Monday, September 19, 2011

Saudi Arabia-based Tamimi Global Company Ltd (TAFGA) Gets DPA

A DOJ Press Release here reports that "Saudi Arabia-based Tamimi Global Company Ltd (TAFGA) has agreed to pay the United States $13 million to resolve criminal and civil allegations that the company paid kickbacks to a Kellogg Brown & Root Inc. (KBR) employee and illegal gratuities to a former U.S. Army sergeant, in connection with contracts in support of the Army’s operations in Iraq and Kuwait."  The press release states:

"Under the terms of that agreement, TAFGA will pay the United States $5.6 million as part of a deferred prosecution and institute a strict compliance program to ensure that the company and its employees will abide by the legal and ethical standards required for government contracts.  If TAFGA meets its obligations under the agreement without violation for 18 months, the United States will dismiss the criminal charges."

(esp)

September 19, 2011 in Deferred Prosecution Agreements, Fraud, News, Prosecutions, Settlement | Permalink | Comments (0) | TrackBack (0)

Thursday, September 15, 2011

"Rogue Trader" - OUCH

UBS is having another "ouch" moment as the media is reporting on a rogue trader. The typical questions are - how could this have happened; why was it not discovered sooner; who should be held liable; and should there be criminal liability?  It is too soon to answer many of these questions. But here are some points of interest -

UBS has a corporate responsibility policy that states:

"UBS is firmly committed to corporate responsibility and actively strives to understand, assess, weigh and address the concerns and expectations of the firm's stakeholders. This process supports UBS in its efforts to safeguard and advance the firm’s reputation for responsible corporate conduct. In very direct ways, responsible corporate conduct helps create sustainable value for the company."

Its policies include a host of different preventative measures, such as money laundering prevention here.  It takes pride in employees and notes that "[o]ur employees have the breadth of our businesses, global career opportunities and a collaborative, performance-oriented culture as a platform for individual success."

Rogue employees are not a new development for the corporate arena. No matter how many controls are in place and no matter how much oversight there might be, it is a problem to have full compliance. Knowing this, it seems important to provide companies with a "good faith" defense when a rogue employee commits acts that might be considered criminal.  Unfortunately, to date, courts have only seen fit to insert such as defense in the civil area and not the criminal sphere.  (See Podgor, A New Corporate World Mandates a Good Faith Affirmative Defense)  But corporate criminality in the federal system is premised on respondeat superior and the acts of a rogue employee are hardly for the benefit of the company.

See also -

Dan Fisher, Why Rogue Traders Get Jail But Bad Execs Get A Pension

Frank Jordans & Paisley Dodds, Houston Chronicle, Rogue trader suspected in $2 billion UBS loss

Nathan Vardi, Forbes, Rogue Trader Deals Big Blow To UBS

Victoria Howley & Emma Thomasson, Reuters, UBS $2 billion rogue trade suspect held in London

The Telepgraph, UBS rogue trader: statement to employees in full

(esp)

September 15, 2011 in Fraud, Media, News, Securities | Permalink | Comments (1) | TrackBack (0)

Monday, September 12, 2011

Maxim Healthcare Gets DPA

A DOJ Press Release here  states that "Maxim Healthcare Services Inc., one of the nation’s leading providers of home healthcare services, has entered into a settlement to resolve criminal and civil charges relating to a nationwide scheme to defraud Medicaid programs and the Veterans Affairs program of more than $61 million."  The Deferred Prosecution Agreement (DPA) provides that Maxim will pay "a criminal penalty of $20 million and to pay approximately $130 million in civil settlements in the matter."  The DPA, which requires the company to meet reform and compliance measures, lasts for two years.

As with many companies who enter into DPAs, there are also individuals being prosecuted.  In this case the press release notes that "[t]o date, nine individuals – eight former Maxim employees, including three senior managers and the parent of a former Maxim patient – have pleaded guilty to felony charges arising out of the submission of fraudulent billings to government health care programs, the creation of fraudulent documentation associated with government program billings, or false statements to government health care program officials regarding Maxim’s activities."

