Saturday, December 16, 2006

Athlete Indicted for Perjury in Balco Investigation

The Balco (Bay Area Laboratory Co-Operative) steroids investigation has entered what U.S. Attorney Kevin Ryan called the "third stage" with the indictment of Tammy Thomas, a former cyclist banned from competition for steroid use.  Thomas testified under a grant of immunity in 2003 before the same grand jury that heard from a number of prominent athletes, including famed San Francisco Giants slugger Barry Bonds and Olympic gold medalist Marion Jones.  According to the indictment (here), Thomas committed perjury by denying she received the designer steroid THG, known as the "the clear," from Balco chemist Patrick Arnold, who entered a guilty plea earlier in 2006 to conspiracy and money laundering charges.  The indictment quotes the relevant testimony for count one:

Q: Did you ever – besides this one instance of getting the 1-AD from Mr. Arnold, did you ever get any other services from Mr. Arnold or products?

(a) A: No, no other products.

* * * * *

Q: Did you ever, in addition to anything I’ve said, get any kind of what you knew to be banned or illegal performance-enhancing drugs from Mr. Arnold?

(b) A: No.

In another exchange quoted in the indictment, she denied ever taking steroids or taking anything that Arnold gave her.  Thomas tested positive for steroids in 2002,leading to her ban from competition.  The key witness appears to be Arnold, which means that the case could come down to a credibility battle between Thomas and an admitted felon.

U.S. Attorney Ryan hinted in a press release (here) that more perjury indictments may be coming.  He said, "“In the early stages of the investigation, the individuals who distributed steroids to some of the nation’s top-flight athletes were indicted and convicted. In the second stage, we developed the evidence to indict and convict the creator of the undetectable steroid THG distributed through Balco. A third stage has begun as we bring charges against individuals who lied to investigators or committed perjury while testifying under oath to a federal grand jury. Our investigation into each of these stages will continue as the evidence develops."  In addition to Thomas, the grand jury earlier indicted Trevor Graham, Jones' former coach.

Bonds has already been the subject of serious speculation about a possible perjury and tax evasion indictment, the latter based on unreported income from memorabilia sales.  When the earlier Balco grand jury expired in July 2006, many thought its last act would be to indict Bonds, but right before its expiration, the Giants released his medical records, so White's office announced that nothing would be done at that time.  Bonds' former personal trainer, Greg Anderson, remains in jail on a civil contempt because of his refusal to testify about Bonds' use of steroids; Anderson was affiliated with Balco and entered a guilty plea to a drug charge related to steroid distribution.  A San Jose Mercury News article (here) quotes Bonds' attorney stating, "If this is phase three, why not indict Barry?'  The simple answer -- they need the testimony of Greg Anderson.''

It's not clear how important Anderson is to the case, but he could certainly help the government by identifying Balco documents that apparently indicate a schedule of steroid use by Bonds.  If the perjury case rides on Anderson, the government will not be in a very strong position unless it has powerful documentary evidence to support its position.  Anderson is unlikely to be a very convincing witness, or perhaps not a very trustworthy one. 

In addition to Anderson, two San Francisco Chronicle reporters are fighting a contempt citation in the Ninth Circuit for refusing to testify before the grand jury about the leak of transcripts of Bonds and other major league players.  The perjury stage of the investigation has generated a significant amount of litigation already, and the U.S. Attorney's Office for the Northern District of California has not been shy about pursuing perjury and contempt cases, so look for more to come.  Whether higher-profile athletes like Bonds, Jones, or perhaps others are charged could play out over the next few months. (ph)

December 16, 2006 in Grand Jury, Perjury, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 13, 2006

Is David Stockman Headed Back to the Woodshed?

