Saturday, June 16, 2012

Keiffer Decision Extends Wire Fraud

The Tenth Circuit recently affirmed the convictions, but remanded the sentence of Howard O. Kieffer.  Kieffer, who for several years was practicing criminal defense law, had a problem - he never went to law school and had no license to practice law.  A court in the Eighth Circuit in 2010 upheld his convictions for mail fraud and making false statements.  But he was also convicted in 2010 in Colorado for wire fraud and contempt of court. That decision was recently affirmed in the Tenth Circuit with a remand on sentencing here.

There is one aspect of this Tenth Circuit decision that raises eyebrows.  The issue is what constitutes interstate wires for purposes of the wire fraud statute.  This is a particularly important issue in these days of the WorldWideWeb. For example, in United States v. Phillips, 376 F. Supp2d 6 (D. Mass. 2005) the court rejected the government argument that “in order to satisfy the elements of this offense, it was not necessary to present evidence that the pertinent wire communications themselves actually crossed state lines, as long as the communications (whether interstate or intrastate) traveled via an ‘instrument of an integrated system of interstate commerce,’ such as the interstate phone system.” Even in the Tenth Circuit in United States v. Schaefer, 501 F.3d 1197 (10th Cir. 2007), the court previously held that one person’s use of the internet, “standing alone” was insufficient evidence that the item “traveled across state lines in interstate commerce.” 

So it is surprising to read in Keiffer that the Tenth Circuit is now saying, "“[t]he presence of end users in different states, coupled with the very character of the internet, render this inference permissible even absent evidence that only one host server delivered web content in these two states.”

Clearly Keiffer's conduct was appalling, but the ramifications of the language in this decision could be huge.  Could individuals from outside this country be charged with crimes against the United States merely because they put something on the web?

(esp)(hat tip to John Wesley Hall)

June 16, 2012 in Defense Counsel, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Friday, June 15, 2012

Gupta Convicted On Some Counts & Acquitted On Others

Thursday, June 14, 2012

Government's Response to Brady Reform Relies on Fear Not Fact

Guest Blogger Jon May

Last week Deputy Attorney General James M. Cole presented a thoughtful argument why Congress should not enact the Fairness in Disclosure of Evidence Act of 2012 which would for the first time codify the obligation of prosecutors to disclose favorable evidence to the accused. (see testimony here) Distilled to its essence, DOJ contends that reform is unnecessary since there has been no showing of a systemic failure of the current system to deny exculpatory evidence to defendants. Moreover, various provisions of the proposed law would further endanger the lives of witnesses and undermine the government’s ability to convict some of the most violent criminals in the country. These are serious objections, likely to find a receptive audience by Congressman afraid of being accused of helping gang members escape justice.

Fear may be the most powerful motivator. And it is an appeal to fear that is at the core of Mr. Cole’s testimony. But that does not mean his concerns are unfounded. Criminal defense counsel often represent witnesses who are very afraid of those charged with a crime. Those of us who have represented witnesses who have been harmed, as I have, understand that in some federal cases, the danger of death or injury is very real. But that danger exists regardless of whether prosecutors must turn over exculpatory evidence or favorable evidence, or whether such discovery must be made after arraignment or a few days before trial. So long as the Sixth Amendment guarantees the accused the right to confront his or her accusers, witnesses will always testify at their peril. This is why there is the Witness Protection Program.  Fundamentally, the flaw in Mr. Cole’s testimony comes from the very examples he cites. Under the current system, witnesses are sometimes harmed. He fails to make a convincing case that either a broader standard or earlier disclosure will lead to an increased risk. And he ignores the fact that the proposed legislation provides for a protective order where the government can show a reasonable basis to believe that a required disclosure would lead to an effort to tamper with a witness. Similarly in claiming that the proposed legislation would undermine national security he fails to explain why the Classified Information Procedures Act is insufficient to protect our nation’s secrets. He just claims it is.

