Tuesday, February 11, 2014
To the surprise of nobody I know, Mathew Martoma, the former SAC Capital portfolio manager, was convicted of insider trading last Thursday by a Southern District of New York jury. The evidence at trial was very strong. It demonstrated that Martoma had befriended two doctors advising two drug companies on the trial of an experimental drug, received confidential information from them about the disappointing result of the drug trial prior to the public announcement, and then had a 20-minute telephone conversation with Steven A. Cohen, the SAC chair, a day or so before Cohen ordered that SAC's positions in these companies be sold off. The purported monetary benefit to SAC, in gains and avoidance of loss, of the trades resulting from the inside information is about $275 million, suggesting that Martoma receive a sentence of over 15 years under the primarily amount-driven Sentencing Guidelines (although I expect the actual sentence will be considerably less).
Cohen is white-collar Public Enemy No. 1 to the Department of Justice, at least in its most productive white-collar office, the U.S. Attorney's Office for the Southern District. That office has already brought monumental parallel criminal and civil cases against SAC, receiving a settlement of $1.8 billion, about a fifth of Cohen's reported personal net worth, but it has apparently not garnered sufficient evidence against Cohen to give it confidence that an indictment will lead to his conviction. It had granted a total "walk" -- a non-prosecution agreement -- to the two doctors whose testimony it felt it needed to convict Martoma, unusually lenient concessions by an office that almost always requires substantial (and often insubstantial) white-collar wrongdoers seeking a cooperation deal to plead to a felony. As an FBI agent told one of the doctor/co-conspirators, the doctors and Martoma were "grains of sand;" the government was after Cohen.
In an article in the New York Times last Friday, James B. Stewart, an excellent writer whose analyses I almost always agree with, asked a question many lawyers, including myself, have asked: why didn't Martoma cooperate with the government and give up Cohen in exchange for leniency? Mr. Stewart's answer was essentially that Martoma was unmarketable to the government because he would have been destroyed on cross-examination by revelation of his years-ago doctoring his Harvard Law School grades to attempt to secure a federal judicial clerkship and covering up that falsification by other document tampering and lying. Mr. Stewart quotes one lawyer as saying Martoma would be made "mincemeat" after defense cross-examination, another as saying he would be "toast," and a third as saying that without solid corroborating evidence, "his testimony would be of little use." See here.
I strongly disagree with Mr. Stewart and his three sources. The prosecution, I believe, would have welcomed Mr. Martoma to the government team in a New York minute -- assuming Martoma would have been able to provide believable testimony that Mr. Cohen was made aware of the inside information in that 20-minute conversation. When one is really hungry -- and the Department of Justice is really hungry for Steven A. Cohen -- one will eat the only food available, even if it's "mincemeat" and "toast." And there is certainly no moral question here; the government gave Sammy "the Bull" Gravano, a multiple murderer, a virtual pass to induce him to testify against John Gotti. Given the seemingly irrefutable direct, circumstantial and background evidence (including, specifically, the phone call, the fact that Cohen ordered the trades and reaped the benefit, and generally, whatever evidence from the civil and criminal cases against SAC is admissible against Cohen), testimony by Martoma to the effect he told Cohen, even indirectly or unspecifically, about the information he received from the doctors would, I believe, have most likely led to Cohen's indictment.
I have no idea why Martoma did not choose to cooperate, if, as I believe, he had the opportunity. "Cooperation," as it is euphemistically called, would require from Martoma a plea of guilty and, very likely in view of the amount of money involved, a not insubstantial prison term (although many years less than he will likely receive after his conviction by trial). Perhaps Martoma, who put on a spirited if unconvincing defense after being caught altering his law school transcript, is just a fighter who does not easily surrender or, some would say, "face reality," even if the result of such surrender would be a comparatively short jail sentence. (In a way, that choice is refreshing, reminding me of the days defense lawyers defended more than pleaded and/or cooperated.) Perhaps Martoma felt cooperation, a condition of which is generally full admission of all prior crimes and bad acts, would reveal other wrongs and lead to financial losses by him and his family beyond those he faces in this case. Perhaps he felt loyalty -- which it has been demonstrated is a somewhat uncommon trait among those charged with insider trading -- to Cohen, who has reportedly paid his legal fees and treated him well financially (and perhaps Martoma hopes will continue to do so), or perhaps to others he would have to implicate.
And perhaps -- perhaps -- the truth is that in his conversation with Cohen, he did not tell Cohen either because of caution while talking on a telephone, a deliberate effort to conceal from Cohen direct inside information, or another reason, and he is honest enough not to fudge the truth to please the eager prosecutors, as some cooperators do. In such a case his truthful testimony would have been unhelpful to prosecutors bent on charging Cohen. That neutral testimony or information, if proffered, which the skeptical prosecutors would find difficult to believe, would at best get him ice in this very cold wintertime. Lastly, however unlikely, perhaps Martoma believed or still believes he is, or conceivably actually is, innocent.
In any case, it is not necessarily too late for Martoma to change his mind and get a benefit from cooperation. The government would, I believe, be willing to alter favorably its sentencing recommendation if Martoma provides information or testimony leading to or supporting the prosecution of Cohen. Indeed, I believe the government would ordinarily jump at a trade of evidence against Cohen for a recommendation of leniency (or less harshness), even if Martoma is now even less attractive as a witness than before he was convicted (although far more attractive than if he had testified as to his innocence). However, the five-year statute of limitations for the July 2008 criminal activity in this matter has apparently run, and an indictment for substantive insider trading against Cohen for these trades is very probably time-barred.
