October 24, 2005
Is Perjury a "Technicality"?
On Meet the Press, in the context of discussing possible charges from the grand jury investigation of the leak of the status of Valerie Plame, Senator Kay Bailey Hutchison stated that a perjury charge would be a "technicality" and any such charge would be an attempt by Special Counsel Patrick Fitzgerald to justify a two-year investigation -- see the Reuters story here. As an earlier post (here) notes, this may well be the week in which Fitzgerald decides whether to seek a grand jury indictment. The Reuters article also notes that Fitzgerald may inform one or more officials in the administration that they are targets of the investigation, a final step toward seeking an indictment.
If a perjury (or Section 1001 or obstruction of justice) charge were to be returned by the grand jury, is that just a technicality, particularly if the underlying subject matter of the investigation -- whether there was a violation of federal law from the disclosure of Plame's position as a cover intelligence agent -- is not also charged? Lying is hardly a technical violation of the law, particularly when a person has sworn an oath to testify truthfully before a federal grand jury, and trying to diminish perjury as a "collateral" violation or otherwise unimportant denigrates the integrity of the investigative process. As the Eighth Circuit noted in U.S. v. Lasater, 535 F.2d 1041, 1049 (8th Cir. 1976): "The grand jury performs an important function in our judicial system, as the device by which criminal investigations are conducted and criminal proceedings instituted . . . Any false testimony before a grand jury, which tends to impede its investigation, should be diligently prosecuted." Interestingly, a claim of perjury was the basis for the first article of impeachment (here) against President Clinton, which stated:
[I]n violation of his constitutional duty to take care that the laws be faithfully executed, has willfully corrupted and manipulated the judicial process of the United States for his personal gain and exoneration, impeding the administration of justice, in that: On August 17, 1998, William Jefferson Clinton swore to tell the truth, the whole truth, and nothing but the truth before a Federal grand jury of the United States. Contrary to that oath, William Jefferson Clinton willfully provided perjurious, false and misleading testimony to the grand jury . . . .
That does not sound like a "technicality" to me. (ph)
October 20, 2005
Rove + Libby = ?
An AP report (here) discusses various conflicts in the testimony of Karl Rove and I. Lewis Libby that indicates Libby may have contacted reporters about the status of Valerie Plame as a CIA operative and not the other way around. Rove also testified that he may have learned about Plame from Libby, although as with everything else in this investigation, the recollection is hazy, at best.
Almost like the pieces of a giant puzzle, the information coming together points to some serious inconsistencies in the testimony of Libby, the chief of staff to Vice President Cheney, about his contacts with the press and the source of his knowledge of Plame. Whether they are enough to pull together into an indictment for false statements, perjury, or obstruction is a different matter, however. While contradictory statements are wonderful for cross-examining a witness, proving a person lied (as opposed to being nonresponsive) in the grand jury is much more difficult. "Might" and "may have" do not make for the types of falsehoods usually prosecuted. As more information leaks out about the grand jury testimony of witnesses, I wonder whether claims of prosecutorial violation of the secrecy requirements of Rule 6(e) will surface. (ph)
UPDATE: An extensive Washington Post story (here) discusses the role of various administration officials in the investigation. (ph)
Subpoena to Lawyer Quashed as "Unreasonable or Oppressive" Under Rule 17(c)
The Ninth Circuit upheld a district court order quashing a federal grand jury subpoena to defense counsel because compliance would have effectively destroyed the attorney-client relationship. Federal Rule of Criminal Procedure 17(c) permits a court to quash a subpoena if it is "unreasonable or oppresive," a standard that is very difficult to meet under the analysis in United States v. R. Enterprises, 498 U.S. 292 (1991), that views grand jury subpoenas as presumptively reasonable. In United States v. Bergeson (here), the defense attorney, Nancy Bergeson, was subpoenaed to testify before a grand jury about her communication with her client, Michael Casey, about his trial date after Casey failed to appear. While Bergeson conceded her communication with Casey of the trial date was not privileged (apparently on the same basis that courts have held client identity and fee information is generally unprotected), the Ninth Circuit held that quashing the subpoena was proper because requiring her to testify against her client would interfere with the attorney-client relationship when the government had access to other sources of information to prove Casey's knowledge of the trial date (an element of the offense of bail-jumping).
