Monday, May 9, 2011

New Scholarship - The Criminal Class Action

Professor Adam S. Zimmerman and David M. Jaros have a new article titled, The Criminal Class Action.  It is forthcoming in  159 University of Pennsylvania Law Review 1385 (2011) and available on SSRN here. The abstract states:

"Over the past ten years, in a variety of high-profile corporate scandals, prosecutors have sought billions of dollars in restitution for crimes ranging from environmental dumping and consumer scams to financial fraud. In what we call "criminal class action" settlements, prosecutors distribute that money to groups of victims as in a civil class action while continuing to pursue the traditional criminal justice goals of retribution and deterrence.

"Unlike civil class actions, however, the emerging criminal class action lacks critical safeguards for victims entitled to compensation. While prosecutors are encouraged, and even required by statute, to seek victim restitution, they lack adequate rules requiring them to (1) coordinate with other civil lawsuits that seek the same relief for victims, (2) hear victims’ claims, (3) identify conflicts between different parties, and (4) divide the award among victims.

"We argue that prosecutors may continue to play a limited role in compensating victims for widespread harm. However, when prosecutors compensate multiple victims in a criminal class action, prosecutors should adopt rules similar to those that exist in private litigation to ensure that the victims receive fair and efficient compensation. We propose four solutions to give victims more voice in their own redress while preserving prosecutorial discretion: (1) that prosecutors and courts coordinate overlapping settlements before a single federal judge, (2) that prosecutors involve representative stakeholders in settlement discussions through a mediation-like process, (3) that courts subject prosecutors’ distribution plans to independent review to police potential conflicts of interest, and (4) that prosecutors adopt the distribution guidelines the American Law Institute developed for large-scale civil litigation to balance victims’ competing interests."


May 9, 2011 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Victims' Rights - Objections to Plea and DP

An interesting Petition was filed by the Instituto Costrarricense de Eletricidad (ICE) objecting to the plea agreement and deferred prosecution agreement between Alcatel-Lucent France, S.A., Alcatel-Lucent Trade International, A.G., and Alcatel Centroamnerica, S.A. with the Department of Justice.  Victim's rights are now something DOJ needs to be aware of as 18 U.S.C. s 3771 provides specific statutory obligations. In this petition, the claimants argue that "the deal between Alcatel Lucent and the government allows the Company to conceal the information relating to its criminal conduct; resolve all criminal exposure through the payment of a fine below the legal required minimum; provides immunity for the companies from prosecution beyond paying these insufficient fines; avoid required presentence procedures; avoid a criminal conviction for Alcatel Lucent S.A. and thereby appropriate administrative restrictions applicable to convicted criminals; and further avoid legally required restitution."  With increased oversight and transparency in deferred prosecution agreements, it will be interesting to see if we start seeing more of these type of motions.

Attorneys handling this case are from Wiand Guerra King(George Guerra, Gianluca Morello, Dominique H. Pearlman, and Jordan Maglich).


May 9, 2011 | Permalink | Comments (0) | TrackBack (0)

Sunday, May 8, 2011

In the News & Around the Blogosphere

Saturday, May 7, 2011

20th Annual National Seminar on Federal Sentencing Guidelines - Corporate Plea Negotiations and Sentencing

This panel was moderated by Jeff Ifrah (Ifrah Law), with AUSA Arlo Devlin-Brown (SDNY) and Steven Bunnell (O'Melveny & Myers) as speakers.  After the typical DOJ disclaimer that he was not speaking on behalf of DOJ, AUSA Devlin-Brown said that monitors are still in use.   Monitors, he said, are usually selected by the US Attorney, but getting input in the selection from defense counsel is something done in some cases. The panelists spoke about the lack of attorney-client privilege with the monitor.  Steven Bunnell  spoke about how expensive monitors can be. One of the items discussed is how the scope of the monitorship is negotiated.  

Steven Brunnell noted that corporate plea bargaining is a kind of begging. The corporate reputation is important. Sentencing guidelines are usually not a direct concern.  AUSA Devlin-Brown noted how the collateral consequences of charging a corporation, make a difference (I call that the Arthur Andersen effect). As a result both sides try to reach a settlement. He also spoke about the delicate interests of parallel proceedings.

