Thursday, March 3, 2011
This afternoon breakout session on public corrruption was moderated by Joshua R. Hochberg (McKenna, Long & Aldridge).
Jack Smith, Chief of the Public Integrity Section of the Criminal Division of the Department of Justice,spoke about how his office was moving cases along. He stressed the importance of maintaining the deadlines that are established. He also stated he has not found a problem finding statutes to use when bringing state and local corruption cases post the Supreme Court's modification of 1346. He said that other statutes are available to bring conflict of interest cases.
Robert M. Cary, a partner in the Washington, D.C., office of Williams & Connolly LLP, noted the lack of transparency in discovery. Until there is an enforceable rule, it will be a problem.
Laura A. Miller, Nixon Peabody LLP, said that "successful representation is when my name and my client's name does not appear in the press."
Patrick M. Collins, Perkins Coie LLP questioned why the government can't go the extra mile and have open file discovery.
The panel discussed the Speech & Debate Clause and how it can affect a case. They also looked at discovery issues - Laura Miller noted the lack of uniformity on discovery issues. She mentioned how in the "rocket docket" they receive Jencks material the Friday before trial. Jack Smith said that if it is close - turn it over.Jack Smith said they sometimes he will highlight documents for the defense. He recognized his duty to go through documents and find Brady material. Laura Miller noted that we should all work together to manage discovery. A final topic discussed was venue.
(esp)(blogging from San Diego)
The luncheon speaker was not Attorney General Holder, as had been planned. Filling in for him was Deputy Attorney General James Cole. DAG Cole noted the high level of justice department experience at the top of the office. He said that what is different today from in the past is terrorism. He noted that a lot of resources in law enforcement were going to terrorism. He said it was important to reinvigorate important parts of the DOJ mission. He spoke about some of the accomplishments in the white collar area, such as in the civil division in 2010 - 2.5 billion dollar from cases - the largest health care fraud case. He also spoke about initiatives on health care and financial fraud.
(esp)(blogging from San Diego)
The opening panel of this morning discussed some recent white collar cases: Karatz (alleged options backing); WebMD (alleged financial statement fraud), and Petters (alleged Ponzi scheme). Ronald J. Nessim was listed as moderating this panel, but Vince Marella filled in for him. Particularly interesting were the remarks of John Lauro, who talked about how a group of defendants stuck together for a long time - and the importance of this for the case. Both he and John Keker discussed the initial corporate investigation in their cases and how the companies did not conduct it with a purpose to demonize their clients, although in one instance the later relationship might not have been as amicable.
In the Petters case, the prosecutor explained how the case came to light and how quickly it moved forward. This was contrasted with the WebMD case where there was no discussion with the prosecutors. What was noted in the WebMD case was the importance of having resources to make the case - Lauro said it would not have been possible without resources.
John Lauro explained that one of the biggest challenges for the defense was the discovery. He also explained how a Daubert challenge allowed them to educate the judge about the case.
I only wish I could have stayed to listen to more of this fascinating presentation - but off to a meeting for my panel on ethics.
(esp)(blogging from San Diego)
Wednesday, March 2, 2011
The opening session titled, Fundamentals of White Collar Investigations, had each panelist providing some pointers on the white collar criminal practice. Moderating was Jodi L. Avergun. The first speaker, Hon. Melinda Haag - US Attorney in San Francisco, opened by telling what folks who are newer to the practice do that irritate them - in other words their pet peeves:
The culture in criminal practice is very civil (not necessarily true of the civil side). There is no need for a lack of professionalism, and no need for sharp practices - the nastiness isn't necessary.
Be conscious of obstruction of justice. When agents are executing a search warrant the US Attys Office they may get a call from counsel saying claiming to represent everyone in the company. Think about the conflict issues. She said that calling us up and telling us you represent the world doesn't go well with them.
We don't like when the attorney tells everyone not to cooperate with us - safer to tell them what their rights are.
Failing to produce something to us and it comes out later that this was a conscious decision can have ramifications.
Criminal defense lawyers who get in the way when there is a search warrant is a problem.
Lack of respect for the government and the power that they have.
Making unfounded allegations of prosecutorial misconduct - the phrase is being thrown around too lightly.
Don't come in too soon to speak to the US Attorney's Office - be skeptical of what your client is telling you
The second speaker, David Gerger offered "A Pep Talk for Going the Distance":
- Many times we look at the same facts and see different things - the agents see the evil intent and you may see a reason for the conduct - you look for the good as defense counsel
- Start out fighting and having respect and compassion for your client
- Your credibility with the prosecutor is critical
The third speaker, Matthew W. Friedrich, spoke on Can a Civil Litigator be a White Collar Criminal Defense Attorney? Key Differences -
- There are differences between civil and criminal practice - for one the balance of power; on the civil side they can take depositions and it is a long rode - with criminal things it can be quick - things can happen fast and not be subject to delay (you may need to address cooperation immediately); third party discovery requires specificity - this can be difficult to articulate; in civil cases tort victims win 50% of the time - that is not the case in criminal matters
- He agreed that the criminal side is more collegial than the civil side
The fourth speaker, David B. Pitofsky, spoke on Managing Client Expectations and Other Client Relationship Issues in White Collar Cases-
- You have a confused scared individual; you need to build trust but also have to have skepticism as to what they are saying - he tries to be enthusiastically agnostic
- Explain the process and ask questions - you are trying to learn
- You need to gain the client's trust; as the relationship evolves you can ask the more pointed questions
- Put the words in the mouths of the judge or prosecutor - e.g., I am not sure the prosecutor will understand the email in which you say you are destroying documents
- Manage expectations - but after you get the trust - you need to prepare them for what might happen
- If you say you will get bail and then don't, and haven't prepared the client - you're likely to get fired
- Whatever you think the retainer should be - double it - plan for the unexpected
The panel then moved to a hypothetical. Some of the topics discussed were whether it was a conflict to represent multiple clients in a company, how to handle a search, what is the client's status (target, subject, witness), should the witness receive immunity, should there be a proffer and by who, and also how districts may operate differently.
This was a two hour panel - but it moved extremely quickly - and the panelists did a wonderful job of covering a lot of ground.
