Sunday, March 20, 2011
Overcriminalization 101: The Dodd-Frank Act as Case Study (Heritage Foundation, NACDL, Texas Public Policy) - Speakers are Andrew Wise (Miller & Chevalier) & Brian Walsh (Heritage Foundation) - Thursday, March 24, 2011, 12:00-1:30 p.m., Capitol Visitor Center, HVC-201 Please RSVP to Landon.Zinda@heritage.org or (202) 608-6205 by Wednesday, March 23, 2011.
ABA Section of Litigation and Criminal Justice, April 13-15, Miami Beach, Florida here
20th Annual National Seminar on Federal Sentencing Guidelines, May 4-6, Orlando, Florida here
American Bar Association Criminal Justice Section Presents, A Town Hall Meeting on the State of White Collar Crime, April 15, 4:00 PM to 5:30 PM - Reception - 5:30 PM – 7:00 PM
Gansevoort Miami Beach 2377 COLLINS AVENUE, MIAMI BEACH, FL here
Sunday, March 6, 2011
May 4-6 in Orlando, Florida, the Tampa Bay Chapter of the Federal Bar Association, The NACDL, and the Criminal Justice Section of the ABA, hold the Twentieth Annual National Seminar on the Federal Sentencing Guidelines. (see here) This is the premier yearly federal sentencing conference, providing the basics of federal sentencing for newcomers and the very latest updates and practice tips on what is happening, practically and theoretically, in federal sentencing courts throughout the country. In a post-Booker world, it is critically important to know how best to advocate within and outside of the sentencing guidelines. With increased judicial discretion at the district court level, the distinct work of judges, trial counsel, and probation officers becomes particularly important.
This year the conference offers panels with judges such as Hon. Fred Block, Paul Borman, Steven Merryday, Jed Rakoff, Charlene Honeywell, Robin Cauthron, Robert Hinkle, John Antoon, II, William K. Sessions, III, John Gleeson, Robert Pratt, and others. There are breakout sessions on sentencing in securities cases, drug offenses, pornography offenses, and fraud, just to name a few of the topics. The conference also has sentencing mitigation specialists speaking. Co-blogger Sol Wisenberg and I will both be there and look forward to seeing everyone for this highlight event.
Saturday, March 5, 2011
This panel was moderated by Michael Pasano, Carlton Fields. It started with a scene from the Verdict with Paul Newman - a scene that explores the question of the tension between justice and winning. The presentation used three movie clips from different movies to discuss the ethical conduct of lawyers.
One of the first topics explored was the prosecutor/defense attorney relationship. Nina Marino, Kaplan Marino, spoke about how she has never been a prosecutor. Mark Filip, Kirkland & Ellis, talked about the role of a lawyer in the court, but how you can be colleagues outside the courtroom. Judge Paul Borman noted that in criminal cases there is civility - he does not always see the same in civil cases. Andre Birotte, Jr., U.S. Attorney for the Central District of California, talked about the training that goes on in his office. There is no case worth cutting corners.
The panel looked at the celebrity defendant, leaks to the press, questioning the venire, the more aggressive use by prosecutors of filing pre-trial motions, and an assortment of other ethical issues. Some highlights included:
- Nina Marino said there is one thing you have - it's your integrity - and if you lose this you lose your ability to effectively represent your client.
- U.S. Attorney Melinda Haag, said that when the case involves a celebrity, she tries to treat it the same as any other case. She tries to put the celebrity status aside.
- Mark Filip noted that structure/procedure can make a difference in a case - for example, whether it is the local US Attorney handling the case or a special prosecutor - especially if this is the career case for the attorney and it is all they are handling.
- Judge Borman talked about how difficult it can be for the prosecutor to comment on evidence that did not come in but was mentioned by the defendant in perhaps opening statement. It is espcially difficult when it might cross into the realm of the defendant not testifying, which of course the prosecutor can make no comment about.