Hypotheticals were used to consider some of the issues.  For example, what is the government view of the corporation indemnifying the CEO?  How do you deal with employee resistance?  One thing was clear from each hypo - the government has a lot of power.

My commentary - One topic discussed during this panel discussion concerned the level of trust between the corporation's attorney and the DOJ. It seemed to make a difference. But I have to ask the academic question -- should the trust between the private attorney and DOJ be a factor in how things progress in a criminal investigation? It is always interesting to see DOJ looking for consistency in sentencing, but then having individual US Attorneys and AUSAs making decisions on different aspects of a case that will be inconsistent based upon the AUSA or the defense attorney handling the matter.


May 7, 2011 in Arthur Andersen, Conferences, Deferred Prosecution Agreements, FCPA, Investigations, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Friday, May 6, 2011

20th Annual National Seminar on Federal Sentencing Guidelines - The Presentence Report and the Sentencing Process

A box lunch was provided with an allstar panel discussion and video. The topic was the presentence report and the sentencing process. Moderating this session was W. Carl Lietz, III (Kish  & Lietz).  The panelists were Hon. Donna Elm (Federal  Public Defender - Middle District of Florida), Laurel Moore Lee (AUSA - Middle District of Florida), Tess Lopez (Sentencing Mitigation Specialist), Ray Owens (Assist. Chief Deputy US Probation - Middle District of Florida), and Adrienne Wisenberg (Barnes & Thornberg).  Some comments:

  • See probation early. (Tess Lopez)
  • Remember that the prosecutor now has to deal with the Victims Right Act & statutory obligations. (Laurel Moore Lee)
  • You need to prepare your client. Spend time with client on what things to avoid saying for getting an acceptance of responsibility.  You may not want the client to speak to preserve appellate issues (Donna Elm)
  • Prosecutors give information about the case to the probation officers (Laurel Moore Lee/Ray Owens)
  • Go to the interview with your client and participate - give your version of the incident - be an advocate.  Discuss in advance any objections you may have and correct inaccuracies in the report. (Adrienne Wisenberg)

Two highlights of the program:

  • Adrienne Wisenberg talked about character letters and how it is important to have them providing specific instances that tell the story of the client.
  • Donna Elm presented a sentencing video that was POWERFUL.

These highlights show the importance of getting a judge to understand exactly who is your client, why your client committed this act, and why this individual deserves a lesser punishment. 


May 6, 2011 in Conferences, Sentencing | Permalink | Comments (1) | TrackBack (0)

Raj Rajaratnam

Thursday, May 5, 2011

20th Annual National Seminar on Federal Sentencing Guidelines - Sentencing Issues in Securities Cases

This was an extremely high-powered panel, with Hon. Frederic Block (E.D. N.Y.) serving as the moderator. 

Giving background on securities fraud sentencing was Alexandra Walsh (Baker & Botts). She noted that the biggest driver is "loss" with as many as 30 points added, and with first offenders being eligible for extraordinary sentences. As long as "loss" has such a huge influence and as long as there are judges who will look at the circumstances  -  there will be disparity.  She asked what will be the Commission's response - will they scale back these sentences?  Judge Block noted how easy it is to get life for a securities fraud sentence. 

Providing history of how we got here - Peter S. Spivack (Hogan Lovells) used the case of Jamie Olis (background see here). He told how each new piece of legislation increased the possible sentence.

Judge Block noted how Dura Pharmaceutical set the standard of "loss" in civil cases. Speaking about post- Dura, Hank Asbill (Jones Day) noted how the 5th Circuit looked at "loss" and how it was developed in civil cases.   But the 9th Circuit in Berger took a different position as noted by Judge Block. They chose not to use the civil fraud standard.  Hank Asbill showed a flaw here when he asked - how do you determine the harm to society? He noted how the court gave Berger himself a break. But other cases in the 9th Circuit may not be agreeing with Berger. As noted by Judge Block - "we are dealing with fuzzy stuff."  Judge Block then mentioned the Dodd-Frank Act which seems to have language more like Berger, as opposed to Dura.

Michael Horowitz (Cadwalader Wickersham & Taft, LLP)  was asked whether the Sentencing Commission has to scratch Dura.  It sounded like the Commission will address this issue this coming summer. But where should the Commission go -  on one hand there is a view to raise the guidelines (tough on crime), yet another view is to think beyond incarceration.  Judge Block questioned whether the Commission was giving judges real guidance here.

