Friday, January 14, 2011

Corruption in Florida?

At the end of this past year, the Statewide Grand Jury in Florida issued its first Interim Report - Statewide Grand Jury Makes Anti-Corruption Recommendations in First Interim Report(Report is here) According to the press release issued at that time -

"Key recommendations of the Statewide Grand Jury include:

- Expanding the definition of public employees to include private employees contracted by government entities that perform government services;
- Creating sentencing enhancements for offenses committed by officials who use their public position to facilitate their crimes;
- Creating an independent State Office of Inspector General, responsible for hiring and firing agency Inspectors General;
- Expanding definition of criminal bid tampering to include bid-rigging schemes; and
- Authorizing the Ethics Commission to initiate investigations with a supermajority vote of commission members."

This report comes at an interesting time, as the American Law Institute is gearing up for a new project called Principles of Government Ethics.

(esp)

January 14, 2011 in Corruption, Government Reports, Grand Jury, News | Permalink | Comments (1) | TrackBack (0)

Wednesday, January 12, 2011

Tom DeLay: Political Prisoner

The Washington Post reports here on the three year prison sentence handed down Monday to former House Majority Leader Tom DeLay by Texas state judge Pat Priest. DeLay was found guilty last November by an Austin jury of money laundering and conspiracy to commit money laundering under Texas criminal statutes.

The prosecution of DeLay by Travis County District Attorney Ronnie Earle and his successor has been nothing less than a travesty of justice. This is really not about Tom Delay. You can love him or you can hate him. It is instead about our collective glee whenever a person of an opposing ideology gets indicted.

Earle originally indicted DeLay for conspiracy to commit money laundering and conspiracy to violate the state election code. The election code conspiracy charge was almost immediately thrown out because there was no such crime in existence in Texas, as Earle should have known, and as the state’s highest criminal court later confirmed. The money laundering charge, and the conspiracy charge on which it is bottomed, should have never been brought either. Here’s why.

Delay's alleged laundering activity was accomplished through the writing of checks. DeLay was accused and convicted of knowingly conducting, supervising, and facilitating a transaction involving the "proceeds" of criminal activity in violation of the state money laundering statute, Texas Penal Code Section 34.02. In 2002, the year of the alleged offense, Section 34.01 of the Penal Code provided that "‘Proceeds’ meant "funds acquired or derived directly or indirectly from, produced through, or realized through an act." Section 34.01 defined "funds" as follows.

"‘Funds" includes:

(A) coin or paper money of the United States or any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issue;

(B) United States silver certificates, United States Treasury notes, and Federal Reserve System notes; and

(C) official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign country and foreign bank drafts."

So, in 2002 the "proceeds" of criminal activity meant "funds" acquired, derived, produced or realized through an act. "Funds" in turn included: coin or paper money designated as legal tender, circulating, and used as a medium of exchange; United States silver certificates, United States Treasury notes, and Federal Reserve System notes; and, official foreign bank notes used and accepted as a medium of exchange in a foreign country, and foreign bank drafts. Most conspicuously, "funds" did not include checks. This was no accident. The final version of the 1993 money laundering statute was far narrower than the draft first introduced in the Texas House of Representatives. The initial draft prohibited the knowing facilitation of a transaction involving "property" that was the "proceeds" of criminal activity. Property was defined broadly to cover tangible or intangible personal property as well as "a document, including money, that represents or embodies anything of value."

I am aware of no reported cases under the original Texas money laundering statute, prior to DeLay’s indictment, in which the proceeds of criminal activity were identified as checks. In the vast majority of the cases, the laundered proceeds consisted of currency. There were no reported cases even discussing whether a check could constitute laundered funds. The reason for this is obvious. Virtually no prosecutor in Texas thought that checks were "funds" under the old money laundering statute. 

In 2005, the Texas Legislature amended the money laundering statute and broadened the definition of "funds" to include "currency or its equivalent including an electronic fund, personal check, bank check, traveler’s check, money order, bearer negotiable instrument, bearer investment security, bearer security, or certificate of stock in a form that allows title to pass on delivery." The House Research Organization’s analysis of the amendment stated that it would "broaden the definition of ‘funds’ to include money other than cash." The analysis also notes, in the "Supporters Say" section, that "[u]nder current law, prosecutors may not prosecute offenders for money-laundering if the offender received a form of money other than cash, such as checks or money orders. This is inadequate as it prevents prosecution under this statute in an array of cases." The new bill "would fix this problem by covering money received in a variety of forms other than cash." It gets even worse. Members of Travis County District Attorney Ronnie Earle’s own staff helped in the drafting of the 2005 amendment!

