Thursday, April 2, 2009

Blagojevich Indicted

Rod Blagojevich and 5 others were indicted in a 75 page document that included a myriad of different federal statutes, such a mail and wire fraud, false statements and RICO. The Indictment with its 19 counts (16 against Blagojevich) claim that he "allegedly used his office in numerous matters involving state appointments, business, legislation and pension fund investments to seek or obtain such financial benefits as money, campaign contributions, and employment for himself and others, in exchange for official actions, including trying to leverage his authority to appoint a United States Senator."  One interesting aspect of the Indictment is how prosecutors framed the Enterprise for the RICO charge. They call it the "Blagojevich Enterprise."  The enterprise is an association in fact comprised of "defendant Rod Blagojevich, the Office of the Governor of Illinois, and Friends of Blogojevich."  Will Blagojevich have any friends left by the time this case progresses to trial, if in fact it does?

DOJ Press Release here.

(esp)

April 2, 2009 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Friday, March 6, 2009

Siegelman-Scrushy Opinion & Commentary

As noted here, the 11th Circuit issued its decision in the appellate case involving former Governor Don Siegelman and former CEO of HealthSouth Richard Scrushy. Some of the key points in the decision -

  • the court found sufficient evidence "that a reasonable juror could have concluded that Siegelman and Scrushy explicitly agreed to a corrupt quid pro quo"
  • the government did not prove that "Siegelman knew that Scrushy intended to defraud Alabama of his honest services while on the Board and that Siegelman personally intended to participate in this fraud."
  • although the jury was exposed to extrinsic evidence, it was harmless and the court "did not abuse its discretion in holding that there was no reasonable possibility of prejudice to the defendants arising out of the exposure of the jury to this extrinsic evidence and denying the motion for a new trial"

The court affirmed Scrushy's convictions and reversed two counts of Seigelman's convictions.  Seigelman gets a resentencing because of the reversal of Counts 8 and 9. 

What happens now?  Scrushy and Seigelman have the next step to go - asking for an en banc hearing and perhaps a petition for certiorari to the Supreme Court.  But the political arena may be the avenue that we hear the most noise from in the immediate future, as Karl Rove is scheduled to appear before the House Judiciary Committee.  See Huffington Post, Karl Rove Agrees to Testify

(esp)

March 6, 2009 in Corruption, Fraud, HealthSouth, Judicial Opinions | Permalink | Comments (1) | TrackBack (0)

Monday, February 23, 2009

Senate Happenings - Criminalizing the Filing of False Fishing Licenses

An executive business meeting is set for the Senate Judiciary Committee for February 26, 2009.  On the agenda are S. 386 - Fraud Enforcement and Recovery Act and S. 49 - Public Corruption Prosecution Improvements Act (see here). The most troublesome aspect of this latter bill is its attempt to provide increased prosecutorial power on mail and wire fraud offenses. Section 3 is titled, "Application of Mail and Wire Fraud Statutes to Licenses and Other Intangible Rights."  It looks like an attempt to circumvent the Supreme Court ruling in United States v. Cleveland, where the Court held that licenses were not property for purposes of mail fraud. Imagine this scenario - a person answers a question incorrectly on their mailed application for a fishing license.  Assuming other aspects of the statute being met, the government would now be able to prosecute them federally for mail fraud.  Adding the words "or any other thing of value" might not include licenses, but the title of this provision sure is an attempt to try to increase prosecutorial power to include them.  There needs to be some limits to this already near limitless statute, and this provision is not moving in the correct direction.

(esp)(w/ a hat tip to Tiffany Joslyn of NACDL)

February 23, 2009 in Congress, Corruption, Fraud | Permalink | Comments (1) | TrackBack (0)

Friday, January 30, 2009

New Illinois Governor to Fight Corruption in Government

The new Illinois Governor, as his first executive order, has decided to take on the fight against corruption in government.  He issued an Executive Order creating the Illinois Reform Commission that has several purposes including "to undertake a focused evaluation of both existing Illinois law and the operational practices of the State of Illinois from the perspective of ethics in government, proposing, as the Commission deems appropriate, amendments to existing law."  Although Governor Pat Quinn established this commission before former Governor Rod Blagojevich's impeachment and conviction, this act was his first Executive Order, sending the clear message that he means business.