The press release also states that "[t]he government’s willingness to enter into a DPA with Maxim is due, in significant part, to the company’s cooperation and the reforms and remedial actions the company has taken – beginning particularly in May 2009 – including significant personnel changes: terminating senior executives and other employees the company identified as responsible for the misconduct; establishing and filling of positions of chief executive officer, chief compliance officer, chief operations officer/chief clinical officer, chief quality officer/chief medical officer, chief culture officer, chief financial and strategy officer, and vice president of human resources; and hiring a new general counsel."

(esp)

September 12, 2011 in Fraud, Investigations, Prosecutions | Permalink | Comments (1) | TrackBack (0)

Friday, September 9, 2011

Government Successful in Yet Another Post-Skilling Case

In United States v. Langford, the Eleventh Circuit Court of Appeals found sufficient evidence in reviewing a post-Skilling case. The court notes in this decision that "[w]e have not expressly explored at length what manner of concealment, if any, is necessary to prove honest services mail or wire fraud.  However, we have said that honest services fraud 'may be proved through the defendant's non-action or non-disclosure of material facts intended to create a false and fraudulent representation."(citations omitted).  There is also an interesting question of "in furtherance" here.

(esp)(w/ a hat tip to Linda Friedman Ramirez)

September 9, 2011 in Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 6, 2011

Coram Nobis & 2255 Granted in Post-Skilling Case

Coram nobis is without doubt an extraordinary remedy and one that has limited application. That said, the Eastern District of Pennsylvania granted such a petition in the case of United States v. Lynch and Campenella. The court found that "where an indictment fails to allege any criminal conduct, a petitioner is excused from the showing of actual innocence." 

The smoking gun in this case came from the government when "during both change-of-plea hearings the Government corrected the Court by clarifying that the crime at issue was an undisclosed conflict of interest, rather than bribery." Further the court notes that "[a]t no point during the change-of-plea hearings or in its guilty plea memoranda did the Government mention a quid pro quo bribery theory." 

Enter the Supreme Court's opinion in Skilling and without the bribery, there is problem in the case. Lynch gets a grant of the petition for coram nobis and Campenella a 2255 motion to vacate the conviction and sentence.  

The bottom line - if you have no crime, relief needs to be granted.

Defense counsel on this case was Lisa A. Mathewson (Lynch) and Angie Halim of Ahmed and Zaffarese (Campanella).

Court's Opinion - Download Opinion granting coram nobis

(esp)

Addendum - See also Joseph Tanfani, Philly.com, Fraud convictions overturned for Philly assessor and developer

September 6, 2011 in Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Sunday, September 4, 2011

Government Successful in Post-Skilling Case

U.S. v. Bryant is a third circuit decision where the court affirmed the convictions finding no defect in the jury instructions for honest services or bribery.  The court found that the "government presented substantial evidence of a quid pro quo bribery scheme to defraud the citizens of New Jersey of Bryant's honest services, including circumstantial evidence of the requisite mens rea..." The court stated that the Skilling case did not "undermine[] the viability of the stream-of-benefits theory." And further is was stated that "[i]ndeed, Skilling did not eliminate from the definition of honest services fraud any particular type of bribery, but simply eliminated honest services fraud theories that go beyond bribery and kickbacks."

The court also looked at a claim of prosecutorial misconduct made by appellants that alleged that prosecutors improperly interfered with the defense's access to witnesses. The court noted that "[i]f the prosecution impermissibly interferes with the defense's access to a witness during a criminal trial, that conduct violates due process insofar as it undermines the fundamental fairness of the proceeding."  In this case, the "District Court took measures to clarify" any "misunderstanding well before trial.  In response to Appellants' motion to dismiss, the Court instructed the Government to send a letter to all subpoena recipients five months before the start of trial, stating that the witness had an 'absolute right to speak to anyone...about anything [they] know about any of the matters under investigation, including the fact that [they] were subpoenaed and ....testified before the grant jury."

