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)

Wednesday, February 27, 2008

With the Defense Motions Gone, Will There Be a Plea in the Scruggs Case?

Senior U.S. District Judge Neal Biggers rejected the remaining motions filed by Dickie Scruggs and his two co-defendants, son Zach and Sidney Backstrom, clearing the way for trial at the end of March on the charges related to an alleged attempted bribe by confederate Tim Balducci.  With that goes the best chance Backstrom may have of avoiding a trial in which the spillover from the government's Rule 404(b) bad acts evidence is likely to paint the defendants as three peas in a corrupt pod.  The decisions are available below.

The key ruling by Judge Biggers was the rejection of the defense motion to exclude evidence related to a benefit provided to another state court judge -- a potential offer of a seat on the U.S. District Court by Dickie's brother-in-law, Senator Trent Lott (see earlier post here) -- that the government will use to show that Dickie and Zach engaged in a pattern of corruption under.  As described by the court:

There is no question that the extrinsic evidence offered in the present case constitutes a similar alleged act within the meaning established by the aforementioned case law. The 404(b) evidence reveals (1) the employing of a person not an attorney of record to approach a state court judge (2) with the intent to corrupt the state court judge in regard to (3) a fee dispute (4) involving two of the defendants herein as well as two others who have already entered guilty pleas in this case – all substantially the same elements as charged in the conspiracy count before the court in the present case.

This leads to the second rejected motion, the request by Zach and Backstrom to have their trials severed from Dickie's.  Judge Biggers accepted the government's assertion that Zach was also implicated in the other instance of corruption, and found that Backstrom can be protected by a jury instruction.  Unfortunately for Backstrom, the spillover effect may be significant because this appears to be particularly potent evidence.  While Backstrom has no direct connection to it, the impact may be substantial despite any instructions to the jury to consider the evidence only against his two co-defendants. The old "birds of a feather flock together" problem for the uninvolved co-defendant.

The third defense motion that fell on deaf ears was a request to suppress the wiretap evidence because of alleged government misconduct.  Judge Biggers rejected the defense claims that the government's lead agent misled the magistrate in order to obtain the wiretap warrant, and sent a message regarding his perception of the evidence of the attempted bribe:

In this court’s opinion, to send an attorney to a judge to get him to rule in a certain way – when that attorney is not of record in the case and professes to be a friend of the judge and when opposing counsel has no knowledge of the visit – amounts to an effort to corrupt a judge. In the same meeting with Judge Lackey, Balducci offered Judge Lackey a job as “of counsel” in Balducci’s law firm when the judge chose to retire. These actions are certainly a clear and gross violation of all known codes of ethics applicable to attorneys and judicial officers.  Indeed, when an act such as this occurs, perceived by the judge possibly to be an attempt to corrupt or bribe, it is incumbent on the judge to report the matter to appropriate authorities, which is what Judge Lackey did.

I get the feeling that the three defendants are not going to have the friendliest of judges presiding at their trial.  So the question now is whether Backstrom will break ranks and agree to cooperate against Dickie and Zach.  While I doubt we've seen the last defense motion before trial, and the closer we get the more such missives we're likely to see, the issue now becomes whether one -- or even two or three -- of the defendants decide not to risk a trial and the likely substantial sentence a conviction would bring.  This case only gets more interesting. (ph)

Download us_v_scruggs_order_denying_motion_in_limine_feb_26_2008.pdf

Download us_v_scruggs_order_denying_motions_to_sever_feb_26_2008.pdf

Download us_v_scruggs_order_on_motion_to_suppress_feb_26_2008.pdf

February 27, 2008 in Corruption, Judicial Opinions | Permalink | Comments (0) | TrackBack (1)

Saturday, February 23, 2008

Arizona Congressman Indicted

Add Arizona Representative Rick Renzi to the list of Congressmen indicted over the past couple years.  A grand jury in Tuscon, Arizona indicted the three-term Representative -- who announced in August 2007 that he would not stand for re-election -- on thirty-five counts of mail and wire fraud (including right of honest services), insurance fraud, money laundering, Hobbs Act, and conspiracy for his role in a purported land swap that netted a business partner $4.5 million (indictment available below).  According to a press release issued by the U.S. Attorney's Office for the District of Arizona (here), Representative Renzi allegedly demanded that two companies purchase his partner's interest in land on which Renzi held a note in exchange for the Congressman's support for land exchange legislation.  The partner and a third participant were also indicted.

Representative Renzi is the second member of the current Congress to be indicted, joining Louisiana Representative William Jefferson, who was charged with soliciting bribes and violating the Foreign Corrupt Practices Act.  As a side note, Representative Jefferson filed a notice of appeal of the district court's decision (available below) rejecting his motion to dismiss the indictment because of violations of the Speech or Debate Clause immunity.  This is one of only two constitutional protections that can be the basis for an interlocutory appeal, the other being a claimed violation of the Double Jeopardy Clause.  That will delay Representative Jefferson's trial at least six months, and possibly a year depending on how quickly the Fourth Circuit acts.  Because the charges against Representative Renzi involve what may constitute legislative acts, i.e. his support for legislation, a Speech or Debate Clause claim will come at some point, no doubt.  Two other Representatives who entered guilty pleas while in Congress in its last term are Randy (Duke) Cunningham, serving a 100-month sentence for bribery, and Bob Ney, sentenced to thirty months for not reporting gifts (and recently transferred to a half-way house in Cincinnati).  Other members of the House of Representatives remain under investigation for transactions with former superlobbyist Jack Abramoff, who has been cooperating with prosecutors.  Another black eye for the House of Representatives. (ph) 

Download us_v_renzi_indictment_feb_21_2008.pdf

Download us_v_jefferson_memorandum_opinion_feb_13_2008.pdf

February 23, 2008 in Congress, Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Friday, February 22, 2008

Can Prosecutors Call Lott to Testify at the Scruggs Trial?

The latest bombshell in the prosecution of Dickie Scruggs and two co-defendants on charges related to an attempted bribe of a state judge was the revelation by federal prosecutors that they intend to call former Senator Trent Lott -- Scruggs' brother-in-law -- to testify at trial about conduct that may involve a scheme to influence a second state court judge.  The government notified the defendants earlier that it intends to offer Rule 404(b) evidence against Dickie regarding his conduct to influence Judge Bobby DeLaughter in a case over which he was presiding involving a dispute over attorney's fees, the same type of suit in the main corruption prosecution.  Unlike the attempted bribe, however, the alleged influencing of Judge DeLaughter involved the possibility that Senator Lott would recommend him for appointment as a federal district court judge, and Dickie purportedly offered to intercede with his brother-in-law to help get the appointment. 

At a hearing on various defense motions (see Clarion-Ledger story here), the prosecutors revealed the potential witnesses they would call to establish the influencing of Judge DeLaughter, including the fact that Senator Lott called the judge to discuss his interest in an appointment to the federal bench.  Records indicate that the call was in fact made, although Judge DeLaughter was never nominated and it appears that the issue never went any further than the single telephone call.  The federal corruption statutes do not require success for a violation, and the quid pro quo need not be money or property, only something of value to the recipient, so an offer to help get a federal judgeship would likely constitute a criminal violation.  Senator Lott's involvement appears to be innocent on his end, making what appears to be largely a courtesy call to someone who had virtually no chance of being nominated -- Judge DeLaughter is a Democrat.  The fact that Senator Lott resigned his seat two days before Dickie's indictment is certainly fodder for the conspiracy theorists, but the fact that he made a telephone call, even at the behest of his brother-in-law, does not mean Senator Lott knew there was anything questionable taking place.