Of course DeLay could not be prosecuted under the 2005 version of the statute, for conduct that allegedly occurred in 2002, without violating the Constitution’s ex post facto clause. But that sort of problem did not bother Earle. He simply used the 2002 version, even though nobody thought back then that "laundering" via checks constituted laundering under Section 34.02.

The case is now headed for the higher courts. Here’s hoping that one of them does the right thing.

(wisenberg)

January 12, 2011 in Celebrities, Corruption, Current Affairs, Money Laundering, Sentencing | Permalink | Comments (0) | TrackBack (0)

Sunday, October 31, 2010

An Overlooked Key to Combating Overcriminalization: Reflecting on a Decade of Supreme Court Decisions Disfavoring Overly-Expansive Interpretations of Criminal Statutes

Guest Blogger - Dane C. Ball - Gerger & Clarke

Federal courts often make an understandable mistake when faced with issues of statutory interpretation in criminal cases, focusing only on precedent that is directly on point.  As a result, courts sometimes miss important trends that are broader than a specific statute or case.  The fight against overcriminalization—which in part stems from overly-expansive readings of criminal statutes—is one such trend.  By reflecting on a decade of Supreme Court decisions invalidating overly-expansive readings of criminal statutes, lower courts might notice the trend and avoid repeating previous mistakes that led to overcriminalization. 

Since 1999, and in the midst of stiff opposition from prosecutors and lower courts, the Supreme Court has spend much of its effort curtailing the seemingly-limitless reach of various federal criminal statutes. 

  1. Mail and Wire Fraud:  In Neder, the Supreme Court rejected the argument that the federal fraud statutes contain no “materiality” requirement in relation to misrepresentations or omissions.  In Cleveland, the Court rejected the position that a State’s “right” to truthful information in a license application is “property” protected by the fraud statutes.  And most recently, in Skilling, the Court limited the honest-services fraud statute to “bribe and kickback” schemes, rejecting a more expansive interpretation extending the statute to undisclosed “conflicts of interest” and “self dealing.”
  2. Money Laundering:  In Cuellar, the Supreme Court disagreed that the federal money laundering statutes criminalize the act of concealing money merely to transport it, rather than transporting  money to conceal it.  And in Santos, the Court held that the term “proceeds”—at least when applied to illegal gambling—means “profits,” not “gross receipts.” 
  3. Bribery:  In Sun-Diamond Growers of California, the Supreme Court determined that, contrary to the government’s position, bribery under 18 U.S.C. § 201 requires a quid pro quo—i.e., a link between a “thing of value” and a specific “official act.”

 Read in isolation, each decision addresses a specific statute and utilizes—in addition to common canons of statutory interpretation—specific principles to narrow the statute (e.g., fair notice or federalism).  But when courts read these cases in isolation, they inevitably end up watering down their true meaning and intended effect.  For example, after Neder, courts so broadly interpreted the “materiality” element that misrepresentations and omissions rarely are deemed immaterial; after Santos, lower courts overwhelmingly refused to apply the decision’s definition of “proceeds” outside the gambling context (and Congress later amended the definition to expressly include “gross receipts” in all cases); after Sun Diamond, most courts have refused to require a specific quid pro quo under bribery statutes similar to section 201, such as section 666; and after Skilling, at least one court (the Northern District of New York, in a case called Queri) has allowed the government to repackage invalidated honest-services theories as “intangible property” theories.

If the Supreme Court cases are read together, on the other hand, they show a decade-long trend disfavoring overly-expansive readings of criminal statutes, which contribute to overcriminalization.  Equally important, when read together the cases provide all the tools needed to avoid expansive interpretations and overcriminalization, rather than one tool discussed in one case addressing one statute.  Lower court’s should keep this Supreme Court trend in mind in future cases. 

Dane C. Ball is a Houston-based criminal defense attorney with Gerger & Clarke.