The Department of Justice (DOJ)  person on this panel was Daniel Braun, Assistant U.S. Attorney in the Southern District of NY (starting of course with the typical DOJ disclaimer that he was not speaking for the dept.). He noted that with increased discretion you get broader differences in sentences. He spoke to the letter of Jonathan Wroblewski, Dir. of Policy and Legislation, DOJ.  He stated that this letter was not focused on individualized cases but rather on the broad differences in sentences. (There had been criticism that the letter singled out some specific cases)

Michael Horowitz noted how in the Adelson sentencing, the judge (Judge Rakoff) specifically asked the AUSA if life was an appropriate sentence. Which of course the AUSA could not answer. (Background on Adelson - see here)

Judge Jed Rakoff, speaking next, noted that the guidelines don't capture -  what kind of human being do you have in front of you.  He said that bad guys who make serious mistakes deserve to rot in prison, but he felt different about good guys who make serious mistakes.

Hank Asbill looked at what should a defense attorney do -  he looked at issues of change of venue (are you leaving a more favorable judge?).  He mentioned the Pepper case (see background here) as to whether the court could consider post-arrest variances. Things that were banned from the guidelines, now come back into the game. The panel ended on a somewhat humorous note - with the telling about an Israeli study that showed that favorable sentences were after the judge had eaten.

Bottom line - this was an incredible lineup of speakers, an incredible panel - hats off again to Kevin Napper (Carlton Fields) for putting this one together.


May 5, 2011 in Conferences, SEC, Securities, Sentencing | Permalink | Comments (0) | TrackBack (0)

20th Annual National Seminar on Federal Sentencing Guidelines - Intro

Opening remarks for the seminar were by Kevin Napper (Carlton Fields) & Ted Simon (speaking on behalf of NACDL)- Although I was not there, Ted Simon tried to discern the diversity of the audience.  He asked - "how many believe in the concept that a federal sentence should be sufficient but not greater than necessary"- he received a response of a lot of hands.  He next asked - "how many are dedicated to the concept that a federal sentence should be 'something, but not greater than as little as possible'" - he received laughter.  He next asked - we can't ask the question of how many believe that a federal sentence is insufficient, even if greater than the statutory maximum. 

He noted that the conference included a diverse, rich, talented, experienced, pool of participants. He called the seminar "unequivocally the leading federal sentencing seminar in the country."  He said it was a seminar composed of the leading federal court probation specialists, jurists, prosecutors, and professional officers on all sides of the issues - "all the essential ingredients of the sentencing stew" and a program where everyone can learn and perform their respective roles better. And of course he gave a plug to join NACDL.

Hats off to Kevin Napper, Carlton Fields, for putting together an incredible lineup and conference.


May 5, 2011 in Conferences, Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 4, 2011

In the News & Around the Blogopshere

Tuesday, May 3, 2011

Lauren Stevens Trial: Week Two. Where is the Coverage?

Here is a case of infinitely greater importance than the Rajaratnam insider trading farce, but one that is largely getting the silent treatment from our financial press. I haven't seen a real news story on the Lauren Stevens trial since the first day of trial. This is pathetic. One of the most thoughtful blogosphere commentaries comes here from my friend David Douglas at Shook, Hardy & Bacon. David says that the prosecution represents a "gotcha" game, because the government did not set out clear markers regarding what it would and would not tolerate from in-house counsel responding to FDA document requests.

But that is clearly not the story told by the United States in the charging instrument. The Indictment quotes a 10-29-02 letter from Stevens to the FDA in which she confirms an earlier pledge of GSK's best efforts to obtain and provide "materials and documents presented at GSK-sponsored promotional programs, even if not created by, or under the custody or control of GSK." (That sounds like a pretty clear marker to me.) Stevens then allegedly told the FDA that GSK's production was complete, although she had failed to produce numerous presentation slides containing "incriminating evidence of potential off-label promotion by GSK."

According to one of the defense's responsive pleadings, Stevens and her team, "reached a consensus decision not to produce the presentations immediately, but instead to seek a meeting with the FDA at which GSK would discuss the presentations." Ms. Stevens tried several times to set up such a meeting, but the FDA did not respond positiviely, "and the anticipated meeting never occurred." That isn't exactly a compelling defense.

