Thursday, May 29, 2014
Credit Suisse Conviction Does Not Demonstrate Substantial Change In Department Of Justice Enforcement
The Department of Justice (DOJ) and Attorney General Eric Holder were strutting last week over the criminal conviction by plea of guilty of Credit Suisse, a major financial institution. "This case shows that no financial institution, no matter its size or global reach, is above the law," declared the Attorney General. Recent prosecutions of major financial institutions had resulted in lesser results, "deferred prosecutions," a somewhat deceptive term for "delayed dismissals," or a guilty plea by a minor affiliate.
The Credit Suisse guilty plea does not represent a sea change in the attitude of DOJ toward major financial institutions; rather, it appears to be a small ratcheting-up of the baseline penalty for serious criminal financial acts by such institutions. Credit Suisse, despite paying a hefty $2.6 billion fine, will not suffer the severe collateral consequences that ordinary individual defendants do upon a criminal conviction. (See here, NACDL's report "Collateral Damage: America's Failure to Forgive or Forget in the War on Crime -- A Roadmap to Restore Rights and Status After Arrest or Conviction," released today, Thursday, May 29, 2014.) It will still be able to act as an investment advisor, due to waivers agreed to by federal and New York State governmental agencies. Thus, its conviction, according to its chief executive Brady Dougan, will not have "any material impact on our operational or business capabilities." In other words, for Credit Suisse, it will be business as usual.
I hold no sympathy for Credit Suisse. Its crimes, continuous and notorious, have enabled American citizens and citizens of other countries to launder and evade tax payments on billions of dollars. In effect, Credit Suisse (not alone among Swiss banks) (see here) was a criminal enterprise, for many years making huge profits from extraordinary fees for its knowing and willful provision of a presumably safe haven for untaxed income, ill-gotten or otherwise. Mr. Dougan had stated to a Senate hearing in February that the tax evasion scheme was the work of a small group of private bankers that was hidden from senior management. That hard-to-believe claim was challenged in a statement by Schweitzerisher Bankpersonalverband, the organization representing the bank's employees: "It was common knowledge that tax evasion was the strategy, a business model pursued by many banks for a long time." See here.
To be sure, Credit Suisse's crimes did not cause the vast hardship to tens of millions of Americans that the wrongs -- criminal or not -- of other major financial institutions did in the last several years. And, further, its acts -- while subject to the long-arm jurisdiction of American courts -- were apparently legal under Swiss law, and seemingly condoned by the Swiss government.
Some commentators have suggested that there is considerable unfairness in prosecuting corporations for acts of low- or mid-level employees without knowledge of corporate leaders (see here), a position with which I generally agree. The demi-prosecution of Credit Suisse, however, does not appear to fit within that category, despite Mr. Dougan's claim. I see no unfairness in the government's requiring Credit Suisse to plead guilty.
I do, however, wonder about the effectiveness of the insistence on a guilty plea if the collateral consequences are waived. The conviction of a major financial institution with a considerable financial penalty but a waiver of regulatory bars is to me little different from a civil finding of wrongdoing with such a penalty. Other than its current status as a convicted felon, Credit Suisse today is essentially in the same position it was two weeks ago.
Given the legitimate (but probably exaggerated) fear that a felony conviction of a major financial institution without regulatory waivers will have on its existence and thus on the economy and societal well-being, it may well be that guilty pleas (and trial convictions too) of such corporations should be accompanied by limited collateral consequences. Such prosecutions, however, will then serve little more than a symbolic purpose (which I accept as a legitimate purpose). Overall, DOJ's prosecution to conviction of Credit Suisse is a positive step, albeit a small one.
The resolution here suggests again that the criminal process is inadequate to prosecute large financial institutions. Society looks to the criminal law to solve far more problems than the criminal law is capable of solving. Meaningful reform of a flawed financial system will not come from criminal prosecutions of corporations, but, if at all, from strong, substantial regulatory rulemaking and non-criminal legislation.
Wednesday, May 28, 2014
Tim Tucker, AJC, Jury finds Jim Donnan not guilty on all counts (he was represented by Ed Tolley & Jerry Froelich)
David Deitch, Crime in the Suites, Another SDNY Judge Finds the U.S. Sentencing Guidelines Wanting
Thursday, May 22, 2014
The Department of Justice (DOJ) on May 12, 2014 issued a memorandum creating "a presumption" that the Federal Bureau of Investigation (FBI), Drug Enforcement Agency (DEA), Bureau of Alcohol, Firearms, Tobacco and Explosives (AFT) and United States Marshals Service (USMS) electronically record, if possible videotape, post-arrest statements made by individuals in their custody in a place of detention, essentially FBI and local police offices and detention facilities, where the facility has suitable equipment. Additionally, agents and prosecutors are encouraged to consider electronic recording in circumstances where the presumption does not apply. This policy is not intended to create any enforceable rights for arrestees.