(DCB)

October 31, 2010 in Corruption, Money Laundering | Permalink | Comments (0) | TrackBack (0)

Saturday, October 30, 2010

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 4 of a 5-Part Series

Guest Blogger - T. Markus Funk

OECD Phase 3 Report's General Findings

The 68-page OECD Phase 3 report, issued on October 21, 2010, represents what some regard as the largest available collection of statistics and other information on the Foreign Corrupt Practices Act (FCPA). The assessment provides issue-by-issue analysis of ongoing U.S. enforcement efforts, highlighting a number of key trends and successful practices:

  • Resolving most FCPA cases through plea agreements, deferred-prosecution agreements, and non-prosecution agreements has paid off, resulting in strong enforcement and private sector compliance, without the attendant costs, time, and resource-drain of trials.
  • The Federal Sentencing Guidelines allowing for stiff criminal sanction, more focused SEC guidance, and the potential for hefty civil penalties motivate companies to establish effective compliance policies and procedures.
  • Internal audits of both domestic and foreign subsidiaries, trainings, and whistleblower tip hotlines are the most critical compliance measures.
  • Many FCPA investigations are launched by, or through, U.S. foreign service officers serving in U.S. Embassies overseas.
  • Foreign data protection laws frequently impede companies' abilities to obtain access to the books and records of subsidiaries abroad.
  • From a risk-evaluation standpoint, there are three primary areas requiring the most robust anti-bribery measures: (1) Third parties, including local agents and joint venture partners, (2) facilitation payments, especially to customs officials, and (3) payments for travel, gifts and hospitality.
  • The business community considers corporate monitors with DOJ experience as being the most desirable.
  • The U.S. has devoted significant resources to FCPA enforcement, creating dedicated FCPA units in the DOJ, SEC, and FBI, which, in turn, yield economies of scale, concentrated expertise, and increased enforcement consistency.
  • New federal legislation, including the recent Dodd-Frank whistleblower bounty provisions, is expected to accelerate the detection of FCPA violations and the initiation of investigations and prosecutions.

For the full text of the OECD Phase 3 report: http://www.oecd.org/dataoecd/10/49/46213841.pdf

v "[The U.S. has achieved a] record level of monetary penalties and disgorgement, which should provide a major disincentive to bribing foreign public officials by U.S. companies, FMNEs listed in the U.S., and individuals and a major incentive for establishing effective compliance programmes and measures."

v "Across the board, these companies cited active enforcement by the DOJ and the SEC, in particular recently imposed large financial penalties, as the main thrust for putting into place these measures."

v "The U.S. authorities believe that in light of [the Dodd-Frank Act's whistleblower bounty provisions], reporting violations of the FCPA is likely to increase."

v "FCPA enforcement figures are expected to increase in the near future."

The corresponding USDOJ press release can be found at http://blogs.usdoj.gov/blog/archives/1020

By T. Markus Funk (mfunk@perkinscoie.com). Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at www.perkinscoie.com/mfunk

(tmf)

October 30, 2010 in Corruption | Permalink | Comments (1) | TrackBack (0)

Thursday, October 28, 2010

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 3 of a 5-Part Series

Guest Blogger - T. Markus Funk

DOJ's Heavy Reliance on Non-Prosecution and Deferred-Prosecution Agreements

Although non-prosecution agreements and deferred prosecution agreements have been in use since the early 1990s, the October 21, 2010, OECD Phase 3 report points out that only in recent have they become household tools for Main Justice prosecutors:

  • Non-prosecution agreements and deferred prosecution agreements in FCPA cases began in 2004; since then, they have been used in 30 out of 39 completed criminal enforcement actions against companies.
  • DOJ's annual average number of non-prosecution agreements and deferred prosecution agreements has grown from less than 5 in 2004 to a high of 38 in 2007.
  • Since 1998, 23 of the 44 criminal FCPA enforcement actions have resulted in appointment of corporate monitors to ensure compliance with the agreement's terms, in most cases for three years.