An interesting question is whether Senator Lott can be called to testify, or will the immunity granted under the Speech or Debate Clause bar any questioning about the telephone call to Judge DeLaughter.  That provision provides that "for any Speech or Debate in either House, [Members of Congress] shall not be questioned in any other Place.”  U.S. Const. Art. I, Sec. 6 (italics added).  The protection afforded by the Constitution means a Senator or Representative cannot be charged with a crime or sued in a civil case about the person's legislative acts.  The language of the provision would also appear to include questioning in a criminal investigation or prosecution, such as a grand jury or at trial.  In Gravel v. United States, 408 U.S. 606 (1972), the Court described what comes within the immunity provided to legislators:

The heart of the Clause is speech or debate in either House. Insofar as the Clause is construed to reach other matters, they must be an integral part of the deliberative and communicative processes by which Members participate in committee and House proceedings with respect to the consideration and passage or rejection of proposed legislation or with respect to other matters which the Constitution places within the jurisdiction of either House.

Id. at 626.

The Senate is required to give advice and consent to judicial nominees, and contacting someone about an appointment to the federal bench sure looks like it comes within Gravel's description of a legislative act.  Thus, naming Senator Lott as a witness to testify about the telephone call, which could include questions his motivations for it or discussions that led up to it, would appear to come within the prohibition on questioning a member of Congress about their legislative activities.  Imagine the questions that might be posed by either prosecutors or defense counsel to Senator Lott, such as "Was Judge DeLaughter a serious candidate for a nomination, and what other candidates were you considering?" or "What is the process by which you review candidates for nomination as a federal district court judge?"

The Speech or Debate Clause protection is jealously guarded by Congress, and I doubt counsel to the Senate would be willing to allow such questions, even if Senator Lott wants to testify.  While the Senator could give a voluntary statement because he would not be "questioned" in violation of the Congressional immunity, I doubt it would be admissible for any number of reasons, including problems under the Confrontation Clause if Dickie is not given the chance to cross-examine him under oath.  While the prosecutors and perhaps even the defendant are anxious to have Senator Lott testify, I don't know if we will ever see that take place in this always-interesting case.  (ph)

February 22, 2008 in Congress, Corruption | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 20, 2008

Is Sid in Some Trouble?

In response to the flurry of defense motions (severance, change of venue, dismissal for outrageous government conduct, bar 404(b) evidence, and suppression of evidence) from the defendants in the Scruggs corruption prosecution (see earlier post here), the government filed its responses that set forth a number of details about the case (see WSJ Law Blog here for links to the filings).  The most interesting part of the government response is the inclusion of transcripts from two recorded conversations between Tim Balducci, who was cooperating in the case after being caught trying to bribe a state court judge, and the three members of the Scruggs Law Firm under indictment: Dickie Scruggs, his son Zach, and fellow associate Sidney Backstrom (available below).

The recordings include the usual male bonding-type locker room banter, with lots of "hey dude" and swearing, in addition to discussions of upcoming parties and Halloween candy.  I have viewed Sid Backstrom as the pressure point in the case, and the one most likely to make a deal if indeed anyone from the Scruggs Law Firm does agree to cooperate.  It is not clear from the indictment how Backstrom is involved in the alleged attempted bribe, and the transcript fleshes out his role as one of the main contacts with Balducci.  The tapes may present him with a problem because it appears that Backstrom understood what was going on related to the payment to the judge, even if he did not orchestrate it.

As with many cooperating witnesses, Balducci comes across as talking too much, and making vague references to the bribe that do not elicit much in response.  For example, at one point he says in reference to making another payment that "I've gotta go back for another delivery of uh, another bushel of sweet potatoes down there."  Backstrom's response of "Mm-hmm" is hardly telling, and the use of "sweet potatoes" is not very incriminating.  Unfortunately for Backstrom, later on he implicates himself and Dickie when he says, "DICK was like, no we can go about this another way.  Don't call TIM.  I'll, I'll go about it another way . . . a more indirect way.  And I was like well what are you plannin' on doin'?  And he was like, I'm, I'ma handle it.  I'ma handle it.  And kinda givin' me the you don't wanna know kinda thing."  In a telephone conversation two weeks later, Backstrom responds to Balducci's suggestion to get the state court judge to just dismiss the whole case that led to the attempted bribe: "I think we're gonna get ourselves in trouble by you know, just f***** around with the thing to be honest.  I mean I, I think if we um, if we overreach again probably come back to bite us, so."

While there is nothing plainly incriminating in the transcripts, such as one of the defendants using the word "bribe" or speaking directly about how much was to be paid to the judge, there are enough comments that show Backstrom's involvement with Balducci -- not to mention other conversations with Dickie and Zach -- that the case is likely to move forward with all three defendants sitting together in court.  The severance claim is a difficult one to win, and the transcripts show the involvement of Backstrom and Zach along with Dickie, so I think it's unlikely the judge will split either one off for a separate trial. That puts Backstrom in particular in the difficult position of facing the potential spill-over from the other bad acts evidence that government has against Dickie and takes away the "empty chair" defense of blaming it all on the boss (i.e. Dickie).  I think Backstrom remains the focal point for the government, and if he enters into a plea agreement then Dickie and Zach Scruggs will face an even more difficult task of defending themselves. (ph)

Download us_v_scruggs_transcript_of_nov_1_2007_recording_01.pdf

Download us_v_scruggs_transcript_of_nov_1_2007_recording_02.pdf

Download us_v_scruggs_transcript_of_nov_13_2007_recording.pdf

February 20, 2008 in Corruption | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 19, 2008

The Spider and the Fly

The sentencing of Brent Wilkes for paying bribes to former Representative Randy (Duke) Cunningham may well produce the longest sentence for public corruption seen in a very long time, and perhaps ever.  As discussed in an earlier post (here), the U.S. Probation Office recommended a sixty-year prison term for the offenses, based on the amount of the bribes and business gained from them, the involvement of an elected official, Wilkes' leadership role, and obstruction of justice.  The U.S. Attorney's Office weighed in by responding to objections raised by the defense in a brief (available below) that describes Wilkes as the spider and Cunningham the fly trapped in the web of corruption -- a little cute, to be sure.  Prosecutors take shots at both Wilkes and Cunningham in the filing, describing the former as "a war profiteer, a thug, a bully, a lecherous old man who preyed on his young female staffers and hired prostitutes" and the latter as "simpleminded" and "of limited intelligence."  Certainly not the way you hear a former Congressman described very often.

According to a San Diego Union-Tribune story (here), prosecutors recommend a sentence at least double Cunningham's 100-month prison term for Wilkes, which would be nearly seventeen years, and then ask for a twenty-five year term.  Under the Sentencing Guidelines calculation in the Presentence Report, Wilkes can be sentenced to life in prison.  While I doubt U.S. District Judge Larry Burns will come in at that level, he may well sentence Wilkes to a prison term that will rival those received by Bernie Ebbers (twenty-five years) and Jeffrey Skilling (twenty-four+ years) for corporate frauds.  How often do you see the U.S. Attorney's Office recommend a  lighter sentence than the Probation Office, especially for a defendant who went to trial and is assailed as having committed perjury in his trial testimony (note the "Top Ten Lies" section of the government brief)?  (ph)

Download us_v_wilkes_government_response_to_defendant_sentencing_objections.pdf

February 19, 2008 in Corruption, Sentencing | Permalink | Comments (1) | TrackBack (0)

Wednesday, February 13, 2008

A Barrage From the Scruggs Defendants

Any federal criminal prosecution will trigger motions from the defendant, and the hotly-contested prosecution of Dickie Scruggs and two other lawyers from his firm, his son Zach and Sidney Backstrom, has resulted in a veritable barrage of filings from the defense.  Federal Rule of Criminal Procedure 12(b)(3) requires that most substantive motions that go to the charges or the institution of the prosecution be made before trial or they are waived (absent a claim of plain error, an almost sure loser).  So the defendants fired at the prosecution in a series of motions (available below) that, while unlikely to be granted, at least protect their positions for an appeal if there is a conviction.  So here they come:

