Saturday, July 12, 2008
DOJ Press Release - Alaska State Senator Indicted on Public Corruption Charges - "[A] current member of the Alaska State Senate, was indicted on charges arising out of a federal investigation into public corruption in the state of Alaska." It's a two count indictment - one count of bribery and one count conspiracy.
(esp) (blogging from Dublin, Ireland)
Wednesday, June 4, 2008
The press is reporting on the conviction of Antoin Rezko:
Bob Secter & Jeff Coen, Rezko Convicted of Corruption
Peter Slevin, The Trail Blog, Washington Post - Rezko Convicted of Influence Peddling
Catrin Einhorn & Susan Sauley, NYTimes - Fund-Raiser Convicted in Illinois Bribery Scheme
Ilan Brat & T.W. Farnam, Wall St Jrl, Fund-Raiser Rezko Found Guilty in Illinois Corruption Trial
The case drew national attention when the names of Obama and Blagojevich surfaced during the trial. For background see here, here, here, here and here. The initial DOJ Press Release can be found here.
(esp)(blogging from Atlanta)
Sunday, June 1, 2008
The latest press reports on the Siegelman case -
Newsday (AP) - Ex-Attorneys General File Brief Supporting Siegelman
Ala.com (AP) - List of Former Attorneys General Signing Siegelman Brief (provides the list of 54 Former Attorney Generals Who Signed the Brief)
It is not surprising to see Former Governor Siegelman receiving significant support as the case is clearly one that needs scrutiny - even the DOJ is examining it (see here). And although the courts will scrutinize this case in the normal review process, more is needed here. An independent review is necessary to determine if politics in any way entered into the decision-making process. With enormous prosecutorial discretion provided to prosecutors, it is important for there to be accountability.
(esp) (blogging from Firenze, Italy)
Addendum - Amicus Brief - Download amicus.pdf
Tuesday, May 27, 2008
Mary Owen, Chicago Tribune - U.S. Supreme Court rejects Ryan appeal
Dan Slater, WSJ Blog, Indicted Former Baker & McKenzie Partner Hit With More Charges
Carrie Johnson, Washington Post, Awaiting new Pardon Attorney: Backlog, and Chance to Make Mark
Thursday, May 22, 2008
Former Governor Don Siegelman's brief (see below) was filed in the 11th Circuit Court of Appeals, and it raises some important issues. Also of importance to this case is that the DOJ's Office of Professional Responsibility (OPR) currently has a pending investigation concerning allegations of selective prosecution relating to the prosecution of Don Siegelman. (See AJC - Alabama Governor's Conviction Gets Justice Department Scrutiny - be sure and read the Letter to Chairman Conyers in this article). One has to ask whether the DOJ should be the one doing this investigation, even if it is OPR, or whether this is an appropriate task for an independent outsider.
The first argument in the brief is powerful and unique. It takes the quid pro quo requirement used in the Supreme Court's McCormick case, a Hobbs Act case involving campaign contributions, and applies it to the "honest services" aspect of the mail fraud, conspiracy to commit, and bribery portions of the charges here. And it makes sense that it should apply as the charges are "based on an alleged connection between official action and a campaign contribution." In McCormick, the Court recognized that campaign contributions operate differently and one can't assume criminality for a contribution unless there is a showing of a quid pro quo demonstrated that is tied to that contribution. With a "honest services" statute, that has been criticized by many as allowing for enormous prosecutorial discretion in the charging process, it seems important that a quid pro quo should be mandated so that politicians know what is legal and what is illegal for purposes of violating the "honest services" statute. It's especially important in this case as Siegelman personally received nothing of value. The brief ties in the First and Fifth Amendments here and reminds the court of the importance of the Rule of Lenity in criminal cases.
Equally noteworthy is the next to the last argument in the brief that argues whether it was, "permissible to increase Governor Siegelman's sentence because of out-of-court statements on matters of public concern, i.e., statements criticizing and questioning the actions and motives of prosecutors - particularly without any evidence of factual specificity as to the content of such statements?" It will be interesting to see how the appellate court deals with an increase of a sentence by someone exercising a First Amendment right to speak - especially when the speaking is criticism of the prosecution being politically motivated. In light of recent revelations in the department and the fact that OPR is now investigating this case for possible selective prosecution, this sentence increase is something that an appellate court may want to seriously examine.
There are, of course, other arguments in this brief. Even without seeing the Scrushy Brief and the DOJ response, this brief sends the message that this case will certainly provide for an interesting oral argument.
Addendum - Corrected Brief of Government -
Monday, March 24, 2008
Perjury, obstruction, conspiracy, and misconduct, are the charges brought by the Wayne County prosecutor against the Mayor of Detroit and his former chief of staff. Dan Webb is representing the mayor and is calling this a "selective prosecution." The prosecutor in this case chose to respond to what was said by defense counsel.
The press reports that the basis for the "selective prosecution" claim is that the prosecutor has never charged anyone with the crime of perjury for statements made during a civil matter.
Selective prosecution claims are difficult to win in the pre-trial stage. Prosecutors have broad discretion in their charging powers and as long as there is probable cause of the commission of the crime charged, the decision "generally rests entirely within the prosecutor's discretion." See Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978). That said, if the prosecutor uses an impermissible factor, such as race or religion, it's a different story. Although selective prosecution claims may be difficult to prove in a pre-trial stage, if allowed into evidence it can make for an interesting jury consideration. Couple that with perjury, a difficult charge for prosecutors in that it requires clear questions with clear answers, and the case will be one to follow.
Tuesday, March 11, 2008
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)
Thursday, March 6, 2008
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)
Wednesday, February 27, 2008
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)
Saturday, February 23, 2008
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)
Friday, February 22, 2008
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)
Wednesday, February 20, 2008
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)
Tuesday, February 19, 2008
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)
Wednesday, February 13, 2008
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:
- 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.
- 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.
- 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.
- 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.
- 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)
Wednesday, February 6, 2008
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.
Saturday, February 2, 2008
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)
Friday, February 1, 2008
[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)
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)
Thursday, January 24, 2008
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)
Wednesday, January 23, 2008
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)
Monday, January 21, 2008
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)