My friend, DC criminal defense attorney Eugene Gorokhov, of Burnham & Gorokhov, attended the first day of testimony. Eugene's eyewitness account follows:

"The Stevens trial seems to be off to an interesting start.  We missed openings but saw the government's first witness.  He was a reviewer for the FDA and was the person chiefly responsible for communication with GSK and Ms. Stevens in particular.  The first part of his testimony focused on the basic rules - what is a package insert, indicated use, etc., and legality of off-label prescribing versus illegal off-label promotion.  He testified on direct that [the FDA] initially started to send inquiries to GSK based on an anonymous complaint by a doctor regarding off-label promotion at GSK-sponsored events.  The government had him read at length from correspondence between the FDA and GSK (authored by Stevens).  The point seemed to be to establish that GSK clearly sought wide-ranging materials on any and all off-label promotion, and that Stevens was therefore clearly on notice of what was expected and did not provide complete or truthful responses.  The prosecutor repeatedly asked whether this or that statement by Stevens could have influenced the FDA.
But on cross, the defense showed some of the non-sensical aspects of the prohibition on off-label promotion.  For example, if a paid speaker discusses a drug for 5 minutes and then is asked unsolicited questions the rest of the time about off-label use, it is perfectly legal.  It is also legal in any setting other than promotion, ie, academia, discussions with other physicians, etc.  In any of the above settings the speaker could use the same words regarding off-label use, and it is not criminalized.  On the other hand, if there is a groundbreaking discovery regarding off-label use the paid speaker must keep that a secret at any promotional event. The defense attacked the government's assertion that the documents sought concerned all off-label use, as opposed to just use for weight loss.  The defense confronted the government witness not only with multiple statements from GSK's correspondence with the FDA that reflected this understanding, but also the statement of the witness in a letter to the DOJ that specified off-label use for weight loss and made no mention of other uses.Finally, the government witness admitted that all of GSK's [advertising] promotional materials were in the FDA's files before they sent any document requests, and and that the FDA never previously took issue with any of these materials.  However, the FDA witness indicated that he did not remember reviewing any of these promotional materials before sending the document requests to GSK."

May 3, 2011 in Obstruction, Prosecutions | Permalink | Comments (1) | TrackBack (0)


Check out David Markus' op ed on discovery here. The last line is a classic -

"Perhaps the Department of Justice would like to amend the plaque found in federal courtrooms that reads: "We who labor here seek the truth" with the addition, "only if we think it is material."


May 3, 2011 in Investigations | Permalink | Comments (1) | TrackBack (0)

Monday, May 2, 2011

Privilege in Jeopardy

Check out this piece by Ross H. Garber & Sara J. Goldfarb, Privilege in Jeopardy in Governors Journal.


May 2, 2011 in Privileges | Permalink | Comments (0) | TrackBack (0)

Sunday, May 1, 2011

U.S. Government’s Misdeal in Online Poker Indictments

Guest blogger Chris Flood

Our gambling laws make about as much sense as the government banning gin, but not vodka, during Prohibition. 

Some laws allow gambling, some encourage it and some ban it. You can run an online business for people to bet on horse races, but not on a poker hand.  So, instead of collecting taxes on the $30 billion that is bet in this country every year on online poker sites run by offshore companies, our government is investing tax dollars in an attempt to close down the games. It’s time to fix this absurd system.

While our nation’s leaders fret over our debt, there are millions of American poker players willing to throw coins into tax coffers in order to test their skills. But the national love for Texas Hold ‘Em brings in no taxes while our prosecutors pursue the dealers. 

On April 15, a day the online poker world dubbed Black Friday, the Justice Department unsealed indictments against 11 players in the online poker world, including the founders of popular sites PokerStars, Full Tilt Poker and Absolute Poker. The government also, at least temporarily, seized and shut down the websites. Using the Unlawful Internet Gambling Enforcement Act, a law passed in 2006 but steeped in archaic concepts of virtue, the feds are looking to convict these defendants and reap forfeitures of some $3 billion.

To identify those forfeited dollars, prosecutors had to build a complex case based on how people paid to play, including securing restraining orders on 75 bank accounts. Now, they will have to prove these 11 defendants guilty beyond a reasonable doubt. This complicated and greedy grab by the Justice Department is totally unnecessary.

