Tuesday, January 29, 2013
The D.C. Court of Appeals rejected all of Kevin Ring’s appellate arguments, from his claims of an impropriety premised on the district court’s definition of what constitutes an "official act" to a claim of a Federal Rule of Evidence 403 violation. The court’s findings include that "campaign contributions can be distinguished from other things of value." (see here).
The court states "[t]he distinction between legal lobbying and criminal conduct may be subtle, but, as this case demonstrates, it spells the difference between honest politics and criminal corruption." This sentence in the opinion concerns me. Should a distinction that results in imprisonment be "subtle"? "Googling" the word "subtle" a definition provided is "[s]o delicate or precise as to be difficult to analyze or describe." And if this distinction is "subtle," should the rule of lenity be considered? And should a "subtle" difference be considered to "spell[ ] the difference between honest politics and criminal corruption" or as this case finds - spell the difference between freedom and prison.
Irrespective of whether the movie Lincoln wins best picture, unlike Argo, Zero Dark Thirty, Silver Lining Playbook, and the other nominees, Steven Spielberg will be able to say that a federal appellate court has quoted the movie in its decision. Yes, Hon.Tatel held that "[t]he ubiquity of these practices perhaps explains why in Steven Spielberg’s film Lincoln a lobbyist declared, "It is not illegal to bribe congressmen—they’d starve otherwise."
Murray Janis, a dean of the Virginia and national criminal defense bars, passed away a few days ago. Murray, a former president of the NACDL, was a superb lawyer highly respected and well loved by his peers. He was a true gentlemen whose grace and smile lighted up a room. He will be sorely missed but fondly remembered.
Monday, January 28, 2013
Casey Anthony, who was acquitted of murdering her daughter Caylee Marie in 2011, has filed for bankruptcy in federal bankruptcy court in Florida. She has listed approximate assets of $1,100 and debts of $800,000, including $500,000 due Jose Baez, one of her defense attorneys. See here. I was pleased to see no debt listed for my colleague and friend Cheney Mason, who as Baez' co-counsel, added gravitas, savvy and experience to Ms. Anthony's defense team.
It is not surprising for a criminal defense lawyer not to be paid a large part of the legal fees owed to her. I venture that the average criminal defense lawyer is "beat" for some 10-20% of her fees. And I do not know how much Baez actually did receive in fees, but I am sure nothing like the fees many white-collar lawyers and firms often receive for representation in criminal matters of institutions or individuals, even those who never get close to being indicted. Of course, the Anthony case did provide Baez considerable fame.
Thursday, January 24, 2013
It is hard to argue against the idea of criminal forfeiture; fairness demands that one convicted of a crime give up his ill-gotten gains. A recent article in the New York Times seemed to give its full unstinting approval to federal asset forfeiture (see here).
However, asset forfeiture, aside from its several unfair procedural aspects, has its downsides. It has to an extent diverted prosecutorial resources from investigation and prosecution of more serious cases to "sitting duck" targets involved in lucrative but arguably harmless violations of law, such as offshore gambling enterprises.
And, primarily because of pre-trial restraints, it has, with the 5-4 imprimatur of the Supreme Court in Caplin & Drysdale v. United States, 491 U.S. 617 (1989), and United States v. Monsanto, 491 U.S. 600 (1989), turned the presumption of innocence on its head and allowed pre-trial restraint of funds to leave many defendants without sufficient funds to hire experienced, able (and often expensive) counsel of choice. While court-appointed counsel assigned to represent those now-indigent defendants are generally competent or better than competent, they often lack the experience, resources, aggressiveness and time to provide a first-rate defense. Thus, asset forfeiture often tilts the board in the prosecutor's favor.
Prosecutors are obviously aware that broad pretrial restraint of assets may skew the results of a litigation by preventing the defendant from hiring top-notch counsel. While I do not believe that prosecutors often seek pre-trial restraint for that reason, eliminating experienced and able counsel is an obvious byproduct of many such restraints.
Even in New York State, where the Legislature has, alone among the 50 states, specifically provided for expenditures of seized funds to pay reasonable legal fees, some prosecutors, notably the New York County District Attorney, have taken a strong position, "play[ing] hardball" in the words of a senior forfeiture prosecutor, against release of seized funds for legal fees to private counsel. In New York County, a defendant seeking release of restrained funds for private counsel must initially fill out a sworn 40-page detailed financial questionnaire to demonstrate her lack of access to funds for legal fees. On the other hand, a defendant in New York County who seeks assigned counsel paid for by public funds needs only to say he cannot afford counsel, and such a statement is rarely questioned.
The District Attorney in New York and many places elsewhere receives a portion of forfeited funds; thus, he has an extra incentive to fight the release of funds for private counsel, as well as to prosecute those with substantial assets. An objective observer might question whether the crucial decision whether to prosecute should be made by one with a financial interest in the proceeds of the prosecution. Compare Tumey v. Ohio, 273 U.S. 510 (1927) (conviction at trial by magistrate/mayor where municipality retains part of fine proceeds violates due process).