  1. Get Me the Heck Away From Dickie:  Not that a son should spend too much time with his dad, so Zach filed a motion to sever his trial from his father's, as did co-defendant Backstrom.  Among the reasons cited by both is the potential spill-over from other alleged wrongdoing by Dickie for supposedly bribing another state court judge in a different fee dispute.  The government gave notice under Federal Rule of Evidence 404(b) that it intended to introduce such prior bad acts evidence against Dickie, and no one wants to be near that stuff if it is admitted.  While Zach and Backstrom are not turning on Dickie necessarily, their attorneys do understand that there is a significant danger the jury will take a "pox on all defendants" approach if the three are sitting together at trial and they hear about a second bribe.  This motion has at least a reasonable chance of succeeding, although Senior U.S. District Judge Neal Biggers certainly would not relish hearing the same case three times, and prosecutors lose much of their leverage over Backstrom if his trial is split off from Dickie's, so look for strong opposition from the U.S. Attorney's Office.
  2. The Government Was Simply Outrageous:  Here the defendants are the Three Musketeers, filing a joint motion to dismiss for outrageous government conduct.  Citing to the dismissal of charges in U.S. v Stein (KPMG prosecution), U.S. v. Scrushy (perjury charges in the HealthSouth prosecution), and U.S. v. Stringer (misleading defendants by the SEC), the defendants cite the conduct of the state court judge in encouraging the purported bribe as evidence that the government manufactured the charges.  Unfortunately for the Scruggs defendants, the three cases they rely on also involved other constitutional violations found by the district courts as supporting the dismissal, and dismissing charges purely on the ground of outrageous government conduct happens about as often as Ole Miss challenges for the SEC title in football, and maybe even less frequently than that.  It's always worth a shot, but don't look for this one to gain much traction.
  3. What Does That Statute Mean: The defendants moved to dismiss three of the charges filed under Sec. 666, the broad federal statute that applies to bribery of "agents" of state and local government.  The argument is largely a statutory one, that the state court judge who was to receive the putative bribe does not meet the statutory requirements to be an agent of a local government because he has no administrative duties and that the bribe would not affect the operations of the county in which he sat.  They also throw in a constitutional argument that the statute violates the Tenth Amendment -- you don't hear that one very often, and it's not something that has gotten defendants very far in other cases challenging federal criminal statutes. 
  4. Get That Bribery Evidence Away from Me: The three defendants also moved to keep out the evidence of the other alleged bribe by Dickie, raising the usual arguments that it is prejudicial character evidence and has not been proven so it will trigger the much-feared "trial within a trial."  The mention of a second bribe could be powerful evidence against all three because it would establish a pattern of misconduct, so this may be the most important motion filed by the defense.  This type of ruling is always fraught with danger for the district court because an erroneous decision to admit the evidence can result in a reversal of a conviction.
  5. Get Us the Heck Out of Mississippi: While Dickie has certainly never been shy about publicity, the defendants did ask for a change of venue to move the case out of Mississippi because of prejudicial pretrial publicity.  The case is certainly a very big deal in the Magnolia State, but change-of-venue motions are almost sure losers -- just ask Jeffrey Skilling, who faced the wrath of a Houston jury.  Except in perhaps the extreme cases involving significant violence that triggers a strong community reaction, such as the Oklahoma City bombing, venue motions just don't go over very well with federal judges, who pride themselves on being able to seat an unbiased jury even if they might overestimate their abilities in this regard.

The three defendants also refiled their motion to suppress evidence from the wiretaps and search of the Scruggs Law Firm office, arguing that the government misled the magistrate who issued the warrants.  Another tough one to win, but necessary to avoid waiving the claim.  After a quiet couple weeks, it's back to the fireworks down in the Northern District of Mississippi. (ph)

Download us_v_scruggs_zach_scruggs_motion_to_sever.pdf

Download us_v_scruggs_sidney_backstrom_motion_to_sever.pdf

Download us_v_scruggs_motion_to_dismiss_outrageous_government_conduct_feb_11_2008.pdf

Download us_v_scruggs_motion_to_dismiss_666_charges_feb_11_2008.pdf

Download us_v_scruggs_defense_motion_in_limine_feb_11_2008.pdf

Download us_v_scruggs_motion_to_change_venue_feb_11_2008.pdf

February 13, 2008 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (2)

Wednesday, February 6, 2008

Wilkes in More Hot Water

As if defense contractor Brent Wilkes isn't in a heap of trouble already from his convictions for bribing former Representative Randy ""Duke" Cunningham to obtain no-bid Pentagon contracts, now he's accused of lying about his finances to get court-appointed counsel for a second corruption trial.  As discussed in a recent post (here), the Presentence Report on the Cunningham convictions recommends a sixty-year prison term -- essentially life -- based on the gains from the bribery to Wilkes company, ADCS Inc.  The second case involves alleged bribery of former top CIA official Dusty Foggo, and because of national security issues, all the lawyers in the case needed to have a top secret clearance to review materials.  Unfortunately for Wilkes, his lawyer from the first trial, Mark Geragos, declined to undergo the background check required for the clearance -- it's not clear why -- and so Wilkes needed new counsel.  He briefly had another lawyer, Eugene Iredale,* who never officially entered an appearance, and then sought court-appointed counsel based on an ex parte financial affidavit, which the district court granted.  Wilkes is now represented by the Federal Defenders office, but the government is seeking to have them removed from the case because of alleged misstatements about his purported financial need in the affidavit.

In a brief (available below) seeking to revoke the appointment of counsel, reimbursement of the costs of the Federal Defenders, and release of the financial affidavit, the government asserts:

Based upon a sealed ex parte financial affidavit, defendant Wilkes convinced the Court that he was unable to retain counsel to represent him in Criminal Case No. 07CR0329. Yet, at the time this affidavit was provided to the Court, Defendant and his wife were: (1) in the process of distributing over $2.5 million in cash proceeds; (2) the owners of a residence in Poway that had equity of approximately $800,000; and (3) owners of two properties in Rancho Bernardo and one in Chula Vista. Following the appointment of public counsel, defendant Wilkes, unknown to the Court or the government, distributed over $1 million in assets, including $100,000 in cash provided to the Wilkeses (apparently for spending money), $40,000 to their divorce attorneys, and an untold amount of cash that was transferred to their children’s trust accounts. The use of public funds while defendant continues to spend his ill-gotten gains must stop.

If the court strips Wilkes of the court-appointed lawyers, then the pending trial will have to be postponed until he retains new counsel, who will have to undergo the requisite background check.  Moreover, if the court finds that Wilkes' financial affidavit was false, it could lead to a separate perjury charge and a sentencing enhancement for obstruction of justice -- although if he receives anything near the recommended sentence for the Cunningham bribery, any additional term won't matter too much.  Wilkes has filed a motion (available below) for a new trial on the first convictions, arguing that the government violated its Brady obligation and that he was prejudiced by the denial of a continuance.  These motions are difficult to win, and the grounds asserted are not the type that usually lead to overturning a verdict. (ph)

*  Law-Geek Trivia: The attorney who briefly entered the case on Wilkes's behalf before the appointment of the Federal Defenders, Eugene Iredale, is a well-known defense lawyer who was disqualified because of a potential conflict of interest in Wheat v. United States, 486 U.S. 153 (1988), the Supreme Court case that established the broad discretion district courts have in criminal cases to disqualify counsel.

