Monday, June 30, 2014
Campaign finance law-election law-lobbying law gurus Elliot Berke and Bill Farah have left McGuire Woods to form their own political law/white collar shop at Berke Farah LLP. Helping them out as senior consultant is veteran DC white-collar hand John Kern, who will also maintain his separate practice. Elliot, Bill, and John are something of a rarity in DC. Seasoned professionals who quietly and discreetly get the job done with a minimum of self-promotion. (Although Elliot comes from the GOP side, he was one of the first members of the campaign finance bar to criticize the dubious prosecution of former Senator John Edwards.) Best of luck to them all.
Friday, June 27, 2014
This past Wednesday's Supreme Court decision in Riley v. California stressed the importance of law enforcement needing to obtain a warrant if they sought to search digital information contained on a cell phone that had been seized from the individual. From this decision we can see that the Fourth Amendment is alive and well in the Supreme Court.
But is that the case in the Manhattan District Attorney's Office? Larry Goldman notes here on the White Collar Crime Prof Blog that the District Attorney's Office recent prosecution in a computer related case had 4th Amendment problems. And this morning's New York Times article by Vindu Goel and James McKinley, Jr., Facebook Bid to Shield Data From the Law Fails, So Far shows how the Manhattan district attorney's office has been obtaining Facebook information using demands for documents from Facebook without notification to the individuals who posted the information on Facebook, and precluding Facebook from notifying them. Admittedly in this instance the Manhattan DAs Office did obtain a warrant, but Facebook and individuals who had items being obtained from Facebook were precluded from fighting the warrant. According to this article, Facebook has continued to fight these warrants and hopefully a court will see the importance of having oversight when it comes to overbroad computer related searches.
One of the possible ramifications of what the Manhattan D.A. is doing it that when cases eventually come to court, the overbreadth of these searches will be raised. And hopefully attorneys handling these cases will have been alerted by this posting, the New York Times article, and other media sources who may be reporting on these events. But it is hard to believe that all the information received by the Manhattan DA will be used for a prosecution, and many of these individuals will never know that their privacy had been compromised. As we move further into a digitial age, the principles of the Fourth Amendment need to be maintained. Judges reviewing these search warrants need to provide clearer oversight when granting a warrant, especially when terrorism is not the focus of the search.
Tuesday, June 24, 2014
One of the more fascinating cases around is the case of former Goldman Sachs programmer Sergey Aleynikov. Aleynikov was convicted in the Southern District of New York for stealing secret high-frequency trading computer code from Goldman Sachs and sentenced to eight years in prison. His conviction was reversed by the Second Circuit on the grounds that his actions were not covered by the federal statutes under which he was charged. Aleynikov had already served a year in prison.
Then, Manhattan District Attorney Cyrus Vance, apparently provided the testimonial and tangible evidence used in the prosecution of Aleynikov by the U.S. Attorney, decided to prosecute him in state court under state statutes, a decision I criticized because it violated at least the spirit of double jeopardy protection (see here). Last week, a New York State judge threw out much of the evidence underlying the state prosecution on the ground that Aleynikov's arrest and related searches by federal agents were not supported by probable cause that he committed the underlying federal crimes, even though the agents acted in good faith. See here. New York has rejected on state constitutional grounds the "good faith exception" to unlawful searches applicable in federal courts. Compare People v. Bigelow, 66 N.Y.2d 417 (1985) with United States v. Leon, 468 U.S. 897 (1984). Mr. Vance's choice now is either to concede that the judge's suppression has made his case untriable and make an interlocutory appeal or go forward to trial without that evidence (or, of course, move to dismiss the case).
Ironically, Goldman Sachs, the purported victim of Aleynikov's alleged criminality, is laying out millions of dollars to afford Mr. Aleynikov the energetic and aggressive defense his lawyer, Kevin Marino, is providing. A New Jersey federal judge last October ordered Goldman to advance Mr. Aleynikov's legal fees based on a corporate bylaw that required it to advance legal fees for officers charged in civil and criminal proceedings. Aleynikov v. Goldman Sachs (Civ. No. 12-5994, DNJ, October 22, 2013).
