White Collar Crime Prof Blog

Pellicano and Christensen Convicted

A press release of the U.S. Attorney's Office for the Central District of California reports that "[f]ormer private investigator Anthony Pellicano and prominent entertainment attorney Terry Christensen were found guilty today of federal conspiracy and wiretapping charges in connection with their illegal wiretapping of the ex-wife of Christensen’s longtime client, billionaire Kirk Kerkorian, during a 2002 child support dispute."  The jury trial lasted 6 weeks.  Pellicano had previously been convicted of other charges, including RICO, in May.  The government had tapes in this case, something that can be very difficult for the defense to overcome.   

Dan Slater, Wall Street Jrl Blog, Terry Christensen, Pellicano Convicted on Wiretapping Charges

Above the Law - Lawyer of the Day - Terry Christensen

LATimes, Private eye Anthony Pellicano, attorney Christensen convicted of wiretap plot

(esp)

Commentary on Stein (KPMG)

Chief Judge Jacobs of the Second Circuit authored the 68 page opinion that affirms Judge Kaplan's prior ruling (see here and here) in the KPMG related matter.  The lower court had dismissed the defendants' indictments.  In affirming the lower court opinion, the Second Circuit states -

"We hold that KPMG’s adoption and enforcement of a policy under which it conditioned, capped and ultimately ceased advancing legal fees to defendants followed as a direct consequence of the government’s overwhelming influence, and that KPMG’s conduct therefore amounted to state action. We further hold that the government thus unjustifiably interfered with defendants’ relationship with counsel and their ability to mount a defense, in violation of the Sixth Amendment, and that the government did not cure the violation. Because no other remedy will return defendants to the status quo ante, we affirm the dismissal of the indictment as to all thirteen defendants." (footnotes omitted)

The Second Circuit stated that the Sixth Amendment right to counsel held that the amendment "protects against unjustified governmental interference with the right to defend oneself using whatever assets one has or might reasonably and lawfully obtain."  The court noted that-

"Defendants were indicted based on a fairly novel theory of criminal liability; they faced substantial penalties; the relevant facts are scattered throughout over 22 million documents regarding the doings of scores of people,; the subject matter is "extremely complex,"; technical expertise is needed to figure out and explain what happened; and trial was expected to last between six and eight months, As Judge Kaplan found, these defendants "have been forced to limit their defenses . . . for economic reasons and . . . they would not have been so constrained if KPMG paid their expenses." We therefore hold that these defendants were also deprived of their right to counsel under the Sixth Amendment. (citations and footnote omitted)

The best line from the case - "But if it is in the government’s interest that every defendant receive the best possible representation, it cannot also be in the government’s interest to leave defendants naked to their enemies."

The government did not lose this case, as some might say.  In fact, they won.  When justice is done for all, as is reflected in this opinion -- the prosecution, defense, and society wins. 

(esp)

Switching Teams

Keith Coffman, Rocky Mountain News, Enron Prosecutor on Joe Nacchio Team - Sean Berkowitz Has Role Defending Former Qwest CEO

(esp)

What's Happening in the Ben Kuehne Case

John Pacenti, Law.com (subscription required), Defense Team Argues DOJ Ideology Spurred Money Laundering Indictment of Miami Attorney

Background and Prior Discussion of the Ben Kuehne Case:

Supreme Court Rules Against the Government in Two Money Laundering Cases

In the News & Blogsphere

Government Returns Third Superseding Indictment in Prosecution of Defense Attorney Benedict P. Kuehne

White Collar Crime Institute - It's Tough Being a Criminal Defense Attorney

What Conrad Black Says As He Enters Prison

Which Government Office is Behind This One?

Indicted for Writing Opinion Letters

Respected Miami Attorney Charged with Money Laundering

(esp)

Addendum - Southern District of Florida Blog here

Mourning the passing of Donald B. Feidler

We mourn the passing of criminal defense lawyer Donald B. Fiedler.  His obituary is here (Omaha World Herald).  He will be missed.  He was well known for his wonderful teaching at the National Criminal Defense College. See NACDL here.

In lieu of flowers, Memorials to National Criminal Defense College, c/o Mercer Law School, Macon, GA, 31207.

The photo of Don doing William Jennings Bryan. With a thanks to Korey Reiman; John Wesley Hall, and Norman Reimer. (esp)

Thornburgh Enters Appearance in Wecht Appeal

The Third Circuit Court of Appeals entered a stay of the Cyril Wecht trial pending appeal (for background on this case see here).  The case of the 77 year old coroner charged with federal violations for alleged state conduct was set for retrial following a hung jury.

A motion to expedite the appeal was also entered.  The appellee's brief is due on or before May 15th and the appellant's reply brief has a deadline of May 20th.  On the day this order was granted, there was also an entrance of appearance by Richard L. Thornburgh, former Pennsylvania Governor and former Attorney General of the United States and now with the law firm of Kirkpatrick & Lockhart, Preston, Gates, Ellis LLP. 