(esp)

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

Friday, January 2, 2009

More on Pardons & Commutations

More on Pardons & Commutations -

Charlie Savage NYTimes, has an article titled On Fast Track for Clemency, via the Oval Office and there are wonderful follow-ups from P.S. Ruckman Jr., Pardon Power, ABC News: Pardon Breakdown and The Times: On Pardons and Access .   Some observations -

  • The process has its issues and those who are less fortunate and don't have a connection may not have as good a chance of securing a pardon or commutation.
  • Politics and/or influence may have played a factor and this needs to be scrutinized.
  • The press is monitoring every pardon issued.

It's this last point that interests me.  We see newspapers cutting staffs and suffering from the economy and also the effect of the Internet.  Investigative reporters have served an important role in society and in uncovering many corruption and white collar crimes.  So, too, they serve an important role in keeping the government in check. Will this continue and what happens if we lose the power of the press?

(esp)

Addendum, Mary Flood, Houston Chronicle, Pardon watch on as transition nears -But it's doubtful any Houstonians will make the cut

January 2, 2009 in Corruption, Media, News | Permalink | Comments (1) | TrackBack (0)

Friday, December 12, 2008

More on Blagojevich

Some additional thoughts and references on the Blogojevich case -

  • It seems clear that US Attorney Patrick Fitzgerald is now presenting the case to a grand jury. See Todd Lightly & Robert Becker, Chicago Tribune, Tribune Co. subpoenaed in Blagojevich probe (it seems a bit odd to hear the CEO of the Tribune Co. saying to the press that he will not be interviewed)
  • Howard Kurtz,Washington Post,  Media Notes, discusses a point mentioned here regarding the appropriateness of Patrick Fitzgerald characterizing the evidence to the press.  Kurtz notes that US Attorney Patrick Fitzgerald may have gone "beyond describing the allegations contained in the criminal complaint" - Kurtz provides a statement from the Illinois Disciplinary Rule concerning such statements.  But to add to what Mr. Kurtz has written, there is also the ABA Prosecution Function Standards that instructs prosecutors not to make extrajudicial statements that "the prosecutor knows or reasonably should know ... will have a substantial likelihood of prejudicing a criminal proceeding," and the ABA Standards for Criminal Justice, Fair Trial and Free Press that question whether a prosecutor should make a statement that speaks to an "opinion of the lawyer on the guilt of the defendant, the merits of the case or the merits of the evidence in the case." (8-1.1).  And we haven't even mentioned the internal guidelines of the DOJ on this issue. (see John Steele, Legal Ethic Forum here
  • And then there is the most important question of whether the evidence is really there that provides evidence of any crimes.  See Mike Robinson, Houston Chronicle (AP), Are Blagojevich tapes enough evidence to convict?
  • Politicians face additional issues when under investigation or when charged with a crime.  The parallel proceeding may be an impeachment process. See Ray Long, Chicago Tribune, Quinn: Impeach Rod, let me pick Obama replacement
  • One thing is certain - this case will continue to be in the news over the next month.

(esp)(w/ a hat tip to Mark Johnson for the Howard Kurtz piece).

December 12, 2008 in Corruption | Permalink | Comments (3) | TrackBack (0)

Tuesday, December 9, 2008

Commentary on the Arrest of Illinois Governor Blagojevich

The arrest of Illinois Governor Blagojevich raises some interesting questions.  Here are some very preliminary thoughts (for backgound see here):

  • Clearly the selling of a Senate seat and the other remaining allegations in the Complaint are appalling and if the Governor is found to have done this, it is something that needs immediate correction. But it is also important to remember that this is not an Indictment coming from a grand jury and he has not been proved guilty after a trial by jury.  Unlike some countries, we are not a country that convicts a person without first affording them a right to a trial by jury.
  • One has to wonder whether Governor Blagojevich will be able to obtain a fair trial. Even if what the USAttorney heard on tapes was as outrageous as he claims, is it proper for a United States Attorney to make comments that characterize the alleged conduct? See Chicago Sun Times here;  NYTimes here.
  • Mail and wire fraud are statutes with enormous breadth.  Using the "intangible right to honest services" under section 1346 extends it even further.  After all, what isn't "honest services?" Now put it all together under a conspiracy statute (1349) and the question becomes - how far can prosecutorial power go? (e.g. - the hypo I use in this older article is whether a political falsehood is therefore a dishonest service - see here).  One question the defense may raise is whether there was a violation of state law that can serve as the basis for the deprivation of an intangible right to honest services.
  • There are no allegations of Hobbs Act violations in the complaint.  Interestingly this approach would require a quid pro quo - an important requirement when political contributions are involved. Is the use of the mail/wire fraud statutes an attempt to find an open back-door? Is it being used as the "stopgap" (a term once used in the Maze case).
  • Many of the people listed in the Complaint are named as "A", "B", etc.  Are any of these unnamed individuals cooperating, and if not, will they soon be?
  • The federal government has been obtaining information from wires on a state official as high as the governor.  The press release states:

