Monday, January 31, 2011
Mike Scarcella, BLT Blog, has an article about a sentencing of an in-house counsel - Former In-House Counsel of Buddy's Carpet Gets Prison for Tax Fraud. Will be see more of this with Dodd-Frank? The role of gatekeepers can be difficult as they serve a client internally, but also have a larger master in the government.
Thursday, January 27, 2011
D. Daniel Sokol, Antitrust & Competition Policy Blog, More Ian Norris - 3rd Circuit Appeals brief on whether outside counsel can serve as a "conduit" to the grand jury of a false statement
Mike Koehler, FCPA Professor, DOJ Enforcement of the FCPA - Year in Review
Wednesday, January 26, 2011
Peter D. Hardy, BNA - CRIMINAL TAX, MONEY LAUNDERING & BANK SECRECY ACT LITIGATION
Peter D. Hardy, BNA - CRIMINAL TAX, MONEY LAUNDERING & BANK SECRECY ACT LITIGATION- An analysis of the law and procedure relating to federal criminal cases handled by the IRS and DOJ, addressing the pragmatic and strategic challenges at every stage of litigation.
Monday, January 24, 2011
Families Against Mandatory Minimums (FAMM), a nonpartisan, non-profit organization working for sentencing reform has launched a new blog - SentenceSpeak. FAMM has been in existence since 1991 and has become the country’s premier reform organization advocating for the elimination of harsh mandatory minimum sentences. Their mission is to ensure that all offenders – including those convicted of white collar crimes – get fair and proportionate punishments.
Sunday, January 23, 2011
Sara Kropf, Andrew George, William C. Cleveland & Julie Rubenstein, The 'Chief' Problem With Reciprocal Discovery Under Rule 16, The Champion, Sept/Oct. 2010
Charlotte Simon, Ryan D. McConnell, & Jay Martin, Plan Now or Pay Later: The Role of Compliance in Criminal Cases
Friday, January 21, 2011
25th ABA Annual National Institute of White Collar Crime - San Diego, California, March 2-4 here
20th Annual National Seminar on the Federal Sentencing Guidelines, Orlando, Florida, May 4-6 here
ABA 2011 CJS Midyear Meeting - will be held February 11-12, 2011 in Atlanta, GA - here
Friday, February 11, 2011, 4:00 p.m. – 5:30 p.m. - M202, Marquis Level
Cosponsored by Section of Antitrust Law, and in recent years, the Antitrust Division of DOJ has made wide use of statutes in addition to the Sherman Act to enforce its mission of protecting competition. This program will discuss how the Division has utilized the fraud statutes, the FCPA, and obstruction statutes in recent prosecutions. To register, email firstname.lastname@example.org. Please be sure and include the name or number of the session(s) you will attend.
Securities Docket, January 24, 2011 - 1 p.m. - webcast - Global Anti-Corruption Enf. & Compliance – 2010 Year in Review -Channel: Securities Litigation and Enforcement Channel
Illinois Association of Criminal Defense Lawyers - Harrah's Casino, Joliet, Ill., Friday, Feb. 11, 2011 here
Thursday, January 20, 2011
DOJ Press Release, Manhattan U.S. Attorney Announces Guilty Plea of Danielle Chiesi to Insider Trading Charges; Victor Li, Am Law Daily, law.com, Galleon Defendant Chiesi Pleads Guilty to Fraud Counts; Peter Lattman, Chiesi Pleads Guilty in Galleon Insider Case; Dominic Rushe, Guardian, Former Bear Stearns trader pleads guilty in insider trading case
David Bario, NLJ, law.com, Three legal advocacy groups file amicus briefs supporting Rubashkin
Florida AG Press Release, Attorney General Pam Bondi Announces Selection of Economic Crimes Director
Karin Matussek, Bloomberg, First Ex-Siemens Executive to Stand Trial in Munich in Corruption Scandal
The Skilling case proved consequential in the discussion before the the Eleventh Circuit in the Siegelman and Scrushy cases. Check out this story on the oral argument -
John Schwartz, NYTimes, Judges Take Another Look at Ex-Alabama Governor’s Conviction
Some may claim that it is cases like this that should influence Congress to re-examine section 1346. Perhaps - but only to void the entire statute as recommended by Justice Scalia. One lesson that should be learned from both the McNally case, and now Skilling is that if the government is criminalizing conduct, it is necessary to require strict legal lines and those lines should not cross into legitimate conduct. 1346 should be voided because it is unnecessary. The basic mail fraud statute, 1341, and wire fraud, 1343, as well as the other fraud statutes, criminalize deprivations of "money or property." The Supreme Court has clearly held that "money or property" includes intangible property (Cleveland). To include "intangible rights" is therefore unnecessary for the prosecution of criminal misconduct. If the self-dealing does not involve money or property, should we really waste government resources on the prosecution?