The court stated: "That the government does not need the testimony bears on whether the subpoena is 'unreasonable,' and that it would destroy the attorney-client relationship bears on whether the subpoena is 'oppressive.'" The Ninth Circuit also noted that the U.S. Attorney's Manual, which states that all reasonable alternatives should be pursued before issuing a subpoena to an attorney to testify against a client, cut in favor of quashing the subpoena:
There were good reasons for the district court’s exercise of discretion. A client’s confidence in his lawyer, and continuity of the attorney-client relationship, are critical to our system of justice. The Justice Department restraints on issuing subpoenas to lawyers that we discussed in United States v. Perry and that the district court cited in this case are instructive on this point. Though these Justice Department directives are directions by an employer to its employees and not law, they demonstrate the recognition that the government has given to this fundamental interest. Issuing subpoenas to lawyers to compel them to testify against their clients invites all sorts of abuse.
October 17, 2005
"Don't Go There"
One aspect of New York Times reporter Judith Miller's case, presented in great (although sometimes slippery) detail in the newspaper (here), includes some hotly disputed interchanges in 2004 between Joseph Tate, the lawyer for the Vice President's chief of staff, I. Lewis Libby, and Miller's then-lawyer, Floyd Abrams. According to the Times, Tate described to Abrams part of Libby's grand jury testimony in which Libby said he did not give Miller the name or status of Valerie Plame as a CIA operative. According to Miller, Abrams told her that when he told Tate that there could be no assurances that Miller's testimony would be consistent with Libby's, Tate allegedly responded "Don't go there, or, we don't want you there." Special prosecutor Patrick Fitzgerald ultimately examined Miller about whether she believed Libby wanted her to conform her testimony to his.
The role of the lawyers has been crucial in the investigation. Miller's new lawyer, Robert Bennett (former lawyer for President Bill Clinton in the infamous Paula Jones deposition), negotiated her release after Libby provided assurances of his waiver of confidentiality. Fitzgerald even played a key role in that process, sending a letter to Tate stating that any contact with Bennett regarding Miller testifying (or not) would not be viewed as being an obstruction of justice. But, could Miller's (and Abrams') recitation of the conduct of Tate -- who vehemently denies telling Abrams "Don't go there" or even implying that --constitute obstruction of justice? Interestingly, lawyers receive special treatment under the obstruction of justice statutes because legal counseling can often involve telling a client to do things that could be viewed as impeding an investigation. 18 U.S.C. Sec. 1515(c) (here) provides: "This chapter does not prohibit or punish the providing of lawful, bona fide, legal representation services in connection with or anticipation of an official proceeding." Tate's statement, if made to Abrams, would likely fall within the "safe harbor" as bona fide legal services. "Don't go there" is not a request that Miller change her testimony, and "we don't want you there" is even vaguer. Communicating with a lawyer, and not the witness, would likely take the conduct even further away from obstruction, unlike a case where a lawyer meets with a witness and suggests testimony.