Opinion - Download BryantGallagher Opinion

(esp)

Addendum - See also Beldini - Download Beldini NPO

September 4, 2011 in Enron, Fraud, Judicial Opinions | Permalink | Comments (1) | TrackBack (0)

Sunday, August 21, 2011

Post-Skilling Government Approach - Depends on the Case

In Skilling, the Court limited section 1346 to bribes and kickbacks.  But this decision has left courts with several unresolved issues.  The  Stinn case raises an important issue, and the briefs highlight an interesting position being taken by the government.

The defense files a 2255 motion in Stinn saying that Skilling applies and the conviction should be vacated.  - Download Omnibus Memo of Law ISO Stinn's Mtn to Vacate  They note that "[i]t is immaterial that the government and the trial court did not use the phrase 'honest services' in the indictment or the jury instructions. The government argued the same invalid theory as it did in Skilling throughout the trial and relied on that theory to convince the jury to convict Stinn."

The government argues that Skilling does not apply because they did not file the case under 1346. Download Gov's Memo in Opp to D's Mtn to Vacate Convictions & Grant Bail They note "the Supreme Court's holding in Skilling is irrelevant to the defendant's case, as he was not prosecuted under an honest services theory of fraud."

The defense replies, however, with several arguments including - isn't this the exact opposite position the government took in the Redzic case. Download REPLY TO GOVT'S OPP TO MTN TO VACATE  Redzic, an unusual case, had the court finding that the "money or property" portion of the case was problematic and could not stand.  But even though the defendant was not charged under 1346, the court went on to uphold the conviction saying that 1346 did not "create a separate substantive offense, it merely defines a term contained in sections 1341 and 1343."  The court held it was not necessary to cite 1346 in the charging instrument.  

Redzic raised issues of whether the accused had truly been advised under due process of the charges against the defendant since the government was using an uncharged basis for asking that the conviction be upheld.  But now the government in Stinn is saying that it makes a difference whether the government charges a case under 1346. Is the government taking the opposite position in these two cases (Redzic and Stinn), and is this problematic?

(esp)

August 21, 2011 in Enron, Fraud, Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Friday, August 12, 2011

SEC's Dodd-Frank Whistleblower Regulations Take Effect Today. Corporate America Expects More FCPA Woes.

Politico has a story about it here. The new regs implement Section 21F of the Dodd-Frank Act, which authorizes the SEC to award 10 to 30 percent of the monetary sanctions it recovers in a given case to a qualified whistleblower. What seems to most annoy the business community about the implementing regs is the SEC's insistence that whistleblowers are under no obligation to make use of a company's internal complaint procedures before running to the SEC. But the regs do say that an employee who goes through internal company whistleblower protocols is eligible for a Dodd-Frank whistleblower award if his/her employer subsequently self-reports to the SEC, based on the whistleblower's complaint, and a recovery is had. Further, an employee has a 120-day grace period after whistleblowing to his/her company, within which to bring his/her complaint to the SEC. Finally, in determining the amount of a whistleblower reward, the SEC will consider whether the whistleblower made use of his/her internal company procedures.  The new regs contain enhanced anti-retaliation provisions as well, which prohibit direct or indirect retaliation for making whistleblower complaints to the SEC and other government entities.

There is an inherent tension between the anti-retaliation provisions and the SEC's and DOJ's often-emphasized warnings to companies that they should have vigorous and authentic internal whistleblower procedures. What if a company's pre-existing compliance policy requires the prompt internal reporting of whistleblower complaints? Can a company punish an employee who ignores such a provision and goes straight to the SEC? What if the employee declines to internally report, even after going to the SEC, because he/she feels that the company procedure is a sham? My guess is that such punishments will occur and that they will be deemed to run afoul of the anti-retaliation provisions. The retaliatory response is an instinctiual, persistent, and virtually universal impulse. It is really hard to eradicate.

