Thursday, November 29, 2012
We recently saw BP settling with a record $4 billion in criminal fines and penalty. See here. And as noted then -
"The guilty plea entered by BP provides that the 'Department agrees
that, if requested to do so, it will advise any appropriate suspension or
debarment authority that, in the Department's view, the defendant has accepted
criminal responsibility for its conduct relating to the Deepwater Horizon
blowout, explosion, oil spill and response by virture of this guilty plea and
that BP is obligated pursuant to this agreement to cooperate in any ongoing
criminal investigation by the Department relating to the Deepwater Horizon
blowout, explosion, oil spill and response.' But it does state that '[n]othing
in this agreement limits the rights and authority of the United States of
America to take further civil or administrative action against the defendant
including but not limited to any listing and debarment proceedings to restrict
rights and opportunities of the defendant to contract with or receive
assistance, loans and benefits from United States government agencies.'"
Reports are showing now that it is federal regulators that are temporarily suspending BP from government contracts. Although as noted on law.com by Jenna Greene, Feds slam BP's ethics, bar oil giant from contracts it is unclear how long of a period this suspension will last. (see also Michael Pearson, CNN, The spill: How much should BP suffer?)
The real question will be whether the criminal fine or the civil suspension will carry the most deterrence and punishment. This raises an important issue of whether corporate criminal liability is really the best route, or whether civil remedies can provide better compliance with the law and regulations. Most importantly, it is good to see regulators acting. It would be even better if regulatory actions were proactive, as opposed to reactive - after something has occurred.
Position Open: Assistant Director, Office of Defender Services, Administrative Office of the U.S. Courts
Tuesday, November 20, 2012
Aaron Smith, CNN Money, Feds charge hedge funder with $276 million insider trading scheme
Paul Melia & Tom Brady, Independent.ie, Cases 'too complex' as white-collar convictions plummet
Mike Scarcella, BLT Blog, DOJ, SEC Provide Updated Foreign Bribery Enforcement Guidance
Mark Hamblett, NYLJ, Ex-Mayer Brown Partner Convicted at Retrial
Friday, November 16, 2012
In 2004, the then-US Attorney for the District of Maryland famously wrote in a leaked email that he wanted three front-page indictments by November of that year. Though open to interpretation, the impression left by the poorly-drafted missive is that prosecutors should seek headlines rather than justice. Let’s give credit to the prosecutors involved in the Petraeus/ Broadwell affair, er, matter for their
exercise of sound discretion.
Assuming the accuracy of the news reports, it is possible that overzealous prosecutors might have tried to apply one of several cybercrime statutes in a prosecution against Broadwell just to make headlines.
In his paper entitled Computer and Internet Crime, G. Patrick Black, a federal defender in Texas, analyzes a number of cyberstalking statutes. As Black writes: “Under 18 U.S.C. 875(c), it is a federal crime to transmit any communication in interstate or foreign commerce containing a threat to injure the person of another. Section 875(c) applies to any communication actually transmitted in interstate or foreign commerce – thus it includes threats transmitted in interstate or foreign commerce via the telephone, e-mail, beepers, or the Internet.” This is seemingly inapplicable to the alleged Broadwell conduct because there appears to be no evidence of actual threats.
Likewise, there is 47 U.S.C. 223, a misdemeanor that might have been considered for this alleged conduct. Black writes that “47 U.S.C. 223,” makes it unlawful to “use a telephone or telecommunications device to annoy, abuse, harass, or threaten any person at the called number. The statute also requires that the perpetrator not reveal his or her name.”
Finally, there is 18 U.S.C. 2261A, also known as the Interstate Stalking Act. The ISA makes it unlawful for any person to travel across state lines with the intent to injure or harass another person and, in the course thereof, places that person or a member of that person’s family in reasonable fear of death or serious bodily injury causes substantial emotional distress to that person or a member of their family.
Prosecutorial discretion depends on decisions made by individual prosecutors. And there are marked differences in individual prosecutors. A busy federal prosecutor in a major city may be less inclined to take a marginal case than a federal prosecutor in a slower jurisdiction. A new federal prosecutor trying to make a name for him/herself might be more inclined to investigate a high-profile target aggressively than a seasoned veteran who has already seen his or her share of big cases.
Admittedly, white collar laws have to be drawn broadly in order to permit federal prosecutors to combat the increasingly creative, technologically complex efforts of enterprising criminals. At least one downside of such broadness is that a large number of people may find themselves under federal investigation for conduct that can better be addressed in a different forum, or no forum at all. Most prosecutors, do, in fact, make rational decisions based upon the best possible expenditure of resources, the assessment of the jury appeal of a particular case, and the desire to maintain a good reputation with the bench and the bar. However, prosecutors and investigators too often fail to recognize that they may view a case against a high-profile target differently than a case against an average citizen and should consider, in making charging decisions, whether the identity of the target is a valid consideration or not. The decision not to pursue criminal charges against Broadwell for any alleged possible conduct is perhaps a signal that discretion might be working after all.