Should DOJ really be spending taxpayer money on this attempt to re-prosecute this individual? 

Government's Response Arguing that a Stay is Not Necessary - Download govt. Response-Wecht.pdf

Court Order Rejecting Government's Position - Download wecht_order.pdf

(esp)

Government Returns Third Superseding Indictment in Prosecution of Defense Attorney Benedict P. Kuehne

Guest Blogger Jon May, Esq. writes:

When the indictment against Miami attorney Ben Kuehne was unsealed, lawyers across the country scratched their heads. The indictment alleged that Kuehne, hired to vet legal fees paid to famed defense counsel Roy Black for his defense of Fabio Ochoa, was guilty of money laundering. The indictment, however, was almost totally devoid of any facts that explained what Ben actually did that violated the law. The government has attempted to remedy that deficiency in the second and third superseding indictments, but lawyers are still scratching their heads. The government does not contend that the source of the Colombian pesos used to pay Black’s fees were proceeds of any unlawful activity. Rather the government argues that the United States dollars exchanged for the pesos in the United States (by United States agents) were derived from drug trafficking. But the "tainted dollars" exchanged for the clean pesos were not proceeds of any illegal activity involving Fabio Ochoa. These dollars came from various sting operations run by the DEA in New York.

It is the government’s theory that all money exchange businesses operating in the United States are so polluted with tainted dollars and that Attorney Kuehne knew that the money ultimately transferred to Attorney Black was illegal proceeds. Because Kuehne’s trust account was used to temporarily hold the transfer of these funds to Black and because Kuehne drafted opinion letters attesting to the legal source of the funds, the government contends that he committed money laundering.

The government has made this same argument in a number of cases against United States banking institutions who have dealt with money exchanges involving currency from various Latin American nations, most recently Wachovia Bank. But thus far each of these investigations has resulted in deferred prosecutions. Ben Kuehne’s prosecution may be the first case where this unprecedented and peculiar theory has been employed against an individual, in this case a prominent criminal defense lawyer.

A new twist is presented by the third superseding indictment. In addition to money laundering, Ben is charged with defrauding the Government of Colombia, on the theory that these money exchanges defeat Colombian currency control laws. What this means is that the United States is now fully engaged in enforcing other nations’ laws in the courts of the United States.

As this prosecution unfolds, it becomes clearer that the government is using this case to test new theories that have broad implications for every lawyer who provides legal advice that is later argued to have impeded law enforcement efforts, even those of foreign countries. It also threatens to subject civil and corporate counsel to potential prosecution for any legal advice given that somehow violates a foreign law.

Third Superseding Indictment -

Download third_superseding_indictment.5-1-8.pdf

(jm)

In the News - Wecht, Kilpatrick, Paulson Talk, Enron

Philly.Com (AP) - Fifth Day of Deliberations End in Wecht Fraud Trial; Pittsburgh Tribune Review - Wecht Deliberations to Resume Thursday

DetroitNews.com - Mayor Kilpatrick to Get Legal Defense Funding;  Attorneys in Scandal to be Probed

ABA Journal - Ninth Circuit Bounces Judge From Case for Favoring Prosecution

Wall Street Journal - Paulson Joins Advocates of Wider Fed Oversight

AP - Citi Settles Enron Suit for $1.66 Billion

(esp)

Gideon - 45 years old today

45 years ago, Justice Black issued the famed decision in Gideon v. Wainwright. One would have never suspected then that the right to counsel would be an issue in white collar cases.  One has to wonder whether the high cost of legal fees makes it difficult for many facing these complex cases to receive the representation that they deserve.  An accused may be too wealthy to secure a public defender, but too poor to secure counsel that can spend the time examining the many documents that may be found in something like a fraud case.  In no way diminishing the need for proper indigent defense, something needed in so many parts of our country, it is also important to note that white collar cases raise new issues with regard to securing proper representation for the accused individual.  [See, e.g. Stein (KPMG) case]

(esp) (w/ a thank you to IntLawGrrls Blog for reminding me of this historic day).

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

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

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

Avoiding the Whipsaw of Possible Conflicts for Barry Bonds' Attorneys

The first issue raised by the government in the prosecution of Barry Bonds for perjury and obstruction of justice involves the potential -- or perhaps even actual -- conflict of interest his two new attorneys may have because of their prior work representing witnesses in the Balco (Bay Area Laboratory Co-operative) steroids investigation.  The much-heralded lawyers are Alan Ruby and Christine Arguedas, and both were hired right before Bonds' arraignment on December 7.  Ruby earlier represented Dr. Arthur Ting, Bonds' personal physician, for about a month, and Dr. Ting was a witness before the grand jury that investigated Bonds for perjury.  Arguedas represented, among others, former track star Tim Montgomery and three former members of the Oakland Raiders. 