In the hail of information on the investigation of the Plame leak, it is getting more difficult to separate out who said what to whom, and when. Ultimately, that's the challenge that Fitzgerald and his staff faces in deciding whether there has been any criminal conduct that can be proven. (ph)
October 15, 2005
Rove's Fourth Appearance Is a Long One
Karl Rove made his fourth appearance before the grand jury investigating the leak of Valeria Plame's identity as a CIA operative, and he appears to have spent a fairly significant amount of time answering questions. Rove arrived at the federal courthouse in Washington D.C. at 9:00 a.m. and didn't leave until after 1:00 p.m. Even if the entire time was not spent in the grand jury (and I hope they took at least one bathroom break), it appears that Rove's testimony took a great deal of time, at least as compared to other witnesses. With three prior grand jury sessions and interviews with FBI agents, there was a lot of ground to cover. Rove's attorney, Robert Luskin, stated that special prosecutor Patrick Fitzgerald would not need Rove to testify again -- no great surprise given the grand jury will expire in two weeks (unless extended another six months, which is a possibility if new evidence has emerged) and Rove has probably talked himself out at this point. Unless there are additional grand jury sessions next week, the issue now shifts to whether Fitzgerald's office will ask the grand jury to return an indictment or he decides not to pursue criminal charges. Watching a grand jury -- or more appropriately the building where it meets -- is just not all that interesting, however. Stories from the Washington Post (here) and AP (here) discuss Rove's testimony. (ph)
October 13, 2005
Is Libby Wearing the Bullseye?
New York Times report Judith Miller completed her second round of testimony before the grand jury investigating the leak of Valerie Plame's identity as a CIA operative, and now the focus has shifted to I. Lewis Libby, the Vice-President's chief of staff (see CNN.Com story here). Miller reportedly testified about a previously undisclosed meeting she had with Libby on June 23, 2003 [for those into high-level corruption trivia, on that date in 1972, Nixon and his chief of staff, Bob Haldeman, met to discuss covering-up the White House's involvement in the Watergate break-in]. Much has been made of the fact that Libby did not discuss this meeting during his interviews with FBI agents and testimony with the grand jury.
For those salivating about (or dreading) a possible indictment of Libby for perjury or false statement, the first question is whether he was ever asked about the meeting with Miller. The focus of the investigation seemingly has been on contacts between senior administration officials and reporters after Joseph Wilson's op-ed piece appeared on July 6, 2003, and not as much about what occurred before that date. The lesson from perjury cases like Bronston v. U.S. is that the question is just as important, and perhaps more so, than the answer. If no one asked Libby about the meeting, then his failure to volunteer the information may be disingenuous, but it would not necessarily be a lie, which is necessary for a perjury or false statement charge.
There has also been some discussion in the media (see National Journal story here) that Libby may have obstructed justice by telling Miller that his waiver of confidentiality was coerced, thereby ensuring that she would not testify before the grand jury. Can a factual statement ("the waiver was not voluntary") that will likely cause a reporter to refuse to testify before a grand jury constitute obstruction? That seems to be a bit of a stretch, in light of the Supreme Court's recent statement in the Arthur Andersen case about lawful conduct that can have the effect of thwarting an investigation. Chief Justice Rehnquist's opinion notes: "Such restraint is particularly appropriate here, where the act underlying the conviction--'persua[sion]'--is by itself innocuous. Indeed, 'persuad[ing]' a person 'with intent to ... cause' that person to 'withhold' testimony or documents from a Government proceeding or Government official is not inherently malign. Consider, for instance, a mother who suggests to her son that he invoke his right against compelled self-incrimination, see U.S. Const., Amdt. 5, or a wife who persuades her husband not to disclose marital confidences . . . ." 125 S.Ct. 2125, 2134-2135.
Libby's failure to disclose his meeting with Miller is certainly cause for further inquiry by special prosecutor Patrick Fitzgerald, and I would not be surprised if he were "invited" to return to testify before the grand jury, just as Presidential aide Karl Rove will be doing (for the fourth time). Whether the non-disclosure is enough for a criminal prosecution depends on what he was asked as much as what he said. (ph)
October 12, 2005
Down to the Wire on CIA Leak Case
Prosecutor Patrick Fitzgerald is facing a deadline (NYTImes reports it here as Oct. 28th) of an upcoming end to the grand jury that has been investigating the leak of a CIA agent. Although he can ask to continue, it looks like Fitzgerald is moving things along in the final stages of this investigation. He has Karl Rove reappearing before the grand jury (see post) and now NYTimes reporter Judith Miller, who is out of jail, also set to appear. According to the NYTimes, Judith Miller met with prosecutors in anticipation of her testimony today to the grand jury. (see here). Stay tuned.