(esp) (blogging from San Diego)
Saturday, February 12, 2011
Antitrust and Title 18: How the Antitrust Division Goes Beyond the ShermanAct to Enforce Its Mission - Friday, February 11, 2011, Atlanta, Georgia - 4:00 p.m. – 5:30 p.m. - M202, Marquis Level here
The Third Annual National Institute on Internal Corporate Investigations and Forum for In-House Counsel, May 4-6, NY here
25th Annual National Institute on White Collar Crime, March 2-4-, 2011, San Diego - here
20th Annual National Seminar on the Federal Sentencing Guidelines, May 4 - 6, 2011, sponsored by The Tampa Bay Chapter of the Federal Bar Association, The National Association of Criminal Defense Lawyers, andThe Criminal Justice Section of the American Bar Association -Buena Vista Palace Hotel & Spa in Orlando, FL here
Friday, January 21, 2011
25th ABA Annual National Institute of White Collar Crime - San Diego, California, March 2-4 here
20th Annual National Seminar on the Federal Sentencing Guidelines, Orlando, Florida, May 4-6 here
ABA 2011 CJS Midyear Meeting - will be held February 11-12, 2011 in Atlanta, GA - here
Friday, February 11, 2011, 4:00 p.m. – 5:30 p.m. - M202, Marquis Level
Cosponsored by Section of Antitrust Law, and in recent years, the Antitrust Division of DOJ has made wide use of statutes in addition to the Sherman Act to enforce its mission of protecting competition. This program will discuss how the Division has utilized the fraud statutes, the FCPA, and obstruction statutes in recent prosecutions. To register, email email@example.com. Please be sure and include the name or number of the session(s) you will attend.
Securities Docket, January 24, 2011 - 1 p.m. - webcast - Global Anti-Corruption Enf. & Compliance – 2010 Year in Review -Channel: Securities Litigation and Enforcement Channel
Illinois Association of Criminal Defense Lawyers - Harrah's Casino, Joliet, Ill., Friday, Feb. 11, 2011 here
Sunday, November 21, 2010
20th Annual National Seminar on the Federal Sentencing Guidelines - May 4-6th - Buena Vista Palace Hotel & Spa in Orlando, Florida here
ABA Criminal Tax Fraud Conference, Dec. 2-3, 2010, San Francisco here
ABA Environmental Compliance & Criminal Enforcment, Pittsburgh, Dec. 9 here
ABA 25th National White Collar Crime Institute, San Diego, March 2-4 here
Tuesday, October 26, 2010
Held at the Georgetown Conference Center, the Journal of Law, Economics and Policy, the Law and Economics Center at George Mason University School of Law, NACDL, and the Foundation of Criminal Justice joined together last Thursday for a conference entitled Covercriminalization 2.0: Developing Consensus Solutions. An introduction to this conference by Norman Reimer, Executive Director of NACDL, was followed by a keynote address by former Deputy Attorney General and now Senior Vice President - Government Affairs, General Counsel & Secretary for PepsiCo, Inc., Larry Thompson. He said, prosecutors need to ask questions such as: "Is a corporate criminal prosecution really necessary? Does it serve the goals of deterrence and retribution?"
The day was spent coming up with solutions to the problem of overcriminalization and many ideas were offered. Four key presentations were offered by Professor Roger Fairfax (GW) who spoke about "smart on crime" solutions"; Professor Larry Ribstein (Illinois) who spoke about agency costs and monitoring prosecutors; Professor Darryl Brown (Virginia) who spoke about regulation or criminalization; and Professor Geraldine Szott Moohr (Houston) who looked at how to restore the mens rea.
There were a host of commentators. For example, Cynthia Orr had an incredible Powerpoint that showed the small list of crimes that existed in the early days of this country. She talked about the response to the problem de jour. Solomon Wisenberg, gave his confession of a former prosecutor (see here). Paul Rosenzweig looked at whether elections can make a difference in monitoring prosecutors.He cited to Professor Ron Wright's article How Prosecutor Elections Fail Us, 6 Ohio State J. Crim.. L. 581 (2009) and also looked at what prosecutors were saying in the elections. Glenn Lemmi spoke about the responsible corporate officer doctrine. Professor Lucian Dervan (Southern Illinois) looked at the role of plea bargains. Overcriminalization allowed novel theories to go untested, he noted. Professor Sara Sun Beale noted that guns, drugs, immigration are the bulk of cases and we need to keep our eyes on these big areas. Professor Kate Stith and Carmen Hernandez brought in sentencing considerations.
Three judges wrapped up the day (Hon. Frederic Block, Cormac Carney, and Jed Rakoff). Discussion turned to sentencing issues that cause overcriminalization problems, although there were many other points mentioned.
The papers that are produced from this day are likely to be well read as it was an incredible day with many ideas to move the overcriminalization discussion forward. The Journal of Law, Economics, and Policy will be the proud sponsor of the articles from this issue.
Friday, October 22, 2010
I had a fun time commenting about grand jury reform yesterday at the Overcriminalization 2.0 Conference in Washington, DC--our nation's capital.
Here are three of my ideas for improving the federal grand jury's fairness. No doubt others have thought of these improvements as well.
1. All fraternization between prosecutors and grand jurors should be strictly forbidden. Federal grand jury proceedings are supposed to be on the record. But this policy can be circumvented by informal conversations between grand jurors and prosecutors, before grand jury begins or during breaks. Even if testimony is not conveyed through such informal discussions, friendship and camaraderie can develop, particularly over the long haul of a white collar investigation. This makes it far more likely that the grand jurors will bend to the prosecutor's will and resolve all doubts and issues in his/her favor. My suggestion is that the grand jurors be treated more like petit jurors, in terms of the informal contact that prosecutors are allowed to have with them. In addition to promoting fairness, such a reform should impress upon the grand jurors the seriousness and sanctity of their work.
2. All summarizing of prior evidence and testimony by the prosecution should be strictly prohibited. Federal prosecutors are not allowed to "deliberate" with the grand jury. That means they can't sit in with the grand jurors and try to sway their votes. The prohibition applies whether or not the grand jury is engaged in deliberations just prior to voting. What sometimes happens over the 18 month course of a white collar grand jury investigation is that jurors ask questions about the credibility of witnesses and the content of prior evidence and testimony. The prosecutor cannot comment upon the credibiltiy of witnesses, but can summarize prior evidence and testimony. Suppose a grand juror says, "I just don't believe this last witness, Mr. Smith. Isn't what he said inconsistent with what Mrs. Jones said?" Under current rules, the prosecutor may respond as follows. "I cannot comment upon Mr. Smith's credibility, because I cannot deliberate with you. But I am allowed to summarize prior testimony. What I can tell you is that Mr. Smith's testimony is inconsistent with Mrs. Jones' testimony and with the testimony of every other witness we have heard from, including seven of your fellow citizens and five FBI Special Agents." The ability to summarize thus inherently lends itself to potential abuse. This potential should be eliminated, and the prosecutor should be confined to telling grand jurors that they can ask to examine evidence or have prior testimony read back to them by an agent.
