Saturday, July 16, 2011

Clemens Error: Deliberate or Inadvertent

The transcript can be found on Talkleft here. Now Talkleft, along with the Daily Beast here and Houston Clearthinkers here present one view to consider in the key issue that remains to be decided by the court.  On the other side you see Tom Schoenberg and Ann Woolner here who say that it is "likely" to be a new trial.  The title to Del Quetin Wilber's story in the Washington Post shows his cards -Veteran prosecutors’ rookie mistake, no-nonsense judge lead to Clemens mistrial.A more neutral stance is taken by TJQuinn at ESPN here. But perhaps this is just a question that is too close to call, even with the replay.

There appear to be basically two violations here: 1) the first one that was being discussed at the bench; 2) the second one when the tape is left in view of the jury while they were discussing this issue at the bench. Both, however, go to whether the prosecution failed to redact the inadmissible parts of the transcript.

You have one prior call by the judge of a violation which goes against the government. (The defense can use this to argue that they were on notice of the judge's ruling). You also have a clear cut present violation of his order and no mea culpa on the spot - although the prosecutor later says that "there was no intention to run afoul of any Court ruling." But the prosecutor also argues that the exhibits were admitted into trial without objection.  The prosecutor even says that "this video clip and this transcript was turned over in early May."  (but wouldn't that have been before the judge's order? )

On the other hand, the defense did not initially object to the admission of the tape and only raises the issue when the judge initiates a discussion of the issue. But then again - the defense did object for the record and move for a mistrial after the judge raises the issue.

But there's another subsidiary issue here.  Did the government not turn over the evidence (a supposedly redacted video) in sufficient time for defense counsel to realize that it had not been redacted? One question is whether counsel in fact traded exhibits in sufficient time prior to trial that the defense could have realized that it was not a redacted tape/transcript and could have objected prior to it even coming in front of the jury. On the other hand, should defense counsel have had to verify everything that was supposed to be done by the court's order. In the transcript the defense says

"...that when the Court makes a ruling on a motion in limine, it's incumbent on the prosecutor to then redact or alter his exhibits, not hand them to counsel and tell us, I'm admitting 3-A through 3-H and expect counsel for the defense to read them in 30 seconds and then move them in. They should have been changed." 

Does this justify a failure to immediately object. And did counsel have the exhibits in advance and just expect that the prosecution would do what the court had instructed.

So one goes in circles until the judge says "stop" and gives us a ruling. And that perhaps resolves this case.  Although, as previously noted, it could go into extra innings if the judge rules against the defense (see here).

I keep wondering if we had better and more advanced (earlier) discovery to the defense if this would have presented as much of an issue.

But I also continue to say to the government that even if this is inadvertent, lets call an end to this game. We have significant crime and limited funds, lets use it wisely.

(esp)

Addendum - Check out Maureen Dowd's op ed in the NYTimes, Why Are Prosecutors Striking Out?

July 16, 2011 in Celebrities, News, Perjury, Prosecutions | Permalink | Comments (7) | TrackBack (0)

Friday, July 15, 2011

In the News & Around the Blogosphere

Thursday, July 14, 2011

Clemens - This Case Could Go Into Extra Innings

Clearly the first question that will need to be answered is whether Roger Clemens can be retried.  As noted here, double jeopardy will be the source of the controversy.  The defense will likely argue that they had no choice but to ask for a mistrial and were provoked by the prosecutorial misconduct into taking this course.  In contrast, the prosecution may resort to an argument that the conduct was inadvertent and that a retrial will not jeopardize Clemens. See Del Quentin Wilber, Washington Post, Roger Clemens perjury trial ends in mistrial after prosecution error

Prosecutors enter the next inning with two strikes against them - they had not one, but two instances where the judge needed to reign them in for not adhering to his rulings. If they get a third strike they are out.

On the other hand, if the defense loses the double jeopardy motion, there is the possibility that they will seek to take this issue up on an interlocatory appeal.  This means we are into extra inning as a higher court is asked to review the double jeopardy ruling.

And the equally significant issue is what about the collateral consequences that continue to remain in question.  That being, does Roger Clemens join the folks in the Hall of Fame? 

What continues to bother me is whether the government should be playing this game.  Should our precious taxpayer's dollars be used on such a case?   