October 10, 2005
Another Salvo in the Battle Between Tom DeLay and Ronnie Earle
To describe the attacks on Travis County District Attorney Ronnie Earle as vituperative is an understatement, and the latest round from former House Majority Leader Tom DeLay seeks the dismissal of the most recent money laundering indictment because of prosecutorial misconduct. After the first conspiracy indictment, Earle's office sought a second one, perhaps on more legally defensible grounds, but a Travis Country grand jury returned a "no bill," meaning a majority of the grand jurors voted not to indict DeLay. A few days later, a different grand jury in the county returned the money laundering indictment, which is presumptively valid. DeLay's attorney, Dick DeGuerin, has filed a motion to dismiss the indictment on the ground that the Travis County D.A.'s office tried to cover-up the earlier grand jury's refusal to indict. DeGuerin asserted that the prosecutor "engaged in an extraordinarily irregular and desperate attempt to contrive a viable charge" -- just like everything else in Texas, the rhetoric is bigger. While the money laundering charge may be questionable, at least in the eyes of the defense, the grand jury system permits a prosecutor to seek an indictment from different grand juries so long as a majority find probable cause that the defendant committed a crime, and a "no bill" from one grand jury does have any preclusive effect. This may be a fight best left for a trial on the merits. A CNN.Com story (here) discusses DeLay's latest filing. (ph)
Will Rove's Discussions with President Bush Be a Subject of the Grand Jury Investigation?
Karl Rove's fourth appearance before the grand jury could involve inquiry into his discussion in with President Bush about the release of Valerie Plame's identity as a CIA operative. While it was known that the President asked Rove about the leak, recent media reports (AP story here and National Journal story here) indicates that the President questioned Rove specifically about his own role in any effort to engineer the disclosure of Plame's status with the CIA to the media to undermine the position of her husband, Joseph Wilson. Rove denied any involvement to the President, and that was later reflected in the statement of White House spokesman Scott McClellan to the press and the President's own statement in the investigation. As this blog noted back on Aug. 12 (here), a false statement to the President could be the basis for a Sec. 1001 charge because the President's inquiry is a matter within the jurisdiction of the Executive branch. The questioning of Rove could involve not only what he said to reporters who wrote about Plame, but whether he misled the President. (ph)
Addendum - Karl Rove's attorney denies that Rove circulated name "to punish [Valerie Plame's] husband." See CNN here. (esp)
October 07, 2005
Will Rove Make a Final Pitch to Avoid an Indictment?
The AP reports (here) that special prosecutor Patrick Fitzgerald has accepted Bush aide Karl Rove's offer to testify a fourth time before the grand jury investigating the leak of the identity of CIA operative Valerie Plame. While Rove made the offer back in July, which is when Time reporter Matthew Cooper testified before the grand jury about his conversations with Rove regarding Plame, Fitzgerald only accepted the offer last Friday, the day that New York Times reporter Judith Miller finally testified before the grand jury. Is there a contradiction in there that Rove (or Fitzgerald) wants to clarify?
More ominously, it appears that Fitzgerald's acceptance of the offer did not provide any assurance that Rove will not be indicted. Rove's attorney, Robert Luskin, had emphasized repeatedly that Rove has not received a "target letter" from prosecutors, but the absence of a letter does not mean that the special prosecutor's office does not have targets, and Rove may have been notified orally of his status in the investigation. Moreover, these letters usually are sent in the final stages of an investigation and "invite" the person to testify before the grand jury (without their attorney being present, of course) despite the prosecutor's statement that there is substantial evidence of the person's involvement in criminal activity. As part of the "dance" between prosecutors and defense counsel, the target letter can serve a useful purpose to move along negotiations toward a resolution of the case, but in this situation is it unlikely that Fitzgerald's office needs to issue such a letter for that purpose when an oral notification would be sufficient. The targets of the investigation, including other senior administration officials, may well know where they stand, so assertions regarding the lack of official notification of target status are mostly a smokescreen.