3. The case agent should be required to inform federal grand jurors under oath of all exculpatory information that the government is aware of. DOJ already encourages prosecutors to disclose exculpatory evidence to the grand jury and some jurisdictions require it as an ethical matter. I suggest here something further. The case agent should be required to reveal to the federal grand jurors under oath, in every case, all exculpatory information in the government's possession or that the government is aware of. This will facilitate the delivery of relevant information to the grand jurors, by forcing the prosecutor and case agent to focus on the question of exculpatory information. What could be more relevant to a grand jury's charging decision than information inconsitent with guilt? Isn't this the fair thing to do?
These three suggested reforms have at least three things in common: 1) they will improve the fairness of the grand jury process; 2) they pose no risk of physical harm or danger to any government witness or employee; and 3) they impose no significant time or cost burdens on the government.
Wednesday, October 13, 2010
The Journal of Law, Economics & Policy at the George Mason University School of Law will host its annual symposium on October 21, 2010, in partnership with the Law & Economics Center at George Mason University, National Association of Criminal Defense Lawyers, and the Foundation for Criminal Justice. There is widespread recognition, across the political and ideological spectrum, that the United States is over-criminalized, and that over-criminalization poses serious threats to our liberties, our values, and our prosperity. With recognition and examination of this problem, it is now time to move to the next level – developing solutions. This symposium will capture the broad consensus on the over-criminalization problem and serve as the motivation for reform.
View the entire program here.
Some of the speakers confirmed for the symposium include:
Larry Thompson, General Counsel and Senior Vice President for Government Affiairs, PepsiCo, Inc.
Hon. Jed S. Rakoff, United States District Judge, Southern District of New York
Larry Ribstein, Mildred Van Voorhis Jones Chair and Associate Dean for Research, University of Illinois College of Law
Darryl Brown, O.M. Vicars Professor of Law and David H. Ibbeken ’71 Research Professor of Law, University of Virginia School of Law
Sara Sun Beale, Charles L. B. Lowndes Professor of Law, Duke University School of Law
Hon. Frederic Block, United States District Judge, Eastern District of New York
Hon. Cormac J. Carney, United States District Judge, Central District of California
Roger Fairfax, George Washington University Law School
Jim E. Lavine, Zimmermann, Lavine, Zimmermann & Sampson P.C., and President, National Association of Criminal Defense Lawyers
Cynthia Orr, Attorney, Goldstein, Goldstein & Hilley and Immediate Past President, National Association of Criminal Defense Lawyers
Solomon L. Wisenberg, Partner & Co-chair of the White Collar Crime Defense Group, Barnes & Thornburg, LLP
Lucian E. Dervan, Southern Ilinois University School of Law
Kate Stith, Lafayete S. Foster Professor of Law, Yale Law School
Lawrence S. Goldman, Law Office of Lawrence S. Goldman and Past President, National Association of Criminal Defense Lawyers
Hon. Nancy Gertner, United States District Judge, District of Massachusetts
Harvey Silverglate, Author and Of Counsel, Zalkind, Rodriguez, Lunt and Duncan, LLP
The full agenda and registration are now available. The registration fee is $125 by October 1st, $175 after October 1st, and $30 for students. 5.0 Virginia CLE credits are approved. We will also support you in submitting any CLE paperwork for your state bar association.
Wednesday, October 6, 2010
20th Annual National Seminar on the Federal Sentencing Guidelines - hold the date - May 4-6th - Buena Vista Palace Hotel & Spa in Orlando, Florida (more to come)
ABA Criminal Tax Fraud Conference, Dec. 2-3, 2010, San Francisco here
ABA, The Fourth Annual National Institute on Criminal Enforcement of Intellectual Property Rights, Nov. 5, 2010, San Francisco here
ABA, The Fifth Annual National Institute on Securities Fraud, October 7-8, New Orleans here
Strafford Webinars & Teleconferences - Foreign Corrupt Practices Act in Sub-Saharan Africa -Compliance Strategies Given the Region's Unique Cultural and Governmental Intricacies - Oct. 7, here
ABA 2010 Fall Conference, Third Annual Sentencing and Reentry Institute and Criminal Justice Legal Educators Colloquim, Nov. 5, Washington, D.C. here On November 4th there will be a White Collar Crime (WCC) Town Hall Meeting to discuss the latest developments in WCC practice.
ABA 3rd Annual National Institute on the Foreign Corrupt Practices Act, Oct. 21-22. Washington, D.C. here
Friday, October 1, 2010
NACDL's 6th Annual Defending the White Collar Case Seminar – “Passport, Please: Defending in an International Enforcement Climate,” Friday, October 1, 2010
Moderator: Abbe David Lowell
It’s a small world after all and the last panel of the conference: “Passport, Please: Defending in an International Enforcement Climate” demonstrated the complexity of defending multi-national corporations and their officers in the new global business environment. There were a lot of familiar themes with some unfamiliar twists and they were all revealed through the discussion of the hypo, summarized here:
Zurich Auto is a Swiss company that produces parts for customization of high-end automobiles. It is headquartered in Zurich with an office in Amaz, the capital city of a very wealthy oil-producing country called Petrastan. For its sales in Petrastan until 2008, the officials in the Petrastan Transportation Ministry added a 10% fee to Zurich’s invoices and then collected that fee from a separate bank account, set up with the help of Zurich Auto’s agent in Amaz, Barack Peres. Barack has his own company, Barack Supplies, established in the Emirates of Tamir (E.T.) where Peres is a citizen. He is also a dual citizen of France. Peres made all the arrangements for the 10% fee being paid and was paid bonuses by Zurich Auto based on total sales he was able to arrange in this system. In addition, Peres had some side arrangement with Petrastan officials where they exchanged gifts from time to time (e.g., vacation, jewelry, dinners, spending money). Swiss law and French law make it illegal for anyone to pay a bribe or inducement to a public official in exchange for any official action and Swiss law requires Swiss companies to report accurately to Swiss tax and other authorities the revenue and expenses it collects and pays. Zurich Auto never reported the additional 10% as income.