(esp)

July 14, 2011 in Celebrities, Prosecutions, Prosecutors | Permalink | Comments (3) | TrackBack (0)

Clemens - The Game Should Have Been Played

I must respectfully disagree with my colleague. (see here)

The judge appears to me to have jumped the gun. The defense, shown the videotape ahead of time, made no motion to redact. It didn’t object when it was shown to the jury. Apparently, the defense didn’t see it as harmful. Most likely, as Clemens said before Congress, the defense will agree that Pettite (Clemens’ good friend) was honest but argue that he was mistaken about what Clemens said (and I wouldn’t be surprised if Pettite admits he might have misunderstood Clemens), and thus the hearsay evidence as to what Pettite told his wife didn’t bother the defense.

Perjury cases, especially those involving investigations and grand jury proceedings, often include hearsay in questions: "Mr. Jones testified as to x; do you agree, Mr. Witness?" And, a curative instruction that the fact that a question assumed something happened is no evidence that it did happen is considered sufficient.

To be sure, this instance is somewhat different since the judge had previously told the prosecutor that Mrs. Pettite’s proposed testimony was inadmissible. And, probably most importantly, the judge was irked by the prosecutor’s opening that mentioned that Clemens’ teammates used steroids in seeming disregard of his ruling that such testimony was inadmissible – to me, apparently a much more blatant error.

I am happy to see a judge assert his authority and strongly react to a prosecutor’s disregard of his rulings. Most do it too gently. I do think, however, based on what I know at this time, that the judge may have overreacted.

Since the defense apparently moved for a mistrial and since it is unlikely that the defense will be able to demonstrate that the prosecutorial misconduct was designed to force the defense to do so, I doubt that double jeopardy will lie. Thus, at the end of the day – or the summer – Clemens may not really benefit, as Ellen says. And besides the additional cost and loss of a possibly favorable jury Ellen mentions, there is a psychological cost to a defendant, even a Texas tough guy like Roger Clemens, to get ready again to defend himself.

Of course, even assuming that Clemens did lie, I have mixed thoughts about whether this prosecution should have been brought in the first place. Perhaps we will discuss that later.

(Goldman)

Addendum - A later press report here indicates that Judge Walton specifically instructed the prosecutors to eliminate mention of Mrs. Pettite's statements in the videotape. If so, the prosecutor's misconduct , however inadvertent, is more egregious and the judge's mistrial declaration more justifiable than I had believed based on early press reports, although I still think that the error could have been cured, and the prosecutor adequately "punished," by a strong curative instruction. Nonetheless, perhaps I, and not Judge Walton, jumped the gun.  (lsg)

July 14, 2011 in Celebrities, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Commentary on Roger Clemens Mistrial - Called for Rain

Judge Reggie Walton, nominated to the federal bench by President George W. Bush, just tossed out for today (mistrial) the Roger Clemens case.  Hon. Walton had previously been appointed an Associate Judge of the Superior Court of the District of Columbia by President Ronald Reagan and later George H. W. Bush.  He has sat on several high profile cases and been tough. For example, he was the judge that gave a sentence to Scooter Libby of 30 months in federal prison and a fine of US$250,000, a sentence on which Libby was later granted clemency.(see here) This is not the first case that prosecutors have had issues on with regard to abiding by the rules (e.g.,Ted Stevens discovery fiasco here). Several thoughts:

  • Some will argue that Judge Walton did what needed to be done.  After all, one can't erase from the minds of jurors inadmissible evidence of this magnitude.  This is a he said -he said case and the veracity of a key witness will be crucial in this trial.  An inadmissible compromise of this evidence could unfairly slant the case against the defendant. Others will take the opposite position.
  • Judges make tough calls and it is easy to call something "harmless error" and hope that there is later overwhelming evidence that will support that position. But that isn't the right way to judge the case - it needs to be examined at the specific point in time when the violation occurs, as was done by Judge Walton.
  • This is not necessarily a "win" for the defense.  Clemens, if paying his lawyers by the hour (more than likely), could have additional attorney fees to contend with.  Not to mention that the defense seemed to like this jury - and there is no assurance that if this case is retried they will have as favorable a jury.
  •  Prosecutors need to be careful.  They guard our most important rights.
  • A key issue that will be up to bat next is whether Clemens can be retried.  The defense will likely argue that the jury was sworn and double jeopardy bars a retrial.  The prosecution will argue that trial is permitted and that what happened was inadvertant (see LA Times here).  Key issues here may be whether the defense asked for the mistrial and whether the prosecutorial conduct goaded the defense into having to ask for a mistrial (if in fact they even did). The leading Supreme Court decision that will be examined is Oregon v. Kennedy, 456 U.S. 667 (1982).  One case interpreting Kennedy stated: 