Wednesday, January 19, 2011
Attorney General Eric Holder announced a new Professional Misconduct Review Unit (see press release) that will "handle disciplinary actions for career attorneys at the Department of Justice that arise from Office of Professional Responsibility (OPR) investigations." The new chief of this unit is Kevin Ohlson. The press release states that "[t]he Professional Misconduct Review Unit (PMRU) will be responsible for all disciplinary and state bar referral actions relating to OPR findings of professional misconduct against career attorneys."
When a criminal defense attorney commits "intentional or reckless" professional misconduct, they can find themselves the subject of a bar disciplinary action. When a US Attorney or his or her assistant engages in such conduct, what happens? They are subject to the disciplinary rules, but there are few cases of prosecutor discipline. One has to wonder if this new review unit is an attempt to make sure that there are fewer disciplinary actions.
See also Mike Scarcella, BLT Blog, DOJ Creates Professional Misconduct Review Unit
Tuesday, January 18, 2011
The Paul Minor case (see here) may flesh out some of the questions left unresolved by the Court ruling inSkilling. Across the country we are seeing cases being reexamined to determine whether the conduct, indictment, jury instructions, and trial focused on "bribery or kickbacks" - the one permissible activity for "honest services" in the fraud statute - 18 USC 1346. In this regard, in the Paul Minor case we see several interesting issues - 1) Does the Mississippi bribery law meet the Skilling Court's test of "a uniform national standard,"; and 2) How should a court factor in that the prosecution used "concealment" and "self-dealing" in the indictment and closing argument as opposed to terms that would represent bribery. The high powered lineup to present these issues are: Ted Olson and David Debold of Gibson, Dunn & Crutcher.
Motion to Vacate Convictions -Download Motion to Vacate
Memo in Support of Motion to Vacate Convictions-Download Motion to Vacate - Memo
Government Response - Download 46738335-US-Response-to-Paul-Minor-s-lastest-motion-to-dismiss-010711
Monday, January 17, 2011
The Obama Administration was expected to increase environmental crime enforcement as part of its overall commitment to environmental justice. For the first two years, the record has been mixed and the expected increase against corporate defendants never materialized. That may soon change.
FY 2010 saw an increase in the number of individuals, as opposed to corporations, charged with environmental crimes, from 74 percent in FY 2009 to 76 percent in 2010. Criminal charges were brought against 289 defendants during FY 2010 and, of those 289 defendants, 251(87 percent) included charges against individual criminal defendants. These enforcement results are consistent with the EPA/DOJ’s renewed emphasis on maximizing the deterrent effect of its prosecutions.
In 2010, the number of criminal prosecutions against companies declined, but the number of individual prosecutions increased in the last year. Additionally, both individual and corporate criminal defendants can expect stiffer penalties for environmental crimes, in keeping with the EPA’s mission to achieve maximum deterrence.
The EPA’s Strategic Plan outlines a planned 20 percent increase in criminal prosecutions against individuals and corporations. The increased focus on criminal prosecutions reflects a decision by the EPA to increase criminal cases involving waste dumping and other statutory violations where significant harm to the environment or death or serious injury do not occur. In addition, electronic reporting will become a new area ripe for criminal enforcement, as the EPA shifts away from paper records and moves toward requiring regulated entities to certify compliance via e-filing.
In any year, there are only a handful of environmental crime incidents involving death or serious bodily injury. While the agency will certainly investigate and prosecute those serious, the new effort is aimed at increasing the less glamorous environmental crimes – i.e. false reporting or illegal storage or disposal of waste that may not cause serious environmental harm.
In order to carry the increased caseload, the EPA has increased its staff of criminal investigators – 25 new agents are scheduled to start in the beginning of the year, bringing the total staff to over 200 criminal investigators, and another 25 new agents are scheduled to begin in May 2011. During the early 2000s, EPA cut its number of agents to well below 200 in violation of the 1990 Pollution Prosecution Act—following which the agency embarked upon a three-year hiring strategy to restore EPA CID to present numbers.
Corporate compliance officers would be well informed to review their company’s environmental compliance programs, increase compliance efforts, and allocate additional resources to prevent any possible criminal investigation.
