Monday, January 30, 2012

New Financial Unit Raises Questions

Virtually every presidential State of the Union speech, or its gubernatorial equivalent, calls for tougher criminal laws and/or new investigative resources.  President Obama's address last week was no exception.  The President called for the establishment of a new unit "to crack down on large scale fraud and protect people's investments."  As blog editor Ellen S. Podgor wondered, see here, it was unclear how this unit would differ from the Financial Fraud Enforcement Task Force established in 2009.  I too asked whether this purportedly new unit was anything other than a repackaged version.

The announcement of a new prosecutorial unit also was perhaps an unintended implicit admission that existing federal law enforcement agencies had been less than successful in dealing with serious alleged crimes which some believed had caused the financial crisis.  Both Attorney General Eric Holder and SEC Enforcement Director Robert Khuzami defended their record, stating that not every mistake is a violation of law.  Holder said, "We also have learned that behavior that is reckless or unethical is not necessarily criminal," a statement which (aside from leading me to ask why it had taken him so long to realize it) should be painted on the walls of every prosecutorial office.

The principal apparent structural difference between this unit, entitled the Unit on Mortgage Origination and Security Abuses ("UMOSA"), and the prior one is, besides its more focused jurisdiction, that this is a joint task force of both federal and state officials.  One of its co-chairs -- albeit one of five, four being DOJ or SEC officials -- is New York State Attorney General Eric Schneiderman, who has shown his independence and aggressiveness toward Wall Street by pushing for stronger sanctions against financial institutions for robo-signing and other improprieties committed after the crisis arose.

Generally, joint federal-state task forces are a one-way street.  The feds take the best criminal cases and leave the dregs to the state.  One purported justification for such selection is that federal laws and rules of evidence make it easier for federal prosecutors to bring cases and win convictions.  Schneiderman has indicated somewhat to the contrary -- that New York and other state laws give state attorneys general greater means to bring both civil and criminal prosecutions.

The idea of combining federal and state resources is generally a good one.  Too often law enforcement agencies refuse to share information with other agencies, if at all, until they have determined the information was insufficient for them to act on, often too late for use by the other agencies.  On the other hand, I fear that some task force constituents might attempt to make an end run around constitutional and statutory laws and rules, specificially Fed.R.Crim.Pro. 6(e), which, generally, as relevant here, prohibits disclosure of grand jury information to non-federal officials.  Of particular concern is whether information secured by federal grand juries, much of which is through immunized testimony, will be provided for use by the states.  Both Attorneys General Holder and Schneiderman seem aware of this restriction, but both appear to view it as an obstacle to overcome rather than a right to ensure.  How scrupulous they will be in upholding the rule and spirit of grand jury secrecy will be seen.

(goldman)

January 30, 2012 in Current Affairs, Fraud, Grand Jury, Investigations, Mortgage Fraud, Prosecutors, SEC, Securities | Permalink | Comments (2) | TrackBack (0)

Sunday, January 29, 2012

Amicus Brief Filed in Brown Case - Discovery Issue

Previously discussed here, was the cert petition filled in James A. Brown v. United States (11-783),a case that raises interesting questions regarding Brady. As noted, Brown, is a former Merrill Lynch executive who "was convicted of perjury and obstruction of justice for his testimony before the Enron grand jury about a transaction between Merrill and Enron in late 1999." An amicus brief has been filed in this case that includes several different defense groups and several leading law professors. They weigh in on the important question raised in this brief - the appropriate standard of review for Brady cases. Should it be "clear error" or should it be de novo.

The case also examines "materiality," a term that has creates some confusion. What must a prosecutor provide to the defense counsel. And isn't it odd that the adversary in the process is making the determination for what the defense is entitled to receive. The case looks at summaries being provided to defense counsel. Bottom line - summaries are not the same as the real thing.

