Wednesday, April 13, 2011
Contributing Blogger Sol Wisenberg posted here on the Raj Rajaratnam Trial. See also Floyd Norris, NYTimes, Why Is This Trial Happening? and David Stout, Main Justice, The Raj Watch: The Defense Wins One. Should We Care?
Maura Dolan, LATimes, Barry Bonds Convicted of Obstruction of Justice in Steroids Case
Ben Forer, ABC News, Barry Bonds Convicted of Obstruction of Justice, but Jury Hung on Other Charges
Fox News, Bonds guilty of obstruction of justice
Juliet Macur, NYTimes, Bonds Guilty of Obstruction of Justice
Laird Harrison & Dan Levine, Reuters, U.S. jury finds Barry Bonds guilty on one count
Alan Duke, CNN, Bonds convicted of obstruction of justice
Why is it that the headlines tend to focus on the conviction and not the counts that did not result in a conviction (although it is noticed that ABC News did not do this). Was this long investigation and trial worth it? Is this how our tax dollars should be spent?
For background see here.
Tuesday, April 12, 2011
ABA Section of Litigation and Criminal Justice, April 13-15, Miami Beach, Florida here
20th Annual National Seminar on Federal Sentencing Guidelines, May 4-6, Orlando, Florida here
American Bar Association Criminal Justice Section Presents, A Town Hall Meeting on the State of White Collar Crime, April 15, 4:00 PM to 5:30 PM - Reception - 5:30 PM – 7:00 PM
Gansevoort Miami Beach 2377 COLLINS AVENUE, MIAMI BEACH, FL here
ABA Third Annual Internal Corporate Investigations & Forum for IN-House Counsel, May 4-6, 2011 New York, here
ABA 21st Annual National Institute on Health Care Fraud, May 11-13, 2011, Miami Beach, here
NACDL's 1st Annual West Coast White Collar Conference - "Turning the Tabales on the Government", Lake Tahoe, June 16-17, 2011 here
NACDL's 7th Annual Defending the White Collar Case - NY, September 22-23, 2011 here
1. The case is not complex, legally or factually. It isn't even interesting, except for John Dowd's Charles Laughton routine. Nor are the issues novel. The evidence against the defendant is overwhelming. The resources spent on the prosecution are wildly out of proportion to the harm caused by insider trading.
2. Contrary to popular myth, fueled by the press, insider trading is not notoriously difficult to prosecute. It is notoriously easy to detect and prosecute. Most people caught at it plead guilty.
3. Nineteen of the 26 charged defendants pled guilty. Tape-recorded conversations establish both insider trading and co-conspirator awareness that insider trading is illegal. This is hardly surprising. There has long been acute awareness of insider trading's illegality within the financial community. That's why people whisper on the telephone, erase emails, hammer up laptops, and go out at 2:00 in the morning to throw away hard drives.
4. The case will not be won because the prosecutors pulled all-nighters in the war room. The case will be won because the prosecutors got a Title III Order and secretly recorded the hell out of everybody.
5. If the government loses this case, the prosecutors should rend their garments and put on sackcloth and ashes. Really. Acquittal will only come through jury nullification or confusion.
6. John Dowd is in the catbird seat. If Rajaratnam is found guilty, it's no big deal, because everyone in the defense bar expects it. If Rajaratnam is acquitted, Dowd is a magician. Meanwhile, Dowd gets to order around seven Akin Gump colleagues and perfect that Charles Laughton imitation. Not a bad gig.
Monday, April 11, 2011
The Third Circuit recently ruled in a closely watched case, on the issue of whether corporate counsel had in fact represented an individual within the corporation and as such the attorney-client privilege should apply. (see here) The unpublished opinion of the court found no error on the part of the district court. Counsel for Appellant Norris has now filed for a rehearing en banc. Three issues are presented in this Petition:
"I. The Panel Decision Squarely Conflicts With Shramm, Arthur Andersen, and Aguilar as to the Requisite Specific Intent for a Conspiracy to Obstruct a Grand Jury Proceeding;
II.The Panel Decision Squarely Conflicts with Farrell's Holding that 'Corrupt Persuasion' Does Not Include Persuading an Alleged Co-Conspirator to Withhold Incriminating Information;
III. The Panel Decision Misapplied Bevill to Permit the Evisceration of a Corporate Officer's Personal Attorney-Client Privilege."