Mr. Cole also relies upon a statistical analysis that purports to show that serious allegations of government mishandling of Brady material has occurred in only a very small percentage of cases, less than three hundredth of one percent of the nearly 800,000 case brought in the last ten years. This is a significant argument because the burden is on the proponents of reform to demonstrate that there exists a problem that is in need of remedy. Mr. Cole’s analysis fails to take into consideration the fact that some 90% of the cases brought by the government result in pleas. Since there is no obligation to provide Brady material during plea negotiations such material is not provided unless the accused actually goes to trial. Mr. Cole’s statistical analysis also contains a built in bias since allegations of Brady violations are almost always evaluated under a harmless error standard. The upshot here is that regardless of the language of the Supreme Court’s decision in Kyles, circuit courts will rarely find a Brady violation absent a showing that the material withheld contributed to the jury’s verdict. Under such a standard, Mr. Coles can contend that reform is not needed since there has been no demonstration of systemic failure; systemic failure defined in such a way as to insure that no such showing could be made.

Finally, Mr. Cole contends that the government already provides greater discovery than is required by the law. Once again, there is no evidentiary support for this contention. While it may be DOJ policy that such evidence should be disclosed, because the law does not currently require such disclosure, prosecutors are under no legal obligation to actually apply DOJ guidelines and suffer no punishment when they fail to do so. Indeed, the current regime incentivizes prosecutors to evade Brady since prosecutors can enhance the odds of conviction through non-disclosure knowing that after a conviction appellate courts are loath to reverse.

The government’s strategy to defeat Brady reform is based upon convincing Congress that the existing system already strikes the right balance between the defendant’s right to a fair trial and the government’s interest in the wellbeing of its witnesses and preserving national security. New laws are not needed, DOJ contends, just more effective compliance with the existing law. The government is wrong. But in this instance, as in many decisions regarding criminal justice, fear trumps facts and despite the justifiable outrage at what happened to Senator Stevens, Congress is not likely to change the status quo.


June 14, 2012 | Permalink | Comments (0) | TrackBack (0)

In the News & Around the Blogosphere

Tuesday, June 12, 2012

Gupta in Turnabout Decides Not to Testify

The New York Times reported yesterday that Rajat K. Gupta, a former Goldman Sachs director on trial in the Southern District of New York for providing inside information to his friend and business colleague Raj Rajaratnam so that Rajaratnam could make trades based on those tips, will not testify, according to a letter his highly respected lawyer, Gary Naftalis, submitted to the court on Sunday night.  See here.  The prior Friday, Mr. Naftalis told the court and the prosecutors it was "highly likely" that Mr. Gupta would testify.  I was quite surprised by that declaration and even suspected that it might be a feint to divert prosecutorial resources from the preparation of cross-examination of other witnesses and the summation to preparation for the cross-examination of Mr. Gupta.  (While I personally have never made such a feint, I have on occasion considered doing it.)

The government's case against Mr. Gupta is a circumstantial one -- essentially a pattern of incidents in which Mr. Gupta allegedly received secret information at board meetings and very shortly thereafter telephoned Mr. Rajaratnam, and Mr. Rajaratnam then placed trades based on the matters discussed at the board meeting.  Most of the critical evidence -- Mr. Gupta's presence at the board meetings at which the information in question was discussed, his calls to Mr. Rajaratnam and Mr. Rajaratnam's firm's trading -- are virtually irrefutable.  On the other hand, there is no "smoking gun" in the form of testimony or recordings as to what was said in the critical conversations.

On the witness stand, Mr. Gupta would no doubt be thoroughly and harshly cross-examined on whatever explanation he provided about the substance and timing of the phone calls.  Interrogation about these repeated events would allow the prosecutors in effect an extra summation to hammer on these facts, indeed perhaps even better than a summation since the defendant would have to respond directly to each of the allegations, whereas in summation an attorney would have the option of ignoring, glossing over or generalizing about all or portions of the evidence.

In any case, white-collar or not, I believe that when a defendant testifies, the standard of proof beyond a reasonable doubt is diluted.  Jurors, rather than asking themselves whether the prosecutor has proved the case beyond a reasonable doubt, focus more on whether the defendant probably told the truth.

I would not be surprised if Mr. Gupta's legal team had spent much of this past weekend cross-examining him and trying to convince him that the better choice for him was to decline to testify.  The decision whether to testify is one of the very few that virtually all lawyers, and all ethics rules, decree belongs ultimately to the client.  It is often difficult to convince white collar clients, especially those whose egos have become enlarged because of their extreme success, that they will be unable to convince a jury.

While my reading leads me to believe that this is a difficult case for the defense, I believe Mr. Gupta's decision not to testify is a correct one.  A similar decision seems to have worked for John Edwards.


June 12, 2012 in Defense Counsel, Insider Trading, News | Permalink | Comments (0) | TrackBack (0)