Thursday, November 15, 2012
According to a DOJ press release - BP agreed "to pay a record $4 billion in criminal fines and penalties." BP had an Information filed against it for "seaman's manslaughter," and violations of the "clean water act, migratory bird treaty act, and obstruction of congress."
The guilty plea entered by BP provides that the "Department agrees that, if requested to do so, it will advise any appropriate suspension or debarment authority that, in the Department's view, the defendant has accepted criminal responsibility for its conduct relating to the Deepwater Horizon blowout, explosion, oil spill and response by virture of this guilty plea and that BP is obligated pursuant to this agreement to cooperate in any ongoing criminal investigation by the Department relating to the Deepwater Horizon blowout, explosion, oil spill and response." But it does state that "[n]othing in this agreement limits the rights and authority of the United States of America to take further civil or administrative action against the defendant including but not limited to any listing and debarment proceedings to restrict rights and opportunities of the defendant to contract with or receive assistance, loans and benefits from United States government agencies."
The agreement includes an attachment for monitors. It also provides that the North American Wetlands Conservation Fund will receive $100 million. As a part of the probation, special conditions are included in an Order which includes $350 million to the National Academy of Sciences and $2.394 billion to the National Fish and Wildlife Foundation.
While at the same time that we see the company pleading guilty, we see that individuals are indicted - two "BP supervisors onboard the Deepwater Horizon on April 20, 2010 – are alleged to have engaged in negligent and grossly negligent conduct in a 23-count indictment charging violations of the federal involuntary manslaughter and seaman’s manslaughter statutes and the Clean Water Act." Another is "charged with obstruction of Congress and making false statement to law enforcement officials."
Monday, November 12, 2012
Friday, November 9, 2012
In a major environmental prosecution out of the Northern District of Indiana, a great white collar team proves once again that you CAN go to trial and beat the government. The indictment alleged a conspiracy to violate the Clean Water Act and 26 substantive violations by United Water Services and two of its employees. Some counts were dropped along the way by the government. All three defendants were acquitted of all remaining charges by the jury.
This was a complete victory for the defense. The jury deliberated about 8 hours over two days. Congratulations go to the following members of the respective white collar/environmental defense teams:
Representing United Water Services were my colleagues at Barnes & Thornburg: Larry Mackey, George Horn, Pat Cotter, Harold Bickham, Meredith Rieger, and Tim Haley.
Representing Dwain Bowie were Jackie Bennett and Bob Clark of Taft Stettinius & Hollister.
Representing Gregory Ciaccio were J.P. Hanlon and Kevin Kimmerling of Faegre Baker Daniels.
The case was tried in Hammond, Indiana.
Here is the Post-Tribune story.
Wednesday, November 7, 2012
As the New York Times reports (see here), once again a trader has apparently taken an enormous bet with his employer's money and lost, thereby costing his employer, a small Connecticut brokerage firm, millions of dollars and threatening its continued existence. David Miller, described by the Times as a "journeyman" with a career that includes stints at some of Wall Street's less distinguished firms, bought roughly $1 billion of Apple stock hours before Apple was to announce its earnings for his employer Rochdale Securities in what the firm's president called an "unauthorized trade." When the announced earnings were below expectations, Apple's stock price fell and the firm was then forced to sell the securities at a considerable loss.
I have no idea whether Miller's trading was a calculated effort of his own to secure a huge gain for his employer and perhaps a corresponding large bonus for himself, an execution of a strategy approved by supervisors, a ministerial error resulting from a "fat finger" (as Rochdale has reportedly told potential financial rescuers) or something else. However, this situation, along with better-known recent examples of purportedly unauthorized trades which have caused massive losses (some of which, potentially at least, might eventually be borne by taxpayers) lead me to wonder whether there should be a criminal statute prohibiting "reckless" trading of other people's money. Many statutes, generally state, prohibit reckless behavior which causes, or just puts people at risk of, death or physical harm, including in New York reckless assault, reckless endangerment, and reckless driving. I wonder whether just as the law criminalizes reckless conduct which may cause physical harm, it should criminalize reckless conduct which may cause monetary harm. Such a statute might criminalize conduct when one "takes a substantial and unjustifiable risk in making trades with money other than his own and that such risk is a gross deviation from the standard of conduct a reasonable person would observe in that position." (Cf. N.Y. Penal Law Section 15.05).
The bonus system which gives great incentives to hugely successful trading by one whose own funds are not put at risk (at least directly) and lesser disincentives to hugely unsuccessful trading encourages taking long-shots. Perhaps that is the way the markets should work. However, contrary to my visceral feeling that governments enact too many penal statutes, I believe a prohibition of reckless trading which results in severe financial loss might be worthy of consideration.