To be sure, federal prosecutors have attempted -- not always successfully (see United States v. Grimm; see here) -- imaginative solutions to statute of limitations problems. And, if the government can prove that Cohen had committed even a minor insider trading conspiratorial act within the past five years (and there are other potential cooperators, like recently-convicted SAC manager Michael Steinberg, out there), the broad conspiracy statutes might well allow Martoma's potential testimony, however dated, to support a far-ranging conspiracy charge (since the statute of limitations for conspiracy is satisfied by a single overt act within the statutory period). In such a case, Martoma may yet get some considerable benefit from cooperating, however belatedly it came about.
Monday, December 16, 2013
Monday, November 18, 2013
How many federal appellate opinions begin like this?
"An attorney's reputation is her most valuable possession. It forms the basis for her peers' view of her and plays an important role-often a determinative one-in how she advances in her career. This case began with a government attorney's unauthorized filing of a motion for sanctions against Debra K. Migdal, an attorney who has served as an Assistant Federal Public Defender for nearly 25 years. It quickly took on a life of its own, resulting in two district-court orders strongly, publicly, and, we conclude, erroneously reprimanding Migdal. Because the record does not support any basis for these orders, we VACATE the sections of the first order pertaining to sanctions, REVERSE the second order in its entirety, and DISMISS the sanctions proceeding against Migdal."
And how many of them end like this?
"This opinion closes the book on a regrettable chapter in Debra Migdal's career, clears her of all claims that her conduct in this matter was sanctionable, and removes any taint of public censure on her reputation."
As anyone who practices criminal law in the federal court system knows, different districts, and sometimes different judges within a district, have different rules, formal and/or informal, for the issuance of subpoenas demanding early document production pursuant to Fed. R. Crim. Proc. 17(c). Some districts allow prosecutors and defense attorneys to issue the subpoenas, and examine documents, on their own. Other districts require a motion and court order. (Of course, the playing field is uneven, because the prosecution typically has the evidence it needs well before trial through the use of grand jury subpoenas.)
In 2011 Debra Migdal was an Assistant Federal Public Defender in the Northern District of Ohio handling a case in front of U.S. District Judge John R. Adams. At the time, neither the Northern District of Ohio nor Adams had any formal policy regarding the issuance of Rule 17(c) subpoenas. Migdal issued two Rule 17(c) subpoenas on her own, one of which was sent to the custodian of records at the U.S. Border Control, calling for the early production of materials in Judge Adam's court, but on a day she designated that was prior to a scheduled court date. Two previous district court opinions in the Northern District, neither of which were written by Judge Adams, had come to opposite conclusions about the propriety of issuing such subpoenas absent the court's permission. Migdal was unaware of the opinion holding that a court order is necessary.
Migdal used Administrative Office of the U.S. Courts Form AO 89, which commands both the appearance and testimony of the witness and, if necessary, the production of documents. In other words, unless the issuer crosses out the part of the authorized pre-printed form calling on the witness to testify, he/she is always commanded to appear and testify, even though in many cases the issuing party is only interested in obtaining documents. By way of contrast, on the federal civil side, there are two authorized subpoena forms, one calling for documents only and one calling for witness testimony.
AUSA Gregory Sasse told the Border Patrol Agent to ignore the subpoena. Sasse then moved to quash the subpoena and asked the court to impose whatever sanctions it deemed appropriate. Sasse wasn't authorized to move for sanctions and his superiors later withdrew this request. But Judge Adams was clearly not happy with Migdal. He held two hearings and publicly sanctioned Migdal under 28 U.S.C. Section 1927 and his inherent authority.
Section 1927 reads as follows:
"Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct."
The Sixth Circuit, noting that nothing whatsoever in the statute's language authorizes the imposition of non-monetary sanctions, ruled that Judge Adams abused his discretion in sanctioning Migdal under 1927.
The Sixth Circuit then rejected the three rationales Judge Adams relied on for sanctioning Migdal pursuant to his inherent authority. (Any sanctions against Migdal required a showing of bad faith on her part.)
1. Adams had ruled that a criminal defendant is entitled to materials under Rule 17(c) "only after requesting-and not getting-the necessary items from the government via Rule 16 discovery." Incredibly, he believed he had the inherent authority to sanction Migdal for failing to follow this protocol. But as the Sixth Circuit pointed out, no such protocol exists under Rules 16 and 17.
2. Adams had ruled that Migdal violated her duty of candor to to the court by commanding production at a hearing that had not been scheduled or requested. (He referred to it as a "fabricated" hearing.) Migdal acknowledged that the subpoenas were defective in this regard, apologized to the court, and argued that she had not acted in bad faith. The Sixth Circuit agreed, emphasizing that: a) AO Form 89 lacks clarity; b) Migdal called for production in Judge Adams' courtroom, so she was obviously not trying to hide anything from the court; c) the longstanding practice in Migdal's office and in many Federal Public Defender Offices, was to issue Rule 17(c) subpoenas without prior court approval; and d) Migdal relied on a prior Northern District of Ohio opinion specifically authorizing issuance of Rule 17(c) subpoenas without prior court approval. Judge Adams noted that he preferred the contrary judicial opinion. "But Judge Adams' inclination to side with one judge's view over that of another obscures the point that Migdal did not act in bad faith when she hewed to at least one judge's reading of the controlling rule."
