Thursday, February 9, 2012
The House passed the Stock Act which makes members of Congress subject to insider trading scrutiny. With both Senate and House approval (although there are diffferences in the two bills) this is moving in the direction of becoming law. (see Talk Left here). But the House shot down the "Public Corruption" Amendment to the Stock Act which sought a Skilling and Sun-Diamond fix. The NACDL Press Release reports in part:
"The amendment had sought to re-write multiple criminal laws in precisely the way the Supreme Court has declared would be unconstitutionally vague and overbroad. See Skilling v. United States, 130 S.Ct. 2896 (2010); United States v. Sun-Diamond Growers of California, 526 U.S. 398 (1999). Importantly, decades of successful prosecutions of corrupt public officials with the over two dozen federal criminal statutes already in existence belies all assertions that the Department of Justice desperately needs more tools in order to prevent public corruption. The “Public Corruption” Amendment, both in its substance and in the manner in which it was piggybacked onto the STOCK Act, provides further compelling evidence of a disturbing and costly overcriminalization trend in Congress."
"According to NACDL President Lisa Wayne, “There are over 4,450 federal criminal laws on the books and tens of thousands more in the regulations. It’s actions like these – the unconsidered rushing through of harsh criminal law solutions to vague or undefined problems – that got our nation to this terrible place.”
From the Department of Justice Press Release:
"The agreement resolves certain violations of civil law based on mortgage loan servicing activities. The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers. The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group. The United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan. The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits. State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers."
This does not resolve the question of whether any federal robo-signing fraud prosecutions will occur or why none have been brought to date.
Here is Judge Emmet Sullivan's Memorandum Opinion ordering unredacted release of Hank Schuelke's Report on prosecutorial misconduct in the Ted Stevens prosecution. Any comments or objections to the report by the attorneys involved are due by March 8 and will be published along with the Report.
Wednesday, February 8, 2012
The New York Times has the story here. The official announcement may come as early as tomorrow. As always, the devil will be in the details. Here is the $64,000.00 question. What if any limitation of liability for past criminal acts will the banks obtain through this agreement? If there is any limitation on the ability of federal authorities to prosecute the obvious, widespread, and easily provable robosigning fraud that took place in this country, the agreement will constitute a disgrace.
One of the supposed hallmarks of the American criminal justice system is the prudent exercise of prosecutorial discretion. But prosecutorial discretion, even when it works, is a blessing and a curse. A blessing, because it allows for the flexibility and compromise without which most systems, even well-constructed ones, cannot function. A curse, because liberty should not depend upon the the character and wisdom of the person temporarily wielding power.
The U.S. Attorney's Office for the Central District of California has decided not to prosecute Lance Armstrong. An announcement to that effect was made last Friday. The L.A. Times story is here. A good Washington Post piece is here. Today's Wall Street Journal discusses the declination and a potential future probe of of improper leaks related to the case. (An internal investigation of some kind appears to be warranted given the massive leaking that has occurred.) According to the WSJ, the declination decision by U.S. Attorney Andre Birotte and his top aides went against the recommendation of the two line AUSAs handling the case. Maybe, but take it with a grain of salt. News stories about the internal machinations of prosecution teams often get it wrong.
Based on what I know about the case, the decision to decline appears to have been a no-brainer. Recent federal prosecutions involving alleged drug use by star athletes have expended enormous sums of money with mixed or poor results. In the Armstrong matter, the doping, if it occurred, was not itself a federal crime. Prosecutors would have been peddling a wire fraud theory under which Armstrong allegedly defrauded team sponsors by intentionally violating a contractual obligation to avoid improper drug use. Not very sexy. Twelve typical American jurors might well wonder at the start of such a case, "Why are we even here?" Finally, Armstrong is enormously popular and has a sterling defense team with unlimited resources.
The U.S. Anti-Doping Agency (USADA) vows to continue its investigation, accurately noting that its "job is to protect clean sport rather than enforce specific criminal laws." But USADA wants the grand jury materials. This would be a travesty, and is unlikely to happen. Federal grand jury materials are presumptively secret by law for good reason. Don't count on a federal court sanctioning transfer of grand jury materials to an agency like USADA.