Thursday, January 10, 2013
Mike Attanasio (Cooley LLP) and Rusty Hardin (Rusty Hardin and Associates) were the opening speakers at the NACDL White Collar Criminal Defense College at Stetson.And, of course, they were spectacular in their discussion of their successful representation of Roger Clemens. The timing of this event was appropriate as it came the day that the Baseball Writers' Association of America failed to vote Roger Clemens into the Hall of Fame. (see here)
It really is sad to see the Baseball Writers' Association of America turning their heads at our judicial system, a system that found Roger Clemens not guilty of the crimes charged by the government. Clemens could have easily taken the 5th Amendment and never faced these charges. Instead, he did what innocent folks do - he believed in the judicial system and fought back. To now have the Baseball Writers' Association of America disregard this verdict is sad to see.
Tuesday, January 8, 2013
One of the many things that has bothered me about the criminal justice system is that there are no "grays." Everything is either criminal or non-criminal. Conduct that on one day is legally acceptable, even if perhaps sharp and unwholesome, on the next day will, if a penal statute goes into effect, be criminal and punishable by years in prison.
This fair-to-foul scenario is particularly troublesome in certain areas of white-collar law. On day one, for instance, conduct which exploits "loopholes" in the tax law may go from widely-practiced and legally-tolerated "tax avoidance" to now-prohibited and severely punishable "tax evasion." When this change from acceptable to criminal occurs by statute, there at least is some public notice and warning to potential wrongdoers, although such notice obviously never reaches many persons. When, however, the law, or potential law, changes overnight by an unpredictable or unexpected court decision or an indictment based on a novel theory of prosecution, the sudden changes to what is considered prosecutable is even more problematical.
I do not have any easy solution to this problem. We cannot expect the government to send out a hundred million notices that new criminal laws have been enacted (although we do, for instance, require financial institutions to notify all of their credit card customers of interest rate changes). Nor, of course, if such notices were sent, can we reasonably expect a hundred million people to read or understand them. Additionally, we do not want to prohibit prosecutors from imaginative use of legally permissible tactics to prosecute what is apparently morally wrong and harmful.
We should, however, in the sentencing area recognize that it is essentially unfair to punish a defendant as seriously for conduct that had previously been generally accepted or tolerated than for conduct clearly known at the time of the offense to be criminal. Under this theory, for instance, Michael Milken could reasonably be prosecuted, as he was in the late '80s, for essentially "parking" stock, an arguably "civil" violation never before prosecuted criminally, but could not reasonably be sentenced, as he was initially, to ten years in jail (later reduced upon a Rule 35 motion).
I have on a few occasions argued to a sentencing judge that she should give a less severe sentence because the defendant's conduct was at the time he committed it not widely known to be criminal or generally was not prosecuted. I have never been successful, at least to the extent a judge explicitly agreed (of course, judges often do not explicate their reasoning). I am aware of no case in which a court explicitly granted a departure or variance on these grounds (although there may well be some). Nor am I aware of any Sentencing Guidelines consideration of this issue.
The decision by arbitrator Paul Tagliabue in the National Football League's New Orleans Saints "bounty" case (In the Matter of New Orleans Saints Pay-for-Performance/Bounty, December 11, 2012) is interesting and relevant. See here. See also here. Tagliabue, the former National Football League commissioner and a lawyer, affirmed the findings of misconduct made by Commissioner Roger Goodell but vacated the disciplinary sanction for the four players involved, suspensions of from four games to one year. Tagliabue based his vacation on sanctions essentially on two grounds: first, that the players' actions were encouraged by the coaches and other officials of the Saints, and, second, that professional football had previously treated such conduct gently, if not tolerating it. Tagliabue strongly suggested that when an existing "negative culture" is addressed by strict prohibitions, the penalties for violations should be phased in.
I do not expect federal sentences to be "phased in" so that, for instance, a violation of a new law within two years of enactment be punishable by a sentence of up to two years, and thereafter by up to five, although I do not think such an idea is entirely far-fetched. I do hope, however, that in appropriate cases judges consider adjusting sentences downward when the conviction is based on new law or a new application of existing law, especially when the change caused a sudden prohibition of generally acceptable behavior in the prevailing culture, even a negative culture. Mr. Tagliabue's opinion will not, of course, be considered precedential in the criminal law, but application of its reasoning in certain criminal cases may be appropriate.