Former political wunderkind David Stockman was famously taken to the woodshed by President Reagan for his comments about the administration's tax and budget cuts when Stockman was head of the Office of Management and Budget.  He may be headed back there, according to a report in the Detroit News (here) that a federal grand jury in New York is looking at whether he managed earnings through accounting gimmicks and made misleading statements about Collins & Aikman Corp. in 2005 when he was CEO of the company.  After leaving the White House in 1985, Stockman moved to the world of finance, and in 2001 acquired control of various auto parts companies, rolling many of them into C&A, which entered bankruptcy in May 2005.  The board ousted him a few days before filing bankruptcy, and in the months before the filing Stockman made optimistic statements about C&A's prospects.  In addition to the criminal probe, the SEC sent Stockman a Wells Notice that the Enforcement Division staff intends to recommend the filing of a securities fraud action against him.  It sounds like the government is preparing a coordinated criminal-civil case against Stockman, and perhaps other former C&A executives. (ph)

December 13, 2006 in Fraud, Grand Jury, Investigations | Permalink | Comments (0) | TrackBack (0)

Saturday, November 25, 2006

Grand Jury Secrecy

Rule 6(e) is important as it sets forth the importance of grand jury secrecy.  And according to an article by Josh Gerstein of the New York Sun here, the secrecy may have been violated in a recent government case.  The article provides details on a court's recent ruling finding a prima facie case that government officials may have violated grand jury secrecy.  This means the ball is in the government's court to show otherwise. For more details see here.


November 25, 2006 in Grand Jury | Permalink | Comments (0) | TrackBack (0)

Saturday, November 11, 2006

Al-Arian Faces Grand Jury After Plea

Perhaps one of the worst nightmares for a convicted defendant is the thought that they will be subpoenaed before a grand jury, given immunity, and then forced to testify. Like the conviction isn't enough, the government forces cooperation with the threat of increased jail time for contempt.  For example, Susan McDougal spent many months in prison refusing to talk before a grand jury that was investigating Whitewater when prosecutors slammed a subpoena on her following trial.

The Tampa Tribune reports here that Al-Arian is facing similar treatment.  And in many respects his situation is worse as he entered a plea agreement with the government that did not call for cooperation.  Despite this agreement, the government, following sentencing decided to call for his testimony before a grand jury.  The key here may be that the prosecutors doing the investigation are in Virginia and the plea agreement does state that it "is limited to the Office of the United States Attorney for the Middle District of Florida and the Counterterrorism Division of the Department of Justice and cannot bind other federal, state, or local prosecuting authorities, although this office will bring defendant's cooperation, if any, to the attention of other prosecuting officers or others, if requested." (Plea Agreement here)


November 11, 2006 in Grand Jury | Permalink | Comments (0) | TrackBack (0)

Thursday, October 19, 2006

Throwing All the Lawyers Into the Grand Jury

A New York Times article (here) discusses the direction of the government's ongoing investigation of Anthony Pellicano, the so-called "PI to the Stars" who worked with, most prominently, leading Los Angeles attorney Bert Fields.  Pellicano has been under indictment since February 2006 on conspiracy and wiretapping charges that allege he engaged in illegal wiretaps to help out attorneys in various cases, many involving leading Hollywood stars and some of them represented by Fields' Century  City firm, Greenberg, Glusker, Fields, Claman & Machtinger.  According to the Times, approximately ten lawyers from Greenberg Glusker have been called before a federal grand jury to testify about Fields' involvement in Pellicano's activities.

There are a couple of interesting aspects to this phase of the grand jury investigation.  First, the lawyers are being questioned about the firm's representation of clients, so there are probably some sticky attorney-client privilege and work product issues that had to be worked out.  Perhaps the clients waived the privilege and allowed the attorney's to testify, although that would probably involve a number of waivers, and some might not be particularly willing to do that if it turns out Pellicano worked on their cases.  The government could argue the crime-fraud exception as the basis for obtaining the testimony, but that would require proving possible criminal or fraudulent conduct in every representation.  Courts are leery of simply ordering wide-spread disclosure of otherwise privileged or protected information in the name of the crime-fraud exception without proof that a specific representation involved such conduct.

Second, the article states that counsel for the lawyer-witnesses "refused to speak publicly, citing grand jury secrecy rules."  While that excuse for not talking to the press sounds plausible, under Federal Rule of Criminal Procedure 6(e) the secrecy requirement does not apply to witnesses before the grand jury.  While they may not want to discuss what the witnesses said in the grand jury session, the secrecy rules are not a bar to discussing the testimony, even if prudence counsels silence.