"[I]n Oregon v. Kennedy, the Supreme Court created an exception to this rule when it held that the Double Jeopardy Clause does bar retrial in the limited situation where the government engages in prosecutorial misconduct which gives rise to a successful motion for mistrial, and such misconduct 'was intended to provoke the defendant into moving for a mistrial.'"U.S. v. Doyle, 121 F.3d 1078 (7th Cir. 1997).

  • The more important question, however, is whether such a case is worth expending our precious tax dollars. Hopefully prosecutors will carefully consider this question.

(esp)

July 14, 2011 in Celebrities, Judicial Opinions, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Roger Clemens Trial - Mistrial

Check out Juliet McCur, NYTimes Clemens Judge Declares Mistrial here; Washington Post's Del Quentin Wilber is tweeting it here;  Richard Serrano, LATimes, Judge declares mistrial in Roger Clemens perjury case. Commentary to follow.  And Mr. Murdoch start writing your thank you to the judge for getting you off the front page of the newspaper.

(esp)

July 14, 2011 in News, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Murdoch and the Foreign Corrupt Practices Act: A Minefield

Many are talking about whether the U.S. should investigate Murdoch's News Corp for FCPA violations. Obviously no one has a crystal ball to predict whether this will or will not happen, but one thing is for sure - lodging an investigation would be like entering a minefield.

The obstacles facing prosecutors will be enormous, as they should be.  Here are a few:

  • Stretching the Statute- The FCPA, enacted in 1977, came on the heels of the Watergate Investigation that revealed extensive bribery by U.S. companies to foreign officials.  Major corporations had paid foreign officials huge sums of money in order to obtain contracts and other business abroad. The "integrity of the free market" was a key aspect in the passage of the Act. Does this really sound like the allegations here?
  • Extraterritoriality - A key concern has always been whether prosecuting extraterritorial conduct was proper.  For example, in one FCPA case (Castle), the DOJ was barred from using conspiracy to violate the FCPA when it attempted to circumvent the prohibition against charging foreign officials. Would this really be a case of policing U.S. actors?
  • Rogue Employees - Many companies have employees who break the rules.  Companies with strong compliance programs have faced prosecution when individuals within the company exceed the boundaries of acceptable conduct. Unfortunately, Congress and the Court have failed to accept a good faith defense when a company tries to comply with the law.  This case may present a testing ground for the importance of this principle that applies in many civil areas like harassment cases.
  • Overcriminalization - Many are crying for "smart on crime" approaches to crime.  Most importantly it is needed with a Congress that reacts to every public outcry with a responsive statute, irrespective of whether the conduct is already covered under law. Here the issue is more pronounced from a different perspective.  Do we really need to prosecute what is occurring on the other side of the pond?
  •  Due Process - Contributing blogger Lawrence S. Goldman said it better than I could, "As much as I would enjoy seeing Murdoch in the dock, so to speak, I think it would be a terrible stretch to punish conduct committed in Britain by British citizens bribing British citizens to invade the privacy of British citizens in Britain.  Even Murdoch and News Corp. deserve due process."
  • Economics - If everything that is alleged to happen did in fact happen, it sure sounds pretty sad and it needs to get fully exposed and punished.  But unless it will provide us with jobs, assist our budget, and not deplete from our precious prosecutorial resources, let's think twice about this one.

And we haven't even gotten to a discussion of all the procedural issues (e.g., getting the witnesses, evidence, and potential defendants to the U.S.)

(esp)

July 14, 2011 in FCPA, News | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 13, 2011

The Mets Owners -- "Conscious Avoiders"?