Boo hoo. The Washington Post has a good article here, by Jerry Markon and R. Jeffrey Smith, about the Constitution's Speech and Debate Clause, and the various ways in which it is hampering DOJ corruption probes. Unfortunately, the article implies that certain high-profile cases were dropped primarily or solely because of Speech and Debate. This unfairly maligns the named lawmakers and/or former lawmakers in question, and makes it seem that they were let off on a technicality. That damned technical Constitution--always getting in DOJ's way. In fact, the very idea that DOJ wiretapping of House members was, until recently, considered a legitimate and entirely appropriate law enforcement tool is a testament to how out of whack the balance of powers between the Legislative and Executive Branches has become. Congress finally woke up and smelled the coffee and, with an assist from the DC Circuit in U.S. v. Rayburn House Office Building, is resisting Exective Branch encroachment on its institutional powers.
Sunday, January 16, 2011
Sue Reisinger, Corporate Counsel, law.com, Corporate Compliance and Criminal Cases: Plan Now or Pay Later
Kaye Scholer LLP's White Collar Litigation & Internal Investigations Client Alert - Telecommunications Industry Giant Agrees to $132 Million Combined Settlement in FCPA Cases
Rami Grunbaum, Seattle Times, Financial empire, luxurious lifestyle were built on a mirage
Saturday, January 15, 2011
In commenting here Wednesday about former Travis County District Attorney Ronnie Earle's shameful money laundering prosecution of Tom DeLay, I noted that:
"The election code conspiracy charge [against DeLay] was almost immediately thrown out because there was no such crime in existence in Texas, as Earle should have known, and as the state’s highest criminal court later confirmed."
R. K. Weaver sent in a comment disagreeing with my analysis. According to Weaver:
"While it is true that there is no express 'conspiracy' provision in the Election Code, there is a general 'conspiracy' provision in the Penal Code which, on its face, and historically was considered to apply to all crimes in Texas. The Texas Court of Criminal Appeals, an elected body that is entirely occupied by Republicans, held for the first time in the history of Texas law, and contrary to abundant precedent, that this provision was limited to Penal Code crimes and was not applicable to the thousands of crimes that exist outside the Penal Code. That decision is generally considered by Texas lawyers to be absurd on its face and blatantly political. Unfortunately, it is also not terribly uncommon. There is a good reason that this court is referred to as 'the clowns on the Colorado.'" [emphasis added].
"When Earle indicted DeLay for conspiracy to violate the criminal provisions of the Election Code he was acting on established and well known Texas legal principals. DeLay's victory before the Court of Criminal Appeals was more about the political landscape in Texas than about the state of the law. I anticipate that when the current case gets before that court they will once again carve a 'DeLay exception 'to the law." [emphasis added].
Weaver is mistaken.
Title 4, Section 15.02 of the Texas Penal Code is the general criminal conspiracy statute. In 1977, long before Tom DeLay's rise to prominence, the Texas Court of Criminal Appeals, the highest court in Texas authorized to rule on criminal cases, held in Baker v. State, 547 S.W.2d 627 (Tex.Cr.App.1977), that Section 15.02 (the general conspiracy statute) could not be applied to a criminal offense defined by another law (that is, defined by a law located outside of the Penal Code) unless the other law explicitly referenced the Penal Code. The non-Penal Code offense at issue in Baker was the Texas Controlled Substances Act. Baker followed a similar holding in Moore v. State, 540 S.W.2d 140 (Tex.Cr.App. 1977), which had found Section 15.01 of the Penal Code, the general attempt statute, inapplicable to the Controlled Substances Act. Both rulings were based on a strict reading of Penal Code Section 1.03(b) which stated in part that “[t]he provisions of Titles 1, 2 and 3 of this code apply to offenses defined by other laws, unless the statute defining the offense provides otherwise.” Since the conspiracy and attempt statutes were contained in Title 4, they could not apply to the Controlled Substances Act, the Court of Criminal Appeals reasoned, unless the Controlled Substances Act provided otherwise. The Controlled Substances Act did not provide otherwise, and did not contain its own attempt or conspiracy provisions. (The Texas Legislature later amended the Controlled Substances Act and it now expressly references Title 4 Penal Code offenses.) Both Baker and Moore were written by Tom G. Davis, a widely respected mainstream jurist. Judge Davis was a Democrat, as were all of the judges on the Court of Criminal Appeals at the time. In reversing Baker’s conviction and ordering the prosecution dismissed, Davis ruled that “[t]he complaint and information in the instant case do not allege an offense against the laws of this state."