Brief -Download NYCDL Amicus Brief - As-Filed

(esp)

January 29, 2012 in Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Saturday, January 28, 2012

New Scholarship - Revisiting a Foreign Corrupt Practices Act Compliance Defense

Mike Koehler has a forthcoming article in the Wisconsin Law Review, titled, "Revisiting a Foreign Corrupt Practices Act Compliance Defense." The abstract states:

Abstract:
This article asserts that the current FCPA enforcement environment does not adequately recognize a company’s good faith commitment to FCPA compliance and does not provide good corporate citizens a sufficient return on their compliance investments. This article argues in favor of an FCPA compliance defense meaning that a company’s pre-existing compliance policies and procedures, and its good faith efforts to comply with the FCPA, should be relevant as a matter of law when a non-executive employee or agent acts contrary to those policies and procedures and in violation of the FCPA. This article further argues that a compliance defense is best incorporated into the FCPA as an element of a bribery offense, the absence of which the DOJ must establish to charge a substantive bribery offense.

Part I of this article contains a case study to demonstrate the type of conduct that would be covered by an FCPA compliance defense. Contrary to the claims of some, an FCPA compliance defense would not eliminate corporate criminal liability under the FCPA or reward "fig leaf" or "purely paper" compliance programs. A compliance defense would not apply to corrupt business organizations, activity engaged in or condoned by executive officers, or activity by any employee if it occurred in the absence of pre-existing compliance policies and procedures.

Part II of this article places an FCPA compliance defense in the context of the broader issue of corporate criminal liability and acknowledges the work of other scholars and commentators who have called for a general compliance defense to corporate criminal liability. This section channels that work into the specific context of the FCPA and argues that the unique aspects and challenges of complying with the FCPA in the global marketplace warrant a specific FCPA compliance defense.

Part III of this article highlights that an FCPA compliance defense is not a new idea or a novel idea. This section contains an overview of the FCPA legislative history of a compliance defense, most notably the compliance defense passed by the House of Representatives in the 1980’s. The justification and rationale for a compliance defense then pales in comparison to now as most U.S. companies engage in international business during an era of aggressive FCPA enforcement. This section also demonstrates that several countries, like the U.S. that are signatories to the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the "OECD Convention"), have a compliance-like defense in their domestic laws.

Against this backdrop, Part IV of this article details the DOJ’s institutional opposition to an FCPA compliance defense, yet argues that the DOJ already recognizes a de facto FCPA compliance defense albeit in opaque, inconsistent and unpredictable ways. Thus, an FCPA compliance defense accomplishes, among other things, the policy goal of removing factors relevant to corporate criminal liability from the opaque, inconsistent, and unpredictable world of DOJ decision making towards a more transparent, consistent, and predictable model best accomplished through a compliance defense amendment to the FCPA. This section concludes by highlighting the growing chorus of former DOJ officials who support an FCPA compliance defense and argues that the DOJ’s current opposition to a compliance defense seems grounded less in principle than an attempt to protect its lucrative FCPA enforcement program.

Part V of this article concludes by highlighting certain policy objectives advanced by an FCPA compliance defense. This section argues that an FCPA compliance defense will better incentivize more robust corporate compliance, reduce improper conduct, and thus best advance the FCPA’s objective of reducing bribery. An FCPA compliance defense will also increase public confidence in FCPA enforcement actions and allow the DOJ to better allocate its limited prosecutorial resources to cases involving corrupt business organizations and the individuals who actually engaged in the improper conduct.

(esp)

January 28, 2012 in FCPA, Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, January 26, 2012

Romney Non-Disclosure? Ho-Hum.

The L.A. Times reports here that Mitt Romney did not "explicitly disclose" certain foreign and offshore bank accounts on his required federal campaign disclosure forms. These same accounts were reported, however, to the IRS. Doesn't look like there's much to the story. There are different reporting requirements on campaign forms and IRS returns and some of the items revealed to the IRS were apparently listed at a higher level of generality on the campaign forms. Even assuming that there was some misreporting, one would be hard pressed to call it anything other than inadvertent.

(wisenberg)

January 26, 2012 in Celebrities, Current Affairs, Media, Tax | Permalink | Comments (1) | TrackBack (0)

Tuesday, January 24, 2012

Financial Crimes Unit

President Obama's State of the Union Address spoke to many important issues.  One was financial crime.  He said "[w]e will also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people's investments." (see full text Wash Po here).  He later states, "[s]o pass legislation that makes the penalties for fraud count."