In 2007, the U.S. company U.S. Motors, a vehicle manufacturing company, acquired Zurich Auto. As soon as U.S. Auto became aware of the 10% program in 2008, it stopped making such payments but, at the direction of its CFO Thomas Turner, it never reported on any of its S.E.C. or other filings either the payments that had been made by its now subsidiary before or after the acquisition. In 2010, a Wall Street Journal articles revealed the long-standing 10% fee program that had been occurring on all products sold in Petrastan and mentioned Zurich Auto as one of two dozen companies involved.
The panel’s moderator, Abbe Lowell, acted as GC of U.S. Motors and reviewed with the panel the various issues that can come up, including: When do you go to the government and tell them you are aware of the problem? What do you tell them you’re doing about it? What is the scope of your document preservation letter, and who sends it? Do you conduct an internal investigation and do you include in house counsel? How does the issue of successor liability enter into your analysis? How do you account for the possibility of a whistleblower to the SEC? When do you have to make a decision about issuing a new SEC filing relating to material risk?
As is often the case here at the White Collar Conference, we had a representative from the Justice Department on the panel who emphasized that publicity about an FCPA problem of this nature would surely capture their attention and necessitate a phone call to the company if they hadn’t heard from them by Monday morning. An interesting point made here was that any delay in contact would create a suspicion of the possibility of obstruction.
After a discussion of the corporate exposure, we turned to the issues facing the individuals: the seller of the company, the CFO of U.S. Autos and the agent in the foreign country. This discussion raised the following issues: Is the seller of the company still on the hook? And is he better off dealing with law enforcement authorities, in Switzerland or the U.S.? We also turned to the ubiquitous question of who’s paying the individual’s bills because, of course, these individuals have exposure and need separate counsel. This part of the discussion raised some familiar questions about joint defense agreements and advancement of fees, and whether outside counsel still have concerns that these arrangements won’t be perceived well by DOJ and may not be in the company’s best interests. The DOJ representative denied that these factors would be taken into account, but it seemed to me that other panelists did not feel as sure.
The discussion then turned to some of the specific issues created by the multi-national nature of the company and the investigation, including: Will the Swiss company and US Auto work together in gathering evidence? Is there a greater ability to protect documents in Europe, and can that be used to an American company’s advantage? An interesting comparison of punitive consequences was also briefly discussed.
The last topic that was discussed was the representation of foreign individuals, and whether and how to negotiate the service of any period of incarceration in their home countries. The panel agreed that prisoner transfer issues can sometimes be worked out ahead of time, but it can’t happen until one’s client is in BOP custody. At DOJ, the Office of Enforcement Operations is in charge of prisoner transfer operations, but an attendee noted that, as in many other situations, the agreement of the line assistant to these arrangements is critical.
NACDL's 6th Annual Defending the White Collar Case Seminar – “Groundhog Day: What's New in White Collar Sentencing?,” Friday, October 1, 2010
Panelists: Amy Baron-Evans and David Debold
This exciting panel deconstructed the Guidelines for loss and the various enhancements. Amy and David’s presentation focused on how white collar Guidelines are one-dimensional—focusing on loss as the most relevant indicator of the seriousness of the offense, while it should be harm and culpability. Culpability includes mitigating factors such as role in the offense, mental illness and the like.
Amy and David spent considerable time discussing in great detail a specific advocacy approach. It begins with educating the judge about the purpose of the sentence, which starts with 18 USC § 3553 (a) factors. Defenders should explain why the sentence we seek is “sufficient but not greater than necessary” (SBNGN) to satisfy the sentence purposes expressed in that statute. Defenders should also explain why probation, home detention or a split sentence is appropriate, then calculate the range, advocating for the lowest possible sentence. This should be done before you calculate the Guidelines so that if necessary to attack a correct calculation, the attack can be tied to how the Guideline, as it has evolved, no longer effectuates the statutory purpose of the sentence. Both Amy and David suggested that we turn the tables and use avoidance of unwarranted disparity to the advantage of our clients.
The panel turned to how to specifically calculate loss and then to a deconstruction of the fraud and loss Guidelines. The panelists focused on how to ensure that the loss amounts were reasonably foreseeable to your client and how to look for possible credits in application notes to mitigate loss (i.e., asset sale in mortgage fraud). Both panelists pointed out that there are lessons to be learned from security cases on causation. Second Circuit cases have imported the civil standard of legal cause, which can eliminate some loss that is calculated if only a “but for” standard is used. Legal cause removes from the loss calculation losses that can be attributed to intervening and/or unexpected (unforeseeable) events.
The panel then turned to the deconstruction of the Guideline range after it has been calculated, pointing out that Gall teaches that when a Guideline is not the product of empirical data and experience, it is not an abuse of discretion to ignore it. Guidelines are not the product of old empirical data implemented to avoid disparity. Since 1984, sentences have become significantly more severe. Amy and David’s presentation provided numerous specific sources for statistical resources on this issue and on how amendments to the Guidelines have been driven by politics rather than data. Of note, readers should review the latest model sentencing memo available at www.fd.org.
It is impossible to capture the amount of practical advice dispensed by these practitioners and the sheer volume of material that could be applied to your practice. The program and materials will be available for purchase through NACDL’s office.
NACDL's 6th Annual Defending the White Collar Case Seminar – “Evasion, Avoidance, or What? Ethically Navigating the Modern Tax Fraud Case Post-UBS,” Friday, October 1, 2010
Peter Hardy of Post & Schell and Kathryn Keneally of Fullbright & Jaworski presented on government enforcement initiatives and the voluntary disclosure program regarding Americans with off-shore bank accounts. The DOJ and IRS initiative began in 2007 at when Igor Linikov pled guilty to tax evasion in connection with a $350 million undisclosed bank account at UBS in Switzerland. He paid $52 million to the IRS, received probation and cooperated with the government. Later, the person who serviced Linikov at UBS pled guilty, cooperated and received nearly four years in jail.
