Friday, June 28, 2013
Amanda Bronstad, Nat L.J., Report: Bribery Prosecutions Revive Following 2012 Lag
Walter Pavlo, Forbes, The High Cost Of Mounting A White-Collar Criminal Defense
Covington & Burling, Senior DOJ Criminal Division Official Rejoins Covington (Daniel Suleiman)
Bernie Madoff Exhibit Opens at Crime Museum here
Wiliiam Shepherd (Chair, ABA Criminal Justice Section; Hollad and Knight, partner), recently testified before the U.S. House of Representatives Committee on the Judiciary Task Force on Overcriminalization. See here and here.
Thursday, June 27, 2013
The mark of the beast is fading a little, at least in the First Circuit. Amidst the hubbub of the Supreme Court's Wednesday rulings, the First Circuit quietly decided that 18 U.S.C. Section 666 can't be read to prohibit gratuities. This sets up a circuit split. The opinion in United States v. Fernandez & Maldanado is here.
Congratulations to Martin Weinberg, David Chesnoff, Kimberly Homan and Jose Pagan, who were on the brief for Appellant Bravo Fernandez. Congratulations to Abbe Lowell and Christopher Man, who were on the brief for Appellant Martinez Maldonado.
Wednesday, June 26, 2013
In Sekhar v. United States, the Supreme Court looked at the question of "whether attempting to compel a person to recommend that his employer approve an investment constitutes 'the obtaining of property from another' under 18 U.S.C. s 1951(b)(2)," the Hobbs Act. The Hobbs Act has been a statute of choice for federal prosecutors in many white collar cases. Its heavy penalty provisions offer increased sentence posibilities when the defendant knowingly and willfully induced someone to part with property by extorionate means and there has been interstate commerce.
In Sekhar, the issue arose from an alleged threat to disclose an alleged affair following a general counsel's written recommendation to a state comptroller not to invest in a fund. Although the jury form offered three options of the possible property of the attempted extortion, the jury selected only the third option - "the General Counsel's recommendation to approve the Commitment." The Supreme Court reversed the Second Circuit finding that this was not extortion.
The Court issued an unanimous holding with three concurrences. Justice Scalia, writing for the Court, stated that:
"As far as is known, no case predating the Hobbs Act - English, federal, or state - ever identified conduct such as that charged here as extiotionate. Extortion required the obtaining of items of value, typically cash, from the victim."
The opinion provides a wonderful history of the Hobbs Act, and highlights how "extortion" requires "obtaining property from another." The Court holds that "[t]he property extorted must therefore be transferable - that is, capable of passing from one person to another." Finding that the alleged property fails here, the Court reverses the convictions. The Court also goes on to say that you need "something of value." The Court states:
"The principle announced there [referencing its prior opinion in Scheidler] - that a defendant must pursue something of value from the victim that can be exercised, transferred, or sold - applies with equal force here. Whether one considers the personal right at issue to be property in a broad sense or not, it certainly was not obtainable property under the Hobbs Act." (footnotes omitted).
Citing to the prior decision in Cleveland, the Court holds that "an employee's yet-to-be-issued recommendation" is not obtainable property. Intangible property is not enough, it must be "obtainable property."
The Court emphasizes that coercion is not extortion, and Congress has not criminalized coercion in the Hobbs Act.
The three-person concurrence (Justices Alito, Kennedy, and Sotomayor), focuses on property and tries to limit the decision by saying that this case is an "outlier and that the jury's verdict stretches the concept of property beyond the breaking point." They reference the rule of lenity and although this concurrence agrees that Congress did not "classify internal recommendations pertaining to government decisions as property," they leave open the possibility that the government could perhaps have prosecuted "under some other theory."
My Commentary -
Bottom line - the government stretched the statute and they were caught.
This decision offers defense counsel strong arguments and requests for instructions in Hobbs Act cases. Limiting the definition of property to "obtainable property" and requiring a clear definition of when "something is of value" are likely to be requests coming from defense counsel in the future.
My advice to the government - - there is real crime out there, please put our valuable resources into prosecuting it!
Tuesday, June 25, 2013
Washington University Law School reports the passing of Kathleen F. Brickey here. The New York Times here called her " the dean of the field." She authored the first casebook in this area, wrote an incredible treatise on Corporate Criminal Liability, a book on Environmental Crimes and authored many articles in the white collar field. (see here). She served as the model professor and author for so many of us that came after her, entering a white collar scholarship world that was carved by her work. R.I.P.