Finally, while the investigation is focused on Fields' involvement with Pellicano, it may be that the grand jury sessions will turn up additional evidence that can be used in prosecuting Pellicano.  The grand jury cannot be used as a discovery tool for a pending case, but if a continuing investigation produces admissible evidence in such a case, then courts generally allow its use at trial.  Whether or not prosecutors can build a case against Fields, they may get a benefit out of the grand jury sessions for the Pellicano case.  The Times articles hints at weaknesses in the government's case, so the Fields investigation may be a vehicle to help out on the pending prosecution.  That case has already been postponed to February 2007, and Pellicano has been in jail since the indictment.  At some point, the case has to move forward. (ph)

October 19, 2006 in Grand Jury, Investigations | Permalink | Comments (0) | TrackBack (0)

Friday, October 6, 2006

Bonds' Former Trainer Freed Again, For At Least a Little While

Greg Anderson, the former personal trainer for (perhaps the former) San Francisco Giants slugger Barry Bonds, was released from jail by U.S. District Judge William Alsup because of what the judge termed a "legal snafu."  Judge Alsup sent Anderson to jail for civil contempt twice because of his refusal to testify before a grand jury investigating whether Bonds committed perjury in denying before a federal grand jury that he knowingly used steroids.  Anderson pleaded guilty in the Balco (Bay Area Laboratory Co-operative) case to supplying steroids, and according to the government possessed records showing possible steroid use by Bonds.  Anderson's first contempt ended in July when the grand jury's term expired, and this time he was released because the Ninth Circuit did not complete its review of Anderson's appeal of the civil contempt within the required thirty days.  Under the Recalcitrant Witness Act, 18 U.S.C. Sec. 1826(b), "Any appeal from an order of confinement under this section shall be disposed of as soon as practicable, but not later than thirty days from the filing of such appeal."  The Ninth Circuit issued a memorandum opinion (here) on September 28 rejecting most of Anderson's arguments, but it remanded the case because the district court's findings on an secret tape recording that Anderson alleges was the result of an illegal wiretap were insufficient for appellate review.  The district court was given one week to make a record of its position on the wiretap issue so the appellate panel could review it, but that meant the Ninth Circuit had not decided the appeal within the requisite thirty days, which expired on Oct. 5. 

While Anderson is free once again, he could be back in jail rather quickly if the Ninth Circuit agrees with the district court's findings that the government's proposed examination of him in the grand jury will not entail any use of the tape recording and therefore does not violate his rights.  If the Ninth Circuit does not release him, then Anderson may have to sit in jail until the grand jury's term expires in January 2008, unless he decides to cut his losses and testify about Bonds. An AP story (here) discusses District Judge Alsup's reluctant ruling. (ph)

October 6, 2006 in Grand Jury | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 12, 2006

Accounting Investigation of Dell Gets a Lot More Serious

It is a tough time for leading computer companies, with the government investigation of Hewlett-Packard's use of possibly illegal methods to gather private information about its board members and now Dell's disclosure that it will not be able to file its financial statements due to continuing accounting problems.  Dell disclosed in August (8-K here) that the SEC had initiated an informal investigation of its accounting "relating to revenue recognition and other accounting and financial reporting matters for certain past fiscal years . . . ."  The company soft-peddled the inquiry, burying it in a press release that championed its second quarter results.  The disclosure of the informal inquiry came a number of months after the SEC contacted the company.  Now comes another Dell 8-K (here) with the news that the U.S. Attorney's Office for the Southern District of New York has subpoenaed the company in connection with its accounting, and that the issues will affect prior years.  Taking the same approach that seems to discount the investigation, Dell states that "[t]he SEC requests for information have been joined by a similar request from the United States Attorney for the Southern District of New York, who has subpoenaed documents related to the company’s financial reporting from 2002 to the present." 

