Friday, May 25, 2012
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.
Wednesday, April 25, 2012
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.
Wednesday, February 22, 2012
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.
Thursday, February 9, 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.
Wednesday, February 8, 2012
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.
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
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."
Wednesday, November 23, 2011
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.
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
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."
Sunday, August 7, 2011
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
(esp) (blogging from Ottawa)
Tuesday, July 12, 2011
Guest Blogger - Carolyn F. McNiven (DLA Piper)
Although 56 percent of fraud cases were preceded by red flags, instances where actions were taken in response to those red flags "fell massively" since 2007, according to a global KPMG survey. This is probably the most surprising and eye-opening observation in KPMG’s 2011 study, which also found that most fraud was committed by long-term employees, particularly male executives between the ages of 36 and 45; and individuals who worked in the finance area. The increased failure to respond to red flags highlights the need for companies not only develop system for identifying red flags, but also acting on them.
The other notable development KPMG found was an increase in the number of fraud matters perpetrated by company board members. According to KPMG, fraud by board members increased from 11 percent in 2007 to 18 percent in the 2011 analysis. Overall, it found that, "people most often entrusted with a company’s sensitive information and able to override controls are statistically more likely to become perpetrators." Nevertheless, this increase in crimes perpetuated by board members is significant. KPMG’s global survey was based upon a review of 368 actual fraud investigations conducted by KPMG member firms in 69 countries, over the period January 2008 and December 2010. It only took into consideration frauds that were material to the company. According to KPMG, the majority of the investigations involved matters that were not publicized. Some might argue that the nature of the investigations themselves accounted for this result: namely that only larger companies are in a position to engage KPMG to investigate such matters, consequently perpetrators examined by KPMG are necessarily more likely to be corporate executives who are in a position to commit fraud that is material to such companies. While KPMG’s data pool was necessarily limited, I think that it would be a mistake to discount their observations. Among other things, their profile of a fraudster fits the typical demographic of white collar criminal defendants in the United States, at least those prosecuted for federal crimes in the past few years, and is consistent with what I observed during my over 13 year tenure with U.S. DOJ. Fraud is by and large an opportunistic crime. Insider-fraud thrives in environments of trust and access, as the survey points out. Individuals in the executive suite and higher level employees in the finance area are less likely on average to be closely supervised than clerks in accounts receivable. By analogy think of the security surrounding bank employees: tellers have their cash drawers counted after every shift; bank loan officers, who have access to vastly larger sums of bank funds, are generally not scrutinized in the same way although they too are human and subject to the same impulses to steal and self-deal. That being said, KPMG’s observation that most perpetrators were long term company employees, is noteworthy. KPMG found in its 2011 survey that a solid majority (60 percent) of perpetrators worked at the company for more than five years; and 33 percent of perpetrators had worked at the company over 10.
The other notable development KPMG found was an increase in the number of fraud matters perpetrated by company board members. According to KPMG, fraud by board members increased from 11 percent in 2007 to 18 percent in the 2011 analysis. Overall, it found that, "people most often entrusted with a company’s sensitive information and able to override controls are statistically more likely to become perpetrators." Nevertheless, this increase in crimes perpetuated by board members is significant.
KPMG’s global survey was based upon a review of 368 actual fraud investigations conducted by KPMG member firms in 69 countries, over the period January 2008 and December 2010. It only took into consideration frauds that were material to the company. According to KPMG, the majority of the investigations involved matters that were not publicized.
Some might argue that the nature of the investigations themselves accounted for this result: namely that only larger companies are in a position to engage KPMG to investigate such matters, consequently perpetrators examined by KPMG are necessarily more likely to be corporate executives who are in a position to commit fraud that is material to such companies. While KPMG’s data pool was necessarily limited, I think that it would be a mistake to discount their observations. Among other things, their profile of a fraudster fits the typical demographic of white collar criminal defendants in the United States, at least those prosecuted for federal crimes in the past few years, and is consistent with what I observed during my over 13 year tenure with U.S. DOJ.