Download us_v_wilkes_motion_to_terminate_counsel_feb_4_2008.pdf

Download us_v_wilkes_new_trial_motion_feb_5_2008.pdf

February 6, 2008 in Attorney Fees, Corruption, Sentencing | Permalink | Comments (0) | TrackBack (0)

Saturday, February 2, 2008

The Many Battles of Dickie Scruggs

Two hoary maxims that Napoleon ignored were never fight a two front war and never invade Russia in the winter.  Famed Mississippi tort lawyer Dickie Scruggs is fighting on more than two fronts these days, although under the terms of his bail I don't think he'll be heading to Russia any time soon.  His criminal entanglements began with a contempt charge in the Northern District of Alabama, a case we haven't heard much about lately but that continues to percolate.  The contempt came out of Scruggs' possession of information taken from State Farm Insurance related to payment of claims from damager caused by Hurricane Katrina.  The most recent filing (available below) by the Special Prosecutors attacks Scruggs' motion to strike a request for Rule 17(c) subpoenas.  Among the points mentioned in the brief is a claim by Mississippi Attorney General Jim Hood that Scruggs was working as a "confidential informant" on the Hurricane Katrina litigation, and thus should not be found in contempt for his alleged defiance of a federal judge's order.

The second front, much more well known, is the prosecution of Scruggs and two others for their alleged involvement in the attempted bribe of a Mississippi state court judge in litigation over attorney's fees.  A recent government filing (available below) states cryptically that "the United States will seek to introduce similar act evidence pursuant to Rule 404(b) . . . ."  That Rule prohibits the use of other "crimes, wrongs, or acts" of a defendant except as "proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident."  A confederate of Scruggs' has entered a guilty plea to paying a bribe to a judge in a different case, and that certainly may be the evidence the government is referring to, but it could be that there is more prosecutors may want to bring in at trial.  Rule 404(b) evidence is often quite powerful because, while it cannot be used directly to establish the defendant's "bad" character, once admitted the jury can do with the evidence what it will.

Recently, a third front has opened up for Scruggs, this time a civil suit filed by State Farm accusing Mississippi Attorney General Jim Hood of conspiring with Scruggs to threaten the insurer with criminal charges if it did not settle Hurricane Katrina litigation brought by -- you guessed it -- Scruggs.  State Farm noticed the deposition of Scruggs for February 1, which caused his attorney, John Keker, to send a series of e-mails (available below) stating that his client would assert the Fifth Amendment and not show for the deposition.  Any criminal defense lawyer would instruct a client to assert the privilege against self-incrimination before trial, and that's usually the end of the matter.  But State Farm has advanced a particularly aggressive argument in a brief (available below) for wanting Scruggs to appear and take the Fifth in response to specific questions: "Even if Mr. Scruggs invokes the Fifth Amendment, his testimony is necessary because that invocation will entitle State Farm to a negative inference against Mr. Scruggs’ principal and co-conspirator, General Hood." 

Can that argument really work?  While taking the Fifth can be a ground for inferring that the witness' testimony would be incriminating, I have never heard of that inference being drawn against another person.  [UPDATE: A sharp-eyed reader pointed out that I'm mistaken in my belief, and that courts have permitted a negative inference to be drawn from one witness' assertion of the Fifth Amendment against another party.  Those cases tend to involve corporations or other organizations and the witness is an employee or former employee, but the language in the opinions is clear that it is not limited to only that situation and depends on the circumstances.  I happily stand corrected.]  While a statement of one conspirator may be used against another, that's only for what was said during the conspiracy -- and in furtherance of it -- not at a subsequent deposition.  It's hard to see a court extending the potential inferential value of asserting the self-incrimination privilege from one non-party individual (Scruggs) to another individual (AG Hood) based solely on a claimed conspiracy, especially when Scruggs is facing two pending criminal prosecutions that may be the reason for asserting the Fifth Amendment.  I doubt State Farm will be able to make this argument stick, but it's worth a shot.  The litigation points up another potential area for a government investigation, the relationship between Scruggs and AG Hood, which could spread quite far and wide in Mississippi.  I suspect we have not seen the last set of criminal charges involving Scruggs. (ph)

Download us_v_scruggs_response_to_motion_to_strike_feb_1_2008.pdf

Download us_v_scruggs_notice_of_prior_act_evidence_jan_28_2008.pdf

Download state_farm_v_hood_plaintiff_brief_re_deposition_of_dickie_scruggs.pdf

Download state_farm_v_hood_keker_emails_re_scruggs_deposition.pdf

February 2, 2008 in Civil Litigation, Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Friday, February 1, 2008

Can a Disqualified Lawyer Continue to Help Out?

[Moved up from January 28 with a brief update at the end]

The prosecution of Dickie Scruggs has been fascinating, to say the least, including the view it has provided on the web of connections between the various lawyers in and around the case.  The latest filing by Scruggs' defense counsel raises an interesting issue of legal ethics that could present problems down the road.  Earlier, Scruggs sought to hire a well-regarded local Mississippi attorney, Kenneth Coghlan, to be part of his defense team in the bribery case.  Unfortunately, Coghlan had earlier represented a co-defendant, Steve Patterson, for a brief period before withdrawing, and Patterson has now entered a plea agreement and will testify against Scruggs.  Needless to say, this presents a clear conflict of interest problem, despite the waivers by both Scruggs and Patterson because of the possibility that privileged information will be made available to Scruggs' defense team or Coghlan cannot provide effective representation because of his confidentiality obligations to Patterson -- the privilege lasts forever, of course.  Not surprisingly, Senior U.S. District Judge Neal Biggers denied Scruggs' motion to have Coghlan appear as his counsel on January 16.

Scruggs' defense team has filed a motion to reconsider, arguing that the waivers by Scruggs and Coghlan dissipate any problems from the potential conflict created by the confidential information received from Patterson.  No great surprise there, and it's doubtful Judge Biggers will grant the motion because allowing conflicted counsel to appear would be playing with fire.  The interesting issue, especially from a legal ethics point of view, is the following statement in the defense filing (available below):

In the event that the Court does not permit Mr. Coghlan to enter an appearance on behalf of Mr. Scruggs, the undersigned counsel wishes to notify the Court that counsel intends to consult with Mr. Coghlan on issues related to local custom and practice, jurisdiction, jury selection and other strictly legal and procedural (i.e., non-evidentiary issues) that may be pertinent to the defense of the case but which do not implicate any attorney-client privileged communications or information. Mr. Coghlan will have no role in the trial of this matter and will not render any legal advice or consultation to Mr. Scruggs. Furthermore, Mr. Coghlan will not be consulted regarding the specifics of either Mr. Scruggs’s or Mr. Patterson’s alleged involvement in the conduct at issue in the Indictment.

Can it be that a lawyer prohibited from representing a defendant because of a potential conflict of interest can continue to work on the case?  That strikes me as a bit odd.  While Coghlan was not disqualified by Judge Biggers, because he had not yet entered an appearance to represent Scruggs in the case, the district court's denial of the appearance motion seems to me to be the functional equivalent of disqualification under Wheat v. United States.  In that case, the Supreme Court gave trial judges broad discretion to disqualify lawyers because of potential conflicts of interest, especially based on concurrent or prior representation of co-defendants.  If a lawyer is disqualified due to a potential (or even actual) conflict, I take that to mean the lawyer may not continue any form of representation under the professional responsibility rules.  Therefore, can Coghlan consult on Scruggs' case without representing him in court?

It is not clear whether Coghlan would have an attorney-client relationship with Scruggs, or only be a "consultant" to the lead defense lawyer, John Keker.  An argument can be made that Mississippi Rule of Professional Conduct 1.9(a) would allow Coghlan to continue to represent Scruggs, only not in court.  The Rule states: "A lawyer who has formerly represented a client in a matter shall not thereafter: (a) represent another in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client consents after consultation . . . ."  Because Patterson agreed to waive any conflict of interest claims against Coghlan, it could be that the continuing representation does not violate the rule.  But if Coghlan continues to represent Scruggs, only not appear in court, that seems to go against the spirit of Judge Biggers order, which looked to be based on the district court's authority under Wheat to disqualify an attorney due to the potential conflict.  Judge Bigger's decision may have been to remove Coghlan from representing of Scruggs to protect against any possibility of an ineffective assistance claim by Scruggs if there was a conviction.

