Wednesday, September 15, 2010

Government "Finally" Dismisses Charges in Enron Barge Case

The government filed a Motion to Dismiss - with prejudice - charges against James A. Brown on Counts One, Two, and Three.  The former Merrill Lynch banker had been charged as part of the Enron Barge case.  An appeal on the motion for a new trial on Counts IV and V remains.

This has been a case that has a long history with claims of discovery violations on the part of the Enron Task Force.  The defense had argued that "[a]fter Brown's trial and appeal, a new prosecutor finally produced the government's notes of multiple conversations with Fastow, the grand jury testimony of Merrill counsel, and other Brady material - all which proves Brown's innocence on all charges." here 

The original case was discussed on this blog back in 2005.  And a lot has happened since the sentencing of back then. 

What is interesting now is that it takes the government until today to dismiss these counts - with a trial date that had been set for September 20th.  Is it really necessary to wait right up to the trial date to dismiss? One can only imagine the costs to the defense of preparing for trial?  

Motion to Dismiss - Download Dkt. 1263 MTD

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Addendum - Opposition to Continuance - Download Dkt. 1252 Brown's Opposition to Continuance

September 15, 2010 in Enron, Prosecutions | Permalink | Comments (1) | TrackBack (0)

Tuesday, September 14, 2010

Ignorance Is Bliss, But Is It Also a Crime?

NACDL White Collar Summer Series Event -- Ignorance Is Bliss, But Is It Also a Crime?

Opening Your Eyes to the Willful Blindness Doctrine

Speakers are Andrew Wise (Miller & Chevalier), K. C. Maxwell (Law Office of K.C. Maxwell), Daniel Brown, Murphy & McGonigle, Alexandra Walsh (Baker Botts)

The "willful blindness" or "conscious avoidance" doctrine has been a prominent issue for numerous recent white collar defendants, from securities fraud and FCPA allegations through false statements and perjury charges. Our highly experienced panel will discuss the origin and contours of the doctrine, explore recent cases that highlight the current state of the law and offer successful defense strategies.Please join our panelists afterward for a rooftop reception overlooking the White House.

September 16, 2010 - 5 p.m. – 7:30 p.m. EDT

655 15th Street, N.W., Suite 900, Washington, D.C. (enter on G Street)

Beer, wine and light fare will be served. Hosted by Miller Chevalier

Please register at www.nacdl.org/whitecollar. Space is limited. The program is free to attend. If arranged in advance, up to 2 hours of CLE credit is available at a cost of $60.

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September 14, 2010 in Conferences | Permalink | Comments (0) | TrackBack (0)

Sunday, September 12, 2010

The Ninth Circuit Rejects Reach of 18 USC 1344 in Case

Guest Blogger - Linda Friedman Ramirez -

The Ninth Circuit rejects reach of 18 USC 1344 to Bank of America’s mortgage subsidiary, Equicredit Corporation, in a case brought prior to the amendment of 18 USC 20.       

USA v Bennett, (9th Cir. 2010) -

Federal law provides that  it is a federal crime knowingly to execute, or attempt to execute, a scheme or artifice “(1) to defraud a financial institution; or (2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1344. 

According to the Court, the defendant James Bennett operated a sophisticated property flipping scheme in Southern California. He provided cash to straw purchasers, improperly appraised the properties at inflated prices, provided false information about the buyers and falsified documents for closing.  

One of the defendant’s victims was Equicredit, a subsidiary of Bank of America. The Government conceded that in this case, Equicredit did not meet the statutory definition of “Financial institution.”  The definition of “financial institution” was later expanded in May 2009. See Fraud Enforcement and Recovery Act of 2009, Pub.L. No. 111-21, § 2(a)(3) (2009).1

In order to try and save the convictions the Government argued that Bennett fraudulently obtained funds “owned by” a financial institution for purposes of § 1344(2).

The government argued that, as a matter of law, a parent corporation “owns” the assets of its wholly-owned subsidiary, and therefore that Bennett fraudulently obtained assets “owned by” BOA, a financial institution, when he obtained mortgages from Equicredit..

 The Court rejected this argument. ”More than a century of corporate law says otherwise.” The Court reviewed jurisprudence in this area. “As early as 1926, the Supreme Court recognized that “[t]he owner of the shares of stock in a company is not the owner of the corporation’s property.” R.I. Hosp. Trust Co. v. Doughton, 270 U.S. 69, 81 (1926). While the shareholder has a right to share in corporate dividends, “he does not own the corporate property.’”   “Today, it almost goes without saying that a parent corporation does not own the assets of its wholly-owned subsidiary by virtue of that relationship alone.”  The Ninth Circuit thereafter vacated conviction of the relevant counts.

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1“Financial institution” now encompasses “a mortgage lending business ... or any person or entity that makes in whole or in part a federally related mortgage loan as defined in section 3 of the Real Estate Settlement Procedures Act of 1974.” 18 U.S.C.A. § 20(10)  A “mortgage lending business” is in turn defined as “an organization which finances or refinances any debt secured by an interest in real estate, including private mortgage companies and any subsidiaries of such organizations, and whose activities affect interstate or foreign commerce.” 18 U.S.C.A. § 27

 

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September 12, 2010 in Fraud, Judicial Opinions, Mortgage Fraud | Permalink | Comments (0) | TrackBack (0)