Why would Rove agree to testify before a grand jury that may well be asked to return an indictment against him? Assertion of the Fifth Amendment at this point, after three prior trips to the grand jury, would be equally dangerous for someone in a position like Rove's because it would be tantamount to an admission of guilt. Look what happens in business when a corporate officer refuses to testify or cooperate in an investigation, and while the President softened his position earlier this year by stating that anyone convicted of a crime would lose his position in the administration, taking the Fifth would create enormous pressure to dismiss the person. Unlike most cases, in which it is almost foolhardy to appear before the grand jury when there is a reasonable chance it will be asked to indict the witness, in political cases the need to avoid an indictment is particularly strong. Those in the political arena often have good communication skills, so they think they can persuade a grand jury not to indict. Thinking back almost twenty years, then-Virginia Senator Chuck Robb appeared before a grand jury investigating him for corruption, and shortly thereafter the grand jury returned a "no bill" and refused to indict him. While it is a gamble to appear before a grand jury, it may be one worth taking in this case if there is at least the chance of heading off an indictment. If the indictment is inevitable, then the harm is not that great for a person who has appeared three times already. (ph)
October 06, 2005
How Fitzgerald Got Miller to Testify -- And How Much Should We Know
When New York Times reporter Judith Miller testified before the grand jury investigating the leak of the identity of CIA operative Valerie Plame, she ended three months of confinement for civil contempt once she received assurances from her source that he truly waived any confidentiality agreement they had. Special counsel Patrick Fitzgerald appears to have played the key role in prodding I. Lewis Libby, Vice President Cheney's chief of staff and one of Miller's sources, to reaffirm his waiver. Fitzgerald sent a letter to Libby's lawyer, Joseph Tate, dated Sept. 12, outlining his position that if Libby truly wished to release Miller from the confidentiality agreement -- and thereby provide the key to her jail cell -- he could do so with the assurance that any action he took in this regard would not be viewed as obstruction of justice. Fitzgerald's letter, which is now publicly available here, provides a detailed review of Libby's involvement in the investigation, including specific references to interviews and grand jury appearances. Although the letter was most likely meant to be kept private, I wonder whether the reference to a witness's appearance before the grand jury violates the secrecy provision of Rule 6(e), even if that information was already known through disclosures by Libby (and Tate). The Rule does not contain a "public disclosure" exception to the strict secrecy requirement.
The letter is also interesting because of its extensive references to press reports on the positions of Libby and Miller regarding the waiver and their status in the grand jury investigation. Like most everything else in Washington, this appears to be an example of discussion by leak, e.g. "sources close to the investigation" and the like. Once again, if any of the information came from Fitzgerald's office, there is a risk of a Rule 6(e) violation, which could spawn yet another investigation. It would be hard to avoid the irony of an investigation into leaks about an investigation into leaks. Of course, the publication of Fitzgerald's letter shows how much this case involves use of the media as a conduit of information in support of one's position. (ph)
October 03, 2005
What Now, Mr. Fitzgerald?
With the testimony of New York Times reporter Judith Miller complete, at least with regard to her communications with Vice President Cheney's chief of staff, I. Lewis Libby, special prosecutor Patrick Fitzgerald's investigation looks largely complete. The grand jury is scheduled to complete its 18-month term at the end of October, although it can be extended by six-months if there is sufficient necessity -- and Chief Judge Thomas Hogan is unlikely to deny such a request. Nevertheless, the gist of Miller's testimony was most likely known by the special prosecutor's staff in advance, so Fitzgerald ought to be able to make decisions about whether to seek charges within the next month or so, and if necessary have the grand jury return any indictment before it expires.