While one can describe a grand jury subpoena as a "request" from the Department of Justice, subpoenas are a bit more than just a casual missive sent when prosecutors have nothing better to do.  Moreover, the fact that federal prosecutors from the Southern District are now involved in the case means it is a much greater threat to the company, and perhaps to individual officers.  If any executives on the financial side of Dell suddenly resign, that is a good sign that the criminal investigation has advanced and is targeting individuals.  Unlike the Hewlett-Packard investigation, which is unrelated to the company's core business, this investigation goes to the propriety of Dell's financial reporting, a key issue for investors and regulators. (ph)

September 12, 2006 in Grand Jury, Investigations, Securities | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 6, 2006

Reporters in Bonds Leak Investigation Avoid Jail for Now

San Francisco Chronicle reporters Lance Williams and Mark Fainaru-Wada have avoided being sent to jail for civil contempt, at least for a little while.  The two reporters were subpoenaed to testify before a grand jury investigating the leak of the testimony of major league baseball players, most prominently San Francisco Giants slugger Barry Bonds, who testified in 2003 during the Balco (Bay Area Laboratory Co-operative) steroids investigation.  The reporters quoted extensively from Bonds' testimony in which he denied knowingly using steroids provided by his personal trainer, Greg Anderson.  The current investigation includes possible perjury by Bonds and the potential violation of Federal Rule of Criminal Procedure 6(e) related to the improper disclosure of grand jury materials.  While a federal district court judge ordered the two reporters to testify or be subject to civil contempt sanctions (see earlier post here), they worked out an agreement with prosecutors that they do not have to go to jail while they appeal the district court's order to the Ninth Circuit.  They are in a better position than Anderson, Bonds' former trainer, who is in jail for a second time because he refused to answer questions before the grand jury about his knowledge of Bonds' use of steroids.  Given the recent spate of cases enforcing subpoenas to reporters, it seems unlikely that Williams and Fainaru-Wada will avoid jail if they carry through with their assertion that they will not testify.  The grand jury has over 15 more months in its term, so they could face a substantial period of incarceration for civil contempt. An AP story (here) discusses the agreement with federal prosecutors. (ph)

September 6, 2006 in Grand Jury, Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)

Monday, August 28, 2006

Anderson Back in Jail for Contempt

Greg Anderson, former personal trainer for San Francisco Giants slugger Barry Bonds, is back in jail for another stint after being held in civil contempt for refusing to answer questions about steroid use by Bonds and other athletes.  Anderson served a little over two weeks in jail in July for refusing to testify before the earlier grand jury investigating Bonds for possible perjury and tax evasion, and was released only because the grand jury's term expired.  Anderson was subpoenaed immediately upon the empanelment of a new grand jury, and while his most recent appearance included answers to a few questions, such as his name, he refused  to respond about whether he ever injected Bonds with steroids and whether he knows New York Yankee outfielder Gary Sheffield.  Bonds and Sheffield testified in 2003 about steroids produced by Balco (Bay Area Laboratory Co-operative), where Anderson obtained designer steroids.  Bonds has denied ever using steroids, an issue in the current grand jury perjury investigation.  With the new panel's term lasting at least sixteen more months, Anderson looks to settle in for the long haul, unless he unlocks the jail cell by answering questions or if prosecutors have sufficient evidence to indict Bonds, which probably would obviate the need for his testimony.  Even in the latter situation, Anderson is unlikely to testify if called to a trial, so there's a chance he could even go to jail a third time for civil contempt.  An AP story (here) discusses the latest civil contempt. (ph)

August 28, 2006 in Grand Jury, Investigations | Permalink | Comments (0) | TrackBack (2)

Thursday, August 24, 2006

Another Grand Jury Secrecy Leak Investigataion

On top of the investigation in San Francisco into the leak of secret grand jury testimony leaked to the San Francisco Chronicle comes word that U.S. District Court Judge T.S. Ellis has ordered the Department of Justice to investigate whether confidential information was leaked to the press about the impending indictment of two lobbyists subsequently accused of disseminating national security information to Israel.  A Washington Post story (here) states that Judge Ellis, who sits in the Eastern District of Virginia, directed prosecutors to determine who may have disclosed information to CBS News in 2004, which reported that Steven Rosen and Keith Weissman would be indicted for violating the Espionage Act before the indictment was returned.  The ruling comes in connection with a motion to dismiss by the defendants, who argued that the pre-indictment publicity prejudiced the jury pool; Judge Ellis refused to dismiss the charges but did order the investigation. 