In a filing raising the potential conflicts of interest (available below), prosecutors note that they are unlikely to call Montgomery and the three football players, probably because they had nothing to do with Bonds and could not provide any valuable testimony.  I doubt there is even a colorable claim of a conflict of interest involving Arguedas based on her representation of witnesses with no connection to her current client who are not going to tesify.  Dr. Ting, however, is another matter as the government motion notes that he is likely to be a witness at trial.  Indeed, he could well be a crucial witness in establishing that Bonds use steroids during the periods that he denied their use before the grand jury.  Media reports indicate that Dr. Ting accompanied Bonds to Balco, and participated in a private drug test of Bonds in 2000.  The filing redacts a portion of a paragraph relating to Dr. Ting, most likely because it refers to his grand jury testimony, which remains secret under Federal Rule of Criminal Procedure 6(e).  Any redaction draws attention, of course, and it is intriguing to specualate about what he might say at trial, and whether he will try to defend Bonds.

Ruby only represented Dr. Ting for a short time, so the potential conflict is not clear.  One common basis for claiming that defense counsel cannot represent a current defendant because of prior representation of a government witness is that the lawyer will not be able to fully cross-examine the witness due to the confidentiality rules.  For example, if the prior client made a statement to the lawyer and then makes a different assertion at trial, the lawyer would not be able to use that earlier statement to undermine the former client's credibility because of the protections afforded to attorney-client communications.  The lawyer's obligations to the two clients would come into conflict because of the need to protect one at the expense of the other getting the best possible defense, and so might result in the lawyer providing ineffective assistance to the current client, the defendant.  If Ruby has a conflict of interest because of what he might have learned from Dr. Ting during the earlier representation, then his presence on the case could result in the reversal of any conviction due to a Sixth Amendment violation due from claimed ineffective assistance of counsel.

The government's filing notes that prosecutors will accept a waiver from Bonds of the possible conflicts, which triggered his brief appearance before U.S. District Judge Susan Illston on December 21.  At this point, there has not been a motion to remove either Ruby or Arguedas, and prosecutors are raising the conflict at this point to avoid being whipsawed if there is an actual conflict of interest.  One of the dictionary definitions of "whipsaw" is "to defeat or best in two ways at once."  The issue prosecutors are raising is that they do not want to lose a conviction because of a problem that the defense lawyer has with his/her client.  If the case goes to trial with conflicted counsel and the jury returns a "not guilty" verdict, then there is no harm from the conflict.  If the jury convicts, then a defendant can claim that the result is tainted due to defense counsel's conflict, a difficult argument to win but one that results in overturning the verdict if an actual conflict is found that affected counsel's performance at trial.  Hence the whipsaw, because the defendant can win either way with a conflicted lawyer, at least in the government's eyes, because prosecutors did not do anything wrong.

The waiver is one form of protection for the case, although it does not provide an absolute shield against a defendant raising the issue on appeal.  By requiring Bonds to appear in court to answer questions, Judge Illston is taking steps to avoid having the case affected by the potential conflict.  She has ordered Bonds and his attorneys to make a submission by January 4, 2008, waiving the conflict to establish a record that it is both knowing and voluntary.  Because Dr. Ting is likely to be a witness, he too must agree to waive any confidentiality or conflict of interest claim he might have against Ruby.  While the current client is often happy to waive the conflict, the former client has an interest that must be protected. 

If Dr. Ting were to refuse to waive, then the issue becomes much more complicated and I would expect Judge Illston to seriously consider removing Ruby as a member of Bonds' legal defense team.  Of course, that is a decision also fraught with danger, because the recent Supreme Court decision in United States v. Gonzalez-Lopez held that improper denial of a defendant's right to counsel of choice results in an automatic reversal of a conviction.  While I expect the court to accept Bonds' waiver, assuming Dr. Ting also waives the protections of the confidentiality rule, this is an issue that can rear its ugly head at any point in time.  (ph)

Download us_v_bonds_government_conflict_of_interest_motion_dec_20.pdf

Would You Take Barry Bonds As a Client?

Home run king Barry Bonds is supposed to appear in federal court for his initial appearance -- and most likely an arraignment -- on perjury and obstruction of justice charges contained in a federal indictment issued in San Francisco.  A Wall Street Journal article (here), by Bay Area legal maven Justin Scheck, points out the problems Bonds has had in hiring a new attorney with significant federal court experience to conduct the defense at trial.  The article notes that Bonds met with John Keker, of Keker & Van Nest, a nationally-known white collar defense lawyer who has defended, among others, former investment banker Frank Quattrone, who was also charged with obstruction of justice arising from a forwarded e-mail.  There may have been an issue in hiring Keker because he represented the baseball players union in its fight to keep the government from getting the results of drug tests players took (see a New York Daily News story here).  In discussing the approach to Keker, and various in-fighting among Bonds' current legal team, the WSJ article raises in my mind the question whether a lawyer would really even want Bonds as a client.

