Tuesday, April 14, 2015

Second Circuit Denies Rehearing of Insider Trading Case Reversal

   Earlier this month, the Second Circuit, as expected (at least by me), denied Southern District of New York U.S. Attorney Preet Bharara's request for reargument and reconsideration of its December 2014 ruling in United States v Newman which narrowed, at least in the Second Circuit, the scope of insider trading prosecutions. I would not be surprised if the government seeks certiorari, and, I would not be all that surprised it cert were granted.

   In Newman, the defendants, Newman and Chiasson, were two hedge fund portfolio managers who were at the end of a chain of recipients of inside information originally provided by employees of publicly-traded technology funds. The defendants traded on the information and realized profits of $4 million and $68 million respectively. There was, however,  scant, if any, evidence that the defendants were aware whether the original tippors had received any personal benefit for their disclosures.

   The Second Circuit reversed the trial convictions based on an improper charge to the jury and the insufficiency of the evidence. Specifically, the court ruled that:

       1)  the trial judge erred in failing to instruct the jury that in order to convict it had to find that the defendants knew that the corporate employee tippors had received a personal benefit for divulging the information; and

       2)  the government had indeed failed to prove that the tippors had in fact received a personal benefit.

   Thus, at least in the Second Circuit, it appears that the casual passing on of inside information without receiving compensation by a friend or relative or golf partner does not violate the security laws. "For purposes of insider trading liability, the insider's disclosure of confidential information, standing alone, is not a breach," said the court.  Nor, therefore,  does trading on such information incur insider trading liability because the liability of a recipient, if any, must derive from the liability of the tippor.  To analogize to non-white collar law, one cannot be convicted of possessing stolen property unless the property had been stolen (and the possessor knew it).  Those cases of casual passing on of information, which sometimes ensnared ordinary citizens with big mouths and a bit of greed, are thus apparently off-limits to Second Circuit prosecutors. To be sure, the vast majority of the recent spate of Southern District prosecutions of insider trading cases have involved individuals who have sold and bought information and their knowing accomplices.  Although Southern District prosecutors will sometimes now face higher hurdles to prove an ultimate tippee/trader's knowledge, I doubt that the ruling will affect a huge number of prosecutions.

   The clearly-written opinion, by Judge Barrington Parker, did leave open, or at least indefinite, the critical question of what constitutes a "personal benefit" to a provider of inside information (an issue that also might impact corruption cases). The court stated that the "personal benefit" had to be something "of consequence."  In some instances, the government had argued that a tippee's benefit was an intangible like the good graces of the tippor, and jurors had  generally accepted such a claim, likely believing the tippor would expect some personal benefit, present or future, for disclosing confidential information. In Newman, the government similarly argued that the defendants had to have known the tippors had to have received some benefit.

   Insider trading is an amorphous crime developed by prosecutors and courts - not Congress - from a general fraud statute (like mail and wire fraud) whose breadth is determined by the aggressiveness and imagination of prosecutors and how much deference courts give their determinations. In this area, the highly competent and  intelligent prosecutors of the Southern District have pushed the envelope, perhaps enabled to some extent by noncombative defense lawyers who had their clients cooperate and plead guilty despite what, at least with hindsight, seems to have been a serious question of legal sufficiency.  See Dirks v. S.E.C., 463 U.S. 646, 103 S.Ct. 3255 (1983)(test for determining insider liability is whether "insider personally will benefit, directly or indirectly").  As the Newman court refreshingly said, in language that should be heeded by prosecutors, judges, and defense lawyers, "[N]ot every instance of financial unfairness constitutes fraudulent activity under [SEC Rule]  10(b)."

  As I said, I would not be shocked (although I would be surprised) if Congress were to enact a law that goes beyond effectively overruling Newman and imposes insider trading liability on any person trading based on what she knew was non-public confidential information whether or not the person who had disclosed the information had received a personal benefit. Such a law, while it would to my regret cover the casual offenders I have discussed, would on balance  be a positive one in that it would limit the unequal information accessible to certain traders and provide a more level playing field.