The Post story seems to indicate that the investigation is directed at the media, but it looks to me like the basis for it is the grand jury secrecy requirement of Rule 6(e), a violation of which is punishable by a criminal contempt.  Although the media cannot generally be charged for publishing information leaked to it, at least outside the national security context, there is a good possibility that reporters will be subpoenaed to testify about the source of their information, perhaps leading (once again) to the incarceration of members of the media for civil contempt for refusing to comply with a grand jury subpoena.  Our nation's capital has seen quite a bit of that lately, too, during the investigation of the disclosure of Valerie Plame's identity as a CIA agent. (ph)

August 24, 2006 in Grand Jury, Investigations | Permalink | Comments (0) | TrackBack (0)

Friday, August 18, 2006

Lots of Potential Contemnors in SF

The grand jury investigations involving Balco (Bay Area Laboratory Co-operative) and possible perjury by Barry Bonds may end up sending witnesses to jail for civil contempt for their refusal to testify in response to subpoenas.  Bonds' former personal trainer, Greg Anderson, went to jail in July for refusing to testify, and was released when the grand jury's term expired.  With a new panel in place for at least 18 months, he now runs the risk of spending a lot of time in jail.  In an appearance before the grand jury, Anderson apparently responded to a few questions, but refused to answer a key one: "Did you distribute anabolic steroids to Barry Bonds?"  The San Francisco Giants slugger denied knowingly using them in grand jury testimony in 2003.  Prosecutors have asked that Anderson be held in contempt again, and a hearing is scheduled for August 28 to decide whether he should be held on contempt for refusing to answer.  If he is ordered to respond to the question and refuses again, he may sit in jail for up to the 17 months remaining in the grand jury's term, assuming it's not extend by six months.  An AP story (here) discusses the latest twist in the Bonds perjury investigation.

How do we know what Bonds said before the grand jury?  That brings us to two more potential witnesses who have asserted they will not testify about who leaked Bonds' testimony to them despite being ordered by a federal judge, who refused to quash subpoenas to San Francisco Chronicle reporters Mark Fainaru-Wada and Lance Williams.  Prosecutors are investigating the leak of grand jury material that is supposed to remain confidential.  The reporters, whose First Amendment privilege claim has been rejected by courts in a variety of situations, have stated that they will not disclose the confidential source of the grand jury testimony.  As discussed in an earlier post (here), the person who leaked the testimony of Bonds and other major league baseball players could face a criminal contempt and other charges for disclosing the transcripts.  Within a few weeks, there could be three people in jail for refusing to testify before the grand jury, and no one has even been indicted yet. (ph)

August 18, 2006 in Grand Jury, Investigations | Permalink | Comments (1) | TrackBack (1)

Thursday, August 17, 2006

Liquidmetal in Hot Water Over Accounting

Liquidmetal Technologies, Inc., disclosed that it had received a grand jury subpoena for documents related to the company's accounting.  A press release (here) states: "The documents being sought include accounting records, documents relating to the Company’s relationship with Growell Metal of Korea, and documents and records relating to transactions in Company stock by officers and directors. The Company has been advised that the materials sought are pertinent to a grand jury investigation recently initiated in the Middle District of Florida by the U.S. Department of Justice, Criminal Division, Fraud Section concerning alleged accounting improprieties by the Company, among other things."  While the press release is vague -- naturally -- it may be that the overseas transactions involve possible Foreign Corrupt Practices Act violations, particularly when the Fraud Section conducts the investigation.  The issues related to transactions in company stock could indicate possible insider trading questions, but again it's not clear where the government is going.  (ph)

August 17, 2006 in Fraud, Grand Jury, Investigations | Permalink | Comments (1) | TrackBack (0)

Wednesday, August 16, 2006

Reporters Ordered to Testify About Leaks in Balco Grand Jury Investigation

Two reporters for the San Francisco Chronicle, Mark Fainaru-Wada and Lance Williams, have been ordered to testify before a federal grand jury about the leak of the grand jury testimony of major league baseball players who testified in 2003 about receiving steroids from Balco (Bay Area Laboratory Co-operative).  Among those whose testimony reached the reporters is San Francisco Giants slugger Barry Bonds, who stated to the grand jury that he did not knowingly use steroids provided by his personal trainer who also worked at Balco.  Bonds is now the target of a separate grand jury investigation into possible perjury, and the Department of Justice has also been investigating the leak for well over a year.  Fainaru-Wada and Williams published the book Game of Shadows that asserted Bonds used steroids for a number of years, which apparently triggered baseball's investigation of steroid use and may have stimulated the perjury investigation.