There are obvious benefits to being the attorney for one of the most famous players in professional sports history, in a trial that will gain national -- and probably even international -- attention.  Bonds' lead counsel will be on television daily whenever there is any court proceeding, and the chance to have your picture appear over the shoulder of an ESPN SportsCenter anchor on a regular basis is publicity you just can't buy.  The lawyer will join the pantheon of well-known defense counsel in this country, one of the "usual suspects" who will begin to appear regularly in a variety of cases, or be asked to comment on them.  Pretty tempting, isn't it?

But from this ivory tower, I have to say that there are certainly a few major red flags that a lawyer has to think about seriously before undertaking the representation.  The article notes that Bonds asked Keker for a discount on his $900 hourly rate, and wanted another law firm to review the billings.  That certainly goes against the grain in white collar cases, in which cost is often not an obstacle.  Bonds' past baseball income plus future earnings potential, regardless of the outcome of the case, probably means he can afford Keker's rate.  There's nothing wrong with asking for a discount, and it makes good business sense to double check bills.  Not the best way to begin a relationship, but it shouldn't be a showstopper, either.

If that was all, then the fact that Bonds wants a discount and will flyspeck bills would hardly be of interest beyond the stereotype of the allegedly cheapskate athlete.  But the article also says that "Keker was concerned he wouldn't have control over Mr. Bonds's public relations and legal strategies and bridled at the prospect of collaborating with the player's current legal team." [Italics added] That starts to spell trouble for the lawyer.  The fact that Bonds' current legal team is a bit on the dysfunctional side is problematic, but if the strings in the case will be pulled by someone else, then there is a significant danger for the lawyer.  A defense lawyer being pulled in different directions, or forced to clear legal strategies through the "home office," may not be effective.  Trust is a two-way street, and if the lawyer is not going to be trusted, then why take on the case? 

It is always difficult to control a high-profile client who is used to being in charge of everything -- look no further than Lord Conrad Black, when the judge in his case threatened to take action against him for out-of-court comments during the trial if his lawyers didn't muzzle him.  I'm not saying the lawyer has to control everything, but a trial is a lot like any theatrical production in which everyone has a role to play.  The client who believes he or she can "talk my way out of this" or who showers the government with disdain, no doubt believing it is richly deserved, is looking for trouble.  Heaven forbid the client demand the opportunity to testify to "explain" everything for the jury so they will understand how misunderstood the defendant really is -- that drooling person would be the prosecutor waiting for the cross-examination.  Especially in a perjury and obstruction prosecution, portraying the defendant as an honest person whose statements were just misunderstood is paramount, but the defendant may be the worst person to say that.  The hardest decision in a case, especially a white collar prosecution, is whether the defendant will testify, and there can only be two people involved: the lead counsel and the client.  If there is a fight over control of the case from the beginning, then it means other agendas may be playing out, with the trial lawyer getting the blame if things go wrong.

So, would you really want to be Barry Bonds' lawyer?  Tough call, but it would be pretty cool to appear on SportsCenter right after the Patriots highlights. (ph)

                                                                                              

UPDATE:  The San Jose Mercury News reports (here) that Bonds has added two Bay Area attorneys: Allen Ruby and Christine Arguedas.  Ruby has represented the NFL in one of Oakland Raiders owner Al Davis' many lawsuits against the league, and Arguedas is well-known in white collar crime circles for her work recently on behalf of various corporate executives caught up in options backdating, including the former GC at Apple, and the former general counsel of Hewlett-Packard in that company's pretexting imbroglio. 

Arguedas has represented others in connection with the Balco (Bay Area Laboratory Cooperative) steroids investigation, including witnesses who appeared before the grand jury.  That gives her some familiarity with the case.  While it can be dicey to represent different people involved in a grand jury investigation, I doubt there is a conflict of interest problem for her because there does not seem to be any overlap between the witnesses who testified before the Balco grand jury and those who are likely to be called in the Bonds trial.  It remains to be seen, however, whether prosecutors will look for a potential conflict of interest as the basis to move to knock Arguedas off the case.  Another interesting question will be whether Ruby or Arguedas takes the lead in the case, or whether they are co-leaders of the defense -- which one gets to be on SportsCenter.  No word yet on whether either discounted his/her fees for the case. (ph)

Challenging the SEC Over the Denial of Attorney's Fees

One of the defendants in the SEC's civil lawsuit (amended complaint here) against a number of former Nortel Networks defendants for alleged accounting fraud has filed a motion to dismiss based on the claim that the Commission sought to improperly pressured the company to deny her the payment of attorney's fees.  The argument is reminiscent of the KPMG case, which is cited in the brief, in which the indictment of thirteen defendants was dismissed because of pressure from prosecutors on the accounting firm to deny attorney's fees to a number of former partners and employees later charged for their work on tax shelters.  A Globe & Mail article (here) discusses the filing, and notes the connection with the KPMG case.  Whether the two are the same is questionable because there are differences between the cases that may be crucial.