"On October 21, the Government obtained a court order authorizing the interception of conversations in both a personal office and a conference room used by Blagojevich at the offices of Friends of Blagojevich. The FBI began intercepting conversations in those rooms on the morning of October 22. A second court order was obtained last month allowing those interceptions to continue. On October 29, a court order was signed authorizing the interception of conversations on a hardline telephone used by Blagojevich at his home. That wiretap was extended for 30 days on November 26, according to the affidavit.

what does this say about the appropriate balance between the state and federal government?

  • Most USA's resign when a new president comes into office.  Unlike the civil service employees who work in the office, the US Attorney's serve as a presidential appointment.  Will the new DOJ approve this case? Will Patrick Fitzgerald be there to prosecute this case?
  • The Complaint alleges that the arrestees had "corruptly solicited and demanded the firing of Chicago Tribune editorial board members" - but some in the press seem to say the opposite (see here). 
  • Will all this "news" help the Chicago Tribune - Tribune Co. files for Chapter 11 bankruptcy protection.  But can we count on them to report all the news (see Chicago Tribune Editor Kern's admission to withholding items here - an interesting issue in itself considering that this information does not appear to be related to national security).
  • Would everyone be best here if an agreement is reached that takes this matter off the front page? In this regard perhaps the Governor of Illinois should call former Governor Spitzer for advice. (see here)
  • And yes, if these allegations all turn out to be true - then maybe we need some basic ethics tests before a person can hold political office.

(esp)(blogging from Atlanta) 

December 9, 2008 in Corruption | Permalink | Comments (3) | TrackBack (0)

Is US Attorney Fitzgerald Collecting Governors?

U.S. Attorney Patrick Fitzgerald, the same man who handled the case against Governor Ryan, has now had Governor Rod Blagojevich of Illinois arrested. Also arrested and released was his chief of staff John Harris (See Chicago Tribune here).  A press release of the US Attorney's Office for the Northern District of Illinois states that:

"arrested today by FBI agents on federal corruption charges alleging that they and others are engaging in ongoing criminal activity: conspiring to obtain personal financial benefits for Blagojevich by leveraging his sole authority to appoint a United States Senator; threatening to withhold substantial state assistance to the Tribune Company in connection with the sale of Wrigley Field to induce the firing of Chicago Tribune editorial board members sharply critical of Blagojevich; and to obtain campaign contributions in exchange for official actions – both historically and now in a push before a new state ethics law takes effect January 1, 2009."

The Criminal Complaint alleges violations of the mail and wire fraud statute using the intangible right to honest services for allegations of conspiracy under section 1349. There is also a claim under section 666 of title 18 of the federal criminal code. Commentary to follow.

(esp)(blogging from Atlanta)

December 9, 2008 in Corruption | Permalink | Comments (1) | TrackBack (0)

Wednesday, October 29, 2008

Massachusetts State Senator Indicted

A Press Release of the United States Attorney's Office in Massachusetts reports on the indictment of an "[e]ight-term Massachusetts State Senator" "on public corruption charges stemming from her [alleged]acceptance of more than $20,000 in cash payments to introduce legislation in the State Senate." She is charged "with attempted extortion under color of official right and theft of honest services as a State Senator."  But it also sounds like there is another side to this story.  Check out - Michael Levenson and Jonathan Saltzman, Boston Globe, Bribery defendant Wilkerson - Senator allegedly took cash for help on liquor license, development

(esp)

October 29, 2008 in Corruption | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 27, 2008

Abramoff - The Reward for Cooperation

In 2006, this blog gave Jack Abramoff The Collar for the Best Cooperating Witness, after all Abramoff caused many politicos to fall as a result of his inside knowledge and use of that knowledge in providing cooperation to the government. In 2007 this blog awarded Abramoff  The Collar for the Best Skating Not on an Ice Rink (along with Andy Fastow). And although his cooperation has not always resulted in convictions for the government, (see here) it is clear that he has spent many an hour working with DOJ to unravel alleged improper conduct by government officials.