A Washington Post article (here) speculates that Fitzgerald's staff may be considering a conspiracy charge against senior administration officials who sought to have the identity and covert role of Valerie Plame disclosed in order to discredit her husband, Joseph Wilson. If the officials plotted to leak her position as a covert agent, which is a crime, then they could be found guilty of a conspiracy even if no official can be shown specifically to have disclosed the information about Plame to a particular reporter. The information came from someone, and if an elaborate subterfuge was used to leak it, then it is possible to bring a conspiracy charge. There would be significant problems with such a prosecution, starting with proving the intent of the administration officials and a criminal agreement. Vague assertions of a motive to discredit Wilson would not, in themselves, prove the agreement necessary for a conspiracy charge. The fact that different reporters, speaking to different officials, learned similar information is hardly proof of a conspiracy, particularly in an environment in which reporters compete to obtain information and then try to confirm it with multiple sources.
Conspiracy theories are always fun for speculation, but as the basis for a criminal charge against public officials accused of forming a secret cabal to manipulate the press, it seems like a bit of a stretch. Then again, if anyone who was part of such a "conspiracy" came forward with some information (beyond speculation) about an agreement to have Plame's identity as a CIA covert agent made public, then Fitzgerald would have an important building block for any conspiracy prosecution: someone who was part of the agreement who can explain its operation. The investigation appears to have reached its denouement, and now the tough decisions have to be made. (ph)
September 26, 2005
Senator Frist's Blind Trusts
In addition to seeking information from HCA, Inc., federal prosecutors in the U.S. Attorney's Office for the Southern District of New York and attorneys from the Enforcement Division of the SEC have contacted Senate Majority Leader Bill Frist's office for information related to the sales of HCA stock in so-called "blind trusts" that held assets in his name, and for his wife and children. With the parallel investigations, Senator Frist may be asked to testify under oath before the Commission staff and federal prosecutors, and could even be subpoenaed to testify before a grand jury in Manhattan. An AP story (here) notes that at one time, Senator Frist stated about the trusts that "I have no control. It is illegal right now for me to know what the composition of those trusts are. So I have no idea." I'm not sure where he got the idea that it is illegal, although the Senator may simply have meant it would be a violation of the trust agreement for him to be involved in investment decisions. It's hard to think of a crime involved just from his directing the sale of assets (leaving aside possible insider trading), unless he were to have taken trust assets improperly, which certainly does not appear to be the case. Whether his conduct is proper under the trust instrument is largely irrelevant to the DOJ and SEC investigations, which will focus on any leaks of information from the company. Given the volume of stock sales by other HCA executives around the same time as Senator Frist's sales, it may be difficult to track down any improper disclosure of information, but investigators from those offices have not shied away from tough cases in the past. (ph)
UPDATE: A New York Times article (here) discusses how blind the trusts are under Senate disclosure rules. (ph)
September 24, 2005
Time Receives Grand Jury Subpoena in Circulation Probe
A grand jury in the Eastern District of New York (Brooklyn) issued a subpoena in July to Time Inc. for documents related to its circulation figures for the company's various magazines. The investigation focuses on whether media companies have overstated the number of copies that have been purchased as opposed to distributed for free; those figures are important in setting advertising rates, particularly the number of paid subscriptions and news stand sales as opposed to free copies. Earlier this year, three former employees of newspapers owned by the Tribune Co. were charged with fraud for inflating paid circulation figures at Newsday and Hoy (see U.S. Attorney's Office press release here). An AP story (here) discusses the investigation.