If Judge Biggers understood his decision to be a disqualification under Wheat, then hiring Coghlan as a "consultant" looks more like a subterfuge to get around the effect of the court's order.  If a lawyer has a conflict of interest due to possessing privileged information, then that attorney must be completely removed from the case.  The whole idea behind screening lawyers with conflicts is that they can have no contact with the attorneys representing a client, so the lawyer cannot be consulted for general knowledge and background with a promise that no confidential information will be passed.  Moreover, if Coghlan is not representing Scruggs, then discussions with him would not necessarily be privileged, although they could qualify for protection under the attorney work product doctrine.

When a judge decides to disqualify an attorney from a case, I always assumed that it meant the lawyer was completely removed from any aspect of the client's legal representation.  The Scruggs prosecution once again presents a new and interesting twist.  It remains to be seen whether the U.S. Attorney's Office will seek a complete disqualification if Coghlan continues to do some work on the case, but it would not surprise me to see the prosecutors challenge this type of consultation on behalf of Scruggs. (ph)

Download us_v_scruggs_motion_to_reconsider_jan_25_2008.pdf

                                                                                                            

UPDATE: Judge Biggers denied the motion for reconsideration in a short opinion (available below), stating that Scruggs could hardly complain about a lack of defense help with "five eminent attorneys" already on his team.  Interestingly, the Judge passed on making any decision about whether Coghlan could continue to help out with Scruggs' defense, stating in a brief footnote at the end of the opinion, "As to the extra-judicial matters for which the defendant states he intends to employ Mr. Coghlan, the court has no opinion at this time."  I suspect that if Coghlan starts showing up in the courthouse for hearings the judge may express an opinion. (ph)

Download us_v_scruggs_order_denying_motion_for_reconsideration_jan_30_2008.pdf

February 1, 2008 in Corruption, Defense Counsel, Legal Ethics | Permalink | Comments (0) | TrackBack (0)

Thursday, January 24, 2008

Could Scruggs Lose His Tobacco Settlement Fees?

A reader sent a question asking whether, in light of all the bribery allegations leveled against famed plaintiffs lawyer Dickie Scruggs, the government could seek to forfeit the reputed $1 billion fee he received for his role in the state tobacco litigation that resulted in a $248 billion settlement.  We certainly aim to please here at the White Collar Crime Prof blog, so I will give a shot at answering it.  Forfeiture involves the government taking the "proceeds" of criminal activity, and the current charges against Scruggs do not involve the tobacco settlement or his fees from those cases.  The bribery allegations have involved disputes over attorney's fees, but not regarding the disposition of the underlying litigation.  The current indictment of Scruggs and two other remaining defendants does not contain a forfeiture count, and the alleged offense is an attempted bribe, so there are no proceeds of the criminal activity.  The civil asset forfeiture statute, 18 U.S.C. Sec. 981(a)(2)(A), defines proceeds as "property of any kind obtained directly or indirectly, as the result of the commission of the offense giving rise to forfeiture, and any property traceable thereto, and is not limited to the net gain or profit realized from the offense."  While the Sec. 666 charges against Scruggs can trigger forfeiture, they do not allow the government to seek assets that are not generated by the violation, or substitute assets if it is a criminal forfeiture.  Thus, while some might question whether the fees Scruggs received from the tobacco litigation were fair, that money is not directly at risk in a forfeiture action because there is no claim that I'm aware of regarding bribery or other violations in the conduct of that litigation.  The cost of his defense is another issue, and his attorney, John Keker, was viewed by Barry Bonds as being on the expensive side, but then I doubt Scruggs will struggle to pay these costs given the strong reputation of Keker and his firm.  So the short answer is "no" regarding whether the government can seek to forfeit the tobacco fees as part of the current prosecution. (ph)

January 24, 2008 in Corruption | Permalink | Comments (0) | TrackBack (1)

Wednesday, January 23, 2008

Wilkes May Get Whacked

Brent Wilkes, the former owner of defense contractor ADCS, was convicted for paying bribes to former Congressman Randy (Duke) Cunningham to obtain contracts for his company.  The Presentence Report filed in the case recommends a 720-month sentence -- that would be sixty years for those who (like me) are a bit math challenged.  Wow!  That is by far the longest prison sentence I've ever seen recommended for a corruption defendant, and dwarfs the extensive sentences seen in corporate fraud cases, like those received by former CEOs Bernie Ebbers (25 years) and Jeffrey Skilling (24+ years).  Cunningham received a 100-month prison term, and Wilkes will definitely pay the price for going to trial if he receives anything close to the PSR recommendation.  Moreover, note that this is the Probation Office's recommendation in the PSR and not the position of the U.S. Attorney's Office, which can be expected -- despite the unseemliness of this approach -- to seek the highest potential sentence, thus fulfilling its role as an advocate.  Recommendations in the PSR usually carry great weight with the court, and even if U.S. District Judge Larry Burns does not accept the entire set of suggestions under the Sentencing Guidelines, I suspect Wilkes is looking at a sentence that may well put him in jail for much of the rest of his life.

How did the Probation Office get to this point?  The sentencing recommendation is discussed in a filing by Wilkes (available below).  Under the Guidelines, Sec. 2C1.1 governs bribery cases, and the starting point is an offense level of 18 because the bribe was paid to an elected official.  The bulk of the sentencing increase comes from the estimation of the gain from the bribe, which requires application of the fraud loss table of Sec. 2B1.1.  The PSR recommends a twenty-level enhancement, which means the gain to Wilkes and ADCS from the bribes was between $7 million and $20 million.  Throw in a two-level increase for obstruction of justice -- Wilkes testified at trial and was convicted on all counts by the jury, so there's a decent ground for this enhancement -- and another four levels for leadership role, and you've got the very top of the Guidelines (it only goes to 43) that calls for a life sentence

The sentencing was originally set for January 28, but the PSR did not arrive in time so Judge Burns has pushed it back to February 19, thus meeting the statutory 35-day period between receipt of the Report and the sentencing.  Wilkes' counsel, Mark Geragos, will have to take aim at the gain amount, and unless that figure is reduced substantially, Wilkes is looking at a sentence that could be greater than any we've seen to date in a federal white collar crime case.  In its response to the defense motion for a delay in sentencing, the government asked the district court to take Wilkes into custody on the original sentencing date because he is likely to receive a prison term and does not meet the requirements for bail pending appeal.  If Judge Burns does sentence Wilkes to a significant prison sentence, it would not surprise me if Wilkes was ordered to be taken into custody immediately because of the severity of the punishment and possible concerns about flight in light of the sentence.  (ph)

Download us_v_wilkes_motion_for_production_of_documents_jan_15_2008.pdf

January 23, 2008 in Corruption, Sentencing | Permalink | Comments (1) | TrackBack (0)

Monday, January 21, 2008

Honest Services Fraud Convictions Overturned

The First Circuit overturned the convictions of two former senior officers at Roger Williams Medical Center in Providence, Rhode Island, because the jury instructions allowed the honest services theory of mail fraud to roam a bit too far from the core of the statute.  The case highlights, once again, that honest services is among the most slippery of concepts in the federal criminal code, and any claim that it can be defined is a chimera.  The statute, Sec. 1346, says only that "the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services" but no where does it try to explain what that means.  Courts have struggled with it ever since Congress adopted the provision to overturn McNally because there is virtually no legislative history and the government has not been shy about using one of its most potent anti-corruption statutes in a variety of contexts.