 (goldman)

 

 

April 14, 2015 in Congress, Corruption, Defense Counsel, Fraud, Insider Trading, Judicial Opinions, Prosecutions, Prosecutors, Securities, Statutes | Permalink | Comments (0) | TrackBack (0)

Thursday, January 22, 2015

New York State Assembly Speaker Sheldon Silver Faces Federal Fraud Charges

The New York Times has the story, with a link to the criminal complaint, here. U.S. Attorney Preet Bharara followed his longstanding tradition of holding a press conference in order to make inflammatory, prejudicial, and improper public comments about the case.

(wisenberg)

January 22, 2015 in Corruption, Current Affairs, Fraud, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Monday, January 12, 2015

Campaign Corruption - Internationally

A former Peru president is convicted "of funneling more than $40 million in public funds to tabloid newspapers that smeared his opponents during his 2000 re-election campaign." See  AP, Former Peru President Convicted of Corruption

(esp)

January 12, 2015 in Corruption, International | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 6, 2015

McDonnell Gets Two Years

Monday, January 5, 2015

You Can’t Take Back Time Served - McDonnell Should Remain Free Pending Appeal

Many are focused on what sentence former Virginia Gov. Bob McDonnell will receive from the judge today. After all, he was convicted, and now is the time for him to be punished. But there is a second question, and an important one in this particular  case, that also warrants consideration: Whether the former governor should be allowed to remain on bond pending his appeal. It should be an easy answer - he needs to remain free.

McDonnell’s case screams, ‘let’s wait before we put him behind bars.’ That’s because this is really a case about whether prosecutors stretched the law too far.

Creative federal prosecutions are not new and higher courts have been quick to strike prosecutions that exceed the boundaries of the law. Sometimes our courts have to remind prosecutors of John Adams words that  we are “a government of laws, and not of men.”

We recently saw the Supreme Court strike down a prosecution that used the Chemical Weapons Convention Implementation Act to prosecute a woman for an attempted simple assault. And the Supreme Court is currently reviewing the government’s use of the Sarbanes  Oxley Act to prosecute a fisherman for throwing fish overboard that a state official had asked him to bring to shore.

McDonnell prosecutors used a novel approach in bringing this case. They attempted to prosecute conduct that folks may find offensive. But merely  being offensive is not enough for making something a crime. It has to be criminal under existing laws, as opposed  to a new interpretation created by the government in order to bring their case to court.

This case wasn’t the typical bribery case of someone handing a person money and that individual doing a specific official act in return. When an appellate court finally gets its hands on this case, it may all come down to whether McDonnell corruptly performed  or promised to perform an “official act.” But what constitutes an “official act” is not so easy to explain. Will it include any act that happens to be done by a government official? Will it make a difference in a federal prosecution that the government official happens to be elected to a state position? Will it make a difference that state ethics rules exist to oversee what may or may not be considered corrupt conduct?

So now an appellate court will need to decide whether McDonnell’s conduct fits within the language of the statute. And that is a substantial question of law, the test the court looks at in determining whether to grant bond pending appeal. Pending that decision, it seems that he should remain free.

Many convicted defendants before McDonnell have been allowed to stay out on bond pending their appeal. There’s Martha Stewart, who eventually decided to go ahead and serve her sentence; Bernie Ebbers who received a  25 year sentence; John and Timothy Rigas, who received 15 and 20 years, respectively, and actor Wesley Snipes, who was convicted in a tax case. All went to trial and were convicted.  And all were offered the chance to remain free pending their appeal. One even finds former governors and congressman on the list of those who have been given an appellate bond – former Illinois Gov. George Ryan was the recipient of one and so was former representative William Jefferson.

In many instances, the trial judge is the one who grants the bond pending appeal. But in some cases, it has required a higher, appellate court to step in to order the release of the accused pending his or her appeal. That happened to former Alabama Gov. Donald Siegelman, who was initially granted bail.

The bottom line in most white collar cases comes down to whether the accused has a significant issue being raised on appeal that it is better to have resolved prior to the start of the sentence. After all, once the individual is incarcerated, you can’t take back the time they have served.