UBS entered into a deferred prosecution agreement with the government, paid $700 million in penalties and disclosed the names of 250 account holders of foreign accounts to the government. Since then, the U.S. and Swiss governments have entered into an agreement whereby Swiss financial institutions have agreed to turn over information to the U.S. regarding Americans who hold accounts in Swiss institutions. As a result, the government is now prosecuting UBS account holders, although the cases have so far been few (only ten indicted), and the sentences have been relatively short.
Most practitioners may be unaware of the FBAR form that must be filed by a person who holds a foreign bank account containing greater than $10,000. Under Title 31 of the U.S. Code, a willful failure to file the form is a felony carrying a maximum sentence of five years. The civil penalty for failing to file is also severe. That penalty is 50% on the total assets in the account per year. Besides the FBAR, IRS Form 1040 requires a taxpayer to disclose foreign bank accounts. Failure to disclose the account on the Form 1040 is interpreted by the IRS as a false return, a felony.
To encourage voluntary compliance, and in recognition that people fall out of the system for various reasons, the IRS instituted the “Off-shore Voluntary Disclosure Initiative.” Under this Program, the IRS guarantees a one-time penalty of 20% of the highest balance in the foreign account for the prior six years. Those in the Program would, of course, have to file the FBAR and amend their tax returns to pick up the unreported income. Under this Program, 14,700 people came forward, which overwhelmed the system. After an extension, the Program ended on October 15, 2009. Thus, the IRS guarantee of the 20% penalty ended.
Although the Off-shore Program ended, the general IRS Voluntary Compliance Program regarding tax offenses still remains in effect. There are, however, some changes to this program implemented in connection with off-shore accounts. One such change is that the IRS developed an institutional position against so-called “quiet disclosure,” i.e., disclosing the omission by simply filing an amended return.
Today, there is a great deal of uncertainty regarding the treatment of undisclosed off-shore accounts by DOJ and the IRS for people who missed the “Off-shore Voluntary Disclosure Program” deadline. Moreover, UBS is not the only foreign bank disclosing the names of account holders to the IRS. News reports have revealed that HSBC and many others are doing the same. Now, white collar practitioners have to present clients with a choice of loss of their freedom versus the loss of the assets in their foreign accounts. Such decisions will become more frequent as DOJ and the IRS ramp-up prosecutions.
NACDL's 6th Annual Defending the White Collar Case Seminar – “Making Ends Meet: Obtaining Insurance Advancement & Indemnity in White Collar Cases,” Friday, October 1, 2010
In his “Advice to a Young Tradesman,” Benjamin Franklin included the time honored maxim that “time is money.” If that is clear to anyone, it is clear to defense attorneys. Evan Jenness, an NACDL Board member, and Lee Shidlofsky, offered helpful advice to defense practitioners interested in maximizing their ability to collect attorney fees from employers and insurers. This third breakout session of the final morning of the seminar provided several tips for obtaining advancement and indemnity for defense costs from an insurance company during an investigation and any subsequent prosecution or enforcement action. Jenness who practices in Santa Monica, CA, and Lee Shidlofsky of Austin, TX, addressed the issues thoroughly.
Jenness first summarized the multiple sources of indemnification. They include corporate charters and by-laws, partnership agreements, employment contracts, employer insurance policies, and severance agreements. In some states, there are statutes requiring companies to indemnify (e.g., California)
Jenness reminded the audience that advancement is separate from, though related to, indemnification. Companies often try to avoid or delay advancing fees. Clients are often asked for an undertaking requiring the employee to repay the company if the employee is ultimately convicted of a crime, and sometimes are even asked for security to make the undertaking enforceable. Jenness encouraged challenges to those attempts on the basis that the company could have required a secured undertaking in its by-laws or employment contract.
Jenness also encouraged defense attorneys who are unable to get a written promise from the company or its insurer to pay right away to challenge it immediately. As backup protection against recalcitrance from the company, defense attorneys may need to include language in retention agreements requiring a retainer from the client to be used if initial efforts to get paid by the company and insurance company fail.
Jenness discussed Delaware’s provision of nearly unlimited capacity for companies to indemnify employees and officers, and noted that even if an employee is employed at will, some states provide that advancement and indemnity are available.
Jenness offered several pracice tips: 1) Don’t assume your client isn’t entitled to coverage under a D&O policy due to lower rank in the company. Many policies are interpreted to cover lower ranking employees. 2) Find sample indemnity agreements by industry on the internet. Use them in negotiating the terms of employment and severance contracts. 3) There is no requirement that you share work product and privileged information with the third party fee payer. Redact bills that are forwarded to the third party payer. If the company/carrier balks because they don’t know what they are being asked to pay for, then very narrow descriptions may have to be included.
Shidlofsky reported that D&O policies are typically broad. Just because a client is under investigation for criminal or intentional conduct and there are “bad conduct” exclusions in the policy, it does not mean there is no coverage. And, most policies require a final determination of the bad conduct before coverage can be denied. There may be coverage disputes, but they are worth fighting.
Shidlofsky also offered a few key practice tips: 1) Provide notice to the insurer as soon as you obtain knowledge of the investigation. Failure to provide prompt notice can result in reduced or no coverage. 2) Read the definitions of “loss” and “wrongful act” in the policies very carefully. There is limited case law interpreting these terms, but the more modern trend in policies is to provide coverage even at the investigation stage. Much litigation is underway on these issues. 3) Evaluate whether the policy requires advancement of fees and costs, or reimbursement only. Absent clear language on this, many states require advancement of fees and costs.
Effective defense efforts take time and, therefore, money. With some tenacity and diligent searching through the sources of potential indemnification, you just might find enough money to do the job right.
NACDL's 6th Annual Defending the White Collar Case Seminar – “An SEC Makeover: Restructured, Refocused, and … Back in the Game?,” Friday, October 1, 2010
Moderator: Gerald B. Lefcourt
What a panel. Susan Brune kicked off the discussion with thoughts on whether the SEC’s new cooperation policy will work. In her view, Bob Khuzami, as the SEC enforcement chief, will have to figure out how to make the SEC a bit more like a federal prosecutor’s office. One of his new big weapons, however, gives her pause. The SEC’s new cooperation scheme differs from the federal prosecution process, and some of the differences will impact the SEC’s effectiveness. AUSAs, in her experience, have much more autonomy than SEC staff attorneys. While they have to get supervisory approval to grant immunity or decline prosecution, the front office rarely reverses a line Assistant’s recommendation. With the SEC, in contrast, you never know until the staff attorney completes a long, formal, and inscrutable process that ends with the Commission itself weighing in, and often with political factors at play. And even then you don’t know. The SEC’s practice of including lengthy recitations of alleged conduct in its Consent Orders—facts to which the defendant does not agree—risks inflaming the judge, inciting Article III activism, and prompting Courts to reject carefully crafted agreements. This contrasts markedly with a sentencing hearing with a 5K motion by a USAO, where the federal prosecutor stands with your client shoulder to shoulder.