Thursday, June 19, 2014
According to a May 12, 2014 article in the National Law Journal (Tony Mauro, "DOJ's Quiet Concession: U.S. gives up a widely decried charging theory."), the Department of Justice has quietly narrowed the scope of 18 U.S.C. 1001, the statute that makes lying to an FBI or other government agent a five-year felony. The statute -- perhaps most notably used to send Martha Stewart to jail when the government couldn't make out an insider trading case against her -- makes it a crime to "knowingly and willfully" make materially false statements in any matter under federal jurisdiction, including lying to an FBI agent. The government now has conceded that, in order to prove that a defendant accused of a Section 1001 violation acted "willfully," it must show that she knew that her action making or providing a false statement was unlawful.
The change in government attitude was mentioned in low-profile submissions to the Supreme Court containing confessions of error. The Supreme Court has already returned at least two cases to lower courts for further consideration in light of the concessions.
The most questionable use of the statute, in my opinion, has occurred when agents without prior notice confronted an individual about a purported crime she committed and elicited a knee-jerk exculpatory false denial (although such denials are now to my knowledge infrequently prosecuted). Prosecutors and agents may now have to forego prosecutions where targets or witnesses lie to them (in the field or their offices) or alternatively give those targets and witnesses a warning that a false response to the government questions is unlawful., which, of course, may discourage them from talking.
(Hat Tip to Monroe Freedman and Steve Lacheen.)
Wednesday, June 18, 2014
With the growing internationalization of business crime, the question of when a foreign national may be extradited to the United States for crimes charged in the United States is arising more frequently. Generally speaking, under the requirement of "dual criminality," a resident of a foreign country charged in the United States will not be extradited if the country he is residing in does not deem his conduct criminal. If, however, that person travels from his "safe haven" home country to another country (even in transit) where such conduct is criminal, he may be extradited.
As reported in a recent Wilmer Hale article, see here, Romano Pisciotti, an Italian citizen charged with an antitrust bid-rigging violation in 2010, this April was extradited from Germany after the connecting flight on his trip from Nigeria to Italy landed there. Germany generally criminalizes bid-rigging; Italy generally does not. Presumably, had Pisciotti not left Italy, he would not have been arrested.
Pisciotti's extradition demonstrates that foreign residents indicted in the United States who are not extraditable from their home country (some nations, like Germany, will not extradite its own citizens other than to another European Union country or the International Criminal Court, for instance) take a considerable risk whenever they travel away from their country of residence.
Libby Longino, Women and White-Collar Crime
James Aldridge, San Antio Business Journal, Three San Antonio PEO owners sentenced for fraud (discussing the largest tax fraud case in San Antonio - Lawyer Gerald Goldstein represented an individual who received probation - and this was without a 5K1.1).
Paul Hastings Press Release, Seasoned Government Lawyer Joins Paul Hastings in New York as Firm Continues Growth of Investigations and White Collar Defense Practice (John Nowak - who was Deputy Chief of the Business and Securities Fraud Section of U.S. Attorneys Office, ED New York)
Paul Hastings Press Release, Respected White Collar Team Joins Paul Hastings in Washington, DC (Michael Levy, Michael Spafford, Amy Carpenter-Holmes).
Blank Rome Press Release, Blank Rome Welcomes New White Collar Defense Of Counsel Jed M. Silversmith
Tuesday, June 3, 2014
If it was not such a serious abuse of power, it would almost be funny. It certainly has its comic elements. Wallace Hall is a Member of the University of Texas System Board of Regents, appointed to that position in 2011 by Governor Rick Perry. The Board of Regents is the governing body for the entire University of Texas System. Hall started snooping around and uncovered several things that troubled him, including:
1. An allegedly secret forgivable loan program for favored law professors at the University of Texas School of Law.
2. Allegedly incorrect accounting treatment of certain in-kind donations to the University's fund-raising campaign. The University had to restate its fund-raising figures after the Council for the Advancement and Support of Education rejected the school's accounting theory.
3. Admission of students to the University of Texas School of Law who had LSAT scores below the average for entering U.T. Freshlaws. Some of the admitted students were related or connected to powerful state legislators with key roles in funding the university and law school.
That last revelation was apparently too much for the legislature (or "the leg" as we called it in my day) and impeachment hearings were commenced by the House Select Committee on Transparency in State Agency Operations ("Transparency Committee").
As I said, the controversy has had its comic moments. The Transparency Committee voted to recommend impeachment of Hall before deigning to draft any Articles of Impeachment. And Transparency Committee Co-Chair Dan Flynn wrote a public letter stating that: 1) there were insufficient grounds to impeach Hall; 2) Hall should resign anyway; and 3) Hall should be impeached if he did not resign. When Hall refused to resign, Flynn voted to impeach him. (The Texas Tribune has a good story here on Flynn's remarkable letter and the response he received from Representative Eric Johnson. Both letters are attached to the story in PDF format.)