This is a significant change and DOJ should be commended. Historically, the FBI, in particular, has resisted recording conversations and in fact has had a formal policy prohibiting it without special permission from a supervisor. FBI memoranda stated that recording "may interfere with and undermine . . . successful rapport building techniques" and that "perfectly lawful and acceptable interviewing techniques do not always come across in recorded fashion to lay persons as proper means of obtaining information from defendants." A transcript of the testimony of an FBI agent in a 2013 trial reads:
Q: Does the FBI have a policy of recording interviews?
A: We do not record interviews.
Civil liberties and defense lawyer groups have been seeking such a policy for well over a decade. Indeed, I wrote an NACDL president's column on the subject in December 2002. The cynical have believed that the FBI refusal to record investigations was in order to allow agents to use tough, deceptive and coercive methods to induce confessions and then testify to a sugar-coated sanitized version of the interrogation. The more cynical have believed it gave FBI agents a license to lie with impunity about what the defendants said or did not say.
I believe recording interrogation is a win-win situation. Jurors will be able to see and hear the circumstances surrounding the questioning and the specific words and tones used by the agents and the defendant. Agents will be discouraged from shading testimony as to their methods and the defendant's statements. Defendants and defense lawyers will be unable to argue effectively that the defendants did not make the statement they actually did or claim that they were beaten or coerced when they were not.
To be sure, the memorandum does not require, as some civil liberties and defense lawyer groups have advocated, that the recording begin at arrest. Thus, there still remains the possibility that agents will coerce statements on the way to the place of detention and lie about it or falsely state that the defendant confessed, or that defendants who did make admissions upon arrest will deny it before the jury.
Nonetheless, this is an important positive step toward presenting the triers of fact with accurate best-evidence versions of events so that they will reach a more just determination. It will reduce the number of unjust convictions and perhaps unjust acquittals also. Every law enforcement agency -- federal, state and local -- should adopt such a policy, absent special reasons. The federal government should require it as a condition of a state police agency receiving federal support.
(I just received notice that Martin Tankleff, who was released from prison in 2007 after serving 17 years upon a wrongful conviction for killing his parents based on a false confession when he was 17 years old, will graduate from Touro Law School this Sunday. Had Marty's confession been recorded, Marty would very likely not have been convicted. Marty has vowed to dedicate himself to becoming an advocate for the wrongfully convicted. Congratulations, Marty; consider this policy a graduation present from DOJ.)
Wednesday, May 21, 2014
Two New York State legislators have proposed the creation of a state commission on prosecutorial misconduct to review and investigate complaints of prosecutorial misconduct and to discipline prosecutors who have been found to have acted improperly. See here.
The proposed commission would, it is said, be the first in the nation of its kind. It will be modeled upon New York's Commission on Judicial Conduct, which investigates allegations of misconduct by judges and, if misconduct is found, may discipline a judge by public admonition, censure or removal from the bench.
Virtually every state (but not the federal government) has a commission on judicial conduct and these commissions, it is generally agreed, have had a positive effect in limiting judicial misconduct, removing unfit judges who had committed serious misconduct and increasing public confidence in and awareness of the workings of the court system. (I note that I am a past chair of New York's Commission.) There is, I believe, no good reason that there should not be an analogous agency to review instances of alleged prosecutorial misconduct, sanction offending prosecutors, and remove the most serious offenders from their positions. Indeed, there are stronger reasons for a commission concerning prosecutorial misconduct than for one concerning judicial misconduct. Much of the most serious prosecutorial misconduct, such as concealing exculpatory material and suborning perjury, occurs in the investigative and preparatory stages of a case and is hidden from the view of judges, defense attorneys, and the public and thus not detectable and reviewable by a court. Almost all judicial misconduct, on the other hand, occurs on the bench in public view, is recorded and observed by lawyers and the public, and is readily reviewable by appellate courts.
With rare exception, see here, prosecutorial misconduct has gone unpunished by prosecutorial offices, bar disciplinary committees and judicial authorities. Although grievance committees have authority over the improprieties of prosecutors as much as other lawyers, they have historically shown little interest in sanctioning prosecutorial misconduct. See, e.g., Gershman, Reflections on Brady v. Maryland, 47 S. Tex. L. Rev. 685 (2006); Yaroshefsky, Wrongful Convictions: It is Time to Take Prosecution Discipline Seriously, 8 D.C. L. Rev. 275 (2004). Similarly, judges, even when they reverse a conviction due to egregious prosecutorial misconduct, almost always conceal the prosecutor's identity and rarely refer the prosecutor for professional discipline. And, prosecutorial offices themselves often defend on appeal and thus ratify even serious misconduct of line prosecutors, and fail to sanction even those prosecutors whose serious misconduct they concede. See, Rudin, The Supreme Court Assumes Errant Prosecutors Will Be Disciplined By Their Offices or the Bar: Three Case Studies That Prove That Assumption Wrong, 80 Fordham L. Rev. 537 (2011).