U.S. District Judge Jeffrey White issued an opinion (In re Grand Jury Subpoenas to Mark Fainaru-Wada and Lance Williams available below) rejecting the reporters' assertion of a journalist privilege to maintain the confidentiality of sources, and found that the grand jury subpoenas were not "unreasonable or oppressive" under Federal Rule of Criminal Procedure 17(c).  The decision to enforce the subpoenas is consistent with the decisions reached in the Special Counsel's investigation of the leak of Valerie Plame's identity as a CIA agent in which former New York Times reporter Judith Miller spent almost three months in jail on a civil contempt before I. Lewis Libby released her from the promise of confidentiality.  See In re Grand Jury Subpoena, Judith Miller, 438 F.3d 1141 (D.C. Cir. 2006).  Among those filing affidavits in support of the two reporters were former baseball commissioner Fay Vincent and well-known journalist and author Carl Bernstein.

The reporters are unlikely to testify before the grand jury and could end up in jail for civil contempt, a fate that has already befallen Bonds' former personal trainer, Greg Anderson, who refused to testify in the perjury investigation.  While Judith Miller's source released her from the confidentiality agreement, that is probably less likely to occur here because of the substantial legal risks that person (or persons) faces.  The leak of grand jury material is punishable as a criminal contempt under Rule 6(e)(7).  Moreover, during the government's investigation, it appears that all parties to the Balco case with access to the leaked grand jury testimony have stated they did not disclose it, so revealing the source of the information could well open that person up to additional charges of perjury, obstruction of justice, and making a false statement (Sec. 1001).  The two reporters may be in jail for quite a while if the case is being investigated by the new grand jury empaneled in July in the Bonds perjury investigation because the civil contempt lasts for the panel's term, which could be until January 2008 (assuming it's not extended another six months).  (ph)

Download order_denying_motion_to_quash_subpoenas_fainaruwada.pdf

August 16, 2006 in Grand Jury, Investigations, Privileges | Permalink | Comments (1) | TrackBack (5)

Wednesday, August 2, 2006

US Senate Candidate Katherine Harris Gets a Subpoena

According to the Tampa Tribune here, US Senate candidate in Florida, Katherine Harris received a subpoena. We previously reported about Katherine Harris here.  What appears to be the issue is that she failed to tell her campaign manager of receiving this federal subpoena.  The article states that Harris has stated that she is not a "target." 

There are three categories often used to describe individuals who receive subpoenas.  They can be targets, subjects, or witnesses.  Obviously, target is the least favorable category for the accused.  Being a subject can also be problematic as it means that the government has not yet made up their mind on whether to indict you. Being witness is used to describe the person who be providing information that will assist the government in proceeding against others.


August 2, 2006 in Grand Jury | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 1, 2006

Who Are Your Friends?

The Wall Street Jrl reports here that Sanofi-Avenits has received a DOJ grand jury subpoena. It appears to relate to "a proposed settlement of a patent lawsuit involving Plavix, a blood thinner."  The drug is co-marketed with Bristol-Myers. CNN Money reports here on happenings at Bristol-Myers.

Bristol-Myers Squibb entered into a deferred prosecution agreement with the government last year. (see here). The agreement called for the company "to endow a chair at Seton Hall University Law School dedicated to the teaching of business ethics and corporate governance, which position shall include conducting at least one seminar on business ethics and corporate governance annually that members of BMS' executive and management staff may attend, as well as other corporate executives."


August 1, 2006 in Grand Jury | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 26, 2006

He's Back, and No More Talkative

Greg Anderson, the former personal trainer for San Francisco Giants slugger Barry Bonds, will be called back to testify before the new grand jury being scheduled to be empaneled on July 27 to take up the perjury investigation where the prior panel left off.  The earlier grand jury's term expired on July 20, at which time Anderson was released from his civil contempt for refusing to testify about possible steroid use by Bonds.  With a fresh panel in place, Anderson could be held for up to eighteen months if he refuses to testify again, as he has asserted he plans to do.  While he is likely to land back in jail, the issue will be whether the civil contempt has any possibility of driving him to testify.  If it appears that he will simply continue to refuse to answer questions, at some point the court will have to let him go, although federal district judges have fairly broad discretion in determining when the coercive effect of the civil contempt has become fruitless.  An AP story (here) discusses the next step in Anderson's merry-go-round life with the grand jury and the local federal lockup. (ph)