The motion by Mary Anne Poland (available below), a former assistant controller at Nortel, makes two interconnected arguments.  First, Nortel Networks cut off payment of her attorney's fees when the SEC indicated that it was looking at her as a possible defendant in an enforcement action.  Unlike the company's former CEO and CFO, also defendants in the suit, she does not have the deep pockets necessary to fight an SEC securities fraud case, which usually involves significant discovery and a long trial if it gets that far.  The motion states that Nortel's counsel, who was the former head of the Enforcement Division at the SEC, counseled the company to terminate the payment so that it could appear cooperative with the SEC in the case.  Nortel eventually settled the accounting case by paying a $35 million civil penalty. 

Poland's motion points to the company's cooperation as evidence of the Commission's involvement in the decision to terminate the attorney's fees.  The SEC's Litigation Release (here) announcing the settlement with Nortel states that "the Commission acknowledges Nortel's substantial remedial efforts and cooperation."  In addition, the motion notes that the SEC announced in another case -- involving telecom equipment manufacturer Lucent -- the Commission highlighted the company's cooperation that involved terminating attorney's fee payments for employees.  The argument is that the Commission, at least indirectly, caused Nortel to terminate Poland's attorney's fees.  Hence, the specter of the KPMG case, in which such governmental pressure led the firm to cut off the attorney's fees that eventually triggered the dismissal of the indictment. 

The problem for Poland is that the SEC's policy was not as explicit as the Thompson Memo that the defendants pointed to in the KPMG case as the basis for terminating the attorney's fees.  The motion leads off with the district court decision in United States v. Stein that found the violation of the defendant's rights based on the governmental pressure to deny attorney's fees.   While the SEC's policy certainly emphasizes a company's cooperation, it is not nearly as explicit at the Thompson Memo was on the attorney's fee issue -- a point changed in the current iteration of the Department of Justice's policy on charging corporation, the McNulty Memo.  It is not clear whether there is any direct evidence of pressure by the Commission staff on Nortel to cut off attorney's fees, and pointing to the company's lawyer as the source of that decision may be a crucial distinction from the KPMG case.  Moreover, unlike Stein, a criminal case, there is no Sixth Amendment right to counsel in a civil case, so that ground is unavailable to dismiss the complaint.

The second related claim is that while Poland did not have counsel, the SEC sought and obtained two tolling agreements that allowed the investigation to continue beyond the five year limitations period.  The motion argues that the denial of attorney's fees was related to these requests because the Commission took advantage of Poland's position of acting without legal advice.  She claims that the SEC staff pressured her to agree to the tolling, once even saying that an FBI agent might join the interview.  Because there is no Sixth Amendment claim, the argument is that the government violated Poland's due process rights.  That was one basis for the Stein decision, but the due process concerns in criminal cases are different from those in a civil case.  Poland could have refused to sign the tolling agreement, or could have hired counsel with her own resources to advise on that issue.  Moreover, she is now represented again by lawyers.  Unlike a criminal case, the SEC cannot seek a prison term, so the decision to sign the tolling agreement may be viewed by the courts as less significant under the Due Process Clause.

The motion relies largely on the overtones of the governmental policy that was castigated in the KPMG case and has led to significant criticism of the Department of Justice on Capitol Hill.  The connection, however, between Nortel's decision to cut off the attorney's fees and any particular pressure from the SEC is less clear in this case.  The fact that a company decides to terminate the payment of fees, even if it is based on the hope that it will curry favor with the SEC, does not necessarily mean the Commission acted improperly.  Whether the dismissal motion gains any traction remains to be seen, but the damage from the government's actions in the KPMG case show how widely felt its effects will be for other cases and agencies. (ph -- thanks to YH for passing along the information)

Download sec_v_dunn_motion_to_dismiss_poland_nov_2007.pdf

Gonzales Gets a Legal Defense Fund

The first thing to do when your conduct is the subject of a government investigation is to hire counsel to advise you, and that's what former Attorney General Alberto Gonzales did shortly after leaving office in September.  As discussed in an earlier post (here), Gonzales retained former Deputy Attorney General George Terwilliger in connection with an investigation by the Inspector General at the Department of Justice concerning the truthfulness of Gonzales' testimony before Congress about the terrorist surveillance program -- including the famous meeting with then Attorney General Ashcroft in the ICU -- and the firing of eight U.S. Attorneys.  That earlier post said "[d]on't be surprised to see a legal defense fund organized soon to help out with the legal costs, if it hasn't begun already."  Well, the Alberto R. Gonzales Legal Defense Trust has now come into existence, as detailed in a Washington Post article (here).  According to an e-mail sent by an organizer of the fund, ""In the hyper-politicized atmosphere that has descended on Washington, an innocent man cannot simply trust that the truth will out . . . He must engage highly competent legal counsel to represent him. That costs money, money that Al Gonzales doesn't have." 