Further, potentially criminal misconduct by judges may be investigated and prosecuted by the District Attorney, an agency wholly independent from the judiciary. However, except in the extremely rare instances where a special prosecutor is appointed, potentially criminal misconduct by prosecutors generally may only be investigated or prosecuted by the very same prosecutorial office that committed that misconduct, which in almost all instances will be hesitant to prosecute one of its own and embarrass the office.
Additionally, there is a stark imbalance in the adversarial criminal justice system where one adversary -- the prosecutor -- may criminally charge the other adversary -- the defense attorney -- when he tampered with evidence or suborned perjury, but where the defense attorney who believes the prosecutor committed such criminal acts may only make a shout in the wilderness by a futile complaint to an overprotective disciplinary agency with no criminal prosecution power. A commission on prosecutorial conduct will not wholly right this imbalance, but will tilt it in the right direction.
Tuesday, May 20, 2014
The sentencing of three former Wellcare individuals demonstrates the importance of having the guidelines as advisory, and the importance of an independent judicary that can recognize that sentences should be about individuals and not about arithmetic. (see here) Hats off to Hon. James S. Moody for being a judge that went beyond the math in sentencing the individuals and for his recognition that the stigma and collateral consequences of a conviction for a white collar offender are huge. With little chance of recidivism, strict guideline sentences were unwarranted here. (see here)
The court gave Todd Farha three years (significantly below the number asked for by the government). Paul Behrens received a sentence of 24 months; William Kale a year and a day, and Peter Clay 60 months of Probation. The attorneys representing these individuals were:
Todd Farha: Barry Boss, Stephen Miller, Rebecca Brodey, Seth Waxman, Peter Neiman, Alan Schoenfeld, Robert Stauffer, Laura Vaughan
Paul Behrens: John Lauro; Jeffrey Lamken; Michael Matthews, Michael Califano
William Kale: Stan Reed, Patrick Donahue, Lauri Cleary, Larry Nathans
Peter Clay: Bill Jung, Larry Robbins, Donald Burke.
Sunday, May 18, 2014
Blank Rome hires Carlos Ortiz as a partner in the White Collar Defense and Investigations Group- here
Scott Neuman, NPR, Congress Holds Former IRS Official Lois Lerner In Contempt
Tony Mauro, NLJ, U.S. gives up a widely decried charging theory
Todd Ruger, Legal Times, Leslie Caldwell Confirmed to Lead DOJ Criminal Division
Friday, May 16, 2014
Here is an unusually sophisticated article about a white collar topic in today's NYTimes. The piece, by Floyd Norris, probes what are essentially debarment waivers obtained by many financial and brokerage institutions as part of their global deals with DOJ and SEC. A guilty plea or deferred prosecution agreement with DOJ, accompanied by an SEC fine and censure, in the past may have been a company's death knell. Now it is just another cost of doing business. Naturally, guilty pleas still look bad and companies want to avoid them. But there's a rather large difference between a short-term public relations nightmare (or even a long-term and expensive monitoring agreement) and a firm's demise. So when government officials say that no companies are too big to jail or too big to fail, it is important to understand the context of the particular global agreement in question. Because a company can't be jailed, and if the company is big and important enough, it won't be allowed to fail.
Thursday, May 15, 2014
An amici brief was filed by a group of law professors and practitioners in support of three defendants in United States v. Farha. It's unusual to see amici coming in at the trial level, but this esteemed group offers some important reasons for allowing this brief.
They note "that this case highlights a serious problem facing federal sentencing judges today - namely, that the federal sentencing guidelines as currently written place too much emphasis on economic 'loss' and too little emphasis on other factors that traditionally have been important factors in determining a fair and just sentence that takes full account of the factors set forth in 18 U.S.C. s 3553(a)." In addition to discussing the distortion caused by the loss guidelines, the authors of this brief also note how other judges have recognized that focusing on loss under the guidelines presents problems. As aptly noted by Hon. Jed Rakoff, the guidelines "tend to place great weight on putatively measurable quantities, such as .....the amount of financial loss in fraud cases, without however, explaining why it is appropriate to accord such huge weight to such factors." (United States v. Adelson).
