Friday, April 15, 2011
Bruce Alpert, Times-Picayune, Enron ruling may hurt former U.S. Rep. William Jefferson
Sue Reisinger, Corporate Counsel, law.com, Feds Re-Indict Former Glaxo In-House Lawyer
Joy Powell, StarTribune, Prosecutions up for white-collar crimes
Mike Scarcella, BLT Blog, FTC Clerk Pleads Guilty to Stealing More Than $218K
Greg Moran & Ryan Gabrielson, San Diego News, Tax convictions comparatively low in San Diego - Prosecutors say focus on border, other financial crimes come into play
James M. Odato, Times Union.com, Federal Prosecutors Seek New Trial Against Former Sen. Joseph Bruno
Sue Reisinger, Corporate Counsel, law.com, U.K. Corporate Manslaughter Fine Set at $630K (hat tip to Ivan Dominguez)
Azam Ahmed, Dealbook, NYTimes, At Galleon Trial, Flashes of Anger From the Defense
Michael Winter, USA Today, Israel's foreign minister facing indictment alleging corruption
David Ingram, BLT Blog, Senator Says Goldman Sachs Misled Congress, Plans DOJ Referral
Zoe Tillman, BLT Blog, Former D.C. Ethics Counsel Joins Stinson Morrison Hecker
DOJ Press Release, Newspaper Publisher Pleads Guilty to Making False Statement to Congress
Samuel Rubenfeld, WSJ, Nigerian Ex-Governor Extradited to UK to Face Corruption Charges
Thursday, April 14, 2011
A fascinating opinion vacating convictions and reversing the district court, was issued by the Sixth Circuit in the case of U.S. v. Ford. This appeal concerned convictions for false statements and two counts of "honest services" wire fraud. This case does not pertain to another case against Ford in which he was sentenced to 5 1/2 years imprisonment.
The government's problem with the 1001 conviction was that the statute was inapplicable to the defendant's conduct. Section 1001 requires federal jurisdiction. As stated by the court in noting the defendant's argument, "while the facts that he failed to disclose concerned an entity inseparable from federal ties, the entities to which he failed to disclose those facts were anything but federal." The court noted that the "failures to disclose financial interests were related to functions of the state government of Tennessee - the senate's and election registry's reporting requirements." The court also used the rule of lenity in support of its vacating these convictions.
The wire fraud counts were easier - Skilling limited honest services to "bribery and kickbacks," and that was not the case here.
It is interesting to see that the government has issued a press release announcing that it has re-indicted the former pharmaceutical (GlaxoSmithKline) company lawyer with charges of obstruction and making false statements. It is common for the government to use"short-cut" offenses in white collar cases. (see here).
But shouldn't they have also issued a press release weeks ago when the government's indictment was tossed by a judge (see here). Why is it that the press releases only tell half the story? Shouldn't a minister of justice tell both the dismissals and the re-indictments?
More importantly, is this a case that the government should be spending our precious resources for government prosecution. Even if there is a discovery violation here, and I am not convinced that there has been one - does this matter belong in criminal court? Or, if this conduct did occur, would this better be suited for an administrative or disciplinary matter?
See also Sue Reisinger, Corporate Counsel, Feds Re-Indict Former Glaxo In-House Lawyer
As tax day gets closer, it is always interesting to see the spike in criminal tax filings. In many ways this makes sense since a goal is to achieve deterrence by letting the public know the ramifications of failing to file or fraudulently filing tax returns. But one problem, as I see it, is that DOJ doesn't put out press releases when individuals are found not guilty.
Here are some of the recent DOJ Press Releases on tax filings:
DOJ Press Release, Alabama Sisters Indicted for Tax Fraud and Identity Theft
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.