Baker was still the law in Texas in 2005, when Earle brought his indictment against DeLay, and had been the law for 28 years. The pertinent portions of the conspiracy statute (Section 15.02) and of Section 1.03(b) remained the same. Earle’s original indictment of Tom DeLay charged that DeLay conspired in October of 2002 to violate the Texas Election Code. The Election Code is not a part of the Penal Code. In 2002, the Election Code did not contain a conspiracy provision or reference or incorporate Section 15.02. In other words, under authority of Baker and Moore, one could not conspire to violate the Election Code. The Election Code was amended, effective September 1, 2003, to permit application of Title 4 offenses, including the Section 15.02 conspiracy statute. But the amended version could not be applied to DeLay’s alleged conduct without violating Ex Post Facto principles. Ergo, Earle’s original indictment of DeLay did not, in the words of Tom G. Davis, “allege an offense against the laws of this state.”
According to a story in the Washington Post, Earle did not learn that there might be a problem with the original charge until his assistants told him about it, shortly after the indictment was returned. How sad. The Penal Code went into effect in 1973. The Election Code was enacted in 1975. Earle was elected Travis County District Attorney in 1976. Baker was decided in 1977. DeLay was indicted in 2005. When Earle found out about his mistake, he did not drop the Election Code conspiracy charge, which would have been the right thing to do. He re-indicted DeLay, using a new grand jury under dubious circumstances, but kept the Election Code conspiracy charge in the indictment. The trial court properly threw it out. The Court of Criminal Appeals affirmed in a 5-4 opinion.
Friday, January 14, 2011
At the end of this past year, the Statewide Grand Jury in Florida issued its first Interim Report - Statewide Grand Jury Makes Anti-Corruption Recommendations in First Interim Report. (Report is here) According to the press release issued at that time -
"Key recommendations of the Statewide Grand Jury include:
- Expanding the definition of public employees to include private employees contracted by government entities that perform government services;
- Creating sentencing enhancements for offenses committed by officials who use their public position to facilitate their crimes;
- Creating an independent State Office of Inspector General, responsible for hiring and firing agency Inspectors General;
- Expanding definition of criminal bid tampering to include bid-rigging schemes; and
- Authorizing the Ethics Commission to initiate investigations with a supermajority vote of commission members."
This report comes at an interesting time, as the American Law Institute is gearing up for a new project called Principles of Government Ethics.
Thursday, January 13, 2011
Andrew M. Harris, Bloomberg, Conrad Black Won't Be Retried on Honest Services Fraud Charges, U.S. Says
Jenna Greene, BLT Blog, SEC Reaches $119 Million Settlement with Charles Schwab
Stephanie Ebbert, Boston Globe, Congressman Tierney's Wife gets 30 Days in Jail for Tax Fraud (article notes that prosecutor "argued that Tierney had suffered enough")
Brian Rogers, Houston Chronicle, A voice for the poor in court (interview with Alex Bunin)
Wednesday, January 12, 2011
The Washington Post reports here on the three year prison sentence handed down Monday to former House Majority Leader Tom DeLay by Texas state judge Pat Priest. DeLay was found guilty last November by an Austin jury of money laundering and conspiracy to commit money laundering under Texas criminal statutes.
The prosecution of DeLay by Travis County District Attorney Ronnie Earle and his successor has been nothing less than a travesty of justice. This is really not about Tom Delay. You can love him or you can hate him. It is instead about our collective glee whenever a person of an opposing ideology gets indicted.
Earle originally indicted DeLay for conspiracy to commit money laundering and conspiracy to violate the state election code. The election code conspiracy charge was almost immediately thrown out because there was no such crime in existence in Texas, as Earle should have known, and as the state’s highest criminal court later confirmed. The money laundering charge, and the conspiracy charge on which it is bottomed, should have never been brought either. Here’s why.
Delay's alleged laundering activity was accomplished through the writing of checks. DeLay was accused and convicted of knowingly conducting, supervising, and facilitating a transaction involving the "proceeds" of criminal activity in violation of the state money laundering statute, Texas Penal Code Section 34.02. In 2002, the year of the alleged offense, Section 34.01 of the Penal Code provided that "‘Proceeds’ meant "funds acquired or derived directly or indirectly from, produced through, or realized through an act." Section 34.01 defined "funds" as follows.
(A) coin or paper money of the United States or any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issue;
(B) United States silver certificates, United States Treasury notes, and Federal Reserve System notes; and
(C) official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign country and foreign bank drafts."
