by means (and sometimes on grounds) not available to the less privileged. Much responsibility for the desuetude and disrepute into which a once-proud and useful institution of government has fallen must be laid at the door of the Justice Department, which during the past two administrations failed in its responsibilities as steward of the power, exposing the president to embarrassment and the power to abuse. To date, President Obama has taken no steps to reform and reinvigorate a pardon process that has, in Justice Anthony Kennedy’s words, been “drained of its moral force.”
Who hijacked the president’s pardon power? Is it worth rescuing, or should it be left to die in peace? To find the answers, this article first looks at pardoning practices in the 19th and early 20th centuries, a time when the pardon power played an important operational role in the federal justice system. It describes how pardon evolved into parole, and after 1930 came to be used primarily to restore rights of citizenship. It then examines the reasons for pardon’s decline in the 1980s and its collapse in the Clinton Administration. Finally, it argues that President Obama should want to revive the power, and suggests how he might do it.
The link to this paper is here.
ABA, Internal Corporate Investigations and Forum for In-House Counsel 2010, May 5-7, 2010 Washington, D.C. here
Strafford CLE - Foreign Corrupt Practices Act Compliance in Joint Ventures and Consortia, Wed. April 21 1-2:30 p.m. here
WLF, Free Enterprise & Criminal Law: Is Today's Brand of Federal Enforcement Compromising Business Civil Liberties?, Webcast, March 17, 2010 here
19th Annual National Seminar on the Federal Sentencing Guidelines (Tampa Bay Federal Bar & NACDL), May 12-14, St Petersburg, Florida - program - Download 100127 2010 guidelines book
March 14, 2010
Forget about big brother, it is time to watch out for little brother and his foreign cousins
Guest Blogger Todd Foster (Cohen, Foster, Romine P.A.)
On 2/10/10, the Financial Crimes Enforcement Network (Fincen) announced a final rule amending the Bank Secrecy Act information sharing rules to allow certain foreign, state, and local law enforcement agencies to submit confidential requests for information to American financial institutions. [See 31 CFR 103.100]
Under the new Rule, foreign, state and local law agencies may petition Fincen to require financial institutions to disclose if they maintained an account or conducted a transaction with a person certified by that law enforcement agency to be "reasonably suspected" of engaging in terrorist or significant money laundering activities. The requesting agency must also certify that they have been unable to locate the information being sought through traditional methods of investigation. The financial institution is prohibited from disclosing Fincen's request to the client.
This means, that upon proper certification (which is not to be confused with a proffer of admissible evidence, an independent finding of probable cause or a grand jury subpoena), agencies can secretly receive account and transaction information on depositor accounts.
While the motivation for this Rule is good, the means of achieving its purpose are far too broad. Some greater standard of proof should be required before any of the multitude of qualifying agencies can receive this private information.
Even George Orwell did not see this coming.
Amicus Brief - Cert Petition: Legislative Jurisdiction/Extraterritoriality
"I wanted to begin by reaching out to law professors who might be interested in signing on to a amicus brief in support of a petition for writ of certiorari. Max Huffman(Indiana) and I are writing an amicus brief in the case British American Tobacco v. United States. The cert. petition is part of a massive case brought by the U.S. against the tobacco companies. Various cert. petitions have been filed, including a government petition seeking recovery of a $280 billion disgorgement award. Details about the underlying case can be found on SCOTUSblog.
"The amicus brief that we are writing is on a narrow issue focused on how a court should interpret the geographic reach of federal law (the extraterritoriality question). The brief is being submitted to encourage the Court to grant certiorari and review the decision of the D.C. Circuit. The brief clarifies the history and application of the effects test and shows how that history bears upon the proper interpretation of whether Congress intended a statute to reach extraterritorial conduct. The brief does not take a position on the underlying merits: the federal government's use of RICO to prevent and restrain an alleged scheme to deceive American consumers about the health risks of smoking.
"If you are a law professor who would consider signing on to the amicus brief, please email me at firstname.lastname@example.org, and I can send you a draft. A draft will be completed Monday, and we hope to finalize within the next week or so (it's on a tight filing deadline). Because the effects test applies in a number of contexts (antitrust, securities, trademark, labor law, environmental law, criminal law etc.), the D.C. Circuit's decision, if left to stand, could have far-reaching implications. Legal commentators have also lamented the doctrinal incoherence in how courts approach legislative jurisdiction. This would be a good opportunity for the Court to clarify what is now a confused area of law. More information about the case and the amicus brief is included below.