3. Adams had ruled that Migdal "utterly disregarded Rule 17(c)'s implicit requirement that the court must approve and order early-production subpoenas." (internal quotations omitted). The Sixth Circuit carefully pointed out that reasonable people could disagree on this point, as evidenced by the conflicting district court opinions. That Migdal chose to take a view of Rule 17(c) at odds with Judge Adams' position, at a time when there was no clear controlling authority, could hardly amount to bad faith.
Throughout Judge Jane Stranch's opinion, for a unanimous Sixth Circuit panel, there runs a tone of incredulity at Judge Adams' actions in "branding a blemish on Migdal's reputation." It should never have happened. It should never happen again.
Here is the Sixth Circuit Migdal Vindication Opinion.
Friday, November 1, 2013
The three-lawyer Coral Gables criminal law firm of Hirschhorn & Bieber has joined the Orlando-centered multi-city law firm of Gray Robinson. See here. Their move from a small criminal law practice to a much larger firm reflects a trend of many of "the best and the brightest" of the criminal defense bar leaving small firm practices to join large firms, a trend about which I have mixed feelings. See here.
On the one hand, superb lawyers like Joel Hirschhorn and Brian Bieber, with significant criminal trial experience and demonstrated willingness to stand up to the government when appropriate, add expertise, energy and a degree of combativeness to the often too compliant white collar criminal defense bar.
On the other hand, the loss of two excellent lawyers from the ranks of the general criminal defense bar with its willingness and ability to represent the most unpopular and most in need of able, experienced and vigorous counsel saddens me. Although Brian Bieber vowed that his group will retain its "boutique" identity, I fear that there will be pressures from others in their new firm not to handle certain cases for image and economic reasons. I hope, and I would not be surprised, that these two dedicated lawyers resist.
I wish them luck.
Tuesday, October 8, 2013
The statute of limitations, I used to think, was designed to allow a wrongdoer who is not arrested for a period of years to have a certain sense of repose to be able to go on with his life without fear of arrest for that wrongdoing. Recent legislative and prosecutorial activity in extending statutes of limitations in areas such as child sex crimes and sex crimes where DNA of the otherwise-unidentified perpetrator has been preserved has undermined this rationale. Further, the use of conspiracy statutes in federal prosecutions also allows prosecutors to effectively punish defendants for acts committed beyond the ordinary statute of limitations as part of a conspiracy that continues into a period within the statutory limit.
White-collar prosecutors often view the statute of limitations, generally five years from the date of occurrence of the crime, as the period which they have to prepare a case to secure an indictment. Courts rarely, if ever, dismiss a case for a delay in indictment if the indictment is returned within the statutory period even if the defendant can demonstrate that the delay was due solely to prosecutorial lassitude and that the defendant has been prejudiced by loss of witnesses, dimming of witnesses' memories, and other factors that hamper her right to present a defense. And arguments at sentencing that the defendant has led a blameless but fearful life for the many years the prosecution took to indict him generally fall on deaf ears.
Occasionally, prosecutors find they are unable to prepare to their satisfaction cases within the statute of limitations period and ask defense counsel to agree to extend the limit. Unless there is a possibility that additional time would afford a defense lawyer a realistic possibility of dissuading the prosecutor from indicting or of securing a favorable pre-indictment plea disposition, there is rarely a good reason for a defense lawyer to agree to such an extension. Yet, defense lawyers frequently acquiesce to the prosecutor's request.
Some years ago, in a matter involving a series of allegedly false billings to the government, a federal prosecutor asked me to agree on behalf of my client to extend the statute of limitations. In response to my question why he sought an extension, the prosecutor said, quite frankly, that he had been too busy with other matters to bring the matter before a grand jury and that some (but not all) of the charges would soon be time-barred. I asked him why I, on behalf of the defendant, should therefore consent to a waiver of the statute. He responded that if I did not consent to the extension, he would charge my client as part of a massive conspiracy to defraud the United States in order to include the false billings on the expired dates (but not as separate charges). I told him that I would not agree.
A few days later, I received a letter from the prosecutor, thanking me for agreeing to an extension of the statute of limitations and including a waiver form to be signed by my client and me. Concerned that a failure to protest might be construed at a later time by a judge as an acquiescence to the prosecutor's request for an extension, especially if the prosecutor (or a successor) contended that I had agreed orally, I fired off a letter expressing my surprise at the letter and reiterating that I did not and would not consent to an extension. (I do not know whether the prosecutor's letter was prepared prior to our conversation in the expectation that I would consent and then sent in error, or was sent in the hope that I would change my mind or execute it without paying attention.) The client was never indicted.
As this case illustrates, it is my belief that defense lawyers too readily consent to prosecutors' requests to extend the statute of limitations. Although I personally am generally agreeable to consenting to an extension of time because an adversary is busy and needs more time to prepare papers, when such consideration clearly is to the detriment of a client, I believe a lawyer should not extend such professional courtesy, even if she fears she would be marked by the prosecutor's office as an attorney who deserves no personal consideration. Effective advocacy should generally trump civility.