Related Article - Tagliabue tosses out player penalties in bounty case
Sunday, January 6, 2013
One of the hot topics for corporate counsel is the conflict minerals legislation. Karen E.Woody of Cadwalader, Wickersham & Taft LLP has a new article that was recently published in 81 Fordham Law Review (2012) titled "Conflict Minerals Legislation: The SEC's New Role as Diplomatic and Humanitarian Watchdog." SSRN describes it as:
"Buried in the voluminous Dodd-Frank Wall Street Reform and Consumer Protection Act is an oft-overlooked provision requiring corporate disclosure of the use of "conflict minerals" in products manufactured by issuing corporations. This article scrutinizes the legislative history and lobbying efforts behind the conflict minerals provision to establish that, unlike the majority of the bill, its goals are moral and political, rather than financial. Analyzing the history of disclosure requirements, the article suggests that the presence of conflict minerals in a company’s product is not inherently material information, and that the Dodd-Frank provision statutorily renders non-material information material. The provision, thus, forces the SEC to expand beyond its congressional mandate of protecting investors and ensuring capital formation by requiring issuers engage in additional non-financial disclosures in order to meet the provision’s humanitarian and diplomatic aims. Further, the article posits that the conflict minerals provision is a wholly ineffective means to accomplish its stated humanitarian goals, and likely will cause more harm than good in the Democratic Republic of Congo. In conclusion, this article proposes that a more efficient regulatory model for conflict minerals is the Clean Diamond Trade Act and the Kimberley Process Certification Scheme."
Thursday, January 3, 2013
The Ninth Circuit issued an opinion in United States v. Philips, a case that includes issues related to mail fraud, money laundering, forfeiture, and alleged government misconduct. The court reversed the district court decision to deny the government's forfeiture application, and affirmed other aspects of the case, including the money laundering conviction. All but one, that is - the mail fraud conviction. Here the court rejected the government's arguments and reversed the conviction.
In a opinion written by District Judge Jed Rakoff (yes, sitting on the Ninth Circuit by designation) we are finally getting to see what we hope he will include in a Part II to his famed mail fraud article published in 18 Duq. L. Rev. 771 (1979-80) titled Federal Mail Fraud (Part 1).
Hon.Rakoff does not cite to himself in this opinion, but his incredible knowledge of this statute definitely shows.He dissects the Supreme Court's decision in United States v. Maze and concludes that "[h]ere as in Maze, the success of Phillip's fraudulent scheme did not depend in any way on the use of the mails."
Too many take for granted the enormous power of the government in its use of the "stop-gap" provision. But it is also important to remember that there are limits - constitutional ones - with this statute. Thank you, Judge Rakoff for reminding us of this. And thank you Washington Appellate Project atty Lila Silverstein for making this argument.
(esp)(with a hat tip to Evan Jenness)
Joel Rosenblatt, Bloomberg, Rajaratnam Agrees to Pay $1.5 Million to Settle SEC Case
Mike Koehler, The Story of the Foreign Corrupt Practices Act
Wednesday, January 2, 2013
It is not often that I praise the Department of Justice ("DOJ"), especially for bringing a prosecution. However, I commend the decision to prosecute -- really prosecute, and not just indict and offer a deferred prosecution -- a UBS subsidiary for its role in manipulating the benchmark LIBOR interest rate. See here.
To be sure, UBS was allowed to offer as the defendant in this case a Japanese subsidiary (UBS Securities Japan Co. Ltd.), for which a conviction would bring considerably less collateral damage than it would upon the parent company. Substituting others for prosecution, whether corporations or individuals, of course, is not a common benefit offered to criminal targets. Nonetheless, for DOJ, bringing a prosecution against a major financial institution, even a subsidiary, is a considerable and commendable step.
Generally, I believe that prosecutions should not be brought against large institutions because of a few rogue employees, unless at least one is a director or "a high managerial agent acting within the scope of his employment and in behalf of the corporation." New York Penal Law Section 20.20(2)(b). See also Model Penal Code Section 2.07. UBS, however, is a serial offender with a history (not alone among Swiss and other banks) as an eager accomplice of money launderers and tax evaders throughout the world. Although UBS' belated and commendable efforts to clean up its act and cooperate deserve credit, in this case DOJ apparently felt it did not make up for its past conduct enough to deserve non-prosecution, and appropriately broke its usual pattern of allowing major financial institutions to avoid criminal convictions.
As a practical matter, one may ask what the difference is between an indictment/deferred prosecution (as occurred in the case of the parent, UBS AG of Zurich) and indictment/conviction if both ultimate results carry huge financial penalties and other requirements, such as monitoring. Aside from the collateral consequences -- which can, as in the obvious case of Arthur Andersen, be fatal to a major financial institution (although I agree to an extent with Gabriel Markoff (see here) that such a fear is exaggerated) -- the conviction here has importance as a symbol, and perhaps also a deterrent in both the specific and general aspects.
Although the huge UBS fines will be borne by current UBS shareholders (not necessarily the same stockholders who benefited from the LIBOR bid-rigging), one would hope that UBS makes an effort to recoup the substantial financial gains through bonuses and other compensation geared to profits that those in leadership and supervisory roles made as a result of UBS' now-admitted criminality even if those leaders were uninvolved or unaware of the wrongdoing. I suspect that there will be no such serious effort, or at least little or no success if there is one.