July 26, 2006 in Grand Jury, Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)

Sixth Circuit Rejects Government Taint Team to Review Subpoenaed Documents

In the usual case in which a grand jury issues a subpoena for documents, the recipient determines what is responsive and, if necessary, asserts any attorney-client privilege and work product protection claim by refusing to turn over the records.  At that point, the ball is in the government's court to either challenge the claimed privilege or protection, or to assert the crime-fraud exception to undermine the claim.  A recent decision by the Sixth Circuit in In re Grand Jury Subpoenas 04-124-03 and 04-124-5 (here) essentially follows that model when a third party held the documents and was willing to turn them over to the government despite a privilege claim by the target of the investigation.

The investigation concerns Venture Holdings and possible looting of the company by its former owner, Larry Winget, before it went into bankruptcy.  As a result of the bankruptcy, new ownership took control of Venture (called "New Venture" in the opinion), and when a grand jury investigation began regarding questionable transactions at Venture, New Venture received a subpoena for documents that it was more than happy to comply with, including waiving any corporate attorney-client privilege.  At this point, Winget stepped in and claimed that records held by New Venture included documents covered by his personal attorney-client privilege.  The district court accepted the government's suggestion that a "taint team" made up of a prosecutor and investigator with no connection to the case -- behind the so-called "Chinese Wall" -- review the documents and determine which ones were subject to a privilege claim.  Under the government's proposal, if the taint team determined that a document was not privileged, it would go straight to the personnel assigned to the grand jury investigation without a chance for Winget to challenge that decision, at least not until after disclosure of the document.

It was this step in the process that cause the Sixth Circuit to reject the taint team and instead permit the privilege claimant to make the initial determination on the privileged nature of the documents, as if the subpoena were served directly rather than on a cooperative the third party.  The court expressed some hesitation about the fairness of the proposed government review, stating:

It is reasonable to presume that the government’s taint team might have a more restrictive view of privilege than appellants’ attorneys. But under the taint team procedure, appellants’ attorneys would have an opportunity to assert privilege only over those documents which the taint team has identified as being clearly or possibly privileged. As such, we do not see any check in the proposed taint team review procedure against the possibility that the government’s team might make some false negative conclusions, finding validly privileged documents to be otherwise; that is to say, we can find no check against Type II errors in the government’s proposed procedure. On the other hand, under the appellants’ proposal, which incidentally seems to follow a fairly conventional privilege review procedure employed by law firms in response to discovery requests, the government would still enjoy the opportunity to challenge any documents that appellants’ attorneys misidentify (via the commission of Type I errors) as privileged. We thus find that, under these circumstances, the possible damage to the appellants’ interest in protecting privilege exceeds the possible damage to the government’s interest in grand jury secrecy and exigency in this case.  Therefore, we reverse the district court, and hold that the use of a government taint team is inappropriate in the present circumstances. Instead, we hold that the appellants themselves must be given an opportunity to conduct their own privilege review; of course, we can presently make no ruling with respect to the merits of any claimed privilege that may arise therefrom.

Government taint teams have been used primarily in law office search cases in which documents seized are within the government's control, and there has been quite a bit of controversy about them because the same incentives identified by the Sixth Circuit are present.  While In re Grand Jury Subpoenas is a subpoena case, so the court is merely putting the privilege claimant in the same position he would have been in if the he received the subpoena directly, the court's rationale regarding taint teams could be applied to challenges to searches involving privileged documents.  (ph)

July 26, 2006 in Grand Jury, Investigations, Privileges | Permalink | Comments (0) | TrackBack (0)