Criminal defense lawyers dread the jury instruction on "conscious avoidance" (also called "willful blindness" or "deliberate indifference"). It is given, almost always at the prosecution’s request, when the evidence of requisite knowledge is weak. It is, to defense lawyers, an invitation to the jury to convict based on recklessness, negligence, or surmise.

"Conscious avoidance" is a judicially-made doctrine that expands the definition of knowledge to include closing one’s eyes to the high probability a fact exists. An obvious example occurs when one agrees with a fellow air passenger to carry a suitcase through customs for $100,000 but specifically tells the other passenger he does not want to know what the suitcase contains. The doctrine has recently been reaffirmed, but apparently narrowed, by the Supreme Court in a patent infringement case, Global-Tech Appliances Inc. v. SEB S.A., 131 S. Ct. 458 (2011)(for more discussion on this case see here and here). There the Court held that one’s subjective belief that there was a high probability that a fact existed combined with his "taking steps to avoid knowing" the fact existed constituted willful blindness. The "deliberate steps" prong seemingly went beyond the prevailing definitions of willful blindness in most federal circuits, which required little, if anything, beyond awareness of the high probability that the fact exists.

The Madoff bankruptcy trustee, Irving H. Picard, is employing the conscious avoidance doctrine in a clawback action against Fred Wilpon and Saul Katz, the owners of the New York Mets. Picard’s lengthy complaint alleges that the Mets’ owners deliberately failed to investigate the tell-tale signs of Madoff’s fraud and, therefore, instead of being victims, were beneficiaries -- and by implication even accomplices – of the fraud. He is seeking not only a return of funds they received from Madoff, but also damages for the indirect benefits of their Madoff association.

Picard’s novel theory will be decided not in the bankruptcy court which is his home field, but by Jed S. Rakoff, a brilliant and hard-working Southern District judge (and a friend) who himself is not shy about innovation. It will be interesting to see what happens.

In the meantime, although it appears to go against the grain of those cases which hold in essence that negligence or stupidity of the victim is no defense to fraud (otherwise, there would be far fewer successful fraud prosecutions), defense lawyers might consider whether conscious avoidance of the purported victim may be a defense.

(Goldman)

July 13, 2011 in Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 12, 2011

Skilling Reversal Triggers Double Jeopardy

The 11th Circuit remanded a case, Cabrera, premised on Skilling, vacating all counts of the conviction.  But it allowed the lower court to determine whether a retrial was possible or whether the Fifth Amendment prohibited a retrial. Obviously, on remand the court prohibited the retrial as it would violate the Fifth Amendment's double jeopardy provisions.

It is interesting to contrast the initial portion of this case with the cases of Conrad Black, Jeffrey Skilling, and former Governor Ryan. In the Cabrera case, the jury was instructed on honest services. It was not limited to acts of bribery or kickbacks. The jury limited their decision to the scheme to defraud being premised on an alleged defrauding of investors of the intangible right to honest services. The government admitted in their sentencing memo that the "jury had not convicted defendant of a scheme to defraud investors of money."  But the government in the Cabrera case tried to use this acquitted conduct for sentencing.

Then came the Skilling decision and having stretched the statute beyond its limits, the government in the Cabrera case was caught in a bind. The Court admitted in Skilling that this "'flaw'  [not limiting the statute to bribes and kickbacks] did not necessarily require reversal of the conviction because it could have been harmless error."  And in Skilling, the case was sent back on remand for consideration, which the Fifth Circuit found harmless for Skilling.   In contrast, in the Eleventh Circuit in Cabrera, the court found the jury instructions incorrect and vacated the conviction. One could stop here and note that the differences in harmless error analysis may be an interesting question for later Court decisions.

But what is more interesting is that the government conceded the evidence in Cabrera did not meet 1346 as interpreted under Skilling.  Why didn't they take this same posture in Ryan, Black and Skilling? Did the special verdicts work in this case, just because the jury had only checked the honest services box? Did the government not want this case to be the testing ground should a case go up on appeal?

But the government  then attempted to retry the Cabrera case, despite their concessions that a Skilling reversal was warranted.. The court on remand in Cabrera starts its analysis with "The Double Jeopardy Clause of the Fifth Amendment to the United States Constitution provides in relevant part: '[N]or shall any person be subject for the same offence to be twice put in jeopardy of life or limb."  The order provides a wonderful double jeopardy analysis.

