Friday, June 10, 2011

Civil Insider Trading - Monetary Penalties

Second Circuit holds in SEC v. Rosenthal - "civil monetary penalties for insider trading are not available under section 21(d)(3) of the Exchange Act."

(esp)(hat tip to Lawrence S. Goldman)

June 10, 2011 in Judicial Opinions, SEC | Permalink | Comments (1) | TrackBack (0)

Thursday, June 9, 2011

Khuzami's Complaint

The United Jewish Appeal-Federation of New York has a Criminal Law Group. Wow. I never knew. SEC Enforcement Director Robert Khuzami recently spoke to its members about questionable tactics routinely engaged in by white collar lawyers (and their clients) during SEC Enforcement Division proceedings. Khuzami's Speech is troubling as it reveals clearly unethical and potentially illegal behavior, including: improper signalling to witnesses regarding substantive testimonial responses, representation of multiple witnesses with clearly adverse interests, representation of multiple witnesses who adopt virtually identical and implausible explanations of events, witnesses who "don't recall"  dozens of basic and uncontroverted facts documented in their own writings, scorched earth document production, suspect recantation of damaging testimony after deposition breaks, and window-dressing internal investigations that scapegoat mid-level employees. Khuzami laments these tactics and notes that they often backfire by increasing Enforcement Division skepticism of the entity or person under investigation and by damaging the future credibility of counsel who encourage such behavior. But employment of at least some of these brazen tactics should do more. The people and entities who engage in them should go straight to secondary, as they say at the border. If this had been done in Bernard Madoff's case, after he was caught red-handed lying during a regulatory examination, his fraud would have been uncovered years ago. The message from the SEC should be clear. You don't get to lie or obstruct justice during Enforcement Division investigations or SEC exams. Hat tip to Jonathan Hardt of Wilmer Hale for bringing this speech to my attention.


June 9, 2011 in Civil Enforcement, Investigations, Legal Ethics, SEC, Securities | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 8, 2011

The Cost of Cooperation – Redux

Guest Blogger - Lawrence S. Goldman - Law Offices of Lawrence S. Goldman

In her blog piece on June 5, 2011, Prof. Ellen Podgor asked, “[I]s the cost of cooperation worth it?”  Her particular focus was on the suicide of a former Wall Street trader two days after a tape he had surreptitiously recorded as a government cooperator was played at trial.

On a more global basis, the widespread prosecutorial (and judicial) practice of giving favorable treatment in white-collar and other cases to those who cooperate with the government by informing, taping and/or testifying has had in many ways a pernicious effect on the criminal justice system, particularly in the white-collar area.  It has weakened the deterrent effect by institutionalizing an escape valve from serious punishment for wrongdoers, has facilitated overcriminalization and the expansive interpretation of existing law by the Inquisition–like requirement that accused wrongdoers admit criminality in order to escape serious punishment, and it has substantially transformed the practice of criminal law, at least in the white-collar area, from an adversarial system in which defense lawyers challenged the government’s proof into one in which defense lawyers are more likely to serve as adjunct prosecutors in seeking deals for their clients to cooperate with the government.

In subsequent blogs, I hope to discuss the process and effects of cooperation in greater detail.


June 8, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 7, 2011

In the News & Around the Blogosphere

Milton J. Valencia, Boston Globe, DiMasi lawyers seek case dismissal

Gina Passarella, The Legal Intelligencer,,Former CHOP GC Charged With Mail Fraud, Money Laundering 

Squire Sanders Continues to Expand Its Global White-Collar Defense Practice With Another Seasoned Fraud Prosecutor - Former Assistant US Attorney Thomas E. Zeno Brings More Than 25 Years of Experience in Fraud Prosecutions and Investigations

David Voreacos, Bloomberg-Busines Week, Goldman Sachs Criminal Probe May Use Powerful New York State Law

David Markiewicz, Atlanta Jrl Constitution, Ex-Omni Bank exec gets 21 months in prison


Brian Baxter, ALM, On Edwards Indictment, Am Law 200 Ranks Include Plenty of Skeptics (with a hat tip to John Wesley Hall)

Amanda Bronstad, Nat.L.J., Figure in FCPA prosecution negotiates reduced sentence

Colin MIller, Evidence Prof Blog, Legally Blind?: Supreme Court Attempts To Clarify The Willful Blindness Doctrine

David Sell,, Prison Term Sought For Four Over Deadly Medical Tests

DOJ Press Release, Two New Jersey Dietary Supplement Companies and Their Principals Found Guilty of Criminal Contempt

Mike Scarcella, BLT Blog, Former Blackwater Guards Challenge Appeals Court Ruling

60 Minutes, The Speed Traders

KPMG, Global Anti-Bribery and Corruption Survey 2011 - Download 23816NSS_ABC_Srvy_v15_WEB


June 7, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, June 6, 2011

Do You Really Need Five DOJ Lawyers to Prosecute John Edwards

A key problem when a DC Prosecution team is sent in to investigate and perhaps indict on conduct, is that they examine the conduct out of the context of the typical case seen in the local U.S. Attorneys' Office.  They don't see the run-of-the-mill drug, immigration, or fraud case that typically comes through the U.S. Attorneys' Office. They become champions of a single or multiple case that they investigate, and with a single lens proceed or not proceed with their cause. 

One has to wonder if this may be playing a part in the John Edwards prosecution.  Mike Scarcella, over at the BLT Blog, notes here that the Public Integrity prosecutors are teaming up with some local prosecutors in this case. But it seems according to his blog entry that "a former chairman of the Federal Election Commission," is saying that the alleged activity is not criminal - and is not even a civil violation.

Whether the prosecutors, or Edwards and his defense team and others, are correct on whether this is a crime or even civil violation, is only half the problem. The other half is why are five lawyers from the department of justice working on an alleged election violation case.  There is some real crime out there - even some real white collar crimes like identity theft and credit card fraud.  Wouldn't our tax dollars be better spent on this?


June 6, 2011 in Celebrities, Investigations, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Wesley Snipes - Cert Denied

The United States Supreme Court denied certiorari in the Wesley Snipes case (for background see here). His Petition to the highest court had raised questions regarding proof of venue in failure to file criminal tax cases. The next possible step would be for him to file a Motion to Vacate under 28 U.S.C. 2255.

See Order - Download Snipes


June 6, 2011 in Celebrities, Tax | Permalink | Comments (0) | TrackBack (0)

Sunday, June 5, 2011

The Cost of Cooperation

Is the cost of cooperation really worth it?  In some instances you get a 5K1.1 motion that offers a reduction in sentence for substantial assistance.  In some cases you get the benefit of arguing to the court for a lower sentence.  And in some matters, it may even provide a basis for a non-prosecution. 

But what does this all mean for the person cooperating?  What are the internal costs that this person suffers? This sad story tells it all - Peter Lattman & William K. Rashbaum, NYTimes, A Trader, an F.B.I. Witness, and Then a Suicide


June 5, 2011 in Investigations, Prosecutions, Prosecutors | Permalink | Comments (1) | TrackBack (0)