One interesting aspect of the investigation is that, according to a Time spokeswoman identified in the AP story, the company received the grand jury subpoena approximately two months ago. Only now, however, is the information coming out, and I could not find any public disclosure of the subpoena in company filings as of Sept. 23. In its 10-Q filed in early August (here), the Time disclosed the government's investigation related to accounting issues involving AOL, which resulted in a large settlement and appointment of an outside monitor. The grand jury subpoena seems to have fallen through the cracks, or perhaps it was not viewed as "material" information that a reasonable investor would consider important. Then again, when a substantial portion of a company's revenue and income is tied to advertising, an investigation of possible fraud in the basis for those rates sure seems material to me, but then I'm not a very good investor, either. (ph)
September 10, 2005
Spitzer Prepares to Move Against Former Insurance Executives for Bid-Rigging
New York Attorney General Eliot Spitzer's initial investigation that roiled the insurance industry last year may be reaching fruition amid a report that a number of former executives of Marsh Inc. have been told they will be indicted on bid-rigging and criminal enterprise charges if they do not reach a plea agreement in the next two weeks. Marsh Inc. is the insurance brokerage unit of Marsh & McLennan Cos., and the company has already settled charges filed by Spitzer's office. The bid-rigging investigation led to a broad review of the reinsurance industry by the SEC and Department of Justice along with the New York Attorney General, and has resulted in the filing of charges or notices of possible charges against a number of insurers and individuals, including AIG, General Re, and MBIA. With Labor Day behind us, look for those investigations to move into the final stages. A Bloomberg.Com story (here) discusses the possible charges against the former Marsh Inc. executives. (ph)
August 26, 2005
AP (Tampa Bay) reports here that a federal prosecutor will in fact call a grand jury to hear evidence about individuals who jammed Democratic phone lines on election day, telephone lines that had been established for the purpose of receiving calls from individuals needing rides to polling places. Two individuals previously plead guilty, including the 2002 state GOP executive director.
August 13, 2005
Collins & Aikman Discloses SEC and DOJ Investigations
Collins & Aikman Corp., the large auto-supplier that filed for bankruptcy protection earlier this year, disclosed that it has received a grand jury subpoena and has been providing documents to the SEC. The company's press release (here) states:
Collins & Aikman Corporation (CKCRQ) announced today that it has received a grand jury subpoena from the United States Attorney’s Office in the Southern District of New York, seeking documents and information relating to the Company’s financial statements for the fiscal years 2000-2005, as well as documents and information pertaining to accounts receivable, customer and/or supplier rebates and other matters. The Company intends to fully cooperate in responding to this request, as it has for similar information requests from the Securities and Exchange Commission. As previously announced, an independent committee of its board of directors initiated and has been conducting an investigation of these issues.
C&A has annual sales in the $4 billion range, so a subpoena for five years worth of financial records will like result in more than a few truckloads of documents.
C&A's former CEO immediately before the bankruptcy filing was David Stockman, former Reagan White House OMB wunderkind (I've always wanted to use that term) whose private equity firm, Heartland Industrial Partners, took a controlling stake in the company a few years ago. Given Stockman's high profile and well-known financial acumen, it will be interesting to see if prosecutors from the Southern District focus on him as they investigate the company's accounting. (ph)
August 08, 2005
Grand Jury Investigation of Milberg Weiss Lawyers Heats Up
The grand jury investigation of leading lawyers from famed securities class action firm Milberg Weiss is expanding, according to a report in the Wall Street Journal (here). According to the Journal, two former Milberg Weiss partners have received immunity, and one has testified before the grand jury. The investigation has already produced the indictment of Seymour Lazar, who served as a representative plaintiff in a number of class actions in which the firm was lead counsel. The indictment alleges that Lazar received secret payments from the firm, and he worked closely with former name partner William Lerach, who split away from Milberg Weiss last year to form his own firm. The article also asserts that the government is looking into payments made to an expert witness who testified in a number of Milberg Weiss securities class action cases on damages issues; the expert was charged with fraud and embezzlement in an unrelated case.