Creative federal prosecutions have cost prosecutors much time and money, with few rewards. And in some cases it takes appellate courts to step in and act – and until they do, McDonnell should remain free.

(esp)

January 5, 2015 in Corruption, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Friday, December 5, 2014

Transparency International Releases 2014 Corruption Perceptions Index

Transparency International has released their 2014 Corruption Perceptions Index.  The Index contains a wealth of information regarding the perceived levels of public sector corruption in 175 countries and territories.  Topping this year’s list with the highest score, thus indicating very low perceived levels of public sector corruption, is Denmark, which received a score of 92.  Denmark is followed closely by New Zealand, which received a score of 91.  At the bottom of the list are North Korea and Somalia, each with a score of 8.  The United States is ranked 17th with a score of 74. 

Along with interesting charts, figures, and analysis, the report contains stories of corruption from select locations.  These include stories about corruption related to pharmaceuticals, medical care, food aid, education, and rule of law. 

A very interesting report worth spending some time examining.

(LED)

December 5, 2014 in Corruption, International | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 12, 2014

Future Trends Regarding White Collar Crime and China

As I mentioned in my post last week, I moderated a roundtable discussion at this year's ABA annual meeting entitled Navigating the White Collar Crime Landscape in China.  While the discussion included many unique and interesting insights into current trends and challenges in the field of white collar crime in China, I thought I might share just a few of the themes we heard from participants.

First, according to our participants, we should expect to see a continued focus on anti-corruption enforcement actions by both the United States and China.  Second, it is important to note that China has begun focusing on the prosecution of high-level corporate employees, not just low-level employees and the corporation.  Third, we should anticipate that China will continue to expand its anti-corruption mission, including directing more attention towards U.S. entities.  In this regarding, it was also predicted that China may soon explore the adoption of an anti-corruption statute with extraterritorial jurisdiction to assist it in undertaking a broader anti-corruption mission similar to the U.S.  This might mean we will soon see a Chinese version of the FCPA.  Finally, several of our panelists noted that China is increasing its focus on data privacy and state secrets laws, including enforcing such laws against foreigners more vigorously.

Regarding this last theme from the discussion, I'll note that on the morning of our program two corporate investigators in China, one from the UK and the other from the U.S., were found guilty of purchasing private information regarding Chinese citizens.  The pair, who are married, were well known in the internal investigation community in China and regularly performed work for large U.S. corporations, including GlaxoSmithKline.  According to the charges, the pair violated Chinese law by illegally acquiring personal information on Chinese citizens and then selling that information to their clients.  The first defendant, Peter Humphrey, was sentenced to two and a half years in prison.  The second defendant, Yu Yingzeng, was sentenced to two years in prison.  Those who perform due diligence and internal investigation work in China are keeping a close eye on this and related matters.  You can read more about the prosecution in The Wall Street Journal

(LED)

August 12, 2014 in Conferences, Corruption, FCPA, International, Investigations, Prosecutions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 29, 2013

Former Congressman Rick Renzi Sentenced to 36 Months

USA Today has this story. Here is the interesting part, at least to federal sentencing aficionados. Renzi took the government to trial. Judge David Bury calculated Renzi's U.S. Sentencing Guidelines range at 97-121 months. (The government asked for a 9-12 year sentence.) Judge Bury downwardly varied to 36 months. This is striking, and yet another example of the Guidelines losing their luster in white collar cases. Under the law the Guidelines must be considered, but in an increasing number of cases they are being considered and ignored or discounted.

(wisenberg)

October 29, 2013 in Corruption, Prosecutions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 17, 2013