So it is no surprise to see an article in the Washington Post (AP) by Matt Apuzzo titled, Prosecutors Seek to Slash Abramoff Prison Term.

Cooperation provides benefits to the cooperator.  But it also continues to raise serious questions such as:

  • What about the individual who is the last one approached, and who has no one left to provide evidence against?  Is it proper to deprive this individual of the enormous benefits associated with cooperation?
  • And what about the individual who avails him or herself of the constitutional right to a jury trial - is there a penalty for proceeding to trial if the person is convicted?

(esp)

August 27, 2008 in Corruption, Sentencing | Permalink | Comments (2) | TrackBack (0)

Saturday, August 16, 2008

Ted Stevens - How Will He Sound on Tape?

Previously discussed here and here, the case against Senator Ted Stevens of Alaska is  moving forward quickly. He is under indictment for seven counts of false statements under 18 U.S.C.  section 1001. Del Quentin Wilber at the Washington Post has an article titled, "Court Filings Reveal Evidence Against Stevens - Prosecutors Possess Recordings of Senator Promising to Help Oil Company

Tapes have destroyed many a criminal defendant's case.  Often the criminal activity is not the most devastating aspect of the tape.  It can be that the accused comes across as someone who just is not a likeable person. In some cases the defendant is forced to hear tapes played in court that may be filled with profanities and other statements that can taint him or her with the jurors.  But just because there may be tapes, does not mean that they will automatically be admitted into evidence, and if they are, that they will prove damaging to the defense.

Tapes can also be a problem for the government in that it can confirm the accused's explanation of what might have really happened. In this case it sounds like the defense may have some forceful arguments.  The first problem for the government is that the allegations appear to have the company executive coming to the Senator for assistance, as opposed to the reverse.  Second is the very fact that this is a Senator, and everyone knows that Senators serve their constituents.  Third is that the individual having the conversation with the Senator has obtained a plea deal from the government and this bargain will likely be scrutinized by the defense.  So much of what really exists in the evidence related to this case, and what may not exist, has not been seen or discussed. That will happen when the Senator has his day in court.

(esp)

August 16, 2008 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 23, 2008

AG Mukasey on Public Corruption

AG Mukasey spoke to the United States House of Representatives Committee on the Judiciary Concerning "Oversight of the U.S. Department of Justice." The written statement is 37 pages, and it includes the following concerning public corruption:

"Public Corruption

"The investigation and prosecution of public corruption is among the highest obligations of law enforcement, and I consider it to be one of the top priorities of the Department of Justice. The Department’s career prosecutors and criminal investigators are engaged in a renewed effort to pursue corruption at all levels and in all branches of government. The Department’s achievements during the past year in this area show a steady commitment to fighting public corruption wherever it is found and on a non-partisan basis.

"The Department’s recent public corruption investigations have resulted in convictions of federal officials in all branches of government, as well as numerous state and local officials. At the federal level, in February, defense contractor Brent Wilkes was sentenced to 12 years in prison for his involvement in what the Washington Post called "the most brazen bribery conspiracy in modern congressional history." Wilkes funneled cash, mortgage payments, cars, meals, luxury travel, and prostitutes to former Congressman Randall "Duke" Cunningham in return for the Congressman’s assistance in steering contracts to Wilkes’s company.

"In March 2008, the Department obtained the seventh criminal conviction arising out of an ongoing investigation into public corruption among state officials in Alaska. The convictions have included three former elected members of the Alaska State House of Representatives (including a former speaker of the house), a chief of staff to a former governor, and three high-ranking executives with a major Alaska oil-services company. The convicted individuals made or received thousands of dollars in corrupt payments as well as offers of employment in return for official actions—including votes in the legislature—that would benefit the company.