Rich Strassberg took the baton at that point and addressed the pitfalls of representing a client who has exposure to both the SEC and DOJ. Most clients who work in the securities industry cannot, as a practical matter, assert their 5th Amendment right and also keep their jobs. Clients may feel compelled to give testimony and effectively provide both the SEC and DOJ a roadmap for their investigations. Rich also touched on the public’s clamor for enforcement action in the wake of the Commission’s failure to anticipate the perils from credit default swaps and derivatives. The SEC’s perceived need to respond to the public’s furor with immediate action presents huge risks to clients. Wall Street has moved way beyond the stock market. The SEC needs to take the time to understand new markets, in Rich’s view, and to reflect on how complex industry norms inform the issue of criminal intent. A rush to respond to perceived enforcement lapses will deprive market participants of the benefit of a fair investigation that reveals the true context in which market participants worked. In short, the SEC has to work hard not to act too slowly, or too quickly, but to strike the balance just right.
Pam Rogers Chepiga then took the audience on a tour of the Dodd-Frank Act’s whistleblower provisions, the SEC’s prior rewards program--$159,000 paid out over 20 years—and the rulemaking process for the new rewards process on which the Commission will now embark. She then posed the following big questions for the audience: do securities fraud allegations lend themselves to whistleblower programs due to the heightened intent requirement that applies? Will the time and energy it takes to filter through leads drain agency resources from more important enforcement programs? Will the financial incentives undermine well thought out corporate compliance programs? And finally, how will defense attorneys counsel clients who have a choice between laying low and seeking a financial windfall?
Bob Khuzami attempted to address the concerns raised by the other panelists. Judicial scrutiny is what it is. The SEC, in his view, should be prepared to defend its charging decisions. While he doesn’t relish headlines, and is concerned a bit sometimes that judges don’t fully understand how a case evolved, he calmly accepts the scrutiny as part of the job.
Cooperation and whistleblowers offer fundamental intelligence that brings forward higher quality information sooner. The entire Commission supports these new initiatives and will not bog down approvals. They have already agreed on the basic parameters: wrongdoers won’t continue to work in industry; they also won’t keep the financial benefits they have wrought. As to interactions with DOJ, he expects better communication at an earlier stage between the two agencies.
Fear not, moreover. There will be no shortage of process; no rush to judgment under his watch. Bob also credited the talented and sector-focused divisions within the SEC; they all will weigh in with their expertise on cooperation agreements and whistleblower rewards.
The whistleblower program will not drain resources; it will serve as corollary to the SEC’s established office of market intelligence. The program will also not undercut the need to encourage employees to “report up” via their in-house compliance programs. The SEC will fashion financial incentives in a way that supports this valuable corporate compliance function, though Bob did not explain why (we will have to wait for the rules).
Eliot Spitzer then grabbed the microphone. Wall Street is rife with conflicts of interest, he noted. The SEC cannot and should not wait for information to come in. The Commission instead should anticipate. The recent financial collapse, in his view, reflects an intellectual failure by regulators. The solution? Smart people at the SEC should think about problems before the public suffers. Eliot cited mutual fund fees as a perfect example. We know that these fees—suggested to amount to billions of dollars each year--hurt the middle class. We have democratized investing through these funds; now the regulators have to make them transparent and fair.
No shortage of practical insight and forward looking thoughts from this group!
Thursday, September 30, 2010
NACDL's 6th Annual Defending the White Collar Case Seminar – “The White Collar Trial: Required Skills and Exceptional Techniques,” Thursday, September 30, 2010
Moderator: Gerald Goldstein
Frank Carter spoke about openings. His advice was never to waive it. It must be brief, with no more than three to four themes. Be indignant but under control. In order to prepare it, you need early access to Jencks. In a multi-defendant case, address issues and facts relating to your client alone. Talk about your client’s good qualities you know you will be able to elicit from government witnesses. Do not promise your client will testify. Stay away from humor. Stick with a style that works for your personality. If the government uses demonstratives, you should respond to those exhibits with your own.
Chris Arguedas talked about cross-examining the key government witness. Learn how to cross by watching other accomplished lawyers. You have to have real confidence in yourself – either from doing lots of trials or by being very well prepared. Remember you have law and control on your side. Cite Crawford, argue constitutional due process, materiality – dictate pace, topics, sequencing. Remember also not to do any harm. Do not cross if you don’t need to.
Chris keeps a trial notebook with a section of each witness that she transfers to a computer to ensure it is organized. She writes down her questions, anticipated answers, text of potential impeachment – and color codes them. She recommends asking only one fact per question and never using tag lines and never schmoozing with the prosecutor or agent in the jury’s presence. It’s all about discipline and the effective use of your demeanor and outrage.
Lastly, Chris rereads the rules on impeachment with inconsistent statements right before she starts her cross. And she makes sure to use documents if she can find any to impeach.
Biz Van Gelder addressed the issue of whether to put your client on the stand. She thinks it is a decision that is made well before the trial – primarily by the client. She would prefer not to put any of them on and tries to convince them to remain silent. She also asks judges to voir dire the client about the decision. If the client testifies, you must communicate your theory of the case and the client’s credibility in the examination. The key to successful direct is preparation and your trust in their ability to help the case. Biz asks her clients to help write out the questions in conformity with her outline so the client’s voice will come through. She also recommends having a heart to heart with the client’s spouse about the defendant’s decision to testify and making sure to prepare the client for mistakes or misrecollections on cross.
Marcus Busch addressed the cross-examination of the defendant. It’s a test of your judgment how you approach the witness. Map it out weeks or months in advance – structure it around your themes and your key documents. Don’t go for the home run. Win on points. Take the defendant out of his comfort zone – he’s not adored or in charge while you are crossing him, but if the witness is annoying, give him the rope to hang himself. The key to great cross is to be creative.