The First Circuit decision, United States v. Urciuoli (available below), concerns the hiring of an influential Rhode Island state Senator, Joseph Celona, for what the government claimed was a sham job on behalf of a subsidiary of RWMC when in fact he was using his position to help out the hospital in the state Senate.  The government alleged three activities that aided the deprivation of honest services owed by Celona: influencing legislation to help RWMC, pressuring local mayors to use RWMC for ambulance services on so-called "rescue runs," and pressuring an insurance company to settle a dispute with the hospital favorably.  The First Circuit found the first activity clearly violative of the honest services fraud provision because it was a misuse of office of personal gain by Celona.  The third activity also can be the basis for a mail fraud conviction because Celona brought representatives of the insurer into his office and implied -- rather pointedly -- that things would not go well in the legislature if RWMC didn't receive a favorable resolution. 

The problem was the second activity, in which Celona had the mayors of local municipalities come into his office and urged them to follow the law by sending their ambulances to the hospital, even though he never disclosed his financial ties with RWMC.  The government called this the "cloak of office" misuse of public authority that constituted mail fraud.  The First Circuit described the weakness of this theory of honest services fraud:

The government says that a legislator's informal duties commonly extend to representing constituents with local officials and engaging in oversight functions and so to this extent should be regarded as official; but Celona's conduct falls in a borderland where analogies can easily be drawn both to public and private conduct and there is no indication that Celona invoked any purported oversight authority or threatened to use official powers in support of his advocacy. The government says the mayors can be affected by state legislation, but it did not show by context or threat that Celona sought deliberately to exploit this leverage.

Certainly his title and (possibly improper) use of senate letterhead assured him access and attention . . . ; but his position guaranteed that in any event and its invisible force would have existed even if he emphasized that he was present solely as a paid advocate. Indeed, even the legitimate work that Celona performed on behalf of [RWMC] traded in part on the reputation, network and influence that comes with political office. That much is an unavoidable result of Rhode Island's decision to retain a system of government in which legislators hold outside employment without very stringent restrictions.

The government's rationale for introducing this evidence is that having Celona advocating on behalf of the hospital worked to subtly -- or perhaps overtly -- put pressure on the mayors, who would want to curry favor with a powerful member of the state Senate.  But the First Circuit rejected this kind of "wink-and-a-nod" approach to honest services fraud as conduct that did not involve any misuse of office nor a clear violation of any state law prohibition that would take it beyond at most an arguable ethics violation.

While the government had two good theories and only one problematic one, the indictment and jury instructions did not distinguish among them, so that the jury simply convicted the defendants of mail fraud (and conspiracy to commit mail fraud).  Therefore, much like the convictions based in part on the private right of honest services theory in the Enron Nigerian Barge trial that were overturned in United States v. Brown, the presence of one bad theory taints the entire case and requires a new trial.  Whether the outcome will be any different remains to be seen, but the defendants will get a second bite at the apple. (ph)

Download us_v_urciuoli_first_circuit_opinion_jan_18_2008.pdf

January 21, 2008 in Corruption, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (1)

Friday, January 18, 2008

The Next Battle in the Scruggs Case

A recently unsealed defense motion (available below) filed by Dickie Scruggs and two other attorneys at his firm gives some insight into where the defense is headed in their prosecution for attempting to offer a bribe to a Mississippi state court judge.  The motion seeks a continuance in the trial, which the district court granted by postponing its start until March 31.  The defense also discusses pre-trial motions is plans to bring, the most important being one to suppress all evidence from the wiretaps and search of Scruggs' law office, on the ground that the government misled the magistrate in its warrant applications.  The defense is asking for a Franks hearing, and outlines what it claims are inconsistent and exculpatory statements that were not disclosed in the applications.  Here, the defense points to statements by the state court judge indicating that he wanted it made clear that the bribe was from Scruggs, and some backpedaling by Tim Balducci, who was the person dealing directly with the judge.  It is difficult to win a Franks claim because the requirement for issuing the warrant is probable cause, and the fact that there may be modestly exculpatory evidence that was not included in the government's presentation is usually not sufficient to suppress evidence. 

While I doubt the Franks motion has much chance of success, the filing shows the approach the defense is likely to take at trial.  Not only will Balducci be vilified, because he was the key go-between and is cooperating, but also the state court judge will be the target, and indirectly the government for creating the appearance of a crime.  The defense will point to the judge trying to bait Balducci into implicating Scruggs, and perhaps even suggest that the "bribe" was all a figment of the judge's imagination, and that he manipulated poor, weak-willed Tim Balducci into paying money to curry favor on behalf of an unknowing Dickie Scruggs.  This is not an entrapment defense per se, but more an outrageous government conduct claim that portrays the prosecutors as creating a crime where there was none.  Whether it flies or not remains to be seen, but it is clearly the type of defense that would appeal to those who like conspiracy theories.  The defense has also said it will seek dismissal of the indictment for the government's outrageous conduct, but that type of motion succeeds about as often as the Detroit Lions make the NFL playoffs.

With the trial not set to start for two months, an interesting question is whether Sidney Backstrom, another defendant from the Scruggs firm along with Zach Scruggs, Dickie's son, will make a deal with prosecutors.  The government will put as much pressure as it can on him to cooperate because to this point all the prosecutors have is testimony from people on the outside of the Scruggs firm -- Balducci and his former partner, Steven Patterson, who entered a guilty plea recently.  The key to the three defendants' position is a united front in which they can claim ignorance of the alleged bribe and paint a picture of an overzealous judge who created the appearance of Scruggs' involvement.  Backstrom is the most likely person to plead guilty at this point simply because I can't see Dickie Scruggs admitting to a crime -- absent a "smoking gun" document -- nor Zach Scruggs rolling over on his father.  I am only speculating about this, but these types of corruption cases rely on the testimony of insiders, and Backstrom seems like the best candidate at this point.  (ph)

Download us_v_scruggs_motion_for_continuance_jan_11_2008.pdf

January 18, 2008 in Corruption | Permalink | Comments (1) | TrackBack (0)

Monday, January 14, 2008

The Attorney Merry-Go-Round In the Scruggs Cases

I discussed in an earlier post (here) that you "Can't Tell the Attorneys in the Scruggs Case Without a Scorecard" because of all the shuffling of counsel in the case.  The latest round of plea agreements down in Mississippi sheds a little light on why there was such a flurry of activity on January 9, when lawyers from The Langston Firm who represented Dickie Scruggs dropped out of the case and he tried to add new counsel, Kenneth Coghlan, who had earlier represented a co-defendant, Steven Patterson.  Meanwhile, Dickie's son Zach, a co-defendant, terminated his attorney, Anthony Farese, who attempted to withdraw.  The smoke has now cleared a bit on the counsel issue as Dickie's former lawyer, Joseph Langston, entered into a plea agreement for conspiracy to pay a bribe to a Mississippi state court judge in a case involving a fee dispute between Dickie and two former partners -- what a shock, because this is the same basic transaction alleged in Dickie's current indictment in Mississippi.  The plea agreement (available below) is dated January 7, 2008, and was sealed, but obviously it required Langston to withdraw from representing Dickie because he is named in the criminal information as a coconpirator despite not being charged . . . yet.

Just to make things even more complicated, Langston's attorney is Farese, who was also representing Zach.  Both Langston and Zach filed conflict waivers (available below), but it would be a bit difficult to represent a defendant's son in one case and a lawyer who states that the father paid a bribe in a similar case.  Even if there's no risk of disclosure of confidential information, it just doesn't engender the kind of trust necessary between a lawyer and client, so Farese's motion to withdraw as Zach's attorney was essentially a foregone conclusion.  According to filings in the case, Zach is now being represented by Todd Graves from Missouri.  In case that name sounds familiar, Graves was the U.S. Attorney for the Western District of Missouri who became the "eighth" fired U.S. Attorney in 2006 when it came out ther he too had been removed for political reasons by Alberto Gonzales' Justice Department.  Odd how the streams have crossed in this case (for the Ghostbusters fans out there).