Court's Order -Download Samir Cabrera

(esp)  

July 12, 2011 | Permalink | Comments (0) | TrackBack (0)

KPMG Global Study Confirms: Most Fraud Perpetuated by Company Bosses

Guest Blogger - Carolyn F. McNiven (DLA Piper)

Although 56 percent of fraud cases were preceded by red flags, instances where actions were taken in response to those red flags "fell massively" since 2007, according to a global KPMG survey. This is probably the most surprising and eye-opening observation in KPMG’s 2011 study, which also found that most fraud was committed by long-term employees, particularly male executives between the ages of 36 and 45; and individuals who worked in the finance area. The increased failure to respond to red flags highlights the need for companies not only develop system for identifying red flags, but also acting on them.

The other notable development KPMG found was an increase in the number of fraud matters perpetrated by company board members. According to KPMG, fraud by board members increased from 11 percent in 2007 to 18 percent in the 2011 analysis. Overall, it found that, "people most often entrusted with a company’s sensitive information and able to override controls are statistically more likely to become perpetrators." Nevertheless, this increase in crimes perpetuated by board members is significant.

KPMG’s global survey was based upon a review of 368 actual fraud investigations conducted by KPMG member firms in 69 countries, over the period January 2008 and December 2010. It only took into consideration frauds that were material to the company. According to KPMG, the majority of the investigations involved matters that were not publicized.

Some might argue that the nature of the investigations themselves accounted for this result: namely that only larger companies are in a position to engage KPMG to investigate such matters, consequently perpetrators examined by KPMG are necessarily more likely to be corporate executives who are in a position to commit fraud that is material to such companies. While KPMG’s data pool was necessarily limited, I think that it would be a mistake to discount their observations. Among other things, their profile of a fraudster fits the typical demographic of white collar criminal defendants in the United States, at least those prosecuted for federal crimes in the past few years, and is consistent with what I observed during my over 13 year tenure with U.S. DOJ.

Fraud is by and large an opportunistic crime. Insider-fraud thrives in environments of trust and access, as the survey points out. Individuals in the executive suite and higher level employees in the finance area are less likely on average to be closely supervised than clerks in accounts receivable. By analogy think of the security surrounding bank employees: tellers have their cash drawers counted after every shift; bank loan officers, who have access to vastly larger sums of bank funds, are generally not scrutinized in the same way although they too are human and subject to the same impulses to steal and self-deal.

That being said, KPMG’s observation that most perpetrators were long term company employees, is noteworthy. KPMG found in its 2011 survey that a solid majority (60 percent) of perpetrators worked at the company for more than five years; and 33 percent of perpetrators had worked at the company over 10.

So what turns a good employee into one who commits fraud? KPMG found that the primary motivators behind the fraud they investigated were greed and work pressure. KPMG found that attempts "to conceal losses or poor performance (possibly due to pressures to meet budgets and targets, to enhance bonuses, or to safeguard against loss of employment)" were motivating factors in many cases. Of course, greed – satisfied by misappropriating assets – was the other primary motivator that they identified.

Good employees turning bad may well also result from the same economic and cultural shifts we have seen in other areas. People -- particularly the middle class -- were hard hit in the recession resulting in increased financial pressure, which in turn can create the incentive to steal or "borrow" from one's employer. That incentive combined with a fairly systemic disenchantment with employers -- particularly those that downsized significantly --creates an environment where workers may be more likely to take what they can get from an employer, particularly if they believe that they are being undercompensated or the employer has transgressed in some way (for example, by paying its upper level management disproportionately while cutting staff and middle management).

All-in-all, KPMG’s 2011 global survey is eye-opening, and a reminder to all companies that they cannot be complacent. At a minimum, companies should regularly ensure that internal controls are operating effectively to prevent and detect insider fraud; and that red flags are not only seen, but acted upon.

Carolyn F. McNiven is a partner in DLA Piper’s San Francisco office where she is a Partner in the White Collar, Corporate Crime and Investigations practice. She is a former long-time federal prosecutor, and handles white collar criminal defense and related administrative, regulatory and compliance matters for individuals and companies. She has particular expertise in the areas of health care, food and drug, and FCPA compliance counseling, risk assessment and litigation.