Sixth Circuit Reverses RICO Vote-Buying Convictions Due To Multiple Evidentiary Errors

by: Solomon L. Wisenberg

In a major blow to the government, the U.S. Court of Appeals for the Sixth Circuit has reversed the convictions of each and every defendant in U.S. v. Douglas C. Adams, et al. This was a high-profile RICO public corruption prosecution (premised on an alleged vote-buying scheme) brought by the U.S. Attorney's Office for the Eastern District of Kentucky. The Sixth Circuit vacated and remanded based on the following evidentiary errors: 1) admitting testimony from three cooperators regarding their drug-dealing activities with some of the defendants, which activities occurred 10 years prior to the alleged vote-buying scheme; 2) admitting an Inside Edition video that also discussed drug-dealing activities in the community; 3) admitting evidence of witness intimidation that could not be tied to any of the defendants; 4) the trial court's making of unprompted, substantive changes to the government's tape transcripts; 5) permitting use before the jury of the inaccurate transcripts that resulted from the unprompted changes; 6) admitting un-redacted, and highly prejudicial, versions of state election records which contained statements implicating the defendants in vote-buying schemes. This appears to be a case of government overkill in the presentation of its evidence, as the Sixth Circuit had no problem affirming the sufficiency of the evidence. The unanimous panel opinion was written by Judge Karen Nelson Moore. John Kline, Trevor Wells, and Jason Barclay argued the case for Appellants. With them on the various briefs were: Larry Mackey, Marty Pinales, Candace Crouse, Kent Westberry, Elizabeth Hughes, Jerry Gilbert, Robert Abell, Scott White, and Russ Baldani. Congratulations to all.

(wisenberg)

July 17, 2013 in Corruption, Current Affairs, Fraud, Judicial Opinions, RICO | Permalink | Comments (0) | TrackBack (0)

Thursday, June 27, 2013

First Circuit Holds That 18 U.S.C. Section 666 Doesn't Criminalize Gratuities

by: Solomon L. Wisenberg

The mark of the beast is fading a little, at least in the First Circuit. Amidst the hubbub of the Supreme Court's Wednesday rulings, the First Circuit quietly decided that 18 U.S.C. Section 666 can't be read to prohibit gratuities. This sets up a circuit split. The opinion in United States v. Fernandez & Maldanado is here.

Congratulations to Martin Weinberg, David Chesnoff, Kimberly Homan and Jose Pagan, who were on the brief for Appellant Bravo Fernandez. Congratulations to Abbe Lowell and Christopher Man, who were on the brief for Appellant Martinez Maldonado.

(wisenberg)

June 27, 2013 in Corruption, Fraud, Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Monday, June 17, 2013

A Great Moment In The History Of The FBI

by: Solomon L. Wisenberg

This makes me so damn proud to be an American. What a righteous Department of Justice we have! Always going after the malefactors of great wealth. And God Bless the Fan Belt Inspectors too. No crime is too small for the Bureau to root out.

Kudos to John Cook of Gawker.com for posting this item and to Anthony Colleluori for bringing it to my attention.

(wisenberg)

June 17, 2013 in Corruption, Fraud | Permalink | Comments (0) | TrackBack (0)

Friday, May 25, 2012

Statement of Williams & Connolly on DOJ's "Laughable" Punishment of Ted Stevens's Prosecutors

The Statement of Williams Connolly LLP, through Rob Cary, Brendan Sullivan, and Simon Latcovich, truly speaks for itself. We will have more to come on the DOJ's actions.

(wisenberg)

May 25, 2012 in Contempt, Corruption, Government Reports, Legal Ethics, Obstruction, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 25, 2012

Should Wal-Mart Be Prosecuted, Really Prosecuted?

I expect that any day now one of my non-white-collar criminal clients will come to my office and ask me to incorporate him to protect him from future criminal liability.  Of course, incorporation does not immunize an individual from criminal liability.  Nor, generally, does it protect small corporations from prosecution.

However, it appears that just as massive corporations are "too big to fail," they are too big to prosecute.  In the wake of the government's destruction of Arthur Andersen because of an ill-conceived, aggressive and ultimately unsuccessful indictment which caused the loss of thousands of jobs, DOJ has been highly reluctant to aggressively prosecute major corporations.

Although there are occasionally indictments of major corporations, most often these are disposed of by "deferred prosecutions," which are essentially delayed dismissals with financial penalties in numbers that are large in absolute terms but meager in comparison to the profits and assets of the corporation.  To be sure, even when prosecuted to conviction, corporations do not go to jail and thus there may be little practical difference between a conviction of a corporation and a deferred prosecution.  However, to the extent a goal of the criminal justice system is to achieve apparent fairness and equality, there is a genuine, if symbolic, reason for the prosecution of the large and powerful, whether they be individuals or corporations.