"The petitioner's cert petition implicates the question of whether RICO applies to the overseas conduct of foreign corporations. The D.C. Circuit did not directly address whether Congress intended RICO to apply extraterritorially -- an issue on which the lower courts are divided. Instead, it found: (1) that when domestic effects are felt in the United States, regulation of foreign conduct of a foreign corporation does not implicate extraterritorial jurisdiction; and (2) that it need not decide whether RICO applies extraterritorially so long as the foreign conduct has substantial effects in the United States. Because the D.C. Circuit found a domestic effect, it presumed that Congress intended RICO to regulate abroad. The case raises interesting questions about the role of the presumption against extraterritoriality and the effects test. It implicates at least a three-way circuit split on how the courts determine legislative (prescriptive jurisdiction).
"The amicus brief attempts to show how the D.C. Circuit's opinion has added confusion to the existing circuit split. It also suggests that the D.C. Circuit erred by disregarding the presumption against extraterritoriality. The brief argues that the effects test sets the outer limits, under international law, of Congress's legislative jurisdiction, but does not serve as a canon of construction that overrides the presumption against extraterritoriality. The brief highlights how assuming legislation applies extraterritoriality can cause harm and undermine the meaningful development of international law.
"Max Huffman and I have previously written about these issues. Max's excellent article on the Foreign Trade Antitrust Improvements Act can be found here. I have written two pieces on international law, the effects test, and extraterritoriality. They can be found here and here."
In the News & Around the Blogosphere
James Glanz, NYTimes, New Fraud Cases Point to Lapses in Iraq Projects
Tony Pugh, McClatchy Newspapers, Recession is Fueling a Boom in Insurance Fraud (w/ a hat tip to Ted Gest)
AP, NYTimes, Former Edwards Aide Avoids Jail
The Utilitarian vs Kantian Methods of White Collar Crime Punishment
Guest Blogger - Brooklyn White
It’s becoming more rampant now than it ever was, largely because of the advances being made in technology and communications. White collar crime is now the main tool for those who want take the easy road to riches and wealth – yes, there is hard work involved, but it is all directed to the immoral and unethical practices of fraud, forgery, embezzlement and trickery. We’re all aware that white collar criminals are punished differently from those who commit blue collar crimes like murder, rape, arson, burglary and assault, and there is considerable debate on why this discrimination exists. With federal sentencing guidelines for these crimes being advisory rather than mandatory, it is up to the presiding judge to use their discretion in deciding how to punish the criminal.
In general, white collar crimes are punished by a large monetary fine and/or some time in prison. Some criminals may even be let off after being set to perform social service while others may be confined to their home as punishment. No matter how you look at it, white collar crime seems to be higher up on the ladder than the blue collar variety. The criminals are mostly rich enough to be able to fork out the fines (without it affecting their financial standing significantly) and/or bribe people to get their sentences reduced.
There are two schools of thought on imposing punishment for white collar crime:
The Kantian Method: takes a stand that white collar crime is as bad as the blue collar kind and so, must be punished on similar levels. According to the Kantian perspective, white collar criminals must be punished to the full letter of the law. By Kant’s argument, the people who perpetrate the crime are acting rationally, and this means that they should suffer the consequences of their actions.
The Utilitarian Method: follows the idea that if the crime is for the "greater good", then it is not punishable or punishable by lenient methods. Those who believe in this perspective tend to take the view that it is acceptable to accept plea bargains if some criminals turn state’s witnesses and turn their partners in crime in. Here, punishment is doled out according to the final utility value created.
Both perspectives have their pros and cons – with the Kantian method, we can justify that every white collar criminal knows what they are doing and are completely rational in their thoughts and actions. Also, they fail to consider the effect that their actions have on the people they defraud or cheat – lives are ruined and some victims are even driven to commit suicide. Also, if burglary is a blue collar felony, then why are large scale frauds and embezzlements treated under the more fanciful umbrella of white collar crime?
The Utilitarian method begs the question – who decides what the greater good is? What’s good for you may not be as good for me, so under what conditions is the overall utility value of the crime judged?
Punishment in white collar crimes must be severe enough to prevent the perpetrator from repeating their ways and also a definite deterrent to others who want to tread the same path. And with most white collar criminals being rich with deep pockets, the only thing they’re probably afraid of is time in a maximum security prison.