In other declination news, the DOJ attorneys prosecuting the Gabon sting case have informed U.S. District Judge Richard Leon that DOJ is considering dropping all future prosecutions. A decision will be made by February 21. The BLT piece is here. Full disclosure: I briefly represented one of the defendants, and considered representing another of the defendants, neither of whom has gone to trial. My comments here are based on the public record. The two cases brought to date have resulted in three acquittals and two hung juries. Nobody going to trial has been convicted in what DOJ thought was a sure win. Whatever merit there was in initially bringing the case, reconsideration is in order. The two trials to date have revealed a number of weaknesses. First, this was a sting--a crime engineered by the U.S. Government. Second, the informant who helped orchestrate it was far more compromised than the typical informant in a white collar case. Third, in a key tape recorded conversation between that informant and one of the defendants, the defendant seeks to back out of the alleged unlawful transaction, but the informant reels the defendant back in by telling him that attorneys have approved the deal. Fourth, the inherent ambiguities and weaknesses in the FCPA itself.
If there has been a benefit to the Gabon FCPA prosecution it is this--it has taught the white collar defense bar that FCPA cases can be fought and won and, presumably, has taught DOJ that FCPA cases aren't as easy to win as they first appear.
February 8, 2012 in Celebrities, Corruption, Current Affairs, FCPA, Fraud, Government Reports, Grand Jury, Investigations, Media, Prosecutions, Prosecutors, Sports, Statutes | Permalink | Comments (0) | TrackBack (0)
Tuesday, February 7, 2012
Joelle Scott, Forbes, Bharara's Wiretaps: The Latest Insider Trading Charges
Mike Scarcella, BLT Blog, Federal Appeals Court Upholds Abramoff Associate's Plea Deal (w/ a hat tip to Ivan Dominguez)
BLoomberg, Rajat Gupta May Face More Charges, U.S. Says
Kevin McCoy, USA Today, Swiss bank indictment details tax evasion ploys; Lynnley Browning, Reuters,
U.S. indicts Wegelin bank for helping Americans avoid tax
Shannon Green, Corporate Counsel, law.com, Was Penn State's GC Counsel for University Officials?
Mike Scarcella, BLT Blog, DOJ Considers Abandoning Its FCPA Sting Prosecution
Monday, February 6, 2012
In criticizing Judge Jed Rakoff's refusal to rubber-stamp its proposed settlement agreement with Citibank, the SEC has claimed that if it has to require companies to admit wrongdoing as a condition of settlement, there will be far fewer settlements and more trials. As a result, says the SEC, its resources would be so strained so that it would bring considerably fewer enforcement actions. The New York Times on Friday, February 3, cited unnamed "legal experts" as endorsing that view, saying that companies will be less likely to admit facts which could be used against them in shareholder lawsuits. See here.
There is a certain logic to that argument. Companies that have committed misconduct now do choose to pay the SEC rather than admit or reveal their wrongdoing to the public (and to class action lawyers). Companies that believe they have not committed misconduct sometimes decide it is less costly to pay the SEC than fight it. Few SEC cases go to trial. This settlement model works well for the SEC, which gets a check with less sweat, and for most defendants, which conceal their misconduct and/or save money.
But is that in the public good? More trials should lead to more public knowledge, promote more curative government action, and add an additional deterrent to corporate misconduct. Additionally, it should force the SEC to be more scrupulous in bringing marginal or questionable cases since they would more often be required to justify the charges in court.
I also question whether these "experts" are right in their expectation that there would be far more trials. I am not so sure that many corporate executives want public airings of the factual details of the company's wrongdoing. "Experts" predicted that the enactment of the Sentencing Guidelines would overwhelm the federal courts with trials since many more criminal defendants would exercise their right to trial because of the perceived (and actual) harshness and rigidity of the Guidelines upon a conviction. That simply has not happened. The percentage of cases settled by plea has remained relatively constant, if not increased, since the enactment of the Guidelines.
Sunday, February 5, 2012
As we get closer to the 50th Anniversary of the Gideondecision, it is wonderful to see Attorney General Eric Holder being a true "minister of justice" in his support for counsel for indigent defendants. (see here) It is wonderful to see his recognition of the problems with indigent defense -
"Across the country, public defender offices and other indigent defense providers are underfunded and understaffed. Too often, when legal representation is available to the poor, it’s rendered less effective by insufficient resources, overwhelming caseloads, and inadequate oversight."
Across the country, public defender offices are handling cases of defendants charged with crimes related to mortgage fraud, Ponzi schemes, and other white collar offenses. AG Holder's recognition of the problems here and efforts to correct this situation are important to assuring a fair criminal justice process.