According to a thorough account in the New York Times this past Saturday, April 21, see here, Wal-Mart in Mexico, where the company has, according to the Times, one-fifth of its stores, engaged in a systemic countrywide scheme in which it spent millions of dollars to bribe hundreds of Mexican officials to gain favorable and expedited treatment and a competitive advantage.  According to the Times, this conspiracy was not, as is often the case in corporate wrongdoing, the act of a rogue individual or group.  Rather, it was orchestrated from the very top of the Wal-Mart Mexican hierarchy.  Additionally, again according to the Times, when reports of this corruption reached Wal-Mart's U.S. headquarters, top executives took great pains to cover up the wrongdoing.

The alleged conspiracy, if the Times report is accurate, appears to be the kind of corporate crime, therefore, that deserves aggressive prosecution (not just an indictment and a deferred prosecution), especially if the government wants the Federal Corrupt Practices Act ("FCPA") to be taken seriously.  Of course, there may be statute of limitations or other fact-finding or evidentiary problems involved in putting together a case involving facts from 2005, the year, according to the article, the bribe payments were made.  It is far easier to write an article reporting corruption than to prove it under the rules of evidence beyond a reasonable doubt.  It will be interesting to see what, if anything, DOJ does with respect to this matter.

(goldman)

April 25, 2012 in Arthur Andersen, Corruption, Deferred Prosecution Agreements, FCPA, International, Investigations, Obstruction, Prosecutions, Prosecutors | Permalink | Comments (2) | TrackBack (0)

Wednesday, February 22, 2012

Strauss-Kahn Involved Again in Sex Case

Dominique Strauss-Kahn is once again in trouble with the law in relation to an investigation involving sexual activity.  Strauss-Kahn was detained overnight in Lille, France, for questioning in a French investigation related to an alleged prostitution ring that purportedly supplied women for sex parties with Strauss-Kahn in Brussels, Paris and Washington.

Strauss-Kahn contends that he had no reason to believe that the women at these parties were prostitutes.  His French lawyer bared that defense to French radio in December, "People are not always clothed at these parties.  I challenge you to tell the difference between a nude prostitute and a classy lady in the nude."  Reuters article, see here.  This lack of scienter defense ironically appears to be the converse of what many believed would have been Strauss-Kahn's defense had the New York case in which he was accused of sexual assault gone to trial.  In that case, it was expected that his defense would have been that he did believe that the woman in question was a prostitute.

The investigation, in which eight people have been charged, involves alleged misuse of corporate funds to pay for the services of the prostitutes.  Engaging prostitutes is not illegal in France (although it is in Washington), but if the investigators determine that Strauss-Kahn had sex with prostitutes he knew had been paid for out of company funds, he might be charged as a beneficiary of that misuse of funds.  Most likely, it will be difficult to prove that Strauss-Kahn, even if he were found to have known the women involved were prostitutes, knew how they were paid.

High-profile cases in other jurisdictions often affect prosecutorial priorities.  One wonders whether this case will lead American prosecutors to scrutinize corporate books to determine whether corporate funds have been used to supply prostitutes to customers, political figures and others.  I suspect that such payments (and consequent tax deductions as business expenses) are not wholly uncommon, at least for non-public businesses.  Any resulting cases, involving both sex and corporate corruption, are sure to draw media attention.

(goldman)

February 22, 2012 in Celebrities, Corruption, International, Investigations, Media, News, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, February 9, 2012

The Schuelke Report: Public On March 15, 2012

Here is Judge Emmet Sullivan's Memorandum Opinion ordering unredacted release of Hank Schuelke's Report on prosecutorial misconduct in the Ted Stevens prosecution. Any comments or objections to the report by the attorneys involved are due by March 8 and will be published along with the Report.