Marcus uses searchable case management systems to ensure he does not fumble around with paperwork when he wants to impeach. And he recommends never bluffing.
Marcus also closely watches the defendant’s demeanor in the trial – both in and out of the jury’s presence – and tries to use that demeanor against the witness. He takes good notes on direct so he can hold the witness to exactly what he testified to and demonstrate to the jury that he is accurate and therefore credible. If the witness scores points on Marcus, he tries not to show he has been hurt.
Gerry Goldstein summarized the panel’s presentation. He then covered closing arguments. He passionately emphasized telling a theatrical story at all stages of the trial, and about borrowing great ideas from great lawyers. He admitted morphing over the years from being an “attack dog” to taking a more mature, measured approach. He talked about the importance of candor, self-deprecation and pride in your role as a defender of the accused – all critical themes to convey to the jury. And, he illustrated his points with many examples from the conference’s written materials.
NACDL's 6th Annual Defending the White Collar Case Seminar – “Where Do We Go From Here? Honest Services Fraud and Public Corruption,” Thursday, September 30, 2010
Moderator: Abbe David Lowell
The future of honest services fraud—that immensely nebulous charge—was addressed by an afternoon panel comprised of Miguel Estrada, Ross Garber, Hon. Barbara Lynn, Jack Smith (N.D. Tex.), and Tim O’Toole. Abbe Lowell moderated.
The context was set by a complex hypothetical involving government contracts and an amorphous “benefit” without a concrete quid pro quo. In other words, the perfect scenario for a charge-of-last resort. Now that the United States Supreme Court has limited the reach of honest services fraud charges with the recent Skilling opinion, the future of honest services/public corruption charges is unclear. The Court said that bribery and anti-kickback charges are certainly viable in the post-Skilling world, but undisclosed conflicts of interest may no longer be sufficient to state a federal crime. Indictments alleging mushy, apparent benefits short of a concrete quid pro quo, therefore, are vulnerable to challenge.
Here, the hypothetical is one of those mushy cases. The target of the investigation, Reynolds, is a U.S. Congressman and former Texas state legislator. Since the Texas legislature is a part-time gig, Reynolds was employed by Dallas Dynamics when in the State house. Dallas Dynamics is a recipient of state contracts. Reynolds’ compensation from Dallas included a bonus based on business he generated. One year, the state Comptroller, Brown, awarded a contract to Dallas Dynamics after Reynolds introduced Brown to Dallas Dynamics’ CEO, Cowen. As a result of this contract, Reynolds received a $1.5 million bonus. Brown’s office also got increased appropriations thanks to help from legislator Reynolds. Reynolds and Cowen agreed to pay his bonus out over the course of 8 years. As a result, there was no discernible spike in Reynolds’ income. Reynolds reported his income from Dallas Dynamics, but did not particularize the salary and bonus amounts or reveal that part of his compensation was based on bringing in business. Dallas Dynamics hired Reynolds’ son soon after receiving the government contract. Finally, after becoming a U.S. Congressman, Reynolds could no longer earn new income from outside work, but he did disclose the remaining years of amounts owed to him by Dallas Dynamics in the same way as he did while in the state house.
A key preliminary issue identified was the need for separate representation for Reynolds, for Cowen, for Brown, and possibly for the son too. This issue of ensuring no conflict in representation is a theme that has run through several of the panels today. The broad consensus is that the more separate lawyers, the better. Even if individuals sign conflict waivers, the better practice is to provide separate counsel. From a judicial perspective, conflicts are not only problems for the immediate case, but down the road in case one of the targets is convicted and later raises the conflict issue as a habeas petition. The possibility of collateral attacks and ineffective assistance claims make separate representation all the more important and prudent.
Adding to the need for more lawyers in the hypothetical investigation, entities such as the Comptroller’s Office and the Texas legislature will likely receive investigative subpoenas. Because these agencies and entities need to protect themselves against allegations of spoliation or even obstruction, separate, independent counsel is very important.
This led to a discussion of joint-defense agreements, whether they should be written or oral, and whether the prosecutor could challenge a joint defense agreement under the theory that it is tantamount to a joint representation conflict? It’s probably unlikely that a court would declare a joint defense agreement null and void. But, if someone in the joint defense pleads out, there may be judicial oversight, requiring, for example, notice to the other members if one person is going to start talking to the government.
Going back to the hypothetical, is a case viable if it alleges that as a state senator, Reynolds failed to disclose properly his true benefit from Dallas Dynamics because the bonus payment was not separately disclosed? Reynolds appears to have gotten an improper benefit by introducing Brown to Cowen and the business-generation bonus was hidden.
Now, after Skilling (and Black) limited the breadth/application of the honest services statute, it is much more difficult to bring a viable indictment under that theory case because there is no evidence of an explicit agreement.
Post-Skilling, do you have to allege there was a quid pro quo? Unclear. If the theory is bribery, probably so. But, if you make this hypothetical into a kickback case, you may be able to allege that Reynolds got a kickback in the form of his bonus by using his public office to arrange the contract. By creative pleading, such as using section 371 (conspiracy) and section 666 (bribery), an indictment might survive even without an allegation of a concrete quid pro quo. If it does not allege an actual bribery or kickback, such allegations are vulnerable to a bill of particulars and a mere failure-to-disclosure scenario is probably no longer enough. Additionally, the line between illegitimate “gratuity” and legitimate, e.g., campaign contributions is very hard to draw.
But ultimately, how big is the gap that Skilling left? The consensus is that some creative pleading of conspiracy, bribery/kickback charges can probably survive initial motions to dismiss. There may be proof issues, particularly at the Rule 29 stage, but such charges are probably sufficient in the first instance.
Finally, Congress is now looking at how to fill the “gap” left by the Skilling case—trying to find a way to make the mushy case that the Supreme Court kicked out again subject to prosecution. Senator Leahy’s current gap-filling measure criminalizes the failure to disclose a benefit that was “in whole or in part” motivated by a private interest.
My ultimate take from the discussion is that while the narrowing of honest services charges is indeed a boon to defense lawyers and the accused, and should impose upon prosecutors a higher bar to charging public corruption cases, the ultimate fallout is unclear. There are plenty of arrows left in the government’s quiver and Congress seems eager to simply provide more ammo. Time will tell, but a cynic (e.g., a criminal defense lawyer) would guess that the victory—as important and monumental as it was—may prove academic for all but a handful of individuals…and ultimately short-lived.