July 12, 2011 in Corruption, Fraud | Permalink | Comments (0) | TrackBack (0)

Monday, July 11, 2011

Call for Roundtable Workshop Submissions: Reducing Reliance on Incarceration

On Oct. 27-28, 2011, the ABA and the AALS will present a joint conference, Reducing Reliance on Incarceration, at the Liaison Capitol Hill Hotel in Washington, D.C. The first event of the conference, on the afternoon of Thursday Oct. 27th, is a workshop for scholarly papers relating to the conference theme. Participants will present their work in a roundtable format. Abstracts or drafts will be shared among presenters and discussants in advance of the workshop. Workshop presenters must commit to attending both days of the conference, which will include a plenary and multiple break-out sessions on the topic of reducing reliance on incarceration. For a description of the program, please visit http://www.americanbar.org/content/dam/aba/events/criminal_justice/2011colloquium.authcheckdam.pdf. Workshop presenters will be responsible for their own travel and hotel costs, and will be required to pay the conference registration fee. To apply to workshop a paper, please email an abstract of 500 words to both gshay@law.wne.edu  and mvitiello@pacific.edu  by Sept. 1, 2011. Space is limited and presenters will be chosen by members of the organizing committee.

(esp)

July 11, 2011 in Conferences, Scholarship | Permalink | Comments (0) | TrackBack (0)

Sunday, July 10, 2011

Anticipatory Obstruction of Justice

If you have an obstruction case premised on section 1519, you might want to check out this article by T. Markus Funk (Perkins Coie) in NACDL's Champion Magazine.  It's titled, "Honey Laundering, A Toilet Flush, and a Governor's Yahoo Account: The New Age of Anticipatory Obstruction of Justice."

(esp)

July 10, 2011 in Scholarship | Permalink | Comments (0) | TrackBack (0)

The Need for Corporate Compliance Committees

Guest Blogger: Michael Volkov  (MayerBrown)

It is hard to move businesses in different directions. I like to use the analogy of turning a ship around -- it takes time, dedication and a steady hand.

Corporate governance is shifting again. We had the revolution of Sarbanes-Oxley in the early 2000s and now we have a new movement afoot. It is no coincidence that aggressive changes in white collar enforcement coincide with significant changes in the corporate governance landscape.

The newest trend -- which I fully endorse -- is the creation of corporate compliance committees. For most businesses, a separate compliance committee is an effective means to focus on difficult compliance issues, demonstrate a management commitment to compliance, and facilitate communications on compliance issues within an organization. By establishing such a committee, a company sends a very clear message. But the committee has to be more than just window dressing -- it has to have the support, the resources, and dedicated members with real expertise in the compliance area.

I like to use another analogy -- a compliance committee is like your dashboard on your car, telling you how fast you are going, how much fuel you have, and allowing you to signal others on the road.

A compliance committee should help your company navigate your legal obligations by empowering your decision makers with the right information. It serves a proactive role, separate from the audit committee which has a number of critical obligations related to Sarbanes-Oxley enforcement.

The compliance committee is responsible for ensuring that the company is complying with key legal and regulatory obligations. It is your primary vehicle by which to manage risk.

The compliance committee must actively gather and disseminate information reporting on overall compliance efforts. It must also communicate compliance issues and business risks to the right people. The right people include responsible managers, who are directly responsible for significant day-to-day business decisions.

The compliance committee must include one or more independent members who understand the regulatory environment, as well as the principles of good governance. This has a number of advantages. The independent member can test reports and statements, and mine discussions for issues that may otherwise go uncovered; may be able to share broad industry information and trends; and is likely to be less susceptible to a company’s internal culture (which might be reluctant to discuss certain risks and violations).

A well-structured compliance committee is your ultimate protection against potential legal and regulatory violations. I encourage others to look at such committees as part of an overall compliance program.

(mv)

July 10, 2011 in Investigations, Scholarship, Settlement | Permalink | Comments (1) | TrackBack (0)

Mistrial: Hung Jury in the African Sting Case

Gotta be careful about those compromised informants in front of DC juries. Main Justice has the story here.

(wisenberg)

July 10, 2011 in FCPA, Prosecutions | Permalink | Comments (0) | TrackBack (0)