The government is spending millions of dollars on the chance of raking in $3 billion. Who is gambling now? Why not instead collect a steady stream of tax dollars on online poker, like many other countries do every day?

Because our laws now make some online gambling legal and other online gambling illegal, we have a likely unconstitutional Unlawful Internet Gambling Enforcement Act. We also have to appease leaders in other World Trade Organization member countries who are miffed at our illogical and short-sighted law that violates the treaty in spirit and has ensnared offshore companies that run online poker sites. It is likely that WTO countries will come after the U.S. again for the April 15 round up.

We need not make this a no-limit game. The estimated 2.5 million Americans who play online poker know there is some skill to the game, unlike other sports that can be rigged. There can be online safeguards built in to stop underage players and to warn and screen for problem gamblers, just like casinos do on a regular basis.

We don’t need more charges of bank fraud and money laundering against poker companies.  Instead, we need to end this madness with a solid challenge to the constitutionality of the Unlawful Internet Gambling Enforcement Act, which is aimed at preventing financial services firms from processing funds for online gambling. It’s worth noting that Congress hasn’t targeted the online poker players in this country, where lawmakers know full well its popularity.  

Forbeshas reported that in 2009, online poker took in revenue of about $1.4 billion in the U.S. with PokerStars and Full Tilt, whose founders are now indicted, bringing in about 70 percent of the total. Let’s stop taking a double hit here. Stop spending to prosecute under an inconsistent law and start taxing online poker sites under the proven model used by other countries.

The current poker prosecution echoes “the Noble Experiment” of Prohibition. It is an attempt to enforce a morality that average citizens don’t find immoral. Just as the 18thAmendment to the U.S. Constitution begat the 21stAmendment to repeal it, if Congress won’t legalize online Poker, we should go all in and let the U.S. Supreme Court take a good look at this cockeyed prosecutorial tool.

Chris Flood is a Houston-based white- collar defense attorney and former prosecutor who represented the owner of in what was the largest online gambling case in U.S. history until last month.


May 1, 2011 in Computer Crime | Permalink | Comments (4) | TrackBack (0)

New Scholarship - FCPA Related

Professor Drury D. Stevenson (South Texas) & Nicholas J. Wagoner (South Texas), FCPA Sanctions: Too Big to Debar?  A synopsis by one of the authors -

"Despite the dramatic escalation in corporate fines and imprisonment imposed under the FCPA in recent years, a particularly lethal sanction for combating foreign corruption remains unused—suspension or debarment of prosecuted entities from future contracts with the U.S. Many of the firms caught bribing foreign officials have extensive contracts with a number of domestic federal agencies; meaning debarment may be a particularly devastating penalty both for the government contractor and the agency it transacts business with. 

"This begs the question: are certain private contractors too big to debar? As this Article demonstrates, it appears so. Certain federal agencies have become highly dependent on a handful of private firms responsible for satisfying the vast majority of government contracts. Because of the potential “collateral consequences” that may result from the collapse of a debarred contractor, these firms have enjoyed bailouts from agency officials who refuse to sanction corrupt practices through suspension or debarment. If ridding foreign markets of corruption truly is a top priority of the U.S., it seems both unfair and imprudent for federal agencies to continue awarding lucrative, multibillion-dollar contracts to firms recently prosecuted for fraudulently obtaining such contracts overseas.

"This situation leads to the jaded viewpoint that paying fines when caught bribing foreign officials has “simply become a cost of doing business.” To help illuminate these concerns and lend support to the thesis, this Article examines the third largest FCPA-related enforcement actions to date: the BAE Systems case.  On March 1, 2010, BAE Systems paid approximately $400 million in fines for its corrupt practices abroad. In the 365 days that followed however, BAE was awarded U.S. contracts in excess of $58 billion dollars. The U.S.’s refusal to debar BAE because of the risk of “collateral consequences” provides a case study of the benefits and drawbacks to deterring foreign corruption through suspension and debarment. This Article concludes that the U.S. must begin to diversify its portfolio of federal contractors so that prosecutors may leverage the legitimate threat of suspension and debarment to more effectively deter foreign corruption."


May 1, 2011 in Scholarship | Permalink | Comments (2) | TrackBack (0)