U.S. Administration Message: This Is Only The Beginning

During his May 31, 2010, address to the OECD in Paris, Attorney General Eric Holder reiterated the U.S. Government's continued resolute support for the Anti-Bribery Convention: "As Attorney General, I have made combating [global] corruption one of the highest priorities of the Department of Justice." Attorney General Holder also announced the U.S. government’s intent to strengthen global anti-bribery efforts through enhanced transnational collaboration and the sharing of "best practices." Said Attorney General Holder:

The OECD has been at the forefront of efforts to combat corruption wherever and however it occurs . . . . As Attorney General, I have made combating corruption one of the highest priorities of the Department of Justice . . . . [N]one of the progress the United States has made would have been possible without the long-term cooperation of our law enforcement partners around the globe – cooperation fostered by relationships established through the OECD . . . . I urge the countries [that have not yet achieved criminal convictions in anti-bribery cases] to deepen their commitment to this global effort by dedicating the appropriate resources, such as prosecutors and investigators focused exclusively on foreign bribery cases, and by prioritizing the prosecution of corruption, no matter where the evidence leads.

Attorney General Holder also delivered a diplomatically worded, but in reality quite withering, broadside to the outsized group of foot-dragging signatories: "[I]t is important to note that many of the 38 OECD member countries have no criminal convictions to date. This is not because bribes are not paid by companies in these OECD countries. It is because investigating and prosecuting corruption is difficult, requiring more will, resources, experience, and effort than most crimes." 

Not coincidentally, in the month following the Attorney General's OECD speech, the U.S. House passed the Dodd-Frank Act’s conference report of the bill containing the innovative whistleblower bounty provisions. Such proactive public pronouncements, coupled with targeted, stepped-up law enforcement action yielding tangible results, explain why the OECD report so effusively lauds U.S. efforts to date.

For the full text of the OECD Phase 3 report: http://www.oecd.org/dataoecd/10/49/46213841.pdf

The corresponding USDOJ press release can be found at http://blogs.usdoj.gov/blog/archives/1020

By T. Markus Funk (mfunk@perkinscoie.com). Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at www.perkinscoie.com/mfunk

(tmf)

October 28, 2010 in Corruption | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 26, 2010

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 2 of a 5-Part Series

Guest Blogger - T. Markus Funk

U.S. Anti-Corruption Efforts At An All-Time High

The U.S. government has placed the fight against bribery of foreign public officials at the top of its list of critical law enforcement priorities. The October 21, 2010, OECD Phase 3 report concludes that this focus translates into vigorous law enforcement action:

  • Prosecutions have increased from less than 5 per year between 2001 and 2005, to almost 19 per year between 2006 and 2009.
  • Between 1998 and September 2010, some 50 individuals and 28 companies were convicted of foreign bribery-related offenses, while 69 individuals and companies have been held civilly liable for foreign bribery.
  • Of the 36 individuals who have been convicted of FCPA violations and sentenced during this period, 25 received sentences of imprisonment, with the average sentence being slightly more than 30 months.
  • 26 companies have been publically sanctioned for foreign bribery under increasingly-popular non-prosecution agreements and deferred prosecution agreements.
  • Since 1998, the U.S. has imposed over $2 billion in bribery-related criminal fines against legal persons.

Rounding out this impressive -- and peerless -- enforcement picture, the OECD report emphasizes the U.S. government's imposition of massive sanctions for accounting misconduct and money laundering related to foreign bribery. Consider, for example, that between 1998 and 2003, the maximum monetary sanctions leveled against a company in an FCPA case was $2.5 million. But in the past 6 years some 23 companies were sanctioned to the tune of more than $10 million each, and during roughly the same time U.S. disgorgement actions have reeled in more than $1 billion in foreign bribery proceeds. In fact, in one case, the U.S. government imposed sanctions totaling $800 million against a single company.

The SEC, a federal agency increasingly in anti-bribery motion, obtains civil penalties separate from DOJ criminal fines for foreign bribery-related misconduct. In the first 9 months of 2010 alone, the SEC obtained over $404 million in disgorgement, interest and civil penalties from 13 companies and 8 individuals.

And the business and legal communities have certainly noticed these ramped-up, multi-faceted (and multi-agency) enforcement efforts. According to the OECD report, business leaders credit heavy sanctions and amplified prosecutions for having "significantly raised the FCPA‘s profile," resulting directly in more finely-tuned anti-bribery measures and internal controls, and more carefully-calibrated compliance systems.