(wisenberg)

February 9, 2012 in Congress, Corruption, Judicial Opinions, Legal Ethics, Obstruction, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 8, 2012

Prosecutorial Discretion Is The Better Part Of Valor: Lance Armstrong; FCPA Gabon Sting

One of the supposed hallmarks of the American criminal justice system is the prudent exercise of prosecutorial discretion. But prosecutorial discretion, even when it works, is a blessing and a curse. A blessing, because it allows for the flexibility and compromise without which most systems, even well-constructed ones, cannot function. A curse, because liberty should not depend upon the the character and wisdom of the person temporarily wielding power.

The U.S. Attorney's Office for the Central District of California has decided not to prosecute Lance Armstrong. An announcement to that effect was made last Friday. The L.A. Times story is here. A good Washington Post piece is here. Today's Wall Street Journal discusses the declination and a potential future probe of of improper leaks related to the case.  (An internal investigation of some kind appears to be warranted given the massive leaking that has occurred.) According to the WSJ, the declination decision by U.S. Attorney Andre Birotte and his top aides went against the recommendation of the two line AUSAs handling the case. Maybe, but take it with a grain of salt. News stories about the internal machinations of prosecution teams often get it wrong.  

Based on what I know about the case, the decision to decline appears to have been a no-brainer. Recent federal prosecutions involving alleged drug use by star athletes have expended enormous sums of money with mixed or poor results. In the Armstrong matter, the doping, if it occurred, was not itself a federal crime. Prosecutors would have been peddling a wire fraud theory under which Armstrong allegedly defrauded team sponsors by intentionally violating a contractual obligation to avoid improper drug use. Not very sexy. Twelve typical American jurors might well wonder at the start of such a case, "Why are we even here?" Finally, Armstrong is enormously popular and has a sterling defense team with unlimited resources.

The U.S. Anti-Doping Agency (USADA) vows to continue its investigation, accurately noting that its "job is to protect clean sport rather than enforce specific criminal laws." But USADA wants the grand jury materials. This would be a travesty, and is unlikely to happen. Federal grand jury materials are presumptively secret by law for good reason. Don't count on a federal court sanctioning transfer of grand jury materials to an agency like USADA.

In other declination news, the DOJ attorneys prosecuting the Gabon sting case have informed U.S. District Judge Richard Leon that DOJ is considering dropping all future prosecutions. A decision will be made by February 21. The BLT piece is here.  Full disclosure: I briefly represented one of the defendants, and considered representing another of the defendants, neither of whom has gone to trial. My comments here are based on the public record. The two cases brought to date have resulted in three acquittals and two hung juries. Nobody going to trial has been convicted in what DOJ thought was a sure win. Whatever merit there was in initially bringing the case, reconsideration is in order. The two trials to date have revealed a number of weaknesses. First, this was a sting--a crime engineered by the U.S. Government. Second, the informant who helped orchestrate it was far more compromised than the typical informant in a white collar case. Third, in a key tape recorded conversation between that informant and one of the defendants, the defendant seeks to back out of the alleged unlawful transaction, but the informant reels the defendant back in by telling him that attorneys have approved the deal. Fourth, the inherent ambiguities and weaknesses in the FCPA itself.

If there has been a benefit to the Gabon FCPA prosecution it is this--it has taught the white collar defense bar that FCPA cases can be fought and won and, presumably, has taught DOJ that FCPA cases aren't as easy to win as they first appear. 

(wisenberg)

February 8, 2012 in Celebrities, Corruption, Current Affairs, FCPA, Fraud, Government Reports, Grand Jury, Investigations, Media, Prosecutions, Prosecutors, Sports, Statutes | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 17, 2012

Post-Skilling Remand Includes Spillover

The Third Circuit in United States v. Wright held that the Skilling decision requires an new trial in this case on the honest services fraud convictions and that "prejudicial spillover tainted their traditional fraud convictions."  The court stated:

"An honest services fraud prosecution for bribery after Skilling thus requires the factfinder to determine two things.  First, it must conclude that the payor provided a benefit to a public official intending that he will thereby take favorable official acts that he would not otherwise take.  Second, it must conclude that the official accepted those benefits with the intent to take official acts to benefit the payor."