I therefore note with interest that Reed Brodsky, the defense lawyer for Paul J. Konigsberg, a targeted long-time accountant for and close associate of Bernard Madoff, reportedly had refused to consent to an extension of the limitations period on behalf of his client. See here. I do not know what reasons, if any, the prosecution gave for its request and what reasons Brodsky had to refuse the request. I do know that a trial of some of Mr. Madoff's former employees, which is expected to go beyond the statute of limitations cutoff date, began this week. Of course, in the event any or all of those employees are convicted (or even not convicted), they might well then agree to cooperate with the authorities against Mr. Konigsberg.
If any of those defendants are available to testify against Mr. Konigsberg, the prosecutor will certainly be able to use them as witnesses. The prosecutor should not, however, properly be able to use the grand jury subpoena power or the grand jury itself to obtain their testimony or other additional evidence to prosecute Mr. Konigsberg for the crimes for which he was charged since a grand jury cannot be used to gain evidence for already-indicted cases or for additional Madoff-related crimes since they are time-barred. To be sure, at times prosecutors do secure additional evidence for use in a pending case when they conduct a grand jury investigation with a view toward indicting additional defendants or prosecuting not-yet-charged crimes against an already-indicted defendant. That is unlikely here.
Tuesday, June 25, 2013
According to a federal defender, "[f]ederal public defenders are facing unprecedented and devastating funding cuts in FY14, and the present plan would reduce budgets by 26% and staff by 33% nationally -- making these offices by far the hardest "hit" federal agency in the country." A leading bar organization has issued a statement of concern. The NACDL here notes that last week, "American's federal indigent defense system, known as the Office of Defender Services (ODS) was demoted." In the year that marks the 50th Anniversary of the Gideon decision, this is sad. What is equally sad to see is that these moves are not cost effective, and could end up costing the taxpayers more. As noted by a federal defender:
"Defender offices would lose some branch offices, have to decline the most complex and resource-intensive cases, cease managing the CJA (contract counsel) panel, and shift so many cases to the CJA lawyers that it would double or treble the CJA costs; note, however, that there has been no increase (rather, a decrease) in the CJA budget, and generally private CJA representation costs a lot more than representation by salaried staff in defender offices. Sequestration cuts to defender offices, ironically then, will substantially increase costs of federal indigent defense, while the Federal Defender offices (the "Flagship" of the U.S. Courts) are crippled."
White collar cases tend to be complex and require significant defense time and cost. With the increased emphasis on cases, such as mortgage fraud, more federal public defenders have become involved in this representation. Without adequate defense counsel the status of prosecuting these cases could be at risk. Equally problematic will be whether those charged with crimes will receive adequate representation. Let's hope the legislature wakes us and does something quickly to correct this situation.
Wednesday, June 12, 2013
Gerald Shargel, perhaps the pre-eminent criminal defense lawyer in New York City, has left his solo practice to join the 900-lawyer firm of Winston & Strawn. Shargel's move is embelmatic of two trends: the expansion of white-collar and not so white-collar criminal defense practices of large firms and the exodus of criminal practioners from solo or small partnership practices.
Mr. Shargel's transition is a boon to Winston & Strawn but a loss to the independent, private defense bar that is diminishing in number, income and quality.
Friday, May 24, 2013
Most witnesses with potential criminal exposure who are called to testify before Congressional hearings take the stand, with their lawyers behind them, and repeat the incantation "I respectfully decline to answer the question based on my Fifth Amendment privilege against self-incrimination," or some variation. Occasionally, a witness insists on testifying in spite of a danger that his answers might incriminate him or, if in conflict with other witnesses' statements or other evidence, might lead to a perjury or obstruction prosecution. One notable example is Roger Clemens, who chose to testify and, although ultimately acquitted, was indicted and lost millions of dollars in legal fees and endorsements.
Lois Lerner, an embattled Internal Revenue Service official called to testify before a Congressional hearing earlier this week, tried to have her cake and eat it too. She made a brief opening statement declaring her innocence ("I have not done anything wrong. I have not broken any laws. I have not violated any I.R.S. rules and regulations, and I have not provided false information to this or any other Congressional committee."). She then invoked her constitutional right not to testify. Committee Chair Daryl Issa (R-Calif.) and other Congressmen claimed that, by her opening declaration, she had waived her privilege and therefore was required to answer the Committee's questions.
Some lawyers have criticized Ms. Lerner's counsel, William Taylor III, one of the most highly-respected criminal defense lawyers in the nation, for allowing Ms. Lerner to make an opening statement, claiming that at the very least that she placed herself at risk of waiving her constitutional privilege against self-incrimination. See here. Although the area of waiver of privilege is indeed murky, with cases going in different directions, I believe Ms. Lerner did not waive her right to silence by her unspecific denials. As Miranda v. Arizona itself says, "If the individual indicates in any manner, at any time prior to or during questioning, that he wishes to remain silent, the interrogation must cease." 384 U.S. 436, 473-4, fn. 44.
Nonetheless, courts sometimes bend over backwards to "punish" what appears to them as gamesmanship. Many years ago, a New York City Congressman, Mario Biaggi, in response to a "leak" disclosing he had invoked his privilege in the grand jury and refused to answer questions, declared publicly that he had cooperated fully and answered all the jury's questions -- a statement which was far from true -- and that he had instructed his attorneys to seek release of his testimony to prove it. His attorneys moved for disclosure of testimony, no doubt expecting the motion to be denied. (The United States Attorney also so moved.) The district court, however, as later affirmed by the Court of Appeals, held that Biaggi had waived the privilege and ordered the release of his entire transcript. In re Biaggi, 478 F.2d 489 (2d Cir. 1973).