For the full text of the OECD Phase 3 report: http://www.oecd.org/dataoecd/10/49/46213841.pdf

The corresponding USDOJ press release can be found at http://blogs.usdoj.gov/blog/archives/1020

By T. Markus Funk (mfunk@perkinscoie.com). Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at www.perkinscoie.com/mfunk

(tmf)

October 26, 2010 in Corruption | Permalink | Comments (2) | TrackBack (0)

Monday, October 25, 2010

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 1 of a 5-Part Series

Guest Blogger - T. Markus Funk

On October 21, 2010, the Organization for Economic Cooperation and Development (OECD) issued its much-anticipated "Phase 3" report. This weighty report formally grades the U.S.'s constantly constricting anti-bribery enforcement noose, concluding that U.S. efforts provide a model other nations seeking to similarly fortify their anti-corruption efforts should emulate.

The OECD points its shaming finger at signatory nations not living up to their anti-bribery obligations, and the organization in its report also identifies certain discrete areas for U.S. improvement. But the deep-dive assessment's bottom-line message is that the U.S. government is out in front – way out front – in its all-out offensive against foreign bribery. And the U.S. is not waiting for others to catch up.

OECD Anti-Bribery Convention: The World's Leading Anti-Bribery Instrument

By way of some background, the historic 1997 OECD "Convention of Combating Bribery of Foreign Public Officials in International Business Transactions," adopted by 38 countries, announces standards criminalizing foreign bribery. The OECD Anti-Bribery Convention, in fact, remains the only such international anti-corruption instrument.

In an effort to encourage compliance, the highly-regarded OECD peer-reviewed Working Group on Bribery Monitoring carefully, and publicly, scrutinizes signatories’ performance. The Working Group, in so doing, takes a holistic approach, collecting input not only from the subject signatory governments, but also from representatives of the private sector and civil society. The end-product is an all-things-considered written assessment which enjoys the high regard of the broader international legal and political community.

In terms of procedure, OECD evaluations take place in phases: Phase 1 evaluates the adequacy of a country’s legislation to implement the OECD Anti-Bribery Convention, and Phase 2 assesses whether a country is applying this legislation effectively. Phase 3 then focuses on enforcement of the Convention, the 2009 Anti-Bribery Recommendation, and any earlier recommendations that remain outstanding. An evaluation for good reason feared by many signatory nations, the OECD Phase 3 probing U.S. compliance with the Anti-Bribery Convention will undoubtedly receive a warm, appreciative reception in the Nation's capitol.

For the full text of the OECD Phase 3 report: http://www.oecd.org/dataoecd/10/49/46213841.pdf

The corresponding USDOJ press release can be found at http://blogs.usdoj.gov/blog/archives/1020

By T. Markus Funk (mfunk@perkinscoie.com). Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at www.perkinscoie.com/mfunk

(tmf)

October 25, 2010 in Corruption | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 5, 2010

Legislators and Lobbyists Charged in Alabama

Here is the Alabama Electronic Bingo Indictment, unsealed yesterday.

(slw)

October 5, 2010 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Thursday, September 30, 2010

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

Guest Blogger: Steven P. Ragland, Keker & Van Nest LLP (San Francisco, CA)

Moderator: Abbe David Lowell

Panelists: Miguel A. Estrada, Ross Garber, Hon. Barbara M. G. Lynn and Timothy O’Toole

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.

(spr)

September 30, 2010 in Conferences, Corruption, Fraud | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 17, 2010

Blago Verdict: Read All About It

The former Governor of Illinois is convicted on one Section 1001 count while the jury hangs on the other 23 charges. The jury hangs on all counts against Blago's brother. The Los Angeles Times has the story here. When the testimony wrapped up two weeks ago, Esquire asked its reporter John Bohrer to pretend he was a juror and opine on the outcome. Bohrer's analysis of the evidence is here. In a remarkable bit of prescience, Bohner noted that, "the Government couldn't close the deal. And that's why I'm voting to acquit." Bohrer still hated Blago, but did not feel that he belonged in prison or was worth the expense to prosecute. "I'll hand it to the prosecution on one of these charges: It does seem like he stone-cold lied to the FBI when they questioned him about whether he mixed state business with fundraising."  Pretty close call. Pretty amazing.