(Wisenberg)

August 12, 2011 in Current Affairs, FCPA, Fraud, Investigations, SEC, Securities | Permalink | Comments (0) | TrackBack (0)

Monday, August 1, 2011

Commentary on Second Circuit Opinion in AIG and General Re Execs Case

Reported here is the decision in the Ferguson, et. al. case, in which the Second Circuit vacated the convictions. Commentary:

  • It's a 77 page court decision and having several university degrees would assist in understanding the technical aspects of the business workings described here.  One can only imagine the difficulty faced in explaining this to a lay jury.
  • The court finds two errors by the district court, namely that it: "1) abused its discretion by admitting the stock-price data, and 2) issued a jury instruction that directed the verdict on causation."
  • Part of the problem with the admission of the stock-price data was that the "[a]lthough the evidence was admitted only to show materiality, the government exploited it to emphasize the losses caused by the transaction."
  • With respect to the jury instruction, the court noted that "[i]n seeking to accommodate the reasonable phrasings offered by the various parties, the court ended up with a charge that allowed the jury to convict without finding causation."
  • The defendants had not objected to the causation instruction, but the court found the error as plain error. 
  • The court did not find several other errors that were claimed by the defendants.
  • The Global Tech (see here) decision of the Supreme Court is referenced, but it offers no assistance to these defendants.
  • The court notes that the case depended heavily on the testimony of two cooperating witnesses and that their testimony was "bolstered by contemporaneous recordings of calls involving" one of them. But the court also later states with respect to one of these witnesses -  "Certain factual inconsistencies in Napier's testimony are sufficiently obvious to raise an eyebow, but most of the arguments are meritless."
  • The court states: " Since we are vacating the judgments on the grounds discussed above, we need not reconcile these cases or decide whether the prosecution's actions amounted to misconduct. . . . No doubt it is dangerous for prosecutors to ignore serious red flags that a witness is lying, and the government will doubtless approach Napier's revised recollections with a more skeptical eye on remand." The court does note that it would have been difficult for the government to verify the facts and that there was cross-examination and summation "which resolved the credibility issue against the defendants."
  • In light of this, would it really be the "right" action to retry this case?  Hasn't the cost (including emotional cost) to the clients been sufficient by this prosecution?  I can't help but recall the sentencing hearing of one of the accused individuals here, when the judge stated,  "Ms. Monrad was not motivated by personal gain."
  • To the government - please spend our money wisely.

(esp)

August 1, 2011 in AIG, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Op-ed on Fraud Guidelines

A must-read op-ed by James Felman and Mary Price in the National Law Journal titled, Four reforms would restore common sense to sentences that have become draconian, disproportionate to the crimes.

(esp)

August 1, 2011 in Fraud, Sentencing | Permalink | Comments (0) | TrackBack (0)

Execs of Gen Re and AIG - Convictions Vacated

The Second Circuit vacated and remanded for a new trial the convictions of four executives of General Re and AIG. The decision is here.  Commentary to follow.

(esp)

August 1, 2011 in AIG, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 12, 2011

KPMG Global Study Confirms: Most Fraud Perpetuated by Company Bosses

Guest Blogger - Carolyn F. McNiven (DLA Piper)

Although 56 percent of fraud cases were preceded by red flags, instances where actions were taken in response to those red flags "fell massively" since 2007, according to a global KPMG survey. This is probably the most surprising and eye-opening observation in KPMG’s 2011 study, which also found that most fraud was committed by long-term employees, particularly male executives between the ages of 36 and 45; and individuals who worked in the finance area. The increased failure to respond to red flags highlights the need for companies not only develop system for identifying red flags, but also acting on them.

The other notable development KPMG found was an increase in the number of fraud matters perpetrated by company board members. According to KPMG, fraud by board members increased from 11 percent in 2007 to 18 percent in the 2011 analysis. Overall, it found that, "people most often entrusted with a company’s sensitive information and able to override controls are statistically more likely to become perpetrators." Nevertheless, this increase in crimes perpetuated by board members is significant.