Legal defense funds are common in cases involving the prosecution of current and former public officials, including former Vice-Presidential aide I. Lewis Libby (scooterlilbby.com), former New York City Police Commissioner Bernie Kerik (keriklegaltrust.com), and Representatives Tom DeLay (tomdelay.com) and Jim McDermott (mcdermottlegaltrust.com).  I have not been able to locate a website for the new Gonzales legal defense trust, but I suspect one is on the way. (ph)

Attorney's Conviction Affirmed

The Eleventh Circuit affirmed the conviction of an attorney for violation of: 1) 18 U.S.C. Sec. 1512 (c)(2) ("attempting to obstruct a grand jury investigation") and 2) a conspiracy under section 371 and 1505 ("conspiring to obstruct a Securities and Exchange Commission."). The court rejected the defendant's claim that "he was entitled to the benefit of the safe harbor provision of 18 U.S.C. s 1515(c)" ("This chapter does not prohibit or punish the providing of lawful, bona fide, legal representation services in connection with or anticipation of an official proceeding.") The court noted that "the jury was instructed to consider whether or not the government had disproved this affirmative defense beyond a reasonable doubt."

Opinion - Download 200611212.pdf

(esp)

What to Call the White Collar Attorneys

In the big law firms, where do you find the white collar attorneys? 

For many years there were firms that avoided having any association with criminal matters, after all the business clients wouldn't need this type of work.  Then I saw the rise of "special matters" sections in some of the larger law firms.  It is interesting today to see firms openly advertising that they handle white collar cases.  Today, the white collar practice can include everything from corporate compliance work to handling searches of a client's company or grand jury subpoenas. So it is not surprising to see a headline in the Winston Salem Journal (here) telling that Kilpatrick and Stockton was announcing that it had "formed a special-investigations and white-collar-crime team, which will be led by new partner Scott Marrah," a former AUSA from New York.

(esp)

Indicted Lawyer Leaves Baker & McKenzie

An indicted attorney from the law firm of Baker & McKenzie resigned from the firm.  See here.

(esp)(w/ a hat tip to John Wesley Hall)

Here Come the Lawyers to WellCare

The search of WellCare Health Plan's headquarters by, among others, FBI agents (earlier post here) triggered -- as expected -- an immediate response: let's hire lawyers!  A press release (on Business Wire here) states that since the search and carting away of boxes of documents, the company has:

• Been in direct contact with its Board of Directors, including members of the audit committee;
• Committed to cooperating with the federal and state authorities involved in the investigation;
• Retained the law firms of King & Spalding and Greenburg [sic] Traurig to assist the Company with responding to the investigation;
• Engaged with the Company’s auditors, Deloitte & Touche LLP;
• Been in contact with key constituents, including state and federal regulators in each of the Company’s markets.

It's not clear why two national law firms have been retained, but maybe two -- or twenty counting all the partners and associates -- heads are better than one.  WellCare's stock lost over 60% of its value the day following the search, showing the devastating effect a criminal investigation can have for a company's investors.  While the scope of the investigation is not yet clear, any inquiry into possible healthcare fraud carries a serious danger of criminal and civil fines and penalties, and could even include exclusion from the Medicaid program if an extensive fraudulent scheme were uncovered.  (ph)

DOJ Successful on Motion in KPMG Case

The government had asked for the removal of one of the defense counsel in the KPMG case claiming a conflict of interest (see here). The Washington Post reports (here) that the court has accepted the argument, removing counsel and delaying the trial yet again.  The Order (available below) begins by noting that "[t]he government belatedly called to the Court's attention certain possible conflicts of interest . . . ." (italics added)  Trial was scheduled to start October 23 with the opening statements, but that has now been postponed, with a new trial date to be set at a hearing on November 16.  With the government's appeal of the dismissal of thirteen defendants from the case pending before the Second Circuit, it will be interesting to see if the appellate process beats the start of the trial.  If the court of appeals were to reverse Judge Lewis Kaplan's dismissal order before the trial begins, it's likely that would engender even further delay as the court then would have to schedule a trial of all defendants, working with the schedules of seventeen lawyers -- something akin to herding cats.