Petition for Rehearing En Banc - Download 2011-04-06 Petition for Rehearing En Banc
Sunday, April 10, 2011
On April 1, 2011, US District Judge Howard Matz, of the Central District of California, held that officials of Mexico’s state-owned utility company qualify as foreign officials for purposes of the FCPA. The ruling is a clear victory for the DOJ’s interpretation of the definition of "foreign officials." Judge Matz’s ruling, which comes in the case of U.S. v. Noriega, No. 2:10-cr-01031, could have far-reaching implications for how other courts interpret the definition of a "foreign official" and for how the DOJ prosecutes FCPA cases going forward.
Judge Matz’s Ruling and its Implication for Future FCPA Cases In Noriega, the Lindsey Manufacturing Company (LMC), along with its president and chief financial officer, were charged by the DOJ with violating the FCPA by conspiring to bribe officials of Mexico’s Comisión Federal de Electricidad (CFE). According to the first superseding indictment, the CFE is "an electric utility company owned by the government of Mexico." The CFE officials are alleged to have held senior level positions at CFE and, thus, in the eyes of the DOJ, are considered "foreign officials" under the FCPA.
Judge Matz’s Ruling and its Implication for Future FCPA Cases
In Noriega, the Lindsey Manufacturing Company (LMC), along with its president and chief financial officer, were charged by the DOJ with violating the FCPA by conspiring to bribe officials of Mexico’s Comisión Federal de Electricidad (CFE). According to the first superseding indictment, the CFE is "an electric utility company owned by the government of Mexico." The CFE officials are alleged to have held senior level positions at CFE and, thus, in the eyes of the DOJ, are considered "foreign officials" under the FCPA.
The defendants moved to dismiss the indictment, principally arguing that officers and employees of state-owned corporations, like the CFE, do not fall within the FCPA’s definition of "foreign official." The statute provides that foreign officials include "officer[s] or employee[s] of a foreign government or any department, agency, or instrumentality thereof[.]"1 The defendants noted that the DOJ was likely hanging its hat on the term "instrumentality," as the plain meaning of "department" and "agency" would not encompass a corporation even if owned by the state. The defendants contended, among other things, that Congress did not intend the word "instrumentality"—which is not defined in the FCPA—to cover state-owned corporations.
In support of their position, the defendants cited a 144-page declaration by Mike Koehler, Associate Professor of Business Law at Butler University and author of the well-known "FCPA Professor" blog, surveying the legislative history of the FCPA. Relying on Keohler’s declaration, the defendants argued that, at the time the FCPA was being considered, Congress was aware of state-owned corporations, had included such entities within the definition of "instrumentalities" in a prior statute (the Foreign Sovereign Immunities Act), but ultimately did not do so in the FCPA itself. This, according to the defendants, clearly showed that Congress intended the FCPA to reach traditional governmental bodies only.
Judge Matz, however, disagreed. In a ruling from the bench, he declined the defendants’ invitation to delve into the FCPA’s legislative history and, instead, relied on certain undisputed facts plus a reading of Mexican law. Judge Matz noted there was no dispute that the CFE supplies electricity to all of Mexico except for Mexico City, that the CFE’s governing board is composed of Mexican government officials, that its Director General is appointed by the President of Mexico, and that the CFE’s English language website described it as an agency of the Mexican Federal Government. The CFE’s status under Mexican law was equally critical to his decision. Specifically, the Mexican Constitution provides that the supply of electricity in Mexico is solely a government function and Mexican statutory law defines the CFE as a "decentralized public entity with legal personality and its own patrimony." In light of these factors, Judge Matz found that the CFE officials identified in the indictment were "foreign officials" under the FCPA.
The decision in Noriega could have a domino effect, as defendants in other FCPA cases have recently raised identical issues. In both U.S. v. O’Shea, No. 09-cr-629, pending in the Southern District of Texas, and U.S. v. Carson, No. 09-cr-00077, pending in the Central District of California, the defendants have moved to dismiss their respective indictments, claiming that the term "instrumentality" does not cover state-owned corporations and, thus, officials and employees of such entities cannot be considered "foreign officials" under the FCPA. Given the lack of judicial authority in this area, these courts will likely have to grapple with the Noriega decision.