Some may recall that back in 2009 President Obama created the Financial Fraud Enforcement Task Force that had as its purpose "to hold accountable those who helped bring about the last financial crisis as well as those who would attempt to take advantage of the efforts at economic recovery." (see here)  I am a bit uncertain how this existing body will or will not interact with the new Financial Crimes Unit, but the concept of further enforcement in this area sounds impressive.  Perhaps more funding will be supplied to the SEC through this initiative so that they can properly regulate improprieties and avoid Ponzi schemes of the past.  Perhaps more FBI investigators will be hired to work on building these cases. I applaud the President for this one - especially if he goes in this direction.

On the other hand, we really do not need new legislation to make "the penalties of fraud count."  The legislation is there, and if one looks at the website of the Financial Fraud Enforcement Task Force, there have been a significant amount of prosecutions with existing statutes. (see here). The statutes are there -it is the money that is needed to make these difficult and often complex cases.  Please don't add more to the already approximately 4,500 federal statutes out there. 

So more regulatory oversight, more prosecutors and SEC folks working on financial matters will help.  But the legislation and penalties are already there.  I look forward to seeing this Financial Crime Unit up and running and cracking down on improprieties in our financial world. 

(esp)

January 24, 2012 in Investigations, Prosecutions, Prosecutors | Permalink | Comments (2) | TrackBack (0)

Paterno's Death May Affect Trial of Penn State Officials

Joe Paterno is dead, his legacy as one of the greatest coaches in the history of sports tarnished by his termination -- unjust, I believe -- on the grounds that he inappropriately failed to pursue vigorously an allegation of child sex abuse (see herehere and here).

Paterno's death and absence as a witness will likely have little or no effect on the trial of Jerry Sandusky, the former Penn State assistant coach who was the subject of the allegation reported to Paterno by a Penn State graduate assistant coach, Mike McQueary.  Paterno's only information about the Sandusky issues appears to have been the hearsay report by McQueary, and thus it is unlikely that he would have been a witness.

Paterno's unavailability, however, may have a considerable impact on the trials of Tim Curley, the former university athletic director, and Gary Schultz, a former university senior vice president, both of whom have been charged with failure to report the suspected child abuse and perjury.  Both have been charged with falsely testifying that McQueary, when he spoke with them, did not mention serious or criminal sexual conduct.  McQueary, whom the grand jury report (presumably written by the prosecutors) deemed "extremely credible," testified that he reported the specific act to both Curley and Schultz, and seemingly also to Paterno.  Paterno's grand jury testimony, however, apparently was that what McQueary related to him was far less specific, and thus more ambiguous.  Accordingly, while the grand jury report indicated that Paterno would be a corroborative witness for the prosecution in that he was told by McQueary of the alleged "sexual exploitation" and then reported what McQueary had said to Curley and Schultz, his testimony would apparently also have to an extent corroborated their defenses that McQueary was less explicit than he now claims.

In another highly-publicized investigation involving a former college sports coach, former Syracuse University assistant basketball coach Bernie Fine, it has been reported that two of the four men who had accused Fine of molesting them when they were children have admitted that they committed perjury in connection with the case.  One has admitted that he lied when he claimed Fine molested him.  The second, the only one whose allegations fall within the applicable criminal statute of limitations, while still claiming that abuse occurred, has admitted doctoring purportedly supporting emails.

The Fine situation is a reminder that not every allegation of child sexual abuse is true.  Indeed, in my experience, there is a far higher percentage of false accusations of sexual misconduct than of any other criminal activity.  Thus, such accusations should be scrutinized especially carefully before they are acted upon by law enforcement or others.