Even though I believe that ultimately it will not be determined (or probably even litigated) that Ms. Lerner waived her privilege against self-incrimination, I wonder whether her brief declaration of innocence -- by itself unlikely to persuade anyone -- was worth the risk, however slight. My guess -- pure guess -- is that the decision to allow her to make her brief opening statement was a compromise made between a careful lawyer and a client, like many I have represented, who adamantly desired to testify. Of course, professional discretion would prevent Mr. Taylor from shifting any blame.
Monday, March 25, 2013
Last week, in celebration of the 50th anniversary of the Gideon decision, some of the nation's leading legal figures lauded the outstanding contributions made by the public defense bar. Public defenders indeed do deserve plaudits for their dedication and hard work in representing the poor and often despised. Most public defenders are devoted, diligent, relatively poorly paid, and work in difficult situation and under difficult conditions.
To me, however, the unsung heroes of the defense bar are those private lawyers who ably and diligently represent persons of modest income who are not poor enough to be provided free counsel by the state, but poor enough not to be able to pay substantial legal fees. Those lawyers, like public defenders, work in difficult situations and under difficult conditions. They often have no steady income, no employer-provided retirement or health benefits and sometimes no office. They do not have readily available ancillary services, such as advisory counsel, investigators, social workers and mitigation specialists. Often, they have to perform those functions themselves.
As insubstantial as the resources for public defense are, the resources available to many private lawyers -- whatever meager savings the client is willing to part with, whatever portion of the client's paycheck he has left over after paying for shelter and food and other expenses -- are often less.
This bar, to be sure, is an uneven one. Unlike public defenders, almost all of whom have at least a modicum of competence and expertise and devotion, some in the private bar are part-time or occasional criminal defense lawyers with little criminal experience and little dedication to the representation of their clients. Many, however, are able, experienced, energetic and devoted, despite being paid a fraction of what they deserve. Those unsung lawyers deserve credit and recognition.
Monday, March 18, 2013
Today marks the 50th anniversary of the Supreme Court's landmark decision in Gideon v. Wainwright, a case that promises the accused charged with a crime the right to counsel. Throughout the country many are recognizing the importance of this historic day with articles that tell the Gideon story. (see, e.g., here). One sees a Supreme Court Justice (Kagan) and Attorney General (Holder) recognizing the importance of the right to counsel. (see here)
But what about the white collar case?
White collar cases can be intricate, involve numerous documents, and can entail a sophistication of understanding financial records, something that one may not find in the routine street crime case. So when Justice Kagan says that you aren't entitled to a Cadillac defense, just a "Ford Taurus" defense, will that be enough in a white collar case?
Many white collar defendants will have funds sufficient to pay their lawyers, and in these cases it may be a non-issue. But for those who do not -- Are public defender offices being given adequate funding and resources to handle the lengthy document intensive cases associated with a white collar prosecution? It is difficult to defend these cases with a broken down bicycle that has no wheels.
Tuesday, February 26, 2013
In Caldwell v. Cablevision, 2013 N.Y. Slip Op. 00783, the New York Court of Appeals two weeks ago unanimously affirmed a trip-and-fall civil defendant's verdict in which an emergency room physician subpoenaed by the defense as a fact witness was paid $10,000 for one hour of testimony to verify an entry he made in the "history" section of the hospital records. That note read that the plaintiff had "tripped over [her] dog while walking in the rain," seemingly contradicting the plaintiff's claim that she tripped because of an unfilled trench dug by the defendant.
The court was "troubled" by what was clearly an exorbitant fee paid to a witness for minimal testimony. The relevant statute provided that a witness was entitled to a fee of $15 per day and $.23 per mile travel, but the court wrote it was not improper to pay a witness "reasonable" compensation beyond those amounts for attending, testifying and preparing. The court noted that a witness, however, could not be paid based on the outcome of the litigation.
The court, disturbed by what it called a "disproportionate fee for a short amount of time" and realizing that an excessive payment tended to influence witnesses to testify favorably for the party that paid them, also stated "[a] line must be drawn." However, it not only failed to draw that line, but did not set forth any criteria for when a payment to a witness becomes a bribe. It did hold that the trial court should have tailored a specific jury instruction for the situation, but found the failure to do so was harmless error.
Initially, I thought the court's opinion might provide some limited protection to a New York criminal defense lawyer to offer a witness in a state case a substantial payment to overcome the typical witness reluctance to testify against the prosecution. After a moment's reflection, however, I concluded that such protection was illusory. A criminal defense lawyer who pays a fact witness $10,000 for an hour of testimony is likely to face indictment for bribery. What is acceptable in civil cases is often not acceptable in criminal cases, especially if one's adversary has the power to prosecute. Further, what is acceptable conduct by a prosecutor in criminal cases is often not acceptable if done by a defense lawyer.
Prosecutors routinely induce testimony from witnesses by offering "something of value" greater than money -- a witness' freedom from incarceration, something a defense lawyer obviously cannot offer. While one federal appellate court shook the foundations of federal prosecution offices by holding that the government could not induce testimony by offering such leniency to a witness, United States v. Singleton, 144 F.3d 1343 (10th Cir. 1998), that case was swiftly and soundly overruled en banc, 165 F.3d 1302 (10th Cir. 1999).