The fight between Hall and the legislature is apparently part of a larger years-long battle between th Board of Regents and UT President Bill Powers. The Regents have Governor Perry and company on their side and Powers has legislative allies on his. I'm not concerned about that. I have reviewed Hall's purportedly impeachable offenses and find the allegations against him unpersuasive, but I would not be writing about these things on a white collar blog if impeachment hearings were the only thing going on. Unfortunately, there's more.
The Transparency Committee's Co-Chairs also referred Hall to the Travis County District Attorney's Public Integrity Unit, which has opened an investigation into possible criminal wrongdoing by Hall. This is the same office that brought dubious charges against former U.S. House Speaker Tom DeLay and has a long history of questionable public corruption prosecutions. The Public Integrity Unit is an odd creature of Texas law, housed in the Travis County DA's Office with statewide jurisdiction to investigate and prosecute state officials. The old Travis County DA was Ronnie Earle. The current Travis County DA is Rosemary Lehmberg, an Earle disciple, who refused to resign from office after pleading guilty to Driving While Intoxicated.
One of the House Transparency Committee members made the mistake of asking the U.T. System to review whether Hall had violated state or federal law. The U.T. System hired outside counsel Philip Hilder, a nationally known and well-regarded white-collar heavyweight, to research the issue and write a report. The Hilder Report found "no credible evidence" that Hall violated the Texas Government Code or "any other state or federal law."
In a normal world Hall would be breathing easier. But with the Public Integrity Unit lurking in the background, anything is possible.
To me Hall looks like a classic whistle-blower, albeit a powerful one. He may not have the purest of motives. I really don't know and certainly don't care. But he has uncovered, or helped to uncover, potentially serious problems in the U.T. System. His reward? A criminal referral by the powerful interests whom he has offended. And that is an outrage.
Monday, June 2, 2014
Second Circuit Reverses Convictions Due to Prosecutorial Misconduct and Exclusion of Good-Faith Evidence
The Second Circuit Court of Appeals, which issues complete reversals in only about five percent of the criminal cases it hears, last week in an opinion by Judge Jed S. Rakoff (sitting by designation) reversed the trial conviction of two individuals and a corporation for environmental crimes involving asbestos removal, and ordered a new trial. United States v. Certified Environmental Services, Inc., et al. (see here). The reversal was based on the denial of a fair trial due cumulatively to the exclusion of evidence of good faith to demonstrate the defendants' lack of intent (an issue not discussed here) and prosecutorial misconduct in improper "bolstering" during the opening and closing arguments. The Court denied that part of the defendants' appeal based on Brady v. Maryland.
The decision does not concern any novel legal grounds. Perhaps most significant in the white-collar area is its detailed discussion of the proper and improper use by prosecutors of the cooperation agreements their witnesses commonly enter into with the government. Since many, probably most, white-collar cases involve cooperating government witnesses, prosecutorial introduction of and comments on cooperation agreements frequently occur in white-collar trials. Here, the prosecutor improperly bolstered the witnesses' testimony on numerous occasions, both in the opening and closing arguments, by referring directly and indirectly to the self-serving language that prosecutors routinely place in the cooperation agreements they draft to the effect that the witnesses are obligated to tell the truth. Prosecutors and defense attorneys would do well to review the opinion to determine when and how the government may disclose and use the truth-telling requirement language of cooperation agreements during testimony and in argument.
The opinion also excuses, but does not condone, the improper failure of the government to turn over handwritten notes by a testifying agent which were discovered in the later examination of another agent and belatedly revealed to the defense. The notes should have been revealed earlier, says the Court, not only since they included evidence favorable to the defense, but also pursuant to Fed. R. Crim. Pro. 16(a)(1)(B)(ii), a discovery rule, and 18 U.S.C. 3500, the Jencks Act. However, since the notes were, however belatedly, turned over and the defense had an opportunity to review them, examine the later-testifying agent about their content, and recall the earlier witness if it chose, and since their timely disclosure would not have changed the verdict, in any case there was no Brady violation. The opinion thus demonstrates that late provision of Brady (or Rule 16 or Jencks) by the government during trial will virtually never be grounds for reversal, at least not in the Second Circuit.