Friday, April 8, 2011
Amanda Bronstad, NLJ, Alleged bribes included a yacht and a Ferrari
Leigh Jones, NLJ, law.com, Attorney, client sanctioned for violating gag order
Kian Ganz, law.com, India's Corruption Scandals Start to Worry Investors
DOJ Press Release, Johnson & Johnson Agrees to Pay $21.4 Million Criminal Penalty to Resolve Foreign Corrupt Practices Act and Oil for Food Investigations - Company to Pay Total Penalties of $70 Million in Resolutions with Justice Department and U.S. Securities and Exchange Commission (SEC)
BLT Blog, Mike Scarcella, D.C. Judge Stays Prison Sentence in Bloch Case
Michael Riley & Laurel Brubaker Calkins, Bloomberg, JGC to Pay $218.8 Million to Resolve Foreign Bribery Charges
Tom Kirkendall, Houston's Clear Thinkers, The Fifth Circuit Punts on the Skilling Case Again
(esp)(blogging from Lubbock, Texas)
Wednesday, April 6, 2011
As noted here, the 5th Circuit entered its remand decision in the Skilling case, following the Supreme Court's ruling that honest services would be limited to bribery and kickbacks. Jeffrey Skilling had won the issue of honest services in the United States Supreme Court, but this highest court had sent it back for the lower court to determine if the error was harmless and how far it extended - did it affect other crimes he was convicted upon.
There was never any issue of Skilling being involved in bribery of kickbacks, the only aspect of honest services that remained after this Supreme Court decision. So, it was clear that the lower decision had erred. But merely having error is not enough these days. The error also has to be either a fundamental one or not harmless error in order for a defendant to receive relief.
This remand decision is a most interesting decision for several reasons:
- Justice Ginsberg wrote the Supreme Court's decision in the Skilling case. One of the issues before the Court pertained to the honest services statute. Justice Ginsburg wrote that it was clear that "Skilling did not commit honest-services fraud." She also wrote that "Skilling's conviction is flawed." She then cites to the case of Hedgpeth v. Pulido, which held that when you have alternative theories of guilt and the jury is given a general verdict, you use harmless error to determine the viability of the conviction. Justice Ginsburg in Skilling noted that the "[t]he parties vigorously dispute whether the error was harmless." She says that she "leave[s] this dispute for resolution on remand."
- Footnote 46 will go down in history as important in the Supreme Court decision in Skilling, as it is in this footnote that she says that the Fifth Circuit's prior statement that the conviction needs to be set aside if any of the objects of the conspiracy count are set aside, is incorrect. She tells the 5th Circuit that the Pulido case is not limited to cases on collateral review, but includes cases on direct appeal. And so the Skilling case was remanded to the 5th circuit which initially said if the court took out the honest services aspect of the case, the conspiracy count had to fall.
- But before we move onto looking at the remanded 5th circuit decision that just came down, one side note to look even further back in constitutional jurisprudence and examine the Pulido decision. This was a per curiam decision. But, guess who dissented - Justice Stevens, Souter and Ginsburg. The jury could have applied the instructions in an "unconstitutional way," they said. There was no need to remand the case, they said, the district court and court of appeals already examined the harmless-error issue. The majority, however, in Pulido remanded the case, and it was sent back to the court of appeals - the ninth circuit in this case. The 9th Circuit then held that "'with fair assurance, after pondering all that happened without stripping the erroneous action from the whole, that the judgment was not substantially swayed' by the instructional errors. Because Pulido did not suffer any actual prejudice, he is not entitled to habeas relief." (citations omitted). And yes, there is a dissent, and of course the dissent cites to the Supreme Court's dissent in Pulido.
- Lets now look at the 5th Circuit decision just entered on the remand from the United States Supreme Court in Skilling. The 5th Circuit states that it now abandons the "impossible to tell" standard. That is, when you have an alternate theory case with an error in one part - and you can't tell whether the error affected the jury decision because the jury entered a general verdict - this used to be reversible error. But now, the test is whether it is harmless error.
- But who gets to decide whether it is harmless error? The Supreme Court didn't want that responsibility. They sent it to the 5th Circuit. But my question is whether this should be a question for the fact-finder court, as opposed to an appellate court? The 5th Circuit does remand it for resentencing, a resentencing premised upon its prior decision.