Tuesday, November 6, 2012
Check out NACDL's new resource for its members "a collection of individual downloadable documents that profile the law and practice in each U.S. jurisdiction relating to relief from the collateral consequences of conviction." The website notes:
"The 54 jurisdictional profiles include provisions on loss and restoration of civil rights and firearms privileges, legal mechanisms for overcoming or mitigating collateral consequences, and provisions addressing non-discrimination in employment and licensing. In addition to the full profiles, there is a set of charts covering all 50 states (plus territories and the federal system) that provide a side-by-side comparison and make it possible to see national patterns in restoration laws and policies. The information covered by the charts is summarized on the page for each jurisdiction. These materials will be an enormous aid to lawyers in minimizing the collateral consequences suffered by clients and in restoring their rights and status."
Monday, November 5, 2012
The right to vote is one of the most important rights that we as U.S. citizens have in our democracy. The civil rights division of DOJ has set up a voting rights violations reporting website to provide general information for protecting this right. On their website here it states that "[I]f you believe that you have been denied the right to vote based on your race, color, or language minority status or that otherwise your voting rights under federal law have been violated, you may contact the Civil Rights Division of the United States Department of Justice:" and the telephone, internet, or mail numbers are provided on this webpage.
It was particularly good to see that the Justice Department intended to monitor polls in 23 States on Election Day (see here). Their press release states that, "[t]he Justice Department announced today that its Civil Rights Division plans to deploy more than 780 federal observers and department personnel to 51 jurisdictions in 23 states for the Nov. 6, 2012, general election."
Assuring that voter fraud does not occur is crucial to having a fair election.
An area that has long fascinated me is intellectual property and prosecutions premised on theft of trade secrets. It is particularly intriguing when the actors are outside the United States. The U.S. Attorney in the Eastern District of Virginia issued an indictment of a company and several executives "for allegedly engaging in a multi-year campaign to steal trade secrets related to DuPont’s Kevlar para-aramid fiber and Teijin Limited’s Twaron para-aramid fiber. The indictment seeks forfeiture of at least $225 million in proceeds from the alleged theft of trade secrets from Kolon’s competitors." What will make this case particularly interesting is that the company - Kolon- is "[h]eadquartered in Seoul, South Korea, yet the indictment came from a grand jury in Richmond, Virginia. (see here).
Sunday, November 4, 2012
T. Markus Funk, Perkins Coie Partner and former federal prosecutor, and Chicago Assistant U.S. Attorney Andrew S. Boutros examine the growing - but still largely under-recognized - international phenomenon of what Funk and Boutros term "carbon copy prosecutions." A country’s incentive to vindicate its own laws is not insubstantial, especially when a company or individual has already admitted, in a foreign proceeding, to having violated local law. With the increase in FCPA and money laundering cases, globalization presents many new concerns. Check out - Andrew S. Boutros & T. Markus Funk, "Carbon Copy" Prosecutions: A Growing Anticorruption Phenomenon in a Shrinking World
Maurice E. Stucke has a piece on SSRN titled, Is Competition Always Good? The abstract states:
Competition is the backbone of U.S. economic policy. The U.S. Supreme Court observed, "The heart of our national economic policy long has been faith in the value of competition." Competition advocacy is also thriving internationally. Promoting competition is broadly accepted as the best available tool for promoting consumer well-being. Competition officials, who regularly try to protect the public from anticompetitive special interest legislation, are justifiably jaded about complaints of excess competition. Although the economic crisis has prompted some policymakers to reconsider basic assumptions, the virtues of competition are not among them.
Nonetheless to effectively advocate competition, officials must understand when competition itself is the problem's cause, not its cure. Market competition, while harming some participants, often benefits society. But does competition always benefit society? This is antitrust’s blind spot. After outlining the virtues of competition, and discussing some well-accepted exceptions to competition law, this Article addresses four scenarios where competition yields a suboptimal result.
Saturday, November 3, 2012
Friday, November 2, 2012
The case of Ali Shaygan v. United States is set for distribution for conference on November 9, 2012 in the United States Supreme Court (see here). David Oscar Markus represents the Petitioner on a Hyde Amendment case that asks the question of "[w]hether the Government is exempted as a matter of law for Hyde Amendment sanctions under the statute’s prohibition on "bad faith" prosecutions despite subjective malice in its filing decision and extensive and pervasive prosecutorial misconduct during the course of the litigation, merely because there was probable cause to support the filing of the indictment." The Petition for Cert can be found here. See also Mike Scarcella, In the Supreme Court, a Fight Over Sanctions for Government Misconduct
The NACDL (here) raises the issue of the wide discretion afforded to prosecutors and how "'bad faith' surely includes situations where the government adds numerous charges for an illegitimate reason, such as retaliation for exercising a constitutional right, or engages in discovery abuse." The question here is whether the Hyde Amendment will have any teeth left, and whether there will be a check on government misconduct.
This case raises the important issue of whether there will be any ramifications to the government when it misuses its power.
Thursday, November 1, 2012
NACDL Defending White Collar Cases, New York, November 15-16th here
ABA Securities Fraud National Institute, New Orleans, November 15-16th here
NACDL White Collar Criminal Defense College at Stetson, St Pete Beach, Florida, Jan. 9-13 here