(goldman)

January 24, 2012 in Celebrities, Grand Jury, Investigations, News, Perjury, Sports | Permalink | Comments (0) | TrackBack (0)

Sunday, January 22, 2012

New Article - Indictment of Lawyers for their Legal Advice

Attorney Jack Fernandez (Zuckerman Spaeder LLP) has an interesting Essay for the the ABA's White Collar Book entitled, An Essay Concerning the Indictment of Lawyers for Their Legal Advice.  It is here - Download 3533275_1 DOCX (3) (3)

(esp)

January 22, 2012 in Defense Counsel, Legal Ethics, Prosecutions, Scholarship | Permalink | Comments (1) | TrackBack (0)

Circuit Riding

Last Friday the DC Circuit affirmed a district court's refusal to amend or modify Abramoff cooperator Michael Scanlon's plea agreement. Scanlon sought to amend or modify his plea agreement prior to sentencing in light of Skilling v. United States. He had pled guilty to conspiracy to commit: bribery, money and property mail and wire fraud, and honest services mail and wire fraud. The Court of Appeals, through Chief Judge Sentelle, held that federal courts are statutorily prohibited from modifying or amending plea agreements. Scanlon could have moved to withdraw his guilty plea, but chose not to do so. The case is: U.S. v. Scanlon (D.C. Circuit 2012) (courts are not authorized to modify or amend plea agreements).

Last Thursday, the Eleventh Circuit reversed a health care fraud/controlled substances conviction on Confrontation Clause grounds, because the trial court admitted five autopsy reports, over objection, without hearing testimony from the medical examiners who performed them. The case is: U.S. v. Ignasiak (11th Cir. 2012) (admission of autopsy report violates Confrontation Clause).

(wisenberg)

January 22, 2012 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Cybercrime

The Center on National Security at Fordham Law has a news source that provides "weekly news round-up of articles, information, and opinions about cybersecurity and the laws, policies, and challenges - both domestic and global - that define the cyber world week to week."  For more information, see here.

(esp) 

January 22, 2012 in Computer Crime, News | Permalink | Comments (1) | TrackBack (0)

Friday, January 20, 2012

New Scholarship - Globalized Corporate Prosecutions

I highly recommend Professor Brandon L. Garrett's new piece in the Virginia Law Review titled, "Globalized Corporate Prosecutions."  The abstract states:

"In the past, domestic prosecutions of foreign corporations were almost unheard of. This has changed dramatically just in a few years. Federal prosecutors now advertise a muscular approach targeting major foreign firms and even entire industries. High-profile prosecutions of foreign firms have shaken the international business community. Very little has been known about these cases; scholars assumed such prosecutions were rare or would not result in convictions. After all, corporate criminal liability is itself a form of American Exceptionalism. Few foreign countries hold corporations criminally accountable. To study U.S. prosecutions of foreign firms, I assembled a database of more than 300 publicly reported corporate guilty plea agreements from the past decade and I analyzed previously unexamined U.S. Sentencing Commission data archives on corporate prosecutions. Not only are large foreign firms prosecuted with some frequency, but more surprising, they typically plead guilty and are convicted. In this Article, I explore the puzzle of that unnoticed guilty plea dynamic and the disquieting problems raised by convictions of foreign firms generally. Federal prosecutors have dramatically expanded enforcement against foreign firms in several areas. I develop theoretical justifications for the evolving prosecution approach. Yet I conclude by arguing that prosecutions of foreign firms should be more clearly limited and evaluated. A series of reforms could accomplish that goal, including prosecutorial guidelines incorporating norms of comity, foreign law and governance norms. Unless prosecutors and courts carefully assess these important prosecutions, U.S. prosecutors will not remain preeminent the global corporate criminal law enforcers."

(esp)

January 20, 2012 in Scholarship | Permalink | Comments (0) | TrackBack (0)

The Lesson of Joe Paterno

Yesterday's New York Times has an extremely lengthy but disappointingly unilluminating article about the firing by the Penn State Board of Trustees of legendary football coach Joe Paterno (and also Penn State president Graham Spanier) for purportedly failing to take adequate action after being informed that former coach Jerry Sandusky had molested a boy in a Penn State locker room shower (discussed earlier herehere).  The article reports that the Board telephoned Paterno and said, "The Board of Trustees has determined effective immediately you are no longer the football coach."  Paterno immediately hung up.  Shortly thereafter, his wife called the Board and said, "After 61 years he deserved better."

I agree with Mrs. Paterno.  In the months since the Penn State grand jury report became public, I have seen nothing that to me indicates that Paterno acted improperly by promptly reporting the alleged incident to his superiors, even if not to law enforcement.