(slw)

August 17, 2010 in Celebrities, Corruption, Current Affairs, Fraud, Prosecutions, Prosecutors, Verdict | Permalink | Comments (1) | TrackBack (0)

Tuesday, April 27, 2010

Ted Olson Takes on Paul Minor's Case

Former United States Solicitor General Theodore B. Olson will represent Mississippi attorney Paul Minor in his upcoming appeal to the Supreme Court of the United States.  Olson, now with the law firm Gibson, Dunn & Crutcher LLP, moved immediately into action with an extension of time application that provides clues as to the arguments that will be forthcoming. For openers Minor's convictions are tied to the "honest services" statute, a statute under review this term in three cases (Skilling, Black, and Weyrauch). Also mentioned is the tension between the Fifth Circuit's decision in Minor's case and the McCormick and Sun-Diamond Supreme Court decisions that necessitate a quid pro quo.  The Fifth Circuit had previously vacated the convictions premised on section 666 and remanded the case for resentencing.  The Fifth Circuit in its decision also noted that both the McCormick and Evans cases "left open the question of what level of specificity is required to prove a quid pro quo in regard to the 'quo' or agreed-upon official act."  What is particularly fascinating about this case is that it has "honest services" but also includes bribery allegations.  If 1346 is unconstitutionally vague this issues may be resolved.  But if the Court distinguishes bribery cases under honest services fraud, it may open up other arguments on when a bribery would fall within the reach of the "honest services" fraud statute.

Motion - Download Minor--Extension Application (2)

(esp)

April 27, 2010 in Corruption, Defense Counsel, Fraud | Permalink | Comments (0) | TrackBack (0)

Sunday, November 15, 2009

Finding TARP

The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) emphasizes transparency, but it did take me some time to find the website that told me what was going on in this office. It is easy if you put SIGTARP into Google, but not so easy - at least for me - if you try and find it within the Treasury Department website.  For those who are looking, you'll find it here.  The office issued its Quarterly Report here.  It states in part:

SIGTARP’s Investigations Division has developed into a sophisticated whitecollar investigative agency. Through September 30, 2009, SIGTARP has opened 61 and has 54 ongoing criminal and civil investigations. These investigations include complex issues concerning suspected TARP fraud, accounting fraud, securities fraud, insider trading, bank fraud, mortgage fraud, mortgage servicer misconduct, fraudulent advance-fee schemes, public corruption, false statements, obstruction of justice, money laundering, and tax-related investigations. While the vast majority of SIGTARP’s investigative activity remains confidential, developments in several of SIGTARP’s investigations have become public over the past quarter . . .

I am not impressed with the statement that resulted in Huffington's Post headline that TARP Fraud Probes Have Tripled Since April, Says WatchdogThe numbers should be increasing enormously - after all this is a relatively new office. But it is good to see that this office is getting off the ground, being staffed, and now moving to stop fraud occurring in the use of TARP funds.

(esp) 

November 15, 2009 in Corruption, Investigations, Mortgage Fraud, News | Permalink | Comments (0) | TrackBack (0)

Friday, October 16, 2009

Safavian Gets One Year

A DOJ Press Release reports that "Former General Services Administration (GSA) Chief of Staff David H. Safavian was sentenced today to one year in prison on charges of obstruction of justice and making false statements in connection with the investigation into the activities of former Washington lobbyist Jack Abramoff." He also received two years of supervised release.

(esp)

October 16, 2009 in Corruption, Sentencing | Permalink | Comments (0) | TrackBack (0)

Thursday, October 1, 2009

NACDL's 5th Annual Defending the White Collar Case Seminar - "Pay to Play - The Current Wave of Public Corruption Cases," Thursday, October 1, 2009

Guest Blogger:  Linda Friedman Ramirez, P.A. (Tampa St. Petersburg, FL)

Panel Moderator:  Abbe David Lowell

Panelists:  Robert Trout, Karen Patton Seymour, Reid Weingarten, and Edward Genson

NACDL's 5th Annual White Collar Crime Conference kicked off today with the Pay to Play panelists jumping into a thorough discussion of the key issues in the defense of a public corruption case via a hypothetical created by panel moderator Abbe Lowell. 