The prosecutors argued that defense counsel may have provided legal advice to a defendant who is now cooperating with the government.  This is yet another example of the issues counsel faces if entering into a joint defense agreement.  These agreements are often necessary to exchange information and also to keep the costs for preparation of trial at a lower level.  When counsel can share experts, the client saves funds.  But when one client flips, and the deal includes that they will cooperate against another who was part of the joint defense agreement, problems can arise.  And counsel can be left without a client if the sharing of information causes a conflict to arise.

(esp & ph)

Download us_v_stein_order_oct_18_2007.pdf

Gifts That Keep on Giving

Campaign contributions are given for a variety of reasons, and I suspect most donors don't think that their donations will be used to pay lawyers advising elected officials in government investigations.  TPM Muckraker reports (here) that a number of Congressmen are using funds from campaign committees to pay their lawyers because they have been caught up in a variety of federal corruption probes.  Among those using campaign money for legal fees, as reported in the most recent quarterly campaign finance reports, are:

• Rep. Jerry Lewis (Calif.): $26,982 in the quarter and a total of nearly $1 million in the past year to two law firms, including Gibson Dunn;
• Rep. Don Young (Alaska): $183,785 and a total of $447,000 to two law firms, including Akin Gump.
• Rep. Rick Renzi (Arizona): $111,042 and a total of $148,000 to two law firms (Patton Boggs and Steptoe & Johnson).
• Rep. Alan Mollohan (West Virginia): $55,000 and a total of $78,000 to one law firm.

Can it be legal to use campaign contributions for legal expenses?  The Federal Election Commission has interpreted the campaign finance laws as permitting such payments.  In AO 2005-11 (Sept. 26, 2005) (available below), the FEC responded to a request by former Rep. Randy "Duke" Cunningham's campaign committee for a ruling whether it could pay his attorneys during the federal investigation that led to his guilty plea and lengthy prison sentence on bribery charges.  The Opinion states:

The Commission concludes that the Committee may use campaign funds to pay for the legal fees and expenses incurred in connection with the grand jury investigation and legal proceedings that may arise from this investigation because the investigation concerns allegations that are related to Representative Cunningham’s campaign activities or his duties as a Federal officeholder and the legal fees and expenses would not exist irrespective of Representative Cunningham’s campaign or duties as a Federal officeholder. The Committee may also use campaign funds to pay for the legal fees and expenses incurred in responding to the press regarding the grand jury investigation and legal proceedings that may arise from this investigation.

Maybe it's just me, but an investigation of misuse of office for personal gain does not seem to be related to a Congressman's "duties as a Federal officeholder," but that's what the FEC has decided.  It may be that the campaign committee is a bit like an indemnification provision in a corporation's by-laws -- a special form of protection in case there's an investigation related to conduct during the term of office, even it the conduct is criminal, as in the case of Cunningham.  That said, I doubt most donors understand that their contributions can be used to pay lawyers to defend the official in a corruption probe.

The more traditional method for government officials to take donations to pay their lawyers is to set up a legal defense fund, which is subject to different reporting requirements and donation limits than a campaign committee.  Representative William Jefferson of Louisiana, who is under indictment on a variety of corruption-related charges, has decided to go that route rather than use campaign donations to pay for his lawyers. (ph)

Download fec_ao_200511_september_26_2005.pdf

Lawyers Don't Come Cheap These Days

All the recent investigations and subsequent prosecutions of senior executives, especially CEOs, is creating a boomlet for white collar criminal defense lawyers and some significant costs for companies on the hook for the attorney's fees.  A Bloomberg article (here) notes that Brocade Communications Systems Inc. has paid over $38 million in legal fees related the investigation of options backdating along with the defense costs of former CEO Gregory Reyes and other executives charged in criminal and SEC civil enforcement actions.  That does not include the $7 million Brocade paid as a civil penalty to settle the SEC case against the company.  In the most recent quarter ending in July, the company spent over $18 million on legal fees while making a profit of $10.7 million.  In all likelihood that amount does not include the bulk of the costs for Reyes' criminal trial that ended with a conviction in August, for which his lawyers from Skadden Arps probably didn't submit bills until after the quarter ended.

An American Lawyer article (here) discusses other high-price legal defenses for corporate executives and the costs for intensive internal investigations -- conducted by lawyers, of course -- related to options backdating:

• Mercury Interactive spent $72 million before it was acquired by Hewlett-Packard, which no longer breaks out its results separately;
• KLA-Tencor spend $38.6 million;
• Monster, Inc. spent $32 million;
• CNET Networks spent $21 million.

A case that generated significant legal fees outside the backdating realm was the defense of former Enron CEO Jeffrey Skilling, which came in at around $75 million before the most recent work on his criminal appeal -- and don't think his 200+ appellate brief to be argued by former Solicitor General Walter Dellinger will come cheap.  A recent district court case involving a former executive of Westar involved claimed attorney's fees of over $15 million, including nearly $3 million spent on the successful appeal of a conviction that will lead to a third criminal trial.