The lesson of Paterno's firing appears to be that, even if not required by statute or internal rule, one in authority in a corporation, government agency, institution of learning, or similar entity, should protect himself by reporting any tenable allegation of sexual abuse, whether or not substantiated and whether or not he believes it, to law enforcement.  While such a rule might protect the reporter from termination, it might lead to a heyday for defamation lawyers, as well as severe harm to innocent people.

(goldman)

January 20, 2012 in Celebrities, Grand Jury, Investigations, Sports | Permalink | Comments (0) | TrackBack (0)

Thursday, January 19, 2012

Indicting Criminal Defense Counsel for Trial Misconduct

Mike Scarcella over at the BLT Blog has an interesting piece titled, D.C. Attorney, Charged In Scheme, Fights Prosecutors Over Evidence. But what sounds unusual here is that the attorney is charged based upon testimony from a client that he represented, who is now cooperating with the government and the charges stem from alleged misconduct during the trial.  

Even if these allegations of trial misconduct prove to be true, one has to wonder why this wasn't handled via cross-examination or through objections to the admission of the evidence at trial. Is this a professional responsibility problem, a contempt problem, or should this be considered criminal?  And did counsel do anything wrong?

When defense counsel is charged with a crime for trial misconduct, it needs to be scrutinized carefully as the process can have a chilling effect on the right to counsel. And it certainly needs to be looked at very closely when the case is premised on a former client's cooperation. So isn't this just the kind of case that all discovery should be turned over to the defense so that justice can occur?

(esp)

January 19, 2012 in Defense Counsel, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 18, 2012

In the News & Around the Blogosphere

In the News & Around the Blogosphere

Tuesday, January 17, 2012

Post-Skilling Remand Includes Spillover

The Third Circuit in United States v. Wright held that the Skilling decision requires an new trial in this case on the honest services fraud convictions and that "prejudicial spillover tainted their traditional fraud convictions."  The court stated:

"An honest services fraud prosecution for bribery after Skilling thus requires the factfinder to determine two things.  First, it must conclude that the payor provided a benefit to a public official intending that he will thereby take favorable official acts that he would not otherwise take.  Second, it must conclude that the official accepted those benefits with the intent to take official acts to benefit the payor."

The court also stated that, "[i]n light of Skilling, the jury should have been instructed on the bribery theory but not the conflict-of-interest theory." 

The defense counsel on this case were Lisa A. Mathewson, Peter Goldberger, Ellen Brotman, and William A. DeStefano.

(esp)

January 17, 2012 in Corruption, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Sunday, January 15, 2012

Federal Organizational Plea Agreements Website

Professors Brandon Garrett and Jon Ashley have an incredible new website that is a library of 1495 federal corporate plea agreements in which an organization was convicted. They intend to update this collection of agreements. The site has the agreements by date, U.S. Attorney Office district and name. The site also provides links to other helpful data concerning corporate convictions.  This is an amazing website that provides a wealth of information.

(esp) 

January 15, 2012 in Deferred Prosecution Agreements, Prosecutions, Scholarship, Settlement | Permalink | Comments (0) | TrackBack (0)

More Discovery Issues - Petition for Cert Filed in Brown Case Looks at Brady

The cert petition in James A. Brown v. United States (11-783) raises interesting questions regarding Brady.  Brown, a former Merrill Lynch executive "was convicted of perjury and obstruction of justice for his testimony before the Enron grand jury about a transaction between Merrill and Enron in late 1999."  This case was part of the "Enron barge transaction" investigation. The cert petition states that "prosecutors steadfastly denied that they possessed any Brady evidence and claimed that their production of nineteen pages of court-ordered 'summaries' exceeded their constitutional obligations."  The Fifth Circuit later found the "evidence was exculpatory and 'plainly suppressed,' but 'not material.'"  This was despite the fact that items had been "yellow-highlighted" by prosecutors as "selected exculpatory statements in the evidence they submitted for the district judge's pretrial in camera review." Years after the trial "new prosecutors disclosed thousands of pages of actual notes, 302s, and testimony."  This cases raises the issue of what is the correct standard of review under Brady and Kyles.