Quick Overview of the Hypothetical - Alice Adams, the Democrat Maryland Speaker of the House, is also a civil attorney. Her firm Murphy andSchaeffer also has a lobbying practice. Her Chief of Staff Bruce Bannon is an attorney in private practice but has no office. Funhouse hires Murphy and Schaeffer to promote gambling legislation in Maryland. Alice earns a percentage of her law firms fees. She introduces and fast tracks legislation to legalize gambling. In an ethics form regarding outside employment, she discloses Murphy andSchaeffer but does not discuss specific clients. Funhouse CEO also hires Bannon for personal estate planning work and essentially pays him $50,000 for a will. There is a federal and state joint investigation and grand jury subpoenas are issued for records investigating allegations of bribe, theft of honest services, and wire fraud.

The panel agreed that attorneys are needed for all individuals and entities subpoenaed. The first question is whether joint defense agreements are more problematic than helpful. There seemed to be a consensus that there might be some benefits, particularly when working with attorneys with whom there has been no prior experience or quirky clients, but most panelists expressed reservations about their use.

Next up - the panelists discussed the subpoena for records relating to the legislative process and the Speech and Debate privilege. Who asserts? The panel propounded on the importance of collaboration between the attorney for Alice and the attorney for House. Also, how to handle keeping back documents that may be privileged and the concept of using a privilege log? TheDOJ’s view of the Speech and Debate clause is in a great deal of flux, and DOJ’s view has changed radically. Further, if it is a federal subpoena does this change anything? And how does the counsel for Funhouse handle its own subpoena? The four panelists explored the issues relevant to subpoenas for contribution records and the intersection with the First Amendment.

Another important issue for practitioners is how to respond to precharge or pretrial publicity in high profile cases, including responding to questions by investigative reporters. Clients often have a strong desire to speak to the public. Different responses from the panelists: give clients a limited script; have the attorney act as spokesperson -- though that raises the concern for attorneys of moving into the realm of public relations; hiring surrogates.

Also, what happens if a client wants to make his case to the prosecutor? Is this a good strategy? Of course the most important issues are whether the facts are sufficient for a prosecution pursuant to 18 U.S.C. 1346?  Is conflict of interest + non-disclosure enough under this statute?  This was the meat of the panel and the discussion was exciting and demonstrated the knowledge of the panel.  Also, Moderator Abbe Lowell injected into the discussion 18 U.S.C. 666, which is the jurisdictional statute for prosecution of offenses committed by state public officials and the requirement of a connection with the receipt of federal funds 18 U.S.C 666 (b).

By the close of the panel it was clear that an hour and a half was not nearly enough time to explore this topic!

(lfr)

October 1, 2009 in Conferences, Congress, Corruption, Investigations, Privileges | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 2, 2009

9th Circuits Stays Mandate on Honest Services Case Pending Supremes Ruling

The Supreme Court accepted for certiorari the case of U.S. v. Weyhrauch (see here), a case involving honest services mail fraud.  The court earlier had accepted for cert another mail fraud case with a different issue (Conrad Black's case here).  The Ninth Circuit, in anticipation of the Weyhrauch case, stayed the issuance of a mandate in U.S. v Inzuna.  The Ninth Circuit, however, did go ahead and affirm the district court's judgments against two former members of the San Diego City Council.  The court adopts what it terms "the majority rule" -- "that private gain is not an element of honest services fraud." In so doing it rejects strong precedent coming from the Seventh Circuit.  The Ninth Circuit also rejected a requirement to "prove an independent violation of state law to sustain an honest services fraud conviction."  There are other issues in the case, such as those related to the Hobbs Act and arguments premised on objections to closing arguments.  The key in this case will be how the Supreme Court decides the Weyhrauch case.

U.S. v. Inzuna - Download Honest Services Fraud - US v Inzunza - 9th Cir 9-1-09

See also Kevin Cole, "Strippergate" Appeal, CrimProf Blog here

(esp) (w/ a hat tip to Evan Jenness)

September 2, 2009 in Corruption, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 5, 2009

Jefferson Verdict

Nola.com, William Jefferson verdict: Guilty on 11 of 16 counts

Commentary later...

(esp) (blogging from Palm Beach, Florida) 

August 5, 2009 in Corruption, Fraud, News | Permalink | Comments (0) | TrackBack (0)

Thursday, July 30, 2009

William Jefferson's Case In the Hands of the Jury

The press (e.g., Washington Post here; NOLA.com here; BLT Blog here) is reporting that the jury will receive ex-congressman's William Jefferson's case tomorrow. The Indictment  included counts related to bribery, RICO, money laundering, Foreign Corrupt Practices Act, and Obstruction of Justice. 