- Do we really want appellate court's reviewing the nuances of every aspect of a case to try to discern what the jury was thinking and how they might have decided the case. Or do we need to re-evaluate the standard being used in Pulido? Does a jury always rest its decision on an evaluation of all the evidence, or do they sometimes focus on one piece of evidence that they consider important?
- The 5th Circuit Court handling the Skilling remand does not think it important that the government argued "only once" about Skilling and honest services fraud. The times the government referred to Ken Lay and honest services fraud don't count for Skilling, they say. The court states:
"This single reference to Skilling's honest services, in light of the Government's extensive argument on securities fraud, merely permitted the jury to decide the case on the wrong theory. It did not force or urge it to do so, and therefore, it shows only that an alternative-theory error occurred, not that the error was not harmless."
- Some cases can go on for a long time, and sometimes this is necessary as a part of our judicial process.
See also Doug Berman, Sentencing Law & Policy, Fifth Circuit makes former Enron CEO Skilling's SCOTUS victory Pyrrhic
The Fifth Circuit issued its decision on the Skilling remand here.
The US Supreme Court had "invalidated one of the objects of the conspiracy charge - honest-services" and sent it back to the 5th Circuit to determine if the error was harmless. The 5th Circuit ruling today found it to be harmless error, and they now sent the case back to the trial court for resentencing.
The 16-page decision commences with a review of how to analyze harmlessness of an alternative-theory error. The court concludes that "based on [its] own thorough examination of the considerable record in this case, we find that the jury was presented with overwhelming evidence that Skilling conspired to commit securities fraud, and thus we conclude beyond a reasonable doubt that the verdict would have been the same absent the alternative-theory error." The court later states that because it finds "that the alternative-instruction error in this case was harmless with respect to the conspiracy conviction, it follows that Skilling has no basis on which to challenge the remaining convictions."
Sunday, April 3, 2011
Check out Ellen C. Brotman's (Montgomery, McCracken, Walker & Rhoads) article: Make Probation a Real Option at Sentencing, 23 Federal Sentencing Reporter 257 (No. 4) (April 2011). Her opening line: "My advice to the Commission is to amend the Guidelines to establish probation as a distinct type of sentence with independent value, rather than as merely a lenient option to be used only in extraordinary cases."
(esp)(hat tip to Evan Jenness)
Friday, April 1, 2011
This week's Sentencing Guidelines opinion from the Third Circuit in United States v. Negroni underscores the importance of forcing district courts to create an adequate record at sentencing hearings. Paul Negroni and James Hall IV pled guilty to mail and wire fraud, among other crimes. They were knowing participants in a massive fraud scheme. Hall's original Guidelines range was 87-108 months, reduced to 46-57 months after the district court struck Paragraph 45 of the PSR, which had provided the factual support for a 6-level "250 or more victims" enhancement. The judge then downwardly varied to a 15 month sentence. Negroni's Guidelines range was 70-87 months. The judge downardly varied to a probated sentence with 9 months home detention. The Third Circuit vacated both sentences, because of the procedural unreasonablemess of the downward variances, and remanded for resentencing, I have commented previously on the disturbing trend in federal circuit courts of reversing downward variances based on alleged procedural irregularities, thereby gutting Gall and Kimbrough. The Fourth Circuit is particularly notorious for this.
But district judges must step up to the plate and do their part. In Negroni, the sentencing court struck Paragraph 45 of Hall's PSR, but clearly failed to articulate on the record its reason for doing so. The district court also failed to adequately articulate the substantial downward variance it granted to Negroni. Instead, like so many sentencing judges, it rather rotely recited the Section 3553 factors without intelligently discussing most of them or specifically applying them to the facts of Negroni's case and personal history.
It is really not that hard for a district judge to make an adequate procedural record. Defense counsel must force the sentencing court to discuss each Section 3553 factor and apply it in some fashion to a defendant's unique circumstances. How does counsel do this? By literally providing, in writing and in advance, a paint-by-numbers guidebook for the court. I do not know if that was attempted in Negroni. Perhaps it was. It is not always psychologically easy, in the midst of a hearing, to convince a judge who is ruling in your favor to touch all the bases. But don't kid yourself--the circuit courts are waiting, and itching, to send these babies back. Better to educate the district court beforehand, through your sentencing memorandum, about the procedural requirements for a downward variance.
Here is the opinion. Hat tip to Greg Poe for sending this decision our way.