- The panel talked about how DOJ views defense counsel when they bring what the prosecution believes to be frivolous claims - claims of prosecutorial misconduct. This led to a discussion of bullying by the government. Michael Pasano gave the example of the prosecutor who threatens that if you don't take a plea the prosecutor he/she will indict the wife and others related to the target. U.S. Attorney Melinda Haag tried to get the audience to see another side to this action, using an example of a drug case where the mother, father, and grandmother are all involved. She said she was thinking about a small child in the negotiation and who would care for that child.
- In discussing leaks, U.S. Attorney Birotte spoke about the difficulties with leaks. He said they tell their agents that things need to be kept confidential. US Attorney Haag reminded the audience of First Amendment rights here.
- Nina Marino spoke about the importance of being able to question the jury venire. Judge Borman initiates the voir dire, but lets the parties do follow-up questions. Michael Pansano noted that many judges don't allow follow-up questions.
- U.S. Attorney Melinda Haag thought a more aggressive use of pre-trial motions by prosecutors was good. She said you don't want to pollute the trial with inadmissible evidence. But Judge Borman jumped in here and said - why don't you run it by the defense first- maybe they'll agree and a hearing will not be necessary on this.
The panel finally got to a discussion of Brady- a topic of enormous importance. Mark Filip said that as a prosecutor you need to try and find the truth with a cooperator. A healthy dose of cynicism with a cooperator is important. U.S. Attorney Andre Birotte said you need to try and corroborate the information given by cooperators. If you get information that is helpful to the defense you need to turn it over. He said he thinks the department takes this seriously. He said that some small number of defense attorneys are using prosecutorial misconduct as part of the playbook. On the other side, Nina Marino told of her experience in representing a cooperator - that a main witness being a substance abuser - was not being considered by the government to be Brady. She noted that the agents were deciding that something would not be helpful to the defense - things that she thought she could use if she were representing the defendant. Judge Borman noted that if in doubt of whether something is Brady - go to the judge and ask him or her. Don't take a chance of needing to retry the case. He has received items from prosecutors and it was clear that it was Brady.
I was troubled by the Brady discussion and am glad the ABA is doing a study to find out what is happening across the country. To me the problem here is clear - can the government really know what is useful to the defense. Prosecutors can't and shouldn't be making the determination of whether something is Brady or not. Hopefully there will be a change to the rules of criminal procedure to recognize the existing problems in discovery practices.
Thursday, March 3, 2011
This panel was moderated by Professor Julie O'Sullivan of Georgetown Law School.
It started with Denis J. McInerney, Chief of the Fraud Section of the Criminal Division of the Department of Justice, who gave the history of the mail fraud statute from its inception up to the Court's decision in Skilling.
The second panelist was Martha Boersch of Jones Day. She spoke about the 110 cases that have been examined post-Skilling. Some circuits have said a fiduciary duty is required - but not all circuits have held this. Another big issue is whether the government has to prove a quid pro quo - she noted the split in some court cases on this issue. There is also uncertainty as to what a quid pro quo would be in this context. Does the government have to prove a contemplated economic harm? There are likely to be future cases on the definition of honest services coming from instructions given in mail fraud cases.
The third speaker wasFrank Razzano, Pepper Hamilton,who spoke about five open questions: 1) Does it require a fiduciary duty? (He said you should make sure that there is a breach on the part of the payor); 2) Is legislation necessary to address this issue or is there a way around this for prosecutors; (He spoke about the case of U.S. v. Jain here- how you can use a pecuniary theory of mail fraud; 3) Does Skilling limit the stream of benefits theory? 4) He noted that you need to analyze the intent of the payor and payee carefully 5) Gratuities - does honest services fraud include this, or is it limited to bribery? He looked at some of the cases where these issues had arisen.
Finally Professor Julie O'Sullivan talked about congressional acts that have been introduced since Skilling.
(esp)(blogging from San Diego)
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 firstname.lastname@example.org. 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!