From these press reports, it sounds like one interesting question that the jury will be examining is whether his activities meet the definition of an "official act" for purposes of the bribery statute. The government is required to prove that the accused acted corruptly to influence an official act.  The statute defines "official act" as "any decision or action on any question, matter, cause, suit, proceeding or controversy, which may by law be brought before any public official, in such official's official capacity, or in such official's place of trust or profit." The definition has been the subject of prior court controversy.  For example, in the case of U.S. v. Muntain(DC Cir. 1979) the defendant argued "that his actions were not 'official acts'  in that they did not involve matters that would be brought before him in his official capacity. The District of Columbia Circuit Court of Appeals accepted this argument, finding that the promotion of group automobile insurance was not a matter that would be brought before Muntain in his capacity as the Secretary of Labor Relations at HUD." See Podgor & Israel, White Collar Crime in a Nutshell 4th 115 (2009).

(esp) 

July 30, 2009 in Corruption | Permalink | Comments (0) | TrackBack (0)

Thursday, July 23, 2009

Are the New Jersey Charges Another Abscam?

Back in the 1970s and 80s, the FBI ran an undercover operation to stop corruption by government officials.  Convictions included a New Jersey Senator, members of Congress and others.  The government set up a phony business to lure individuals to commit crimes, and despite claims of entrapment and outrageous government conduct, many of the convictions stood.

Fast forward 30 years and we see the government again is using an undercover operation to arrest many politicians and some religious leaders.  The charges are no longer simple bribery or conspiracy charges.  Rather now we see newer statutes, like money laundering, statutes that carry more significant penalties.

An Acting US Attorney is proud to say that he is behind charges against "mayors of Hoboken, Secaucus and Ridgefield, the Jersey City deputy mayor and council president, two state assemblymen, numerous other public officials and political figures," and yes  community religious leaders.  The long list of complaints and press release can be found here. But as one reads these complaints one has to wonder about the "CW" - cooperating witness - that seems to be behind so many of these cases.  One also has to wonder what if any individual gains or profits accrued to each of the individuals charged with the alleged crimes. Finally one has to wonder why the government felt a  "perp walk" was necessary here.  Did they really think these individuals would flee, destroy evidence, or not turn themselves in voluntarily?

See also, Ted Sherman & Joe Ryan, NJ.com, Massive N.J. corruption sting targets mayors, legislators, rabbis

(esp)

July 23, 2009 in Corruption | Permalink | Comments (0) | TrackBack (0)

Could there be corruption in New Jersey?

See CNN, Mayors, rabbis arrested in corruption probe

NYTimes (AP), 2 Mayors Arrested in Broad N.J. Corruption Sweep

In this same US Attorney's Office, just a couple of days ago, an assemblyman and former mayor had a new charge added to his Indictment alleging that "he participated in a scheme with his former key political advisor to circumvent the contribution limitation and reporting requirements of the Federal Election Campaign Act." (see here).

(esp)

July 23, 2009 in Corruption, Money Laundering | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 22, 2009

NY Corruption Investigation

New York Attorney General Andrew Cuomo is in the middle of conducting a corruption investigation - a Pay-to-Play kickback scheme - with the past chair of the former state liberal party being mentioned in this investigation.  In a press release by Cuomo's office it states that the individual allegedly "obtained over $800,000 in illegal fees on State pension fund investments as a reward for opening up a State Assembly seat . . .and for over 30 years of prior political endorsements." "Cuomo also announced that hedge fund manager and classical music impresario Barrett Wissman has pled guilty to a Martin Act felony for his role in the pay-to-play scheme and will pay $12 million in penalties and forfeiture to New York State over a period of three years."  The SEC previously had complaints against two individuals in this matter, but added the former leader of the New York Liberal Party and Wissman to the SEC complaint. (see here) The New York Times reported on this recent investigation related to pension funds. See Danny Hakim & Mary Williams Walsh, NYTimes, In State Pension Inquiry, a Scandal Snowballs. 

(esp)

April 22, 2009 in Corruption | Permalink | Comments (0) | TrackBack (0)