Saturday, April 24, 2010

Upcoming Conferences

ABA, Internal Corporate Investigations and Forum for In-House Counsel 2010, May 5-7, 2010 Washington, D.C.  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

Society of Corporate Compliance and Ethics, Four-Day Intensive Training Course on Compliance, London, England, May 17-20 here

Society of Corporate Compliance and Ethics, Managing Third Party Anti-Corruption, Compliance, and Ethics Risk, London, England, May 20-21 here

20th Annual National Institute on Health Care Fraud, May 12-14, Miami Beach, Florida here


April 24, 2010 in Conferences | Permalink | Comments (0) | TrackBack (0)

Thursday, April 22, 2010

Animal Cruelty and White Collar Crime

The Supreme Court issued its decision in United States v. Stevens invalidating a statute "to criminalize the commercial creation, sale, or possession of certain depictions of animal cruelty." This is not a white collar crime case, but the decision provides interesting language that may be relevant for the forthcoming trilogy of cases pertaining to "honest services." (see here and here)  Professor Doug Berman over at the Sentencing Law & Policy Blog (here and here) discusses the decision and asks about the effect of this case on the pending Black and Skilling cases. He notes key language from the Court's decision - "We would not uphold an unconstitutional statute merely because the Government promised to use it responsibly."  A few other lines from the majority should also be noted -

  • "The only thing standing between defendants who sell such depictions and five years in federal prison - other than the mercy of a prosecutor - is the statute's exceptions clause."
  • "The government's assurance that it will apply section 48 far more restrictively than its language provides is pertinent only as an implicit acknowledgment of the potential constitutional problems with a more natural reading."
  • "We 'will not rewrite a to conform it to constitutional requirements,' ... for doing so would constitute a 'serious invasion of the legislative domain' ...and sharply diminish Congress's 'incentive to draft a narrowly tailored law in the first place.'"
  • "To read section 48 as the Government desires requires rewriting, not just reinterpretation."

This decision sends a message that the Court is open to striking down statutes that are overbroad.  Many contend that the honest services definition statute for mail fraud fits this bill. Some may claim that there is a difference in how one interprets overbreadth for purposes of the First Amendment (Stevens) versus overbreadth for purposes outside this context.  But such a distinction should not be controlling.  If we desire to put individuals on notice of what should be criminal then due process requires that the statute have clear language that is not subject to prosecutorial legislating.

One final point - Justice Alito is the sole dissenter in the Stevens decision. When it comes to the trilogy of cases on honest services perhaps he will be on the other side.  The difference with Skilling is that Justice Alito's home-run question in the Skilling oral argument proved that there were no pre-McNally cases that presented a similar fact scenario (see here).


April 22, 2010 | Permalink | Comments (1) | TrackBack (0)

In the News & Around the Blogosphere

Tuesday, April 20, 2010

Federal Sentencing Commission Modifies Sentencing Guidelines Pertaining to Organizations

Guest Bloggers - Raymond Banoun, Margaret Ryznar*

Earlier this month, the United States Sentencing Commission voted to change the Sentencing Guidelines pertaining to organizations, which included modifications to Chapter 8 of the Federal Sentencing Guidelines Manual—the provisions governing the sentencing of organizations in federal court. These changes will take effect November 1, 2010, barring any Congressional action against them.

Most of these modifications aim to eliminate the automatic bar to the compliance credit based on the actions of high-level personnel. Before these changes, and since 1991, Chapter 8 of the Guidelines has permitted a reduction of the culpability score—and therefore the sentence—for convicted organizations if they had an effective compliance and ethics program in place at the time of the offense. However, this reduction automatically became inapplicable if high-level personnel of the organization participated in, condoned, or were willfully ignorant of the offense. With the Sentencing Commission’s recent amendments, the actions of high-level corporate personnel with respect to the offense no longer serve as an automatic bar to the compliance credit.

Nonetheless, the Sentencing Commission has introduced four new requirements for the receipt of the compliance and ethics program credit: (1) those with operational responsibility of the compliance and ethics program must report directly to the governing authority or its subgroup, such as an audit committee of the board of directors; (2) the compliance and ethics program must detect the offense before its discovery outside the organization or before such discovery was reasonably likely; (3) the organization must promptly report the offense to the proper governmental authorities; and (4) no person with operational responsibility in the compliance program participated in, condoned, or was willfully ignorant of the offense. If these requirements are met, corporations may receive credit for their compliance and ethics program.

Furthermore, the Sentencing Commission has clarified the definition of an effective compliance and ethics program for the purposes of the culpability score reduction. The Commission elaborates upon the previous requirement of the Guidelines that, after criminal conduct has been detected, the organization must take reasonable steps to respond appropriately and to prevent similar criminal conduct in the future. Specifically, newly added language to the Guidelines clarifies that an appropriate response to criminal conduct is to remedy the conduct’s harm through, for example, restitution to victims, and that the organization must assess its compliance program, potentially with the assistance of an outside professional advisor.

These recent changes appear to shift the inquiry from an organization’s high-level personnel to the effectiveness of its compliance and ethics program. The changes also clarify the reasonable steps that an organization must take to respond appropriately to criminal conduct and to prevent similar criminal conduct in the future. Organizations may, therefore, choose to tailor their approach to their compliance and ethics programs based on these modifications, unless Congress prevents the changes from taking effect on November 1, 2010.

*Raymond Banoun is the Managing Partner of the Washington, D.C. office of Cadwalader, Wickersham & Taft LLP, and head of the firm’s Business Fraud and Complex Litigation Practice; he represents corporations and their audit committees on all aspects of business fraud issues and advises them on corporate compliance and governance matters. Margaret Ryznar is a member of the Group.

April 20, 2010 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Sunday, April 18, 2010

The CIA & Liability For Rogue Employees

Many have been advocating for a "good faith" defense when a rogue employee does an act within the corporation that is diametrically opposed to company policy (see here).  There is an understanding that corporate compliance cannot control every action, and that on occasion the best of corporations will not be able to control the activities of an employee that goes beyond what the corporation authorizes.  The difficulty here is in deciding whether the corporation really allowed for this activity and then decided when caught that this was unauthorized, or whether the corporation truly had a corporate compliance program that tried to preclude this activity.

Place this backdrop on the recent disclosure that individuals may have destroyed videotapes that may have provided evidence of improper interrogation techniques by individuals, perhaps ones associated with the CIA. If there was an ongoing investigation into the interrogation methods being used, the destruction of evidence relevant to that investigation would be wholly improper and perhaps criminal. The first question will be whether there was an ongoing investigation, and whether these individuals were aware or should have been aware of that investigation.  If so, the destruction of possible evidence could be considered an obstruction of justice.

News reports say that white house counsel Miers and CIA lawyer Rizzo were "livid" and "upset" to learn of this destruction. (see Mark Mazzetti, NYTimes, C.I.A. Document Details Destruction of Tapes).  But the real question should be how could this have happened and what kind of compliance measures were in place to make certain that this would not happen. If this were a corporation, the fact that leaders were displeased with the activity of individuals within the entity would not serve to keep that entity from being held criminally liable of the conduct of the rogue employees.  

The CIA is not a corporation, but if the government is demanding that corporations are going to be subject to penalties for the acts of rogue employees, then they too must bear the same consequences when someone bypasses their internal directives.


April 18, 2010 in Obstruction, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Well Done DOJ -

A DOJ Press Release announces the new website It comes out of the Financial Fraud Enforcement Task Force.  DOJ describes it as, "a one-stop shop for the American people to learn how to protect themselves from fraud and to report it wherever - and however - it occurs. It will also serve as a hub of information about the task force’s work."

One finds on this website, a running list of news releases from DOJ that describe some of the criminal activities out there. It has clear tabs giving guidance on how to protect oneself from fraud and how to report fraud. It does exactly what is needed to meet the new generation of students by providing a tab with multimedia links that can help with education on identity theft, dealing with debt collectors, scams, and foreclosure scams.

This is first class website and should be recognized by everyone as a step forward in educating against fraud.

What needs to happen now is that middle school and high schools teachers need to look at this website and incorporate it into their lesson plans so that students can avoid being victims of fraud.


April 18, 2010 in Fraud, Think Tank Reports | Permalink | Comments (2) | TrackBack (0)

In the News & Around the Blogopshere