KPMG’s global survey was based upon a review of 368 actual fraud investigations conducted by KPMG member firms in 69 countries, over the period January 2008 and December 2010. It only took into consideration frauds that were material to the company. According to KPMG, the majority of the investigations involved matters that were not publicized.

Some might argue that the nature of the investigations themselves accounted for this result: namely that only larger companies are in a position to engage KPMG to investigate such matters, consequently perpetrators examined by KPMG are necessarily more likely to be corporate executives who are in a position to commit fraud that is material to such companies. While KPMG’s data pool was necessarily limited, I think that it would be a mistake to discount their observations. Among other things, their profile of a fraudster fits the typical demographic of white collar criminal defendants in the United States, at least those prosecuted for federal crimes in the past few years, and is consistent with what I observed during my over 13 year tenure with U.S. DOJ.

Fraud is by and large an opportunistic crime. Insider-fraud thrives in environments of trust and access, as the survey points out. Individuals in the executive suite and higher level employees in the finance area are less likely on average to be closely supervised than clerks in accounts receivable. By analogy think of the security surrounding bank employees: tellers have their cash drawers counted after every shift; bank loan officers, who have access to vastly larger sums of bank funds, are generally not scrutinized in the same way although they too are human and subject to the same impulses to steal and self-deal.

That being said, KPMG’s observation that most perpetrators were long term company employees, is noteworthy. KPMG found in its 2011 survey that a solid majority (60 percent) of perpetrators worked at the company for more than five years; and 33 percent of perpetrators had worked at the company over 10.

So what turns a good employee into one who commits fraud? KPMG found that the primary motivators behind the fraud they investigated were greed and work pressure. KPMG found that attempts "to conceal losses or poor performance (possibly due to pressures to meet budgets and targets, to enhance bonuses, or to safeguard against loss of employment)" were motivating factors in many cases. Of course, greed – satisfied by misappropriating assets – was the other primary motivator that they identified.

Good employees turning bad may well also result from the same economic and cultural shifts we have seen in other areas. People -- particularly the middle class -- were hard hit in the recession resulting in increased financial pressure, which in turn can create the incentive to steal or "borrow" from one's employer. That incentive combined with a fairly systemic disenchantment with employers -- particularly those that downsized significantly --creates an environment where workers may be more likely to take what they can get from an employer, particularly if they believe that they are being undercompensated or the employer has transgressed in some way (for example, by paying its upper level management disproportionately while cutting staff and middle management).

All-in-all, KPMG’s 2011 global survey is eye-opening, and a reminder to all companies that they cannot be complacent. At a minimum, companies should regularly ensure that internal controls are operating effectively to prevent and detect insider fraud; and that red flags are not only seen, but acted upon.

Carolyn F. McNiven is a partner in DLA Piper’s San Francisco office where she is a Partner in the White Collar, Corporate Crime and Investigations practice. She is a former long-time federal prosecutor, and handles white collar criminal defense and related administrative, regulatory and compliance matters for individuals and companies. She has particular expertise in the areas of health care, food and drug, and FCPA compliance counseling, risk assessment and litigation.

July 12, 2011 in Corruption, Fraud | Permalink | Comments (0) | TrackBack (0)

Thursday, July 7, 2011

7th Circuit Affirms Denial of George Ryan's 2255 Motion

Former Governor George Ryan brought a collateral attack, pursuant to 28 U.S.C. s 2255, following the Supreme Court's decision in Skilling.  He argued among other things "that the jury instructions were defective because they permitted the jury to convict him on an honest-services theory without finding a bribe or a kickback."  The district court, however, found his errors harmless. Interestingly the prosecutor conceded that despite Ryan not filing his 2255 motion within the one year time period, "2255(f)(3) restarts the time when a 'right has been newly recognized by the Supreme Court and made retroactively applicable to cases on collateral review,'"  and Ryan met this standard.  Did the government want this case heard because they want to find the contours of what is encompassed within Skilling?