Dickie's attempt to hire Coghlan could be problematic because of the second plea agreement (available below) in the case, this time by co-defendant Patterson to the conspiracy charge.  Given the prior representation of a co-defendant, it will be hard for the judge to allow Coghlan to appear on Dickie's behalf in the case because of the potential (or actual) conflict of interest.  Courts are generally loath to allow one lawyer to represent a current defendant after previously representing another one now cooperating in the case and likely to testify against the current client -- that's just playing with fire.  Patterson had been a partner of Tim Balducci, who dealt with the judge who was to receive the bribe, and filings in the case indicate that the government has a number of taped conversations between Balducci and Patterson.  Patterson will likely be the next person vilified by the defense, but his plea could give the prosecutors a big boost because he can support Balducci's testimony.  Like Balducci, Patterson can receive a 5K1.1 motion for a lower sentence based on his cooperation, so the first line of attack is clear -- the "deal with the devil" argument.  The remaining defendants in this case are all from the Scruggs law firm, so to this point the government's witnesses remain on the outside.   

Things seem to come in bunches in Mississippi, and the trial is currently set to start on February 25.  With the Patterson guilty plea and the arrival of Graves to represent Zach, don't be surprised to see the defense move to push the trial back. (ph)

Download us_v_langston_plea_agreement_jan_7_2007.pdf

Download us_v_langston_criminal_information_jan_7_2008.pdf

Download us_v_langston_waiver_of_conflict_of_interest_langston.pdf

Download us_v_langston_waiver_of_conflict_of_interest_scruggs.pdf

Download us_v_patterson_plea_agreement_jan_10_2008.pdf

January 14, 2008 in Corruption, Defense Counsel | Permalink | Comments (0) | TrackBack (0)

Thursday, January 10, 2008

Can't Tell the Attorneys in the Scruggs Case Without a Scorecard

The prosecution of famed plaintiffs tort attorney Dickie Scruggs and three other defendants accused of bribing a Mississippi state court judge in a case involving a fee dispute has seen a whirlwind of motions by attorneys seeking to withdraw or appear in the case, and Senior U.S. District Judge Neal Biggers has called a halt to the movement for the moment.  According to the docket sheet in the case, on January 8, attorneys for Dickie from The Langston Law Firm moved to withdraw.  That firm was searched on the day the indictment was returned, and at one time former co-defendant and now cooperating witness Tim Balducci worked there.  Whether the law firm or any of its partners are a target of a grand jury investigation remains to be seen, but Balducci boasted on tape about knowing where "bodies" were buried involving Dickie.  The Langston Law Firm could be one of the cemeteries.

Next came a withdrawal motion on January 9 from Anthony Farese, the only counsel of record for co-defendant Zach Scruggs, Dickie's son who works for his father's firm.  According to Farese's motion, Zach terminated him and plans to hire new counsel.  At about the same time, Dickie moved to add Kenneth Coghlan as a new member of his defense team.  Here's where Judge Biggers threw up a "Stop" sign in an order issued at the end of the day (available below).  First, the Judge noted that there was no motion by a new attorney to appear for Zach, so he would be left without counsel.  Judge Biggers expressed concern about waiting for a new lawyer to appear who then may ask for a postponement of the trial, so for the moment Farese's motion to withdraw is denied.  It will likely be granted once the new lawyer shows up, but don't be surprised to see Judge Biggers hold that attorney's feet to the fire to avoid a postponement of the trial.  The Judge also denied the motion to have Coghlan appear as counsel for Dickie because of a potential conflict of interest.  Coghlan previously represented co-defendant Steven Patterson, who was a partner of Balducci.  As the Judge explained in the order, if Patterson or Dickie were to break ranks and cooperate with the government, Coghlan could well have a conflict because of confidential information learned from one client that could not be used to the benefit of the other.  While Dickie will, in all likelihood, be happy to waive a conflict, the same may not be true of Patterson, who terminated Coghlan in favor of a new attorney.  And even in the event both waive the conflict, the district court has fairly wide discretion to disqualify an attorney with a potential conflict.  Given that Dickie already has other lawyers, including well-known white collar defense lawyer John Keker, Judge Biggers may not feel constrained to accept a waiver from the defendants.

Why all these attorney machinations at the same time?  I would certainly expect Dickie and Zach Scruggs to coordinate their defenses, so Zach's new attorney will likely come with his father's seal of approval.  The withdrawal of The Langston Law Firm could indicate an expansion of the case into other areas, and the lawyers would have to withdraw because of the conflict with their client if they were targets of an investigation involving Dickie, or there is the possibility that the lawyers could be witnesses against their client, which would knock them off the case.  Prosecutors may well seek a separate indictment if there is evidence of bribes in other cases, so the problems for Dickie may not be over any time soon.  The Wall Street Journal Law Blog has an excellent summary of the attorney shuffling (here).  (ph)

Download us_v_scruggs_counsel_motion_jan_9_2007.pdf

January 10, 2008 in Corruption, Defense Counsel | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 2, 2008

DOJ Asks for Cert in Jefferson Office Search Case

The D.C. Circuit's ruling on the legality of the FBI's search of Representative William Jefferson's House office has caused the Department of Justice more than a little consternation, and the Solicitor General's Office filed a cert petition (available below) on December 19 to overturn the ruling.  This issue is not so much that the government lost below because the materials seized do not appear to have had much significance in the case -- Congressman Jefferson was indicted and faces a trial currently scheduled to start on February 25, 2008.  The problem for the government is how the D.C. Circuit construed the scope of the Speech or Debate Clause, which provides that "for any Speech or Debate in either House, [Senators and Representatives] shall not be questioned in any other Place." U.S. Const. Art. I, § 6, Cl. 1.

In its ruling in United States v. Rayburn House Office Building Room 2113 (available below), a majority of the panel essentially held that the Speech or Debate Clause affords members of Congress a privilege from having materials protected by the Clause being examined by members of the Executive Branch, and perhaps by anyone else for that matter.  The D.C. Circuit stated that "[a]lthough in Gravel the Court held that the Clause embraces a testimonial privilege, to date the Court has not spoken on whether the privilege conferred by the Clause includes a non-disclosure privilege. However, this court has."  The SG argues in the cert petition that this misconstrues the protection afforded by the Speech or Debate Clause, which the government claims is not designed to shield materials from any public disclosure but only to protect against a member of Congress from being questioned about it.

How can the government get the Supreme Court to take a case in which the lower court's ruling does not appear to have had any effect on the underlying prosecution?  The tried-and-true method of "waving the bloody flag" by arguing that the decision will have a deleterious impact on a range of corruption investigations.  That claim may not be completely fanciful because one Congressman, Representative John Doolittle, has already raised questions about subpoenas and searches in an investigation of his dealings with former superlobbyist Jack Abramoff.  The cert petition argues:

The court of appeals' absolute rule against compelled disclosure of Speech or Debate material to the Executive Branch calls vital investigative techniques into immediate and serious question with respect to public cor ruption probes. Although this case involves a search of a Capitol Hill office (a concededly extraordinary event), the court's decision threatens to impede searches of Members' homes, vehicles, or briefcases. Also important are the potential implications for wiretaps and pen registers directed at Members. Even using techniques designed to minimize the interception of privileged conversations, officers typically hear privileged communications or identify calls pertaining to legislative acts while seeking unprivileged evidence of crime.

This Court's guidance is needed. The District of Columbia Circuit denied rehearing en banc by a 5-4 vote, and clarification or reversal of its erroneous decision at some indefinite time in the future cannot alleviate the immediate cloud over ongoing public corruption investigations. The court of appeals' decision affects all congressional investigations because it governs investigations in the District of Columbia -- the seat of our Nation's government. The decision also has a chilling effect in other jurisdictions, because the Department of Justice must weigh the need for evidence in those jurisdictions against the potential that courts will hold that investigations were tainted by the use of previously uncontroversial investigative techniques. The petition for a writ of certiorari should therefore be granted.