The petition asks the Court to "establish three clear rules to enforce the crucial constitutional protections established in Brady v. Maryland."  It states:

"First, consistent with the majority of Circuits, this Court should establish that Brady decisions must be reviewed de novo.  Second, this Court should reject the Fifth Circuit's novel and dangerous approach to determining materiality, and thereby refine and reinforce the Kyles test. Third, this Court should adopt and mandate the majority rule that exculpatory evidence is material per se if the government corrupts the adversary process by providing deficient summaries or affirmatively capitalizing on its suppression at trial."

Discovery issues need to be examined by the Court.  This is a good case for the Court to stress the importance of defendants receiving timely discovery to allow for a fair and proper defense to the charges.

Petition for Cert - Download 2011 CERT PETITION FILED

See also Brady posts of co-bloggers Lawrence Goldman here and Solomon Wisenberg here.

(esp)

January 15, 2012 in Enron, Judicial Opinions, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Funk and Minder's Bloomberg Article Serves Up Comprehensive Defense of Incremental, Common Sense FCPA Reform

ABA Global Anti-Corruption Task Force Co-Chair T. Markus Funk and his Perkins Coie colleague M. Bridget Minder just authored "Bribery of Foreign Officials: The FCPA in 2011 and Beyond: Is Targeted FCPA Reform Really the “Wrong Thing at the Wrong Time”? in the Bloomberg Law Reports. This in-depth (6,000+ word) piece summarizes 2011 enforcement trends, but, more importantly, addresses head-on the various arguments raised against the growing call for targeted FCPA reform. For example, is incremental domestic FCPA reform really going to impact foreign anti-corruption efforts? To what extent should we care if it does? Why do the "Busting Bribery" authors' criticisms fall short of the mark? What public policy arguments favor targeted reform? For those following the reform debate, this publication represents the latest fresh thinking on this critically important subject.

(esp)

January 15, 2012 in FCPA | Permalink | Comments (0) | TrackBack (0)

Saturday, January 14, 2012

New Article - Big Law's Sixth Amendment: The Rise of Corporate White-Collar Practices in Large U.S. Law Firms

Check out Charles D. Weisselberg and Su Li's article available on SSRN here.  

Abstract:
Over the last three decades, corporate white-collar criminal defense and investigations practices have become established within the nation’s largest law firms. It did not used to be this way. White-collar work was not considered a legal specialty. And, historically, lawyers in the leading civil firms avoided criminal matters. But several developments occurred at once: firms grew dramatically, the norms within the firms changed, and new federal crimes and prosecution policies created enormous business opportunities for the large firms. Using a unique data set, this Article profiles the Big Law partners now in the white-collar practice area, most of whom are male former federal prosecutors. With additional data and a case study, the Article explores the movement of partners from government and from other firms, the profitability of corporate white-collar work, and the prosecution policies that facilitate and are in turn affected by the growth of this lucrative practice within Big Law. These developments have important implications for the prosecution function, the wider criminal defense bar, the law firms, and women in public and private white-collar practices.

(esp)

January 14, 2012 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, January 13, 2012

Inside Trader Brownstein Receives 366-Day Sentence

Former Denver hedge-fund operator Drew "Bo" Brownstein, about whose case we wrote (see here), was sentenced Wednesday to a prison term of one year and one day following his plea of guilty to insider trading charges.  Brownstein had received confidential information from his friend Drew Peterson concerning a pending purchase of Mariner Energy by Apache Corp. and used that information to reap about $2.5 million in profits for himself and his asset management firm.  Drew Peterson, who has pleaded guilty but has not yet been sentenced, received the information from his father, H. Clayton Peterson, a Mariner director, and personally netted about $150,000 from it.  The older Peterson also pleaded guilty, and received a probationary sentence.

The sentence of 366 days was between the 46-month high under the applicable Sentencing Guidelines range and the probationary sentence requested by defense counsel and above the six-month sentence suggested by the probation officer.  The one-year and one-day sentence will allow Brownstein to earn "good time" of 47 days.  Under federal law, good time is permitted only for a sentence of more than one year.  18 U.S.C. 3624(b).

(goldman)

January 13, 2012 in Insider Trading, Securities, Sentencing | Permalink | Comments (0) | TrackBack (0)