The Seventh Circuit  issued its opinion in which it states that "[c]ollateral review is not just a rerun of the direct appeal, in which a defendant can use hindsight to craft better arguments." They go on to stress the limits of collateral review. The court states that Ryan's "current argument that the jury instructions were defective because they did not track Skilling is novel."  But they also state that "[i]f Ryan's lawyers had done what Skilling's lawyers did, the controlling decision today might be Ryan rather than Skilling.  The bottom line is that the court holds that "[o]n the record at trial, a jury could have convicted Ryan of mail fraud using the legal standard set by Skilling."

Commentary:  1) Even white collar cases are seeing the problems created by limits to collateral attacks. 2) Skilling is certainly not like McNally was to mail fraud cases when the Court issued it in 1987.

(esp) 

July 7, 2011 in Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 28, 2011

What If Ruth and Bernie Madoff Had Divorced?

White-collar defense attorneys are often asked by clients accused of or investigated for theft or fraud, or by their client’s spouses, what could be done to protect the spouse financially. My advice had always been for the spouse to seek advice from a knowledgeable and independent debtor-creditor attorney. As a result of the New York Court of Appeals ruling in CFTC v. Walsh last week, my current advice is to consult with a knowledgeable and independent matrimonial attorney.

In that case, the CFTC and SEC attempted to claw back from a divorced "innocent spouse" funds allegedly stolen by her ex-husband that she received in a divorce settlement. The state court, basing its decision largely on issues of finality and fair consideration (and perhaps that a different ruling would disproportionately harm women), ruled that a wife uninvolved and unaware of her husband’s criminality could not be required to disgorge the proceeds to the theft victims.

The case came to the New York court in a peculiar posture. The federal Second Circuit Court of Appeals referred the case to the New York State court to answer two questions of law, one of which the state court modified before answering.

I am far from sure that the Second Circuit will be comfortable ratifying the state court’s ruling, which I personally find questionable on both logical and policy grounds. If, however, the Second Circuit does accept the state court’s reasoning and precludes disgorgement from the wife, fraudsters fearful of eventual apprehension and considerate of their spouses might seek or encourage divorce to assure the spouse’s secure financial future. And if Bernie and Ruth Madoff had been divorced before Bernie’s fraud was revealed, under such a ruling Ruth Madoff (presumably an "innocent spouse") would now be a very, very, very rich woman.

(Goldman)

June 28, 2011 in Forfeiture, Fraud | Permalink | Comments (0) | TrackBack (0)

Monday, June 27, 2011

Blagojevich Found Guilty on 17 of 20 counts - Joining The Illinois Governor Convicted Felon Club

The press is reporting herehere, here, and here, that Former Illinois Governor Rod Blagojevich has been found guilty of 17 counts, not guilty on one count, and two counts with no verdict. This was the second trial, the first ending in a hung jury except for one count. The jury was out this time for 10 days.  Blagojevich did not testify in the first trial, but did testify this time. 

A second trial was an enormous benefit to the government.  They had the opportunity to re-evaluate their case and to see that keeping it simple was the smarter choice. They also had the conviction on one count to allow them to start cross-examination against him with the "convicted felon question."  

Why is it that so many Illinois Governors wind up as convicted felons?  (e.g. Otto Kerner, Dan Walker, George Ryan, and Rod Blagojevich).  

(esp)

Addendum - Doug Berman, Sentencing Law and Policy Blog here

June 27, 2011 in Fraud, Verdict | Permalink | Comments (6) | TrackBack (0)

Friday, June 24, 2011

Not a Good Day for Conrad Black

Ameet Sachdev, Chicago Tribune, Black headed back to prison; wife collapses in court

(esp)

June 24, 2011 in Fraud, News | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 22, 2011

Second Chance for Bad Guess?