"The Department, through its National Procurement Fraud Task Force, continues to devote significant attention to procurement and other corruption within the Iraq and Afghanistan war theaters and related support efforts. For example, in April 2008, an indictment by a federal grand jury in San Francisco was unsealed against a Canadian night vision goggles manufacturing firm and two of its executives for their participation in a scheme to defraud the U.S. military in the supply of equipment for the Iraqi army. In June 2008, a U.S. Army officer and his wife pleaded guilty for their participation in a conspiracy, bribery, and money laundering scheme involving contracts awarded in support of the Iraq war. Additionally, a retired U.S. Army colonel pleaded guilty in June for her role in a scheme designed to secure a U.S. Department of Defense contract at Camp Victory, Iraq, in 2004 and 2005. Also in June 2008, a defense contractor, Raman International, pleaded guilty for its role in a bribery scheme designed to influence the award of U.S. Department of Defense contracts at Camp Victory, Iraq. "

(esp)

July 23, 2008 in Corruption, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Saturday, July 12, 2008

Recent Indictment - Alaska State Senator

DOJ Press Release - Alaska State Senator Indicted on Public Corruption Charges - "[A] current member of the Alaska State Senate, was indicted on charges arising out of a federal investigation into public corruption in the state of Alaska." It's a two count indictment - one count of bribery and one count conspiracy.

(esp) (blogging from Dublin, Ireland)

July 12, 2008 in Corruption | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 4, 2008

Rezko Convicted

The press is reporting on the conviction of Antoin Rezko:

Bob Secter & Jeff Coen, Rezko Convicted of Corruption

Peter Slevin, The Trail Blog, Washington Post - Rezko Convicted of Influence Peddling

Fox News, Rezko Convicted on 16 Counts in Corruption Trial

Catrin Einhorn & Susan Sauley, NYTimes - Fund-Raiser Convicted in Illinois Bribery Scheme

Ilan Brat & T.W. Farnam, Wall St Jrl, Fund-Raiser Rezko Found Guilty in Illinois Corruption Trial

The case drew national attention when the names of Obama and Blagojevich surfaced during the trial. For background see here, here, here, here and here.  The initial DOJ Press Release can be found here.

(esp)(blogging from Atlanta)

June 4, 2008 in Corruption, Verdict | Permalink | Comments (0) | TrackBack (0)

Sunday, June 1, 2008

Former Governor Don Siegelman's Support

The latest press reports on the Siegelman case -

Newsday (AP) - Ex-Attorneys General File Brief Supporting Siegelman

Ala.com (AP) - List of Former Attorneys General Signing Siegelman Brief (provides the list of 54 Former Attorney Generals Who Signed the Brief)

It is not surprising to see Former Governor Siegelman receiving significant support as the case is clearly one that needs scrutiny - even the DOJ is examining it (see here).  And although the courts will scrutinize this case in the normal review process, more is needed here.  An independent review is necessary to determine if politics in any way entered into the decision-making process.  With enormous prosecutorial discretion provided to prosecutors, it is important for there to be accountability.

(esp) (blogging from Firenze, Italy)

Addendum - Amicus Brief -  Download amicus.pdf

June 1, 2008 in Corruption | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 27, 2008

In the News

Thursday, May 22, 2008

Former Alabama Governor Siegelman's Brief & the DOJ Investigation

Former Governor Don Siegelman's brief (see below) was filed in the 11th Circuit Court of Appeals, and it raises some important issues. Also of importance to this case is that the DOJ's Office of Professional Responsibility (OPR) currently has a pending investigation concerning allegations of selective prosecution relating to the prosecution of Don Siegelman. (See AJC - Alabama Governor's Conviction Gets Justice Department Scrutiny - be sure and read the Letter to Chairman Conyers in this article).  One has to ask whether the DOJ should be the one doing this investigation, even if it is OPR, or whether this is an appropriate task for an independent outsider.   

The first argument in the brief is powerful and unique.  It takes the quid pro quo requirement used in the Supreme Court's McCormick case, a Hobbs Act case involving campaign contributions, and applies it to the "honest services" aspect of the mail fraud, conspiracy to commit, and bribery portions of the charges here. And it makes sense that it should apply as the charges are "based on an alleged connection between official action and a campaign contribution."  In McCormick, the Court recognized that campaign contributions operate differently and one can't assume criminality for a contribution unless there is a showing of a quid pro quo demonstrated that is tied to that contribution. With a "honest services" statute, that has been criticized by many as allowing for enormous prosecutorial discretion in the charging process, it seems important that a quid pro quo should be mandated so that politicians know what is legal and what is illegal for purposes of violating the "honest services" statute.  It's especially important in this case as Siegelman personally received nothing of value. The brief ties in the First and Fifth Amendments here and reminds the court of the importance of the Rule of Lenity in criminal cases.