Fraud is by and large an opportunistic crime. Insider-fraud thrives in environments of trust and access, as the survey points out. Individuals in the executive suite and higher level employees in the finance area are less likely on average to be closely supervised than clerks in accounts receivable. By analogy think of the security surrounding bank employees: tellers have their cash drawers counted after every shift; bank loan officers, who have access to vastly larger sums of bank funds, are generally not scrutinized in the same way although they too are human and subject to the same impulses to steal and self-deal.
That being said, KPMG’s observation that most perpetrators were long term company employees, is noteworthy. KPMG found in its 2011 survey that a solid majority (60 percent) of perpetrators worked at the company for more than five years; and 33 percent of perpetrators had worked at the company over 10.
So what turns a good employee into one who commits fraud? KPMG found that the primary motivators behind the fraud they investigated were greed and work pressure. KPMG found that attempts "to conceal losses or poor performance (possibly due to pressures to meet budgets and targets, to enhance bonuses, or to safeguard against loss of employment)" were motivating factors in many cases. Of course, greed – satisfied by misappropriating assets – was the other primary motivator that they identified.
Good employees turning bad may well also result from the same economic and cultural shifts we have seen in other areas. People -- particularly the middle class -- were hard hit in the recession resulting in increased financial pressure, which in turn can create the incentive to steal or "borrow" from one's employer. That incentive combined with a fairly systemic disenchantment with employers -- particularly those that downsized significantly --creates an environment where workers may be more likely to take what they can get from an employer, particularly if they believe that they are being undercompensated or the employer has transgressed in some way (for example, by paying its upper level management disproportionately while cutting staff and middle management).
All-in-all, KPMG’s 2011 global survey is eye-opening, and a reminder to all companies that they cannot be complacent. At a minimum, companies should regularly ensure that internal controls are operating effectively to prevent and detect insider fraud; and that red flags are not only seen, but acted upon.
Carolyn F. McNiven is a partner in DLA Piper’s San Francisco office where she is a Partner in the White Collar, Corporate Crime and Investigations practice. She is a former long-time federal prosecutor, and handles white collar criminal defense and related administrative, regulatory and compliance matters for individuals and companies. She has particular expertise in the areas of health care, food and drug, and FCPA compliance counseling, risk assessment and litigation.
Saturday, April 23, 2011
The federal criminal trial involving former GlaxoSmithKline ("GSK") Vice President and Associate General Counsel Lauren Stevens commences this Tuesday in Greenbelt, Maryland. When I first read the Indictment, without knowing anything else about the facts, it struck me that the government may have overcharged. That is probably not a good sign for the feds, since the Stevens charging instrument is a classic one-sided speaking Indictment that seeks to put the United States' case in the best possible light.
The crux of the prosecution theory is that Stevens, who headed up a team of inside and outside GSK counsel responding to an FDA inquiry, withheld information about off-label marketing of Wellbutrin. Specifically, Stevens allegedly learned that several doctors, paid by GSK and speaking at GSK-sponsored events, promoted off-label (weight-loss) use of the drug. GSK's responses were part of a voluntary production pursuant to a written request from the FDA's Division of Drug Marketing, Advertising, and Communications ("DDMAC"). Stevens allegedly agreed, orally and in writing, to provide DDMA with "materials and documents presented at GSK-sponsored promotional programs, even if not created by, or under the custody or control of GSK." But, according to the Indictment, Stevens knowingly failed to produce numerous off-label promotional and presentation materials, provided to GSK by the doctors in question, with intent to obstruct an FDA proceeding. Rather than focusing entirely or primarily on this failure to produce, the Indictment lumps in many other broad statements contained in Stevens' various cover letters to the government. It seems to me that at least some of these statements are open to differing interpretations. Perhaps the government should have more narrowly honed in on the failure to turn over the presentation/promotional materials.
Part of Stevens' defense will entail her purported reliance on the advice of outside counsel in sending GSK's written responses to the FDA. The original Indictment was thrown out by Judge Roger Titus, because federal prosecutors incorrectly instructed the grand jury that reliance on the advice of counsel is only an affirmative defense. In fact, good faith reliance on advice of counsel negates the specific intent element under the federal obstruction and false statement statutes at issue in the trial.