          The appeal of former New York State Senate majority leader Joseph L. Bruno, argued last week before the United States Court of Appeals for the Second Circuit, has raised some interesting double jeopardy issues which may or may not be addressed by the court.  Bruno was convicted of honest services fraud under 18 U.S.C. 1346 based on an undisclosed self-dealing theory.  After Bruno’s conviction and while his case was on appeal, the Supreme Court in United States v. Skilling rejected the undisclosed self-dealing theory under Section 1346 and limited the statute’s application to cases involving bribery or kickbacks (thereby making the statute virtually superfluous since such conduct is usually covered by other statutes).  On appeal in Bruno, the government, conceding reversal was required because the court’s instructions to the jury were flawed under Skilling, nonetheless argued that it should be given a second shot at Bruno, this time with a superseding indictment more specifically alleging bribery.

          Generally, an appeal of a criminal trial marred by instructions proper under prevailing law at the time given (as they apparently were here) but later found defective by a higher court in that or another case results in a retrial with proper instructions.  One underlying justification is that the prosecution cannot be expected to anticipate changes in the law and should be able to rely on current law.  This case is somewhat different, however.  Here, the government could not, or certainly should not, have failed to realize that the theory it chose to pursue was constitutionally questionable on vagueness and overbreadth grounds.  The theory of prosecution had been questioned by courts, scholars, and lawyers and was about to be considered by the Supreme Court pursuant to a grant of certiorari.  The government nonetheless chose to go forward on this theory, most likely because it was easier to prove factually, rather than a bribery charge that was less assailable legally but probably more difficult to prove.  This case thus appears to be a classic example of a prosecutor deciding to seek the instant gratification of a conviction at trial and not to worry about the appeal until later.

          Last week, in Davis v. United States, the Supreme Court held in a search and seizure case that evidence should not be excluded if the evidence was seized pursuant to police procedures compliant with then-binding legal precedent even though that precedent was subsequently overruled.  Following that line of reasoning, a court may well rule that there should not be a double jeopardy bar to retrial if the prosecutor’s conduct was compliant with binding legal precedent that was subsequently overruled.  A different approach seems appropriate, however, when the law the prosecutor relied on was, as here, up in the air.  Indeed, Justice Sotomayor, concurring in Davis, made such a distinction, stating that she would have ruled differently if the law the police relied on was unsettled.  It will be interesting to see how the Second Circuit, if it reaches this issue, will decide it.

(Goldman)

June 22, 2011 in Fraud, Prosecutions, Searches | Permalink | Comments (0) | TrackBack (0)

Friday, June 17, 2011

NACDL's 1st Annual West Coast White Collar Conference, “Turning The Tables On The Government” – “The Accidental Felon: Challenging The Expansion of the Willful Blindness Doctrine,” Friday, June 17, 2011

Guest Blogger: Darin Thompson, Assistant Federal Public Defender, Office of the Federal Public Defender (Cleveland,OH)

One of two breakout sessions, two speakers (Timothy O’Toole and Professor Ellen S. Podgor) reviewed the ever-broadening scope of the willful blindness doctrine and proposed several defenses and counter-attacks to this brutally successful prosecutorial tactic.

The speakers opened by discussing a recent U.S. Supreme Court case, Global-Tech Appliances, Inc. v. SEB S.A. Though this is a patent infringement case, the Court addresses the scope of the criminal law willful blindness doctrine. The Court notes that the instruction has been applied to a wide variety of cases, but sets forth two universal requirements: (1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact. The Court affirmed, holding there was sufficient evidence that the patent infringer was willfully blind under the criminal law standard.

Professor Podgor began by reviewing U.S. v. Jewell, the Ninth Circuit case most commonly cited as setting forth the law on willful blindness. Professor Podgor noted that Justice (then Judge Kennedy) dissented in the 9th Circuit decision in Jewell, and that he again found himself (this time alone) in the dissent in Global-Tech.

Mr. O’Toole noted that the use of willful blindness in white collar cases (even though it originated in a drug case) is an excellent example of why white collar defense attorneys should not wall themselves off from other areas of criminal defense.   With respect to Global-Tech, he noted that the second requirement of “deliberate action” appears to narrow the scope of willful blindness in comparison to existing circuit case law. The Supreme Court itself emphasized this requirement in its analysis, noting that the Federal Circuit was in error in not requiring deliberate action.

