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.
Monday, December 31, 2012
Each year this blog has honored individuals and organizations for their work in the white collar crime arena by bestowing "The Collar" on those who deserve praise, scorn, acknowledgment, blessing, curse, or whatever else might be appropriate. I welcome comments from readers who would like to suggest additional categories or winners (or losers?).
With the appropriate fanfare, and without further ado,
The Collars for 2012:
The Collar for Delay of Game Followed by Strikeout - To the Roger Clemens prosecution team
The Collar for the Most illegitimate Prosecution - To the prosecutors who brought the case against John Edwards
The Collar for "I'm Sorry But I Forgot!"- To the authors of the wiretap application in the Rajaratnam case.
The Collar for the Most Missed Law School Exam Questions by DOJ Attorneys - Discovery Questions
The Collar for the Tim Geithner Lifetime Achievement Award - To Attorney General Eric Holder for acquiescing in Treasury's decision not to indict HSBC or any of its senior officers
The Collar for the Statute Giving Courts the Best Shot at Correcting Poor Legislative Drafting - False claims (18 U.S.C. s 287) for Congress' failure to specify materiality and willfulness
The Collar for the Most Likely to Receive a Pardon - DOJ's pardon attorney
The Collar for Best Job at Protecting Your Own - To the DOJ's Office of Professional Responsibility for its report and recommendation on the Stevens case
The Collar for the Most Likely to be Indicted - Your choices are: Governor, Senator, Mayor, recreational pot smoker
The Collar for the Best Legal Treatise - Holder & Breuer on White Collar Declinations (Publication forthcoming in four years)
The Collar for the Show Least Likely to Survive a Season - An FCPA case
The Collar for the Agency to Have the Highest Number of Early Retirements - Tied between the SEC and State Department
The Collar for the Most Likely to Survive a Spill - BP
The Collar for the Best Attempt to Alleviate the Financial Crisis - DOJ's Nearly $5 BIllion Recovery in False Claims Act cases
The Collar for the Worst Attempt to Alleviate the Financial Crisis - DOJ's Failure to prosecute financial institution fraud
The Collar for the Most Likely to Be Visiting a Prison Camp - Former middle management executives of companies that enter into Deferred Prosecution Agreements
The Collar for the Most Likely to Come Closest to Playing "Who Wants to Be a Millionaire" with Donald Trump - Monitors under deferred prosecution agreements
The Collar for the Best Parent - retired years ago and renamed the Bill Olis Best Parent Award - unawarded this year since no one comes even close to Bill Olis, may he rest in peace.