According to a federal defender, "[f]ederal public defenders are facing unprecedented and devastating funding cuts in FY14, and the present plan would reduce budgets by 26% and staff by 33% nationally -- making these offices by far the hardest "hit" federal agency in the country." A leading bar organization has issued a statement of concern. The NACDL here notes that last week, "American's federal indigent defense system, known as the Office of Defender Services (ODS) was demoted." In the year that marks the 50th Anniversary of the Gideon decision, this is sad. What is equally sad to see is that these moves are not cost effective, and could end up costing the taxpayers more. As noted by a federal defender:
"Defender offices would lose some branch offices, have to decline the most complex and resource-intensive cases, cease managing the CJA (contract counsel) panel, and shift so many cases to the CJA lawyers that it would double or treble the CJA costs; note, however, that there has been no increase (rather, a decrease) in the CJA budget, and generally private CJA representation costs a lot more than representation by salaried staff in defender offices. Sequestration cuts to defender offices, ironically then, will substantially increase costs of federal indigent defense, while the Federal Defender offices (the "Flagship" of the U.S. Courts) are crippled."
White collar cases tend to be complex and require significant defense time and cost. With the increased emphasis on cases, such as mortgage fraud, more federal public defenders have become involved in this representation. Without adequate defense counsel the status of prosecuting these cases could be at risk. Equally problematic will be whether those charged with crimes will receive adequate representation. Let's hope the legislature wakes us and does something quickly to correct this situation.
It's a relatively short opinion issued by the Second Circuit, and 24 of the 29 pages pertain to a summary of the holding, facts, and the wiretap order used in this case. For background on the issues raised, the briefs (including amici briefs), see here. Judge Cabranes wrote the majority opinion, joined by judges Hon. Sack and Hon. Carney. A summary of the holding states:
In affirming his judgment of conviction, we conclude that: (1) the District Court properly analyzed the alleged misstatements and omissions in the government’s wiretap application under the analytical framework prescribed by the Supreme Court in Franks; (2) the alleged misstatements and omissions in the wiretap application did not require suppression, both because, contrary to the District Court’s conclusion, the government did not omit information about the SEC investigation of Rajaratnam with "reckless disregard for the truth," and because, as the District Court correctly concluded, all of the alleged misstatements and omissions were not "material"; and (3) the jury instructions on the use of inside information satisfy the "knowing possession" standard that is the law of this Circuit.
Some highlights and commentary:
1. The Second Circuit goes further than the district court in supporting the government's actions with respect to the wiretap order.
2. The Second Circuit agrees with the lower court that a Franks hearing is the standard to be used with a wiretap order where there is a claim of misstatements and omissions in the government's wiretap application. The Second Circuit notes that the Supreme Court has "narrowed the circumstances in which ...[courts] apply the exclusionary rule." But the question here is whether the Supreme Court has really addressed the wiretap question in this context and whether a cert petition will be forthcoming with this issue.
3. Although the Second Circuit uses the same basic test in reviewing the wiretap, it finds that "the District Court erred in applying the 'reckless disregard' standard because the court failed to consider the actual states of mind of the wiretap applicants." The Second Circuit then goes a step further and finds that omission of evidence does not mean that the wiretap applicant acted with "reckless disregard for the truth."
4. The court states that "the inference is particularly inappropriate where the government comes forward with evidence indicating that the omission resulted from nothing more than negligence, or that the omission was the result of considered and reasonable judgment that the information was not necessary to the wiretap application." - This dicta provides the government with strong language in future cases when they just happen to negligently leave something out of a wiretap application.
5. Does the CSX Transportation decision by the Supreme Court call into question Second Circuit precedent? The Second Circuit is holding firm with its prior decisions. But will the Supreme Court decide to take this on, and if so, will it take a different position.
Monday, June 24, 2013
In what should be a surprise to no one, the Wall Street Journal editorial page today launched an attack on James Comey, President Obama's nominee to be the next FBI Director. The primary offenses? Comey's objection to the Bush Administration's illegal warrantless wiretapping and Comey's appointment of Patrick Fitzgerald as Special Counsel to investigate the Valerie Plame leak. The editorial is here. More commentary on this in the next few days.
Coming soon: Professor Podgor's analysis of the Second Circuit's opinion afffirming Raj Rajaratnam's conviction for insider trading violations.