This prosecution should strike terror into the hearts of inside and outside counsel throughout corporate America. Of particular note is that the FDA inquiry into off-label Wellbutrin marketing did not involve a compelled production and was not even quasi-criminal in nature.
Attached for our readers' benefit are some documents setting out the government's case and what are likely to be key portions of Ms. Stevens' defense.
April 23, 2011 in Arthur Andersen, Corruption, Current Affairs, Defense Counsel, Fraud, Grand Jury, Judicial Opinions, Legal Ethics, Obstruction, Prosecutions, Statutes | Permalink | Comments (0) | TrackBack (0)
Sunday, March 27, 2011
New ABA Website Features U.S. and International Anti-Corruption News and Peer-Reviewed Analysis by and for Practitioners
The American Bar Association’s Criminal Justice Section is launching a new website that provides up-to-date, practitioner-oriented information and analysis on global anti-corruption matters. Managed by the section’s Global Anti-Corruption Task Force, the site features, among other unique categories of information: Peer-reviewed articles and analysis from practitioners worldwide; Up-to-date news reports; Extensive online resource links; A library of presentations; and Notices of upcoming anti-corruption events and seminars. The task force provides a neutral, practitioner-focused online resource to monitor, evaluate and report on anti-corruption news and developments in transnational anti-bribery efforts. Focus is on the interplay between anti-corruption governmental efforts and the effect that those efforts have on global commerce and business development. The website’s distinguishing features are: a) all published articles are peer-reviewed and available free of charge online; b) its subject-matter focus covers the globe, and not just the United States; c) published pieces come from leading practitioners and industry leaders from all over the world; and d) its objective is to provide news and analysis that is "for and by" practitioners who are looking for the latest developments and insights in the ever-changing global anti-corruption arena. The site also provides extensive real-time news announcements and reports on criminal and regulatory enforcement activities relating to the Foreign Corrupt Practices Act, as well as similar international instruments such as the United Kingdom Bribery Act, the German Anti-Corruption Act, Russia’s National Plan for Counteraction to Corruption, and the U.N. Convention Against Corruption. The Global Anti-Corruption Task Force is co-chaired by Assistant U.S. Attorney Andrew S. Boutros (in his personal capacity) and Perkins Coie Investigations and White Collar Defense Group partner (and former Assistant U.S. Attorney) T. Markus Funk. A link to the task force website is available here.
The American Bar Association’s Criminal Justice Section is launching a new website that provides up-to-date, practitioner-oriented information and analysis on global anti-corruption matters. Managed by the section’s Global Anti-Corruption Task Force, the site features, among other unique categories of information:
Peer-reviewed articles and analysis from practitioners worldwide;
Up-to-date news reports;
Extensive online resource links;
A library of presentations; and
Notices of upcoming anti-corruption events and seminars.
The task force provides a neutral, practitioner-focused online resource to monitor, evaluate and report on anti-corruption news and developments in transnational anti-bribery efforts. Focus is on the interplay between anti-corruption governmental efforts and the effect that those efforts have on global commerce and business development.
The website’s distinguishing features are: a) all published articles are peer-reviewed and available free of charge online; b) its subject-matter focus covers the globe, and not just the United States; c) published pieces come from leading practitioners and industry leaders from all over the world; and d) its objective is to provide news and analysis that is "for and by" practitioners who are looking for the latest developments and insights in the ever-changing global anti-corruption arena.
The site also provides extensive real-time news announcements and reports on criminal and regulatory enforcement activities relating to the Foreign Corrupt Practices Act, as well as similar international instruments such as the United Kingdom Bribery Act, the German Anti-Corruption Act, Russia’s National Plan for Counteraction to Corruption, and the U.N. Convention Against Corruption.
The Global Anti-Corruption Task Force is co-chaired by Assistant U.S. Attorney Andrew S. Boutros (in his personal capacity) and Perkins Coie Investigations and White Collar Defense Group partner (and former Assistant U.S. Attorney) T. Markus Funk.