NACDL's 6th Annual Defending the White Collar Case Seminar – Special Lunch & Keynote Interview, Thursday, September 30, 2010
Guest Blogger: Ivan J. Dominguez, Assistant Director of Public Affairs & Communications, National Association of Criminal Defense Lawyers (NACDL)
Interviewer: Abbe David Lowell
Keynote Interviewee: Jeffrey Toobin
Jeffrey Toobin, CNN Senior Analyst and New Yorker Staff Writer, delivered a fascinating Keynote address at a special luncheon today at “NACDL’s 6th Annual Defending the White Collar Case – In and Out of Court.” The format of the presentation was as an interview by nationally-recognized white collar trial attorney Abbe David Lowell, partner in the Washington, DC, office of McDermott, Will & Emery.
Toobin explained that the reason he left the practice of law for a career in journalism can be traced to his parents, both of whom worked in journalism. A graduate of Harvard College and Harvard Law School, Toobin clerked on the Second Circuit Court of Appeals for the late Judge Lumbard. He spoke about the book he wrote on the Oliver North case. Toobin had worked for Independent Counsel Walsh in that matter. Later in the discussion, he explained that he is not a big proponent of the independent counsel structure. Toobin went on to serve as an Assistant U.S. Attorney in the Eastern District of New York. His career in journalism, though, was sealed by the O.J. Simpson case.
Toobin went into some detail about his thorough enjoyment of trying cases, though he doesn’t miss the administrative aspects of the practice of law. As far as his favorite part of being a journalist–it is the youthful joy he gets from reporting.
The conversation then moved to Toobin’s recent book The Nine: Inside the Secret World of the Supreme Court. Toobin said he is currently working on a sequel. In connection with his research, he interviewed more than 75 former clerks. During this discussion, he offered a variety of insights about current and former Supreme Court justices, including the effects of Bush v. Gore on different justices. As a Supreme Court observer, Toobin explained his view that Bush v. Gore was a very dark moment for the Supreme Court.
He also noted that former Justice O’Connor has been in a sense exiled from the Republican Party, something he said happened to former Justices Souter and Stevens as well. He described it as a feature of the changed nature of the Republican Party. Indeed, he went on to discuss how former Justice O’Connor is currently working hard, promoting and speaking on the importance of judicial independence, and specifically the undesirability of judicial elections, an effort he said finds its opposition in the Republican Party.
In his discussion of the nomination process to the Supreme Court, Toobin observed that perhaps the most significant development in the American political landscape over the last 40 years has been the turn to the right of the Republican Party, which he suggested might be reinforced by the upcoming midterm election. He explained that in his view the Democratic Party is not as far left as the Republican Party is far right, and this is reflected by the current Supreme Court. In the context of the discussion of the Supreme Court nominees, Toobin characterized Presidents Clinton and Obama as moderates.
Rather than seeing the next Supreme Court nominee be a trial lawyer, Toobin appeared interested in seeing a politician appointed to the Supreme Court. He went on to discuss the history of politicians on the court. In general, he is of the mind that diversity is beneficial in all contexts. He speculated that the uniformity of judicial experience of the sitting justices as appellate justices has come with a cost.
NACDL's 6th Annual Defending the White Collar Case Seminar – “iDefense: Strategic & Ethical Issues in the Digital Age,” Thursday, September 30, 2010
Moderator: Gerald B. Lefcourt
The panel was moderated by Gerald Lefcourt and included defense lawyers Elkan Abromowitz, Mark Hellerer, Daniel Gelb, and Eric Mazur, a forensic expert from Navigant Consulting.
Gerry introduced the panel, speaking about the sea change in the law and life arising out of the explosion of technological changes such as smart phones that have us carrying our personal information about all our contacts, our emails, a GPS device that allow others to know where we are at all times, our photos, and a history of our web browsing.
Elkan Abromowitz addressed three issues. First, Elkan spoke about the Fourth Amendment’s prohibition on unreasonable searches of papers and effects in the modern age when people have all types of private information on their computers, desktops or blackberries. The Ninth Circuit has held that law enforcement can look at information on a laptop at a border search – for any person entering or leaving the country–even in the absence of reasonable suspicion. (By contrast, reasonable suspicion is still required for a personal search, even though most of us carry far more information on our laptops than on our physical bodies!).
Second, Elkan spoke about the Balco case, in which the Ninth Circuit restricted the ability of law enforcement to obtain subpoenas that would allow the government to obtain information on computers that go beyond what was actually sought. En banc, the Ninth Circuit removed certain guidelines set forth in the original opinion, leaving some uncertainty about the proper breadth of a reasonable search in the context of a subpoena for computer records.
Third, Elkan spoke about the Quon case in the Supreme Court, which held that an employer can review emails sent on work computers and mobile devices issued by the employer–regardless of whether the employee has a reasonable expectation of privacy–as long as there is a non-investigatory workplace reason to do so.
Eric Mazur spoke about the exponential increase in the amount of data available and the ability of forensic experts to retrieve it.
Mark Hellerer also spoke about the increase in data and its impact on electronic discovery. In civil cases, the Sedona Conference has met annually to try to develop guidelines and best practices. In criminal cases, companies are faced with the daunting task of trying to respond to extremely broad subpoenas. Mark noted that there are certain limits on the proper scope of a grand jury’s investigative powers, and courts have at times been willing to apply Rule 17(c)’s limitation to quash–or more likely modify–unreasonably overbroad and unduly burdensome subpoenas.
Daniel Gelb talked about the statutory and constitutional limits on the reach of law enforcement with respect to electronically stored information in GPS devices, social media websites, et cetera. He noted that there is no reasonable expectation of privacy in comments posted on social media sites such as Facebook, even if directed only to a limited group of individuals such as “friends.” In addition, the government can often circumvent the need to obtain a search warrant upon a showing of probable cause by issuing a subpoena to cell phone providers who now collect GPS tracking devices.
Finally, the panelists discussed a hypothetical (based on an actual case in Washington, DC) involving a law firm partner who was prosecuted for obstruction of justice, along with his registered domestic partner and roommate, in connection with a homicide. Although the defendants were acquitted, the wife of the deceased brought a wrongful death lawsuit and has sought emails sent and received by the law firm partner on the firm’s computers.