As discussed in an earlier post (here, which includes a link to the Lazar indictment), the major problem the government faces is the statute of limitations for much of the alleged misconduct, most of which occurred before 2000. The Journal articles notes that the government's focus is on a conspiracy case, which would allow for older acts that would otherwise fall outside the limitations period to be used so long as at least one overt act took place within the last five years. The problem is establishing a single, overarching conspiracy that incorporates all the alleged misconduct, which may be difficult to prove. The Journal notes that new subpoenas have been sent to other law firms that acted as co-counsel with Milberg Weiss, although attorney-client privilege issues could slow the investigation even further. (ph)
Division of Authority in Ohio GOP Fundraiser Investigation
The brouhaha triggered by the revelation that prominent Ohio Republican fundraiser Tom Noe may have defrauded the Bureau of Workers' Compensation through non-existent investments in rare coins has resulted in an interesting division of authority over the investigation among federal and state prosecutors. A press release (here) issued by the U.S. Attorney's Office for the Northern District of Ohio describes the agreement among the different offices on how to proceed in the wide-ranging investigation of Noe's various activities:
Prosecutors Julia Bates of Lucas County and Ron O'Brien of Franklin County, together with United States Attorneys Greg Lockhart and Greg White today announced a partial division of prosecutorial responsibilities in the investigation of Thomas Noe and the larger investment issues involving the Bureau of Workers' Compensation. The following was agreed upon at a meeting in the Lucas County Prosecutor's Office on July 7, 2005.
First, the Thomas Noe investigation regarding the investment of Bureau of Workers' Compensation funds in rare coins will be supervised jointly by Julia Bates and Ron O'Brien through a Special Grand Jury convened in Lucas County.
The investigation of the remaining issues associated with the Bureau of Workers Compensation investment portfolio, to include the Emerging Managers Program will be supervised jointly through the offices of the United States Attorneys for both the Southern and Northern Districts. A Grand Jury will be seated in Cleveland to begin that process.
Mr. O'Brien will supervise all state ethics investigations in conjunction with the Columbus City Attorney, Richard A. Pfeiffer.
Finally, the Public Integrity Section of the Department of Justice and the United States Attorney's office in the Northern District of Ohio will jointly supervise the investigation into the Noe contributions to the Bush/Chaney 2004 Campaign. The Federal Grand Jury seated in Toledo will continue to consider matters related to this investigation.
It is rare that prosecutors make a public statement on the scope of an ongoing investigation, and the specific focus of the inquiry. The state investigation has already triggered one guilty plea to a misdemeanor ethics violation by the former chief of staff for Gov. Taft, and the various prosecutors will likely bring more charges. Noe served as the Ohio chairman for the Bush/Cheney 2004 Campaign and was a "Pioneer", which means he helped raise over $100,000 for the presidential election campaign. Fundraising investigations have a way of tainting a number of public officials who receive funds from contributors under suspicion. (ph)
July 30, 2005
The Scope of the Attorney-Client Privilege After the Crime-Fraud Exception
The crime-fraud exception arises with some regularity in white collar crime investigations, and it is always a difficult area because the attorney-client privilege and work product protection, together with the requirements of grand jury secrecy, often mean that both sides are advancing positions based on assumptions and less-than-complete information. Many of the cases involve in camera and ex parte submissions to the court, and cryptic decisions by the judge on the question whether the exception applies. An interesting issue that arose recently in a Fifth Circuit case -- the inevitably named In re: Grand Jury Subpoena (here) -- addresses the subsequent question after a finding that the crime-fraud exception applies: Do any of the communications and attorney work product remain protected by the privilege/protection? The government often seeks particular documents or communications, so the issue may not arise in every case. But in In re: Grand Jury Subpoena, the court had to address the issue whether the attorney could be compelled to testify about all communications with the client and provide all work product (save perhaps opinion work product).
The case began as a run-of-the-mill gun possession case in which the police seized the weapon at the house the defendant shared with his girlfriend. After counsel was appointed, the girlfriend met with him and asked about the difference in penalties between a perjury charