Friday, August 6, 2010

Honest Services Hypo

“[I expect] to see future litigation surrounding efforts by prosecutors to wedge their cases into the ‘bribe or kickback’ paradigm to which the Court has now limited this statute.”

NACDL President Cynthia Hujar Orr commenting upon the Supreme Court's decision in Skilling v. United States. 

Consider the following hypothetical:


X is a well-known insurance industry executive who has had affiliations with many different insurance and reinsurance companies over the years. X has a relationship with ACME Credit Life Reinsurance, a company that re-insures the credit life insurance offered to purchasers of new and used boats. The policies are typically marketed through retail boat dealerships. Dealerships keep a portion of each premium and send a portion to the primary insurer. The primary insurer in turn sends a portion of the premium to ACME. Although X is not listed as an officer of ACME, he has a hidden interest in the company and receives a commission on every policy re-insured through ACME.


X accepts a job as President of Sterling Insurance. Sterling is a primary insurer, offering credit life insurance through high-end retail boat dealerships located in the northeastern United StatesSterling has a Conflict of Interest policy that X agrees to sign upon being hired. The Conflict of Interest policy prevents X from personally profiting in any way (outside of salary and bonuses) from his relationship with Sterling, unless he first notifies the Board of Directors and obtains the Board’s approval.


The Sterling Board is unaware of X's relationship with ACME when it hires X. Sterling re-insures its credit life policies through ACME and other companies. Under X's direction and control, Sterling continues to obtain reinsurance through ACME and increases ACME's share of that business. X also continues to receive a commission on each policy re-insured by ACME, including the policies written by Sterling, but does not inform anyone at Sterling of this fact. ACME's owners and managers are fully aware that X is not disclosing his special ACME relationship, or his ACME commissions, to Sterling.


Reinsurance obtained through ACME is a quality product that is competitively priced. Payments made by Sterling to ACME are wired in interstate commerce. X sends his Sterling Insurance Annual Conflict of Interest Acknowledgment and Disclosure Form, which never reveals the ACME commissions, through interstate wires to Sterling’s Compliance Department. A copy of each year’s form is mailed to the Connecticut Department of Insurance, which requires, through Regulation 326.59(b), all insurance companies doing business in Connecticut to maintain and enforce a Conflict of Interest policy.


Q: Are X's ACME commissions "kickbacks" in the post-Skilling world?



August 6, 2010 in Fraud, Judicial Opinions | Permalink | Comments (1) | TrackBack (0)

Tuesday, August 3, 2010

The Grand Jury - SEALS Panel Explores Reforms

A panel of law professors at the Southeast Association of Law Schools (SEALS) explored grand jury reform. The first speaker was Professor Roger Fairfax (George Washington), who provided a historical overview of the grand jury.  He noted its place constitutionally and provided what role reform might play if the Congress revises federal criminal law.  Next up, Professor Eric Miller (Saint Louis), looked at encouraging grand jurors to act more forcefully in telling the prosecutor what should be prosecuted. Professor Ric Simmons (Ohio State) looked at how to make the grand jury more independent. One item he advocated for was having evidence rules apply to the grand jury. Professor Andrew Leipold noted how little reform has occurred with regard to the grand jury -- "an incredibly stable world."  He asked whether this is a problem that needs a solution. The final speaker was Professor Margaret Lawton (Charleston), who said that we should look at reforms being suggested.  She noted how reforms put forth by NACDL match with items in the US Attorneys' Manual. But the question here, she stated, may be what is happening in practice. 

The panel was moderated by Professor Katrice Copeland (Penn State), who asked thoughtful questions that brought out important points on reforming the grand jury process.  From these questions, the panel talked about - what would the world look like without a grand jury. They looked at various reform proposals - such as why not have the grand jury having options beyond indict or not indict.  Mentioned several times was whether the grand jury should have a role of providing diversion.  They also considered whether a reform proposal would work to the benefit of the defendant or prosecutor. Professor Copeland questioned whether more things should be added to the grand jury's role when so many agree they are not doing a satisfactory job.  The panel discussed what procedures from state grand jury procedures should be adopted in the federal system.

Professor Roger Fairfax noted his forthcoming book - Grand Jury 2.0 (Carolina) that includes pieces from law professors on many aspects of the grand jury and reforms that might enhance this process.

(esp) (blogging from Palm Beach, Florida)

August 3, 2010 in Conferences, Grand Jury | Permalink | Comments (0) | TrackBack (0)

Monday, August 2, 2010

House Ethics Committee Accuses Representative Maxine Waters Of Violating Ethics Rules

No details on the specific allegations. The Wall Street Journal news alert is here.


August 2, 2010 in Congress, Current Affairs, Government Reports, Legal Ethics, News | Permalink | Comments (0) | TrackBack (0)