Equally noteworthy is the next to the last argument in the brief that argues whether it was, "permissible to increase Governor Siegelman's sentence because of out-of-court statements on matters of public concern, i.e., statements criticizing and questioning the actions and motives of prosecutors - particularly without any evidence of factual specificity as to the content of such  statements?" It will be interesting to see how the appellate court deals with an increase of a sentence by someone exercising a First Amendment right to speak - especially when the speaking is criticism of the prosecution being politically motivated.  In light of recent revelations in the department and the fact that OPR is now investigating this case for possible selective prosecution, this sentence increase is something that an appellate court may want to seriously examine.

There are, of course, other arguments in this brief.  Even without seeing the Scrushy Brief and the DOJ response, this brief sends the message that this case will certainly provide for an interesting oral argument.

Brief - Download seigelman_final_brief.pdf

(esp)

Addendum - Corrected Brief of Government -

Download govt_brief.pdf

May 22, 2008 in Corruption | Permalink | Comments (1) | TrackBack (0)

Monday, March 24, 2008

Detroit Mayor and Former Chief of Staff Charged

Perjury, obstruction, conspiracy, and misconduct, are the charges brought by the Wayne County prosecutor against the Mayor of Detroit and his former chief of staff. Dan Webb is representing the mayor and is calling this a "selective prosecution."  The prosecutor in this case chose to respond to what was said by defense counsel.   

The press reports that the basis for the "selective prosecution" claim is that the prosecutor has never charged anyone with the crime of perjury for statements made during a civil matter.

Selective prosecution claims are difficult to win in the pre-trial stage. Prosecutors have broad discretion in their charging powers and as long as there is probable cause of the commission of the crime charged, the decision "generally rests entirely within the prosecutor's discretion." See Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978).  That said, if the prosecutor uses an impermissible factor, such as race or religion, it's a different story. Although selective prosecution claims may be difficult to prove in a pre-trial stage, if allowed into evidence it can make for an interesting jury consideration.  Couple that with perjury, a difficult charge for prosecutors in that it requires clear questions with clear answers, and the case will be one to follow.

For full coverage -Detroit Free Press here (videos and all); Detroit News here.

(esp)

March 24, 2008 in Corruption, News, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 11, 2008

Spitzer and the Southern District of New York

The fact that federal prosecutors from the U.S. Attorney's Office for the Southern District of New York pursued the investigation of New York Governor Eliot Spitzer's use of large amounts of cash for transactions that turned out to involve the services of one or more prostitutes means he could be looking at federal charges for his conduct.  Blog co-editor Ellen Podgor has already discussed (here) the possible application of the Mann Act to Spitzer's involvement in the interstate transportation of a person for prostitution, which in fact is among the charges against the leaders of the Emperors Club service Spitzer used (criminal complaint and affidavit below -- the juicy "Client 9" material begins in paragraph 73 for those with their minds in the gutter).  The investigation began because of Suspicious Activity Reports filed by banks because Spitzer purportedly made large cash withdrawals, and while the initial focus was for possible public corruption, the case turned out to involve a more mundane, albeit considerably salacious, prostitution ring.

While Mann Act charges against Spitzer certainly would be quaint, a criminal structuring charge may be more likely.  The applicable statute is 31 U.S.C. Sec. 5324(a), which provides:

No person shall, for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—

cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by an order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508 . . . .

If Spitzer split deposits or withdrawals in his accounts to stay below the $10,000 threshold for filing a Currency Transaction Report by the bank, then he could be guilty of structuring.  The predecessor to this provision was the subject of the Supreme Court's decision in Ratzlaf v. United States, 510 U.S. 135 (1994), in which the court interpreted the "willfully" element to require proof that the defendant knew there was a legal duty to report the transactions and sought to have the bank violate the law by structuring his transactions.  As the Court explained, "Undoubtedly there are bad men who attempt to elude official reporting requirements in order to hide from Government inspectors such criminal activity as laundering drug money or tax evasion.  But currency structuring is not inevitably nefarious." (Italics added)  In response, Congress sought to overturn Ratzlaf by removing "willfully" as an element of the crime.  Thus, all the government must prove is that the person intended to structure the transactions, not that the person intended to commit a crime by violating the provision.  So while structuring is not always nefarious, it is a crime regardless of the desire to violate the law.