Hopefully the court will note the growing number of judges that reject strict adherence to a sentence that is ascertained solely by examining numbers and will remember that we sentence people, not numbers.
See Amici- Download AmiciBrief
Tuesday, May 13, 2014
Josh Greenberg and Ellen Brotman have written a timely and informative article entitled Strict Vicarious Liability for Corporations and Corporate Executives-Stretching the Boundaries of Criminalization for Volume 51 of the American Journal of Criminal Law. The article, and related pieces on criminal liability in the corporate context by Mark Filip, Julie O'Sullivan, Barry Pollack and others, can also be found on the Journal's website at http://www.americancriminallawreview.com/.
Thursday, May 8, 2014
Howard University School of Law is hosting a conference in honor of Andrew Taslitz, who died on February 9, 2014. It is not a traditional symposium, for we expect concurrent sessions on many subjects. It is open to people who knew Taz and to those who were inspired by his writing or teaching. If you would like to take part in the live event, please submit an abstract by May 30, 2014 to the co-chairs named below. The conference is free but speakers must pay their own way.
Send abstact to co-chairs:
Josephine Ross JRoss.firstname.lastname@example.org
Lenese Herbert LHerbert@law.howard.edu
Ellen Podgor EPodgor@law.stetson.edu
For more details, see here - Download Andrew Taslitz Galaxy
Monday, May 5, 2014
This morning in Robers v. United States (2014), the U.S. Supreme Court resolved a circuit split and unanimously affirmed the Seventh Circuit. The Mandatory Victim Restitution Act of 1996 requires offenders to pay their victims "an amount equal to...the value of the property" taken, minus "the value (as of the date the property is returned) of...the property that is returned." The Supreme Court, through Justice Breyer, held that the "property" in question is money, rather than real property. Thus, Appellant's argument that his criminal restitution judgment, payable to the bank he defrauded through his straw purchases, should have been reduced by the value of the two properties securing the two loans on the day that the bank took the properties back, was rejected. The sentencing court had determined its restitution figure by subtracting the amount of money the bank received through sale of the two houses from the original loan amount. The Court approved this approach. The Court did note that the statute has a proximate cause component and that offenders may be able to show in some instances that intervening factors broke the causal chain. But Appellant failed to make this argument at the district court level. Justice Sotomayor, joined by Justice Ginsburg, joined in the Court's opinion, but expounded upon the proximate cause issues in a separate concurrence.
Saturday, May 3, 2014
Yesterday in United States v. Shawn Sayer, the First Circuit ruled that that a portion of the federal cyberstalking statute, 18 U.S.C. Section 2261A (2) (A), is constitutional as applied to defendant Sayer's actions and is not facially overbroad. The Court held that Sayer waived his void for vagueness challenge. The facts were undisputed and the case involved a multi-year effort by Sayer to harass his ex-lover by, among other things, posting their intimate sex tapes on pornographic web sites and inviting male strangers to contact her for sexual activity. The Court also approved the trial court's upward variance/departure.
Thursday, May 1, 2014
Well. It's complicated.
Can your co-conspirator also be your victim? Your darn tootin' he can, under the Hobbs Act, according to the Fourth Circuit.
In 2007, the Sixth Circuit ruled that the victim of a Hobbs Act conspiracy must be a person outside of the alleged conspiracy. The case is United States v. Brock, 501 F.3d 762 (6th Cir. 2007). This decision seems to have common sense on its side. How can your victim be your co-conspirator, unless you are the Symbionese Liberation Army?
Prior to Brock, the Fourth Circuit had taken a more nuanced and sophisticated view in United States v. Spitler, 800 F.2d 1267 (4th Cir. 1985). There the Fourth Circuit noted a difference between "mere acquiescence" by an extortion victim, which would NOT render him a Hobbs Act co-conspirator, and "active solicitation", which would. "Refusing to paint with a broad brush," the Court ruled that Spitler's conduct was closer to "active solicitation" than "mere acquiescence."
On Tuesday, in United States v. Samuel Ocasio, the Fourth Circuit refused to abandon Spitler in favor of Brock. Ocasio involved the notorious Baltimore City Police Department towing scandal, in which city cops steered accident victims to a particular towing service in return for kickbacks. Ocasio, a former Bawlmer cop, claimed that, as a matter of logic, he could not have conspired with the towing service owners who were his alleged victims. The Fourth Circuit disagreed, applied the Spitler test, and found the towing service owners' actions closer to "active solicitation" than "mere acquiescence." According to the Court, the plain and unambiguous text of the Hobbs Act compels the conclusion that one CAN conspire with one's victim.
Hat Tip to Lonzo and Oscar.