For anyone contemplating serving as an officer or director of a public company, a good indemnification clause is an absolute must.  Corporations paying out these fees are never very happy when the conduct of executives ends up being so costly, but it seems to be the price to be paid for hiring and retaining CEOs, directors, and other officers.  (ph)

A Nasty Turn in the Wesley Snipes Tax Prosecution

LawProf Blog emperor Paul Caron on the TaxProf Blog reports (here) on actor Wesley Snipes changing counsel for his upcoming tax fraud trial in Florida.  The judge initially denied the request for a continuance because of the change of counsel, finding that Snipes was improperly trying to delay the trial.  The judge has now ordered a ninety-day continuance (see order below), in response to a motion for reconsideration (also available below) that is amazing for its attack on Snipes' prior attorney.  In the motion, the new lawyer attacks all aspects of the prior representation, including the interesting claim that the attorney's lack of due diligence came to Snipes' attention from his representation of former Atlanta Falcons quarterback Michael Vick on dog fighting charges. 

How does the Vick case have anything to do with a tax evasion charge, you might ask?  According to the motion, Snipes -- who played Indians center fielder Willie May Hays in the two Major League movies (YouTube clip here) -- became concerned because his former counsel seemed to misunderstand the dual sovereignty doctrine that permitted state prosecutors to indict Vick for conduct that was the subject of the federal prosecution.  At that point, Snipes sought out his new lawyer, who had earlier represented him on a New York state civil matter.  It's hard to see how the representation of Vick influenced Snipes' decision to change counsel, but that apparently is what got the ball rolling.  The motion notes that Snipes plans to raise a selective prosecution claim, which is a difficult one to win.

The district court refused to credit new counsel's claims of ineffective representation by his predecessor.  According to the continuance order, the judge asked whether Snipes planned to file a bar complaint against his prior attorney, and the answer was negative, so "the Court declines to place any credence in the claim of ineffective assistance of counsel."  Instead, the court granted the motion due to the "irreconcilable differences" between Snipes and his prior counsel, although it probably didn't help much that the old lawyer labeled his last filing a "Motion to Withdrawal."  The tone of the continuance order makes it clear the judge remains suspicious of Snipes, which usually does not bode well.  The case will now begin in January 2008. (ph)

Download us_v_snipes_emergency_motion_oct_9_2007.pdf

Download us_v_snipes_continuance_order_oct_10_2007.pdf

Gonzales Is Lawyering Up

Former Attorney General Alberto Gonzales has made the standard move of any person subject to a governmental inquiry involving a white collar crime -- he hired his own defense counsel.  Gonzales retained George Terwilliger, a former Deputy Attorney General during the administration of the first President Bush.  The Department of Justice's Inspector General informed the Senate Judiciary Committee in August that it was investigating a number of issues involving the firing of eight U.S. Attorney's and whether Gonzales's testimony before the Committee constituted perjury, so there's a very good reason to lawyer up.  According to the IG's letter (here):

The OIG has ongoing investigations that relate to most of the subjects addressed by the Attorney General's testimony that you identified. In particular, the OIG is conducting a review relating to the terrorist surveillance program, as well as a follow-up review of the use of national security letters. In addition, the OIG is conducting a joint investigation with the Department's Office of Professional Responsibility into allegations regarding the removal of certain United States Attorneys and improper hiring practices.

Terwilliger is a partner at White & Case so he will not come cheaply, and Gonzales has been working for the state and federal government since 1994 so his economic resources may be limited.  Don't be surprised to see a legal defense fund organized soon to help out with the legal costs, if it hasn't begun already.  An AP story (here) discusses Gonzales retaining Terwilliger. (ph)

Now the Government Claims Conflict of Interest in KPMG Case

Both the New York Times here and the ABAJrl.com here are reporting that prosecutors in the KPMG related case are trying to conflict-out two defense counsel.  The prosecutors are claiming that the two defense counsel may have provided legal advice to David Amir Makov, who is now cooperating with the government.  Interestingly, the ABAJrl.com states that the lawyers for Makov do not see the problem alleged by the government.  If the witness has his own lawyer, and that lawyer doesn't see the issue, why is the government claiming one exists?

The term "secret defense agreement" as used in the article may make what occurred here sound somewhat nefarious.  In reality, joint defense agreements are quite common today.  Multiple defendants will enter into these agreements for the purpose of exchanging information yet maintaining the attorney-client privilege. They also allow the multiple defendants to cut costs by perhaps hiring one accountant, investigator, or other expert. With the costs placed upon defendants facing white collar charges, this is understandable. These agreements, however, can become a problem when one defendant who is a party to the agreement decides to testify for the government.

(esp)