In white collar and other cases, the defense often is hampered by its inability to induce a witness to testify by offering something of value for fear that the defendant or her attorney will be prosecuted for bribing a witness. While the defendant has a Sixth Amendment right to subpoena and call fact witnesses (and to pay witness fees and the "reasonable value of lost time"), that right is considerably limited by the witness' Fifth Amendment right to assert his privilege against self-incrimination and decline to testify. Further, defense attorneys lack a mechanism (such as a grand jury) to test what an unamenable witness will state under oath.
One instance where witnesses are often necessary for a viable defense in white-collar cases is where the defendant claims she acted with a lack of criminal intent, often evidenced by a direction or assurance by superiors of the propriety of her conduct or her openness and expressions to her co-workers. Witnesses who might substantiate the defendant's good faith who were somewhat involved in, or just near, the questioned activity, generally at the direction of prudent counsel will often refuse to testify for fear they will be prosecuted. This foreclosure of potentially favorable testimony is sometimes reinforced by prosecution sabre-rattling, often disingenuous, that the witness himself is a potential defendant. Such a declaration almost always will frighten the witness from testifying and deter a judge from granting the witness immunity over prosecutorial objection. But see here.
Allowing white-collar defendants to "buy" (honest) testimony from a reluctant witness -- that is, to pay the witness to give up his constitutional right not to testify -- conceivably theoretically acceptable under the Caldwell case -- might somewhat level the playing field in which the prosecutor to a considerable extent controls who will testify for either side. However, until a court or legislature "draws a line" that clearly allows it, such a payment is fraught with danger to the defendant and the defense lawyer.
Monday, January 28, 2013
Casey Anthony, who was acquitted of murdering her daughter Caylee Marie in 2011, has filed for bankruptcy in federal bankruptcy court in Florida. She has listed approximate assets of $1,100 and debts of $800,000, including $500,000 due Jose Baez, one of her defense attorneys. See here. I was pleased to see no debt listed for my colleague and friend Cheney Mason, who as Baez' co-counsel, added gravitas, savvy and experience to Ms. Anthony's defense team.
It is not surprising for a criminal defense lawyer not to be paid a large part of the legal fees owed to her. I venture that the average criminal defense lawyer is "beat" for some 10-20% of her fees. And I do not know how much Baez actually did receive in fees, but I am sure nothing like the fees many white-collar lawyers and firms often receive for representation in criminal matters of institutions or individuals, even those who never get close to being indicted. Of course, the Anthony case did provide Baez considerable fame.
Friday, December 7, 2012
New Article - Unregulated Corporate Internal Investigations: Achieving Fairness for Corporate Constituents
Professor Bruce Green (Fordham) and I have a new article coming out in Boston Colleg Law Review, titled Unregulated Corporate Internal Investigations: Achieving Fairness for Corporate Constituents. You can download the article here. The SSRN abstract states:
This Article focuses on the relationship between corporations and their employee constituents in the context of corporate internal investigations, an unregulated multi-million dollar business. The classic approach provided in the 1981 Supreme Court opinion, Upjohn v. United States, is contrasted with the reality of modern-day internal investigations that may exploit individuals to achieve a corporate benefit with the government. Attorney-client privilege becomes an issue as corporate constituents perceive that corporate counsel is representing their interests, when in fact these internal investigators are obtaining information for the corporation to barter with the government. Legal precedent and ethics rules provide little relief to these corporate employees. This Article suggests that courts need to move beyond the Upjohn decision and recognize this new landscape. It advocates for corporate fair dealing and provides a multi-faceted approach to achieve this aim. Ultimately this Article considers how best to level the playing field between corporations and their employees in matters related to the corporate internal investigation.
Friday, November 9, 2012
In a major environmental prosecution out of the Northern District of Indiana, a great white collar team proves once again that you CAN go to trial and beat the government. The indictment alleged a conspiracy to violate the Clean Water Act and 26 substantive violations by United Water Services and two of its employees. Some counts were dropped along the way by the government. All three defendants were acquitted of all remaining charges by the jury.
This was a complete victory for the defense. The jury deliberated about 8 hours over two days. Congratulations go to the following members of the respective white collar/environmental defense teams:
Representing United Water Services were my colleagues at Barnes & Thornburg: Larry Mackey, George Horn, Pat Cotter, Harold Bickham, Meredith Rieger, and Tim Haley.
Representing Dwain Bowie were Jackie Bennett and Bob Clark of Taft Stettinius & Hollister.
Representing Gregory Ciaccio were J.P. Hanlon and Kevin Kimmerling of Faegre Baker Daniels.
The case was tried in Hammond, Indiana.
Here is the Post-Tribune story.
Friday, November 2, 2012
The case of Ali Shaygan v. United States is set for distribution for conference on November 9, 2012 in the United States Supreme Court (see here). David Oscar Markus represents the Petitioner on a Hyde Amendment case that asks the question of "[w]hether the Government is exempted as a matter of law for Hyde Amendment sanctions under the statute’s prohibition on "bad faith" prosecutions despite subjective malice in its filing decision and extensive and pervasive prosecutorial misconduct during the course of the litigation, merely because there was probable cause to support the filing of the indictment." The Petition for Cert can be found here. See also Mike Scarcella, In the Supreme Court, a Fight Over Sanctions for Government Misconduct
The NACDL (here) raises the issue of the wide discretion afforded to prosecutors and how "'bad faith' surely includes situations where the government adds numerous charges for an illegitimate reason, such as retaliation for exercising a constitutional right, or engages in discovery abuse." The question here is whether the Hyde Amendment will have any teeth left, and whether there will be a check on government misconduct.