Friday, July 21, 2006

Bonds Perjury Investigation Goes Into Extra Innings

[Note: The following is a corrected post in light of updated media reports]  The investigation of San Francisco Giants slugger Barry Bonds will shift to a new grand jury so that prosecutors can continue to determine whether to indict him on perjury and tax evasion charges. The grand jury panel that had been hearing evidence against Bonds related to his 2003 grand jury testimony as part of the investigation of steroids distribution by Balco (Bay Area Laboratory Cooperative) expired on July 20 at the end of its 18-month term of service.  By empaneling a new grand jury, prosecutors will not have to race any deadlines in deciding whether to seek charges.  I suspect prosecutors decided to hold off for now rather than risk running afoul of the adage "act in haste, repent in leisure."  Bonds is unlikely to even consider a plea offer, and the statute of limitations is not a concern, so it is better to wait until the case is clear -- one way or the other -- than to rush something through a grand jury on its last day and then have to clear up the mess later. That is especially the case with tax counts, which require approval from the Tax Division in Washington, D.C.

The downside to shifting to a new grand jury is that evidence heard by the prior panel must be presented again to the new set of grand juros, which includes reading transcripts to them, a process that can be deadly dull.  A new grand jury allows prosecutors to subpoena Bonds' former personal trainer, Greg Anderson, to appear once again.  In June, Anderson refused to testify and the district court ordered him to jail on July 6 for civil contempt, but he only served the two weeks until the prior grand jury's term expired.  His time on the outside may be fairly short, however, depending on when prosecutors subpoena him to testify, which most likely will trigger another refusal to testify and another trip to jail. 

While Bonds has dodged an indictment at this time, and probably for the next few months, the U.S. Attorney's Office stated that its investigation has not ended.  Pulling out a well-worn aphorism, an AP story (here) quotes Michael Rains, an attorney for Bonds, as saying, ""They don't even have enough to indict a ham sandwich, much less Barry Bonds."  I'm not sure what a ham sandwich could do that would trigger federal charges, but it's probably not perjury or tax evasion.  (ph)

July 21, 2006 in Grand Jury, Investigations, Perjury | Permalink | Comments (0) | TrackBack (1)

Wednesday, July 19, 2006

Options-Timing Probes = Law Firm Marketing Opportunity

A Wall Street Journal article (here and Law Blog entry here with access to the article) discusses the response of major law firms to the current spate of SEC and grand jury investigations of companies related to the timing of their options awards.  Not surprisingly, the firms have viewed this as a marketing opportunity, informing current and potential clients that the best strategy is, of course, to consult with competent counsel.  For example, national law firm Latham & Watkins is touting its "Options Timing Working Group" that comes complete with a page on the firm's website (here) and offers missives written by Jim Barrall in The Executive Comp Insider that tout, again not surprisingly, the need to obtain legal counsel.  The burgeoning investigations have already touched over fifty companies, and that's just the ones publicly disclosing pending investigations.  The number of companies conducting their own internal reviews is much higher than that, and we will see more disclosures of problems in the coming months.  With all the lawyers getting involved in these cases, the interesting question will be whether firms are conflicted out of certain representations, either because they were involved in the drafting of the stock option agreements or their conduct of an internal investigation means they cannot defend individual officers or directors in subsequent cases.  As Peter Lattman notes in the WSJ article, this is another instances of lawyer full employment -- not that there's anything wrong with that. (ph)

July 19, 2006 in Defense Counsel, Grand Jury, Investigations, Securities | Permalink | Comments (0) | TrackBack (0)

Saturday, July 15, 2006

Bonds Is on Indictment Watch

The personal attorney for San Francisco Giants slugger Barry Bonds, Laura Enos, expects her client will be indicted in the next week on perjury and tax evasion charges.  An AP story (here) quotes Enos as stating, "We are very prepared . . . We have excellent tax records and we are very comfortable that he has not shortchanged the government at all."  The federal grand jury in San Francisco investigating Bonds is set to expire in the near future, perhaps as early as Thursday, July 20, so any indictment must be returned by then barring a six-month extension of its term.  Bonds' former personal trainer, Greg Anderson, remains in jail for civil contempt for refusing to testify before the grand jury, and the Ninth Circuit denied his motion for bail while he appeals the contempt or, more likely, waits for the clock to wind down -- a witness is released from civil contempt once the grand jury's term expires.  A lot of people will be watching for signs of an indictment on July 20, when the Giants will be home playing the division-leading San Diego Padres. (ph)

July 15, 2006 in Grand Jury, Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)