The court also stated that, "[i]n light of Skilling, the jury should have been instructed on the bribery theory but not the conflict-of-interest theory." 

The defense counsel on this case were Lisa A. Mathewson, Peter Goldberger, Ellen Brotman, and William A. DeStefano.

(esp)

January 17, 2012 in Corruption, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 23, 2011

Some Further Thoughts On Judge Sullivan's Order

My colleague Ellen Podgor recently commented here on Judge Emmet Sullivan's 11-21-11 ORDER in In Re SPECIAL PROCEEDINGS, the ancillary proceedings initiated by Judge Sullivan to investigate the multiple Brady violations committed by DOJ prosecutors in U.S. v. Theodore Stevens. The ensuing investigation was conducted, on Judge Sullivan's behalf, by veteran DC lawyers Hank Schuelke and William Shields, who have now issued a report that is, I hope, only temporarily under seal.

It is obvious from reading his Order that Judge Sullivan is still outraged. That's a good thing. Until enough federal judges get hopping mad about systemic DOJ Brady violations, we will have no real legislative discovery reform at the federal level.

In addition to the points highlighted by Professor Podgor, Judge Sullivan's Order notes the following findings and conclusions by Schuelke and Shields:

1. "[T]he investigation and prosecution of Stevens were 'permeated by the systematic concealment of significant exculpatory evidence which would have independently corroborated his defense and his testimony, and seriously damaged the testimony and credibility of the government's key witness.'"

2. "[A]t least some of the concealment was willful and intentional, and related to many of the issues raised by the defense during the course of the Stevens trial."

3. Schuelke and Shields "found evidence of concealment and serious misconduct that was previously unknown and almost certainly would never have been revealed--at least to the Court and to the public--but for their exhaustive investigation."

4. Schuelke does not recommend criminal contempt proceedings, because "in order to prove criminal contempt beyond a reasonable doubt under 18 U.S.C. [Section] 401 (3), the contemnor must disobey an order that is sufficiently 'clear and unequivocal at the time it is issued'... [but] no such Order existed in this case. Rather, the Court accepted the repeated representations of the subject prosecutors that they were familiar with their discovery obligations, were complying with those obligations, and were proceeding in good faith."

5. "Mr. Schuelke also notes that '[i]t should go without saying that neither Judge Sullivan, nor any District Judge, should have to order the Government to comply with its constitutional obligations, let alone that he should feel compelled to craft such an order with a view toward a criminal contempt prosecution, anticipating its willful violation.'"

6. "Mr. Schuelke 'offers no opinion as to whether a prosecution for Obstruction of Justice under 18 U.S.C. [Section] 1503 might lie against one or more of the subject attorneys and might meet the standard enunciated in 9-27.220 of the Principles of Federal Prosecution.'" 

It is clear that most or all of this Report is going to be publicly released. It will be interesting to compare it to DOJ OPR's report, assuming that DOJ decides to release it. Two attorneys for two of the prosecutors under scrutiny have already announced that OPR's report clears their respective clients. DOJ has a long history of ignoring the critical comments of federal judges. The latest example of this took place in reference to the prosecution of former Blackwater employees. Despite Judge Ricardo Urbina's scathing factual findings regarding the conduct and credibility of the original set of prosecutors, they were treated to a laudatory/fawning DOJ press release upon reassignment. Urbina, like Sullivan, is one of the most respected federal judges in the country and his factual findings were not questioned or disputed on appeal. 

Some final thoughts.

1. For every Emmet Sullivan (or Ricardo Urbina or Howard Matz) there are 10 federal judges who unquestioningly accept the Government's representations regarding Brady issues, irrespective of non-frivolous matters brought to their attention by the defense bar.

2. The defense attorney has an obligation to ferret out Brady issues through the filing of detailed, fact-specific Brady motions closely tied to the formal allegations in the case.

3. We must rapidly move toward open discovery in the federal criminal system, with appropriate safeguards in place to protect witnesses where necessary. The presumption, however, must always be in favor of open discovery. Many states have gone this route without any disastrous consequences. It is appalling that civil litigants have substantially more access to discovery at the federal level than do people who are literally fighting for their liberty.