This case raises the important issue of whether there will be any ramifications to the government when it misuses its power.
Monday, October 29, 2012
DC has its share of outstanding white collar practitioners, but some of the very best of them don't often make it into the news. Why? Because they are quietly busy, around the clock and the globe, protecting the reputations, pocket-books, and other interests of their clients. They do this by conducting internal investigations, defending against government inquiries, creating state of the art compliance programs, and offering sound strategic advice. The whole point is to keep your clients out of the news. Two of the very best of these trusted white collar counselors are former Deputy AG George J. Terwilliger III and my old friend Bob Bittman, who are moving this Thursday from White & Case to Morgan Lewis. Terwilliger and Bittman will be Partners in the White Collar Litigation & Government Investigations Group. George and Bob are moving over with experienced white collar hands (and fomer AUSAs) Dan Levin and Matt Miner. Here is the Morgan Lewis Press Release. Congratulations to George, Bob, Dan, and Matt.
Thursday, July 12, 2012
Last month, in a thorough 64-page opinion, Southern District of New York Judge William Pauley ordered a new trial for three of four defendants convicted in what he described as "the largest tax fraud prosecution in U.S. history" because a juror, Catherine M. Conrad, had lied her way into being accepted as a juror. United States v. Daugerdas, et al., 09 Cr. 581.
There appears to be little question Ms. Conrad, a suspended lawyer, connived to make herself in her own word "marketable" so that she could have "an interesting trial experience" as a juror. In voir dire, she lied about her education, claiming the highest level she had reached was a B.A. when in fact she had a law degree. She concealed not only her membership in and suspension from the bar but her own criminal convictions -- for shoplifting, DWI, contempt and aggravated harassment -- as well as her husband's extensive criminal history, which included a seven-year prison stay. She made, according to the court, a "calculated, criminal decision to get on the jury."
At a post-trial hearing at which she was granted use immunity, Conrad stated that if the truth were known, "defense counsel would be wild to have me on the jury." In fact, however, Conrad turned out to be extremely biased against the defendants. In a congratulatory letter she sent to the prosecutors after the trial, she said she was "privileged to observe la creme de la creme -- KUDOS to you and your team." In that letter, she mentioned that she had fought against but ultimately had "thrown[n] in the towel" on a not guilty verdict on one of the counts concerning defendant David Parse. At the hearing, she testified that "most attorneys" are "career criminals." Two of the four convicted defendants were practicing lawyers; Parse was a non-practicing lawyer.
Judge Pauley, clearly upset by the need to retry a case which took three months, strongly urged the government to prosecute Conrad. Perhaps concerned that the government might feel that prosecuting her would be inconsistent with its opposition to a new trial, he added, "The prospect of preserving a tainted jury verdict should not temper the Government's resolve to call Conrad to account for her egregious conduct." Any prosecution of Conrad, however, obviously would have Kastigar obstacles because of her immunity.
The judge, following the Supreme Court's decision in McDonough Power v. Greenwood, 464 U.S. 548 (1984), found that in order to obtain a new trial, the moving party must "first demonstrate that a juror failed to answer honestly a material question on voir dire and then further show that a correct response would have provided a valid basis for a challenge for cause" (emphasis added). Apparently, even in a criminal case, the mere existence of a juror who deliberately lied her way onto the jury may not be sufficient to require a new trial. See United States v. Martha Stewart, 433 F.3d 273 (2d Cir. 2006). The McDonough test appears to be "If the juror hypothetically had answered truthfully, would her truthful answers have led to a challenge for cause?" Thus, unknown facts that might have affected her fitness to serve as a juror which would not in any case have been revealed by accurate responses to voir dire questioning presumably should not be considered.
In a lengthy analysis, mingling those hypothetical answers to questions asked during jury selection with, somewhat questionably, facts learned and impressions formed at the post-verdict hearing -- including Conrad's discovered dishonesty, bias and her animus to lawyers -- the court found that the McDonough criteria had been amply met. Accordingly, it ordered a new trial for all the convicted defendants -- except Parse, who the court ruled had "waived" his claim for a new trial since his attorneys knew or "with a modicum of diligence would have known" that Conrad's statements in jury selection were false and misleading and failed to disclose that knowledge to the court.
Judge Pauley felt that Parse's lawyers, the firm of Brune and Richard, knew or at least suspected (or alternatively should have known) that Conrad was an imposter certainly by the start of jury deliberations, but made a decision not to reveal their belief or suspicion to the court. The court was apparently affected by what seems to be a carefully-crafted, literally true but arguably misleading, statement in the lawyers' new trial motion that they were "prompted" by disclosure of Conrad's post-verdict letter to investigate and conduct records searches "in the wake of Conrad's . . . post-verdict letter." The court found that the motion contained "significant factual misstatements" and that its "clear implication" was to give the false impression that Parse's lawyers had no idea of Conrad's true identity until well after the verdict. In fact, as demonstrated in a later letter from the firm, in the firm's e-mails during trial, which were ordered by the court to be produced, and in testimony by the lawyers at a hearing, the firm apparently had concerns about and suspicion of Conrad's deception, initially at voir dire and later, after further record search revelations, during the judge's charge to the jury. A most graphic example was one lawyer's e-mail during the charge, "Jesus, I do think it's her."