The Second Circuit rejected a fall-back argument that the statute requires that the money that is the subject of the structuring must be tainted and not just funds properly controlled by the defendant.  In United States v. MacPherson, 424 F.3d 183 (2d Cir. 2005), the court stated, "The anti-structuring law may well have been intended to prevent criminals from concealing their illicit profits, but that is not the limit of its reach. Section 5324 makes no reference to the source of the monies at issue or to the reason why a person seeks to avoid CTR filing. Its singular focus is on the method employed to evade that filing requirement, i.e., structuring."  (Italics in original) Spitzer could not avoid a structuring charge by arguing that the money was his, or at least he had lawful access to it, so he could do with it as he wanted.  Moreover, an ignorance defense would be difficult to offer for a former state Attorney General who fancied himself the Sheriff of Wall Street.  The structuring provision is different from the money laundering statute, which reaches the proceeds of "specified unlawful activity," even though it reaches similar activity and often involves conduct by people who are trying to hide criminal activity.

An interesting question is whether any other federal criminal charges could come out of the cash transactions.  The old adage is to "follow the money," and here it may be to trace the dollars backward to find out where they came from and how they traveled, and not so much where they ended up.  Spitzer is a fairly wealthy man, so he probably has access to a sizable pool of money.  Yet, according to the criminal complaint, he did not want to make a wire transfer, even though Emperor's Club employed a shell corporation that could be used to hide the true nature of the payments.  If Spitzer was trying to hide what he was doing from his family, then large cash withdrawals might have raised just as many questions as wire transfers.  It would not surprise me that federal investigators were looking into whether any campaign money was involved in the transactions, or at least campaign bank accounts, that could be used so that it was not as apparent when slugs of cash were used for personal purposes.  Whether that violates any federal laws is an open question, but I suspect the U.S. Attorney's Office is going to take a very close look at the flow of the money to see what roads it traversed. (ph)

Download us_v_brener_criminal_complaint_spitzer_march_2008.pdf

March 11, 2008 in Corruption, Money Laundering, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (1)

Thursday, March 6, 2008

Zach Scruggs, Meet Frank Costello

Mob boss Frank Costello, one--time head of the Luciano crime family, faced charges in the 1950s for tax evasion, the favored means to attack the Mafia before the advent of RICO -- think Al Capone.  Costello's case went to the Supreme Court on the question of whether a defendant can challenge a grand jury indictment on the ground that there was insufficient admissible evidence on which to charge a crime.  Costello came to mind when I read Zach Scruggs' latest challenge to the attempted bribery charges against him and his father, Dickie Scruggs.  In a motion filed on March 3 (available below), Zach seeks dismissal for prosecutorial misconduct because two government witnesses, an FBI agent and the alleged offeror of the bribe, Tim Balducci, gave testimony to the grand jury that he claims was "patently false and misleading in material respects and undoubtedly led to the erroneous indictment of Defendant Zach Scruggs."

While not quite the same claim as Costello, Scruggs is asking for dismissal because the evidence to charge him with a crime was insufficient.  Calling it a motion to dismiss for "prosecutorial misconduct" is a way to avoid the Supreme Court's decision in Costello v. United States, 350 U.S. 359 (1956), which held that "[a]n indictment returned by a legally constituted and unbiased grand jury, like an information drawn by the prosecutor, if valid on its face, is enough to call for trial of the charge on the merits."  The Court rejected Costello's claim that the grand jury did not have enough evidence to charge him because only summary witnesses testified, and further denied his request to use its supervisory power to require prosecutors to present admissible evidence to the grand jury.  The Court stated, "Petitioner urges that this Court should exercise its power to supervise the administration of justice in federal courts and establish a rule permitting defendants to challenge indictments on the ground that they are not supported by adequate or competent evidence. No persuasive reasons are advanced for establishing such a rule."  It seems that Zach's motion is exactly that, asking the district court to review the evidence and find it so flawed that he would not have been indicted.  Costello rejected the use of supervisory power to fashion a rule to challenge indictments, and the Court has been rather hostile to dismissal based on generalized claims of misconduct (see United States v. Williams, 504 U.S. 36 (1992)).

Defendants who want to challenge an indictment because they don't believe there is sufficient evidence to even charge them with a crime have only one option: go to trial and win the case.  That's not the most inviting way to challenge an indictment, but Costello makes it clear that a head-on challenge to an indictment is not going to succeed.  (ph)

Download us_v_scruggs_zach_scruggs_motion_to_dismiss_indictment_march_3_2008.pdf

March 6, 2008 in Corruption, Grand Jury | Permalink | Comments (0) | TrackBack (0)