4. In the meantime, federal prosecutors must be relieved of the burden of determining whether exculpatory information is material. DOJ already recommends this in the Ogden Memo, but it should go one step further and require it. The rule should be: IF IT HURTS MY CASE IN ANY WAY, TURN IT OVER! When a man judges himself, the verdict is always in his favor. When a federal prosecutor, in the heat of trial or pretrial battle, is deciding whether exculpatory evidence is material, the verdict will too often be that it is not. Let's end this invitation to injustice.

5. Of course, federal prosecutors do not think like criminal defense attorneys. That's okay. We don't want them to! But this is the very reason why they cannot ultimately be trusted to make the determination of what is or is not exculpatory. The competent defense attorney headed to trial or sentencing is constantly thinking about anything that will help the defense. Prosecutors are not trained or inclined to do this. Even when they are trying to fulllfil their Brady obligations, AND THE VAST MAJORITY OF FEDERAL PROSECUTORS ARE TRYING TO DO THIS, they cannot be trusted to spot the issues. This difference in outlook/inclination/thought processes really comes to the fore during the period leading up to sentencing hearings, when the prosecutor looks at the defense attorney like a deer in the headlights when reminded of his/her obligation to provide any and all mitigating evidence!

6. Please. Let's have no more: "We understand our Brady obligations and intend to abide by them." Congress should pass a statute requiring some form of detention for any prosecutor who utters this bromide.

(wisenberg)

November 23, 2011 in Contempt, Corruption, Current Affairs, Government Reports, Investigations, Judicial Opinions, Legal Ethics, Media, Obstruction, Perjury, Prosecutions, Prosecutors | Permalink | Comments (4) | TrackBack (0)

Tuesday, November 8, 2011

Honest Services and Section 666 Includes Fraud Committed by a Foreign Worker

Second Circuit - United States v. Bahel - Honest Services -  Post-Skilling, courts have struggled with what gets included as bribery and kickbacks and what gets omitted from the new contours of honest services. In Bahel, the defendant was convicted of four counts of mail and wire fraud premised on a deprivation of the United Nations, his former employer, and a 666 violation and conspiracy. Issues of immunity were considered, but the court said that the "United Nations expressly waived Bahel's immunity" and that irrespective he waived the issue. The court held that "Section 1346 is broad enough to encompass honest services fraud committed by a foreign worker at the United Nations."

Bahel also argued "that ‘[n]o reading of [18 U.S.C. § 666] could plausibly be extended to the charges in this case,’ because ‘[t]he United States’ membership in the United Nations is not a "federal program" under [Section] 666(b), and the contributions made to the United Nations under the United States treaty obligation in the U.N. Convention and Charter is not a "benefit" or "form of Federal assistance" under that same sub-section.’ Bahel argues accordingly that Section 666 cannot reach the conduct at issue in this case."  The court, however, held that "the United Nations Participation Act, which authorizes the payment of the United States' dues to the United Nations (UN), is both a "federal program" and a "benefit" within the meaning of section 666, which encompasses bribes as well as illegal gratuities."

(esp)

November 8, 2011 in Corruption, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Sunday, August 7, 2011

What's Happening in Congress - Clean Up Government Act & FCPA

It isn't all about the budget. And perhaps this one is ironic in many ways.  But there have been some interesting hearings that are well worth noting. NACDL has a press release on the "Clean Up the Government Act" here.  Also they have a Section-by-Section Analysis of the Clean Up the Government Act of 2011 (HR 2572).  The hearing can be found here.  And don't miss Tim P. O'Toole's (Miller & Chevalier) testimony before the House Committee on the Judiciary, Subcommittee on Crime, Terrorism & Homeland Security - Download OTooleTestimony_07262011

 There also was a hearing on the FCPA (here).  Check out the testimony of Shana-Tara Regon (Director - White Collar Policy- NACDL) - Download FCPA Regon Testimony

(esp) (blogging from Ottawa)

August 7, 2011 in Congress, Corruption, FCPA, News, Statutes | Permalink | Comments (0) | TrackBack (0)