The SG's office does not always get its cert petitions granted, but it has a pretty good track record and the Supreme Court may well have to step in to decide the issue because of the delicate issues related to relations between the Executive and Legislative Branch the search raises.  The D.C. Circuit denied rehearing en banc by a 5-4 vote, and there was a dissent from the panel, so this is obviously a close case, which probably enhances the likelihood the Court will get involved by granting the cert petition.  Opposing the Department of Justice will be both Representative Jefferson and, more importantly, the House and Senate, which filed briefs before the D.C. Circuit.  The search caused a great deal of discomfort in Congress, and the real fight will be between the two branches if the case comes before the Supreme Court. 

To avoid any mootness claims if the prosecution of Representative Jefferson is concluded before the Court reaches the issue, the SG asserts that

the investigation underlying this very case has not yet concluded, because the government continues to investigate other participants in Representative Jefferson's schemes. Thus, the evidence seized in the search at issue here is relevant not only to the prosecution of Representative Jefferson, but also to the ongoing investigation and potential prosecution of other individuals. For that reason, the importance of the question presented is not limited to the government's case against Representative Jefferson and will continue regardless of whether he is convicted.

(ph)

Download us_v_rayburn_house_office_building_room_2113_cert_petition_dec_19_2007.pdf

Download us_v_rayburn_house_office_building_room_2113_opinion_august_3_2007.pdf

January 2, 2008 in Corruption, Investigations, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Friday, December 21, 2007

Fifth Circuit Recommends Impeachment of Federal District Judge

The Judicial Council of the Fifth Circuit filed a report (available below) that will be sent to Chief Justice Roberts recommending the impeachment of U.S. District Judge G. Thomas Porteous, Jr., who sits on the U.S. District Court for the Eastern District of Louisiana.  Judge Porteous served as a state court judge in the 24th Judicial District, which covers Jefferson Parish (i.e. New Orleans), before his appointment to the federal bench in 1994.  The report gives four grounds for impeachment:

  1. "[N]umerous false statements under oath during his and his wife’s Chapter 13 bankruptcy, including filing the petition under a false name; concealing assets of the bankruptcy estate; failing to identify gambling losses; and failing to list all creditors."  He is also accused of taking extensions of credit from casinos and paying off certain creditors in violation of bankruptcy court orders.
  2. "[F]raudulent and deceptive conduct concerning the debt he owed to Regions Bank prior to bankruptcy."
  3. Receiving "gifts and things of value from attorneys who had cases pending before him" and failure to disclose his financial relationship with a lawyer in one case before him in which he refused to recuse himself.
  4. "[F]inancial disclosure statements for the years 1994-2000 are inaccurate and misleading because they fail to report the gifts and things of value he received from attorneys, and in the year 2000 failed to report accurately significant amounts of reportable indebtedness owed by Judge Porteous."

Judge Porteous was a subject of a federal investigation involving a bail bondsman that relates back to his state court days, but an AP story (here) notes that federal prosecutors notified him earlier in 2007 that he would not be charged in that case. 

The 1980s saw three federal judges impeached and removed from office: Harry Claiborne of Nevada for tax evasion, Alcee Hastings of Florida for perjury and conspiracy to solicit a bribe, and Walter Nixon of Mississippi for perjury before a grand jury.  In each of those cases, the judge was charged with a federal offense before the impeachment, with Hastings acquitted of the charges before impeachment while Claiborne and Nixon were in jail when the impeachment process started.  Both Claiborne and Nixon received their full salary as Article III judges while serving time before their removal from office by the Senate.  Nixon challenged the Senate's impeachment procedures, which the Supreme Court rejected on non-justiciability grounds (Nixon v. United States, 506 U.S. 224 (1993)).  Interestingly, Hastings is now a Congressman, and would be called upon to vote on Judge Porteous' impeachment if the case gets to the full House of Representatives.

Judge Porteous' case is unusual, at least compared to the three 1980s impeachments, in that he has not been charged with a crime.  Two of the violations alleged in the Fifth Circuit's report could trigger a federal prosecution.  The federal bankruptcy fraud provisions are quite broad, with 18 U.S.C. Sec. 152(2) reaching any persor who "knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11."  Similarly, the bank fraud statute, 18 U.S.C. Sec. 1344, and false statement to a financial institution provision, 18 U.S.C. Sec 1014, would cover the dealings with Regions Bank.  The fourth ground, related to false financial reports, appears to fall outside the statute of limitations period. 

According to the report, Judge Porteous testified at a hearing before the Fifth Circuit's Judicial Council and later argued his case before the decision was made to adopt the report.  The only reference in the report to the vote states that it was by a majority, so it is not clear whether any of the judges dissented.  There is no indication at this point that federal prosecutors plan to pursue any charges.  I would expect that Judge Porteous' statements would be available to a grand jury to review in considering a case, so prosecutors may wait until the impeachment process plays out. 

In case you wondered, the Constitution explicitly provides that impeachment by the House of Representatives and conviction and removal from office by the Senate does not affect a criminal case against the official.  The general impeachment provision is in Article II, Sec. 4, relating to the President, Vice President, and other civil officers, and states that they can be removed from office upon "Conviction of, Treason, Bribery, and other high Crimes and Misdemeanors."  While that sounds like a criminal case, Article I, Sec. 3, Cl. 7 provides, "Judgment in cases of impeachment shall not extend further than to removal from office, and disqualification to hold and enjoy any office of honor, trust or profit under the United States: but the party convicted shall nevertheless be liable and subject to indictment, trial, judgment and punishment, according to law."  In other words, a full-fledged criminal prosecution can come after the impeachment, and there is no double jeopardy bar arising from the Congressional action despite the reference to "conviction" for a high crime or misdemeanor.  (ph)

Download fifth_circuit_judicial_conference_impeachment_report_judge_porteous.pdf

December 21, 2007 in Corruption, Investigations, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

When Will Scruggs Go to Trial?

The prosecution of Dickie Scruggs and three co-defendants on charges related to alleged bribes paid to a state court judge had been scheduled for trial on January 22, but the defendants have asked for a three- to four-month delay because they claim not to have received all the discovery in the case.  The government filed a brief (available below) rejecting the defense claim that prosecutors have not turned over relevant material, arguing that most of the surveillance materials have been provided, which are the key to the case.  The prosecutors assert, "Although the discovery deadline is still six days away, the government has voluntarily made the bulk of discovery in this case. Evidence seized pursuant to the warranted search of The Scruggs Law Firm is still in the hands of a 'taint' team from another jurisdiction, whose job it is to ensure that prosecutors in the Northern District of Mississippi do not receive any evidence that is privileged or outside the scope of the warrant. The evidence sought pursuant to that search warrant is relatively minor, and will be disclosed to the defense in supplemental discovery, if in fact it exists." [Italics added]  The FBI executed a warrant at the law firm the day the charges were filed, but it appears that the material was not all that important anyway, which raises the question about why the search was even conducted or what prosecutors hoped to find.  It's also a bit puzzling that they can describe the value of documents they have not seen yet because they're still with with "taint team."

While the government does not oppose the defendants' motion, its brief concludes that "the case is straight forward and not sufficiently complex to require a protracted continuance."  While the charges are fairly simple, don't take that to mean it will be an easy case, or a short one.  There will be major battles over the meaning of the recorded and videotaped conversations, and the credibility of the cooperating defendant, Tim Balducci, will be front-and-center from the opening.  With four sets of defense lawyers to deal with, this will not be a simple trial.  The judge is likely to grant the motion, so look for the fireworks to start in the spring, when there is no better time to be in MIssissippi. (ph)

Download us_v_scruggs_government_response_to_defense_motion_for_continuance_dec_20_2007.pdf

December 21, 2007 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)