So, in 2002 the "proceeds" of criminal activity meant "funds" acquired, derived, produced or realized through an act. "Funds" in turn included: coin or paper money designated as legal tender, circulating, and used as a medium of exchange; United States silver certificates, United States Treasury notes, and Federal Reserve System notes; and, official foreign bank notes used and accepted as a medium of exchange in a foreign country, and foreign bank drafts. Most conspicuously, "funds" did not include checks. This was no accident. The final version of the 1993 money laundering statute was far narrower than the draft first introduced in the Texas House of Representatives. The initial draft prohibited the knowing facilitation of a transaction involving "property" that was the "proceeds" of criminal activity. Property was defined broadly to cover tangible or intangible personal property as well as "a document, including money, that represents or embodies anything of value."
I am aware of no reported cases under the original Texas money laundering statute, prior to DeLay’s indictment, in which the proceeds of criminal activity were identified as checks. In the vast majority of the cases, the laundered proceeds consisted of currency. There were no reported cases even discussing whether a check could constitute laundered funds. The reason for this is obvious. Virtually no prosecutor in Texas thought that checks were "funds" under the old money laundering statute.
In 2005, the Texas Legislature amended the money laundering statute and broadened the definition of "funds" to include "currency or its equivalent including an electronic fund, personal check, bank check, traveler’s check, money order, bearer negotiable instrument, bearer investment security, bearer security, or certificate of stock in a form that allows title to pass on delivery." The House Research Organization’s analysis of the amendment stated that it would "broaden the definition of ‘funds’ to include money other than cash." The analysis also notes, in the "Supporters Say" section, that "[u]nder current law, prosecutors may not prosecute offenders for money-laundering if the offender received a form of money other than cash, such as checks or money orders. This is inadequate as it prevents prosecution under this statute in an array of cases." The new bill "would fix this problem by covering money received in a variety of forms other than cash." It gets even worse. Members of Travis County District Attorney Ronnie Earle’s own staff helped in the drafting of the 2005 amendment!
Of course DeLay could not be prosecuted under the 2005 version of the statute, for conduct that allegedly occurred in 2002, without violating the Constitution’s ex post facto clause. But that sort of problem did not bother Earle. He simply used the 2002 version, even though nobody thought back then that "laundering" via checks constituted laundering under Section 34.02.
The case is now headed for the higher courts. Here’s hoping that one of them does the right thing.
Friday, January 7, 2011
Okay, let me take off my white collar defense attorney hat and put on my former prosecutor hat for a minute. Call it my citizenship hat. Don't most of us want real, unadulterated big-time crooks to be investigated and, where appropriate, charged? Where are all the investigations and prosecutions of the accounting control fraud that caused one of the greatest recessions in U.S. history? You know, the current recession.
Back in the late 1980s, when the S&L Crisis hit and the Dallas-based S&L Task Force was formed, federal law enforcement officials quickly realized that, in many instances, colossal fraud had been committed by the very players who controlled the S&Ls. The S&L fraud was overwhelmingly based on sham transactions and sham accounting for those transactions. Massive resources were committed to investigating and prosecuting the S&L fraud. It was understood that the crooked players had hijacked their S&Ls and defrauded depositors and/or the FSLIC. This rather elementary distinction between the savings and loan as an institution and the fraudsters who controlled it was grasped by AUSAs and effectively conveyed to juries across the land.
Nothing like this is happening today with respect to the federal government’s investigation of the housing bubble, liars’ loans, and Wall Street's subprime lending scandal. The overwhelming number of investigations and prosecutions seem to be focused on piker fraudsters—corrupt individual borrowers or mortgage brokers. These cases are easy pickings, but do not get to the massive fraud that clearly permeated the entire financial system.
Professor William Black, of Keating Five fame, has written a scathing piece all about this for the Huffington Post. Here it is. Among Black's revelations? "During the current crisis the OCC and the OTS - combined - made zero criminal referrals." Astounding. These two agencies accounted for thousands of criminal referrals per year during the S&L Task Force years. More fundamentally, Black argues that today's federal prosecutorial authorities do not comprehend that individuals in control of an institution can have an incentive to engage in short-term fraud that enriches them individually while destroying the long-term prospects of the institution and the larger economy.
Nobody should be charged with a white collar crime unless the crime is serious and the prosecution believes in good faith that a jury will find guilt beyond a reasonable doubt. But how about a substantive investigative effort, including commitment of appropriate resources? Why are such huge resources being spent on dubious endeavors like insider trading and FCPA enforcement, while elite financial control fraud goes largely unaddressed? Professor Black's piece is highly recommended reading.