Professor Podgor emphasized the strength of the language used by the Supreme Court in this case. Powerful jury instructions can and should be crafted based upon the Global-Tech. Mr. O’Toole seconded these comments, pointing out that the willful blindness doctrine is often relied upon by the government in cases where evidence of deliberate actions is non-existent. He questioned whether any circuit’s pattern instruction remains valid in light of a universal failure to include a requirement of “deliberate actions” to avoid learning of the key fact(s). He also noted that the Supreme Court didn’t merely indicate that recklessness or negligence wasn’t sufficient, but actually set forth the definitions of those two mental states, and suggested that proposed jury instructions should do the same.

One questioner asked whether the improvement in the legal standard was so great that defense counsel should ask for this instruction, to allow focus on the absence of deliberate actions. Both speakers cautioned against it.

(dt)

Postscript -  Mentioned in this session was a wonderful article by Dane C. Ball (Gerger & Clarke) titled, Improving "Willful Blindness" Jury Instructions In Criminal Cases After High Court's Decision in Global-Tech, published in the BNA Criminal Law Reporter. With many thanks to Dane C.  Ball and the Criminal Law Reporter for allowing us to post it here - Download BNAinsights.Ball2

(esp)

June 17, 2011 in Conferences, Fraud | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 25, 2011

Government Response in Weyhrauch Hyde Act Case

The Weyhrauch case has had a long journey - but it is not over yet.  It went to the Supreme Court, along with Jeff Skilling's case. (see here). Bruce Weyhrauch came back and plead to a misdemeanor in state court - not federal court.  He then filed a Hyde Act Amendment motion to recover his attorney fees.  The government has now filed it's Hyde Act response.  A couple of sentences in this response are fascinating:

  • "[T]he Hyde Amendment does not provide for discovery, and none is appropriate here. (p. 1)
  • "The fact that Weyhrauch pleaded guilty to a state misdemeanor as opposed to the federal crimes for which he was originally indicted is irrelevant." (p. 6)
  • "...Weyhrauch fails to specify how the government's position in this litigation has been vexatious, frivolous, or in bad faith ...The closest Weyhrauch comes to making an argument on this point is claiming that an FBI agent testified falsely before the grand jury ..." (p. 7)

See also Richard Mauer, Anchorage Daily News, Justice Department rejects Weyhrauch reimbursement WEYHRAUCH: Prosecutors say guilt admission negates his claim.

  (esp)

May 25, 2011 in Fraud, Judicial Opinions, Prosecutions, Prosecutors | Permalink | Comments (2) | TrackBack (0)

Mixed Verdict in Alleged Tax Fraud Scheme

The DOJ Press Release is titled, Jenkens & Gilchrist Attorneys, Former BDO Seidman CEO and Deutsche Bank Broker Found Guilty in New York of Multi-Billion Dollar Criminal Tax Fraud Scheme - Massive, 10 Year Criminal Scheme Generated More Than $7 Billion Dollars of Fraudulent Tax Losses

The Press Release states in part:

"NEW YORK – Paul M. Daugerdas, Donna M. Guerin, Denis M. Field and David Parse were convicted today in Manhattan federal court for their roles in a tax shelter scheme in which they designed, marketed and implemented fraudulent tax shelters used by wealthy individuals to avoid paying taxes to the Internal Revenue Service (IRS), announced Preet Bharara, U.S. Attorney for the Southern District of New York; John A. DiCicco, Principal Deputy Assistant Attorney General for the Justice Department’s Tax Division; and Victor S.O. Song, Chief of the IRS Criminal Investigation. Together, Daugerdas, Guerin and Field made $130 million in profits from the 10-year scheme. 

But the press release also notes that, "Raymond Craig Brubaker,. . . a banker at Deutsche Bank who was also charged along with the defendants, was acquitted by the jury on all counts."

Brubaker was represented by the law firm of Kramer, Levin, Naftalis & Frankel.

(esp)

May 25, 2011 in Fraud, Tax, Verdict | Permalink | Comments (0) | TrackBack (0)