A link to the task force website is available here.
Thursday, March 3, 2011
This afternoon breakout session on public corrruption was moderated by Joshua R. Hochberg (McKenna, Long & Aldridge).
Jack Smith, Chief of the Public Integrity Section of the Criminal Division of the Department of Justice,spoke about how his office was moving cases along. He stressed the importance of maintaining the deadlines that are established. He also stated he has not found a problem finding statutes to use when bringing state and local corruption cases post the Supreme Court's modification of 1346. He said that other statutes are available to bring conflict of interest cases.
Robert M. Cary, a partner in the Washington, D.C., office of Williams & Connolly LLP, noted the lack of transparency in discovery. Until there is an enforceable rule, it will be a problem.
Laura A. Miller, Nixon Peabody LLP, said that "successful representation is when my name and my client's name does not appear in the press."
Patrick M. Collins, Perkins Coie LLP questioned why the government can't go the extra mile and have open file discovery.
The panel discussed the Speech & Debate Clause and how it can affect a case. They also looked at discovery issues - Laura Miller noted the lack of uniformity on discovery issues. She mentioned how in the "rocket docket" they receive Jencks material the Friday before trial. Jack Smith said that if it is close - turn it over.Jack Smith said they sometimes he will highlight documents for the defense. He recognized his duty to go through documents and find Brady material. Laura Miller noted that we should all work together to manage discovery. A final topic discussed was venue.
(esp)(blogging from San Diego)
Friday, February 18, 2011
The Third Circuit Court of Appeals affirmed a district court opinion here that dismissed conspiracy and attempt charges under section 1951 (Hobbs Act) finding "that acting 'under color of official right' is a required element of an extortion Hobbs Act offense, inchoate or substantive, when that offense does not involve threatened force, violence or fear." The court looks at the text of the statute, the legislative history, and provides a wonderful discussion on the history of the phrase "extortion under color of official right." The bottom line is that "[c]onduct by an unsuccessful candidate in an election does not meet that requirement."
Monday, February 7, 2011
Finding no bribery or kickbacks, a U.S. District Court in the Eastern District of California set aside and vacated in its entirety an honest services mail fraud conviction. See here - Download Judicial Order The Motion to Vacate this Conviction was presented via a Motion of Coram Nobis - Download Corum Nobis Petition Some will obviously claim that this is why section 1346, the honest services fraud provision, should be rewritten. Others of us will say - this is exactly why such a prosecutorial extension should not be allowed. When prosecutors have a deprivation of "money or property," even when the property is intangible property, there is ample basis for prosecuting mail and wire fraud. But to allow prosecutions premised on intangible rights, with little understanding of what constitutes intangible rights, provides prosecutors with discretion that allows them to stretch prosecutions beyond what folks would recognize to be criminal conduct. Attorney Doug A. Goss represented the accused in this case.
See also Scott Smith, Recordnet, Judge vacates conviction of ex-prosecutor
Monday, January 17, 2011
Boo hoo. The Washington Post has a good article here, by Jerry Markon and R. Jeffrey Smith, about the Constitution's Speech and Debate Clause, and the various ways in which it is hampering DOJ corruption probes. Unfortunately, the article implies that certain high-profile cases were dropped primarily or solely because of Speech and Debate. This unfairly maligns the named lawmakers and/or former lawmakers in question, and makes it seem that they were let off on a technicality. That damned technical Constitution--always getting in DOJ's way. In fact, the very idea that DOJ wiretapping of House members was, until recently, considered a legitimate and entirely appropriate law enforcement tool is a testament to how out of whack the balance of powers between the Legislative and Executive Branches has become. Congress finally woke up and smelled the coffee and, with an assist from the DC Circuit in U.S. v. Rayburn House Office Building, is resisting Exective Branch encroachment on its institutional powers.
Friday, January 14, 2011
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.
Wednesday, January 12, 2011
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.
(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.
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
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.
- 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.”
- 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.”
- 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.
Saturday, October 30, 2010
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 (email@example.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