The court believed that the attorneys' submission was designed to foreclose any government claim that their pre-verdict knowledge doomed their post-verdict motion on the grounds that they failed to act with "due diligence." The court found unconvincing the attorneys' claim that notwithstanding the similarities between the juror and the suspended lawyer discovered by electronic research -- name, home town, father's occupation, approximate age -- and the juror's use of previously unmentioned legal terms (such as respondeat superior) in jury notes she authored, the attorneys did not believe until after her letter to the government was disclosed that juror Conrad and suspended lawyer Conrad were the same person.
The court thus found that Parse's attorneys had "actionable intelligence" that Conrad was an imposter and that they had been required, but failed, to undertake "swift action" to bring the matter to the court's attention. The court apparently felt that the attorneys had attempted to "sandbag" it by remaining silent about the defect and only raising the issue when and if the trial did not conclude favorably, in effect providing them and their client with an "insurance policy against an unfavorable verdict." By his attorneys' conduct, the court ruled, Parse waived any error.
It may well be that during the trial the attorneys chose not to report their suspicions because they felt that Conrad, who appeared from web research to be potentially anti-government, would be a favorable juror for the defense, and they did not want to lose her. It may also be that, whatever the objective evidence that the juror and the suspended lawyer were one and the same might look like with hindsight, they actually thought that the juror and the suspended lawyer were different people since, as they claimed, they could not believe that the juror -- a lawyer -- would blatantly lie. Under either alternative, the court found, they had an obligation to share their knowledge with the court.
Some may argue that an attorney, in her duty of zealous representation of a client, may remain silent if she learns during jury selection that a juror misrepresented herself. Judge Pauley's contrary view is clear: "An attorney's duty to inform the court about suggested juror misconduct trumps all other professional obligations, including those owed a client." I agree. See New York Rules of Professional Conduct 3.3(b).
Some may also question whether Parse, the client, should suffer from his lawyer's purported misconduct or lack of diligence (of which he had no apparent knowledge). While generally a client is bound by a lawyer's strategic decision, and cannot cry foul if it backfires, Parse did suffer the same denial of a fair jury as the other defendants. Nonetheless, the court held that his attorneys' failure to report waived any objection by Parse, but granted new trials to the other three convicted defendants (whose lawyers apparently had no knowledge of Conrad's deception).
There are several ironies in this case: Parse, about whom, according to Conrad's letter to the prosecutors, the jurors "had qualms," is the only one whose conviction stands. Further, his attorneys were the ones responsible for investigating and presenting the motions which succeeded in a new trial for the others (who joined the motion), but not for him. And, lastly, if Conrad had told the truth at voir dire and revealed her suspension from the bar and her and her husband's criminal record, she undoubtedly would have been successfully challenged -- whether by cause or peremptory -- on the motion of the prosecution she so strongly favored, and not be the defense she despised.
Wednesday, June 27, 2012
A DOJ Press Release reports, Barclays Bank PLC Admits Misconduct Related to Submissions for the London Interbank Offered Rate and the Euro Interbank Offered Rate and Agrees to Pay $160 Million Penalty
Some highlights of the press release -
- "Barclays Bank PLC, a financial institution headquartered in London, has entered
into an agreement with the Department of Justice to pay a $160 million penalty
to resolve violations arising from Barclays’s submissions for the London
InterBank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR),
which are benchmark interest rates used in financial markets around the world..."
- "To the bank’s credit, Barclays also took a significant step toward accepting
responsibility for its conduct by being the first institution to provide
extensive and meaningful cooperation to the government."
- "Barclays’s cooperation has been extensive, in terms of the quality and type of
information and assistance provided, and has been of substantial value in
furthering the department’s ongoing criminal investigation."
- "The agreement requires Barclays to continue cooperating with the department in
its ongoing investigation."
- "As a result of Barclays’s admission of its misconduct, its extraordinary
cooperation, its remediation efforts and certain mitigating and other factors,
the department agreed not to prosecute Barclays for providing false LIBOR and
EURIBOR contributions, provided that Barclays satisfies its ongoing obligations
under the agreement for a period of two years. The non-prosecution agreement
applies only to Barclays and not to any employees or officers of Barclays or any
Commentary - As a non-prosecution agreement it does not go through the courts and DOJ has the power to enforce or proceed should it believe there is a violation of the agreement. It also sounds like the white collar defense bar may have some new clients as the government has secured the cooperation of the company to go after individuals.
See also Jenna Greene, BLT Blog, Barclays Agrees to Pay $360M to Settle with CFTC, DOJ
over Interest Rate Manipulation
Wednesday, June 20, 2012
The financial cost of a white collar case can be a huge deterrent in itself. But often, the corporation or company where the individual is employed will be footing the bill. Check out - Peter Lattman, N.Y.Times, Goldman Stuck With a Defense Tab, and Awaiting a Payback
(esp)(w/ a hat tip to Professor Jerold Israel)
Monday, June 18, 2012
This nine week trial cost us how much? And what about the first mistrial, too (here)?
And while this was going on, how many cybercrimes and identity thefts have gone unnoticed. And when the investigation of this case was occurring, did we miss some Ponzi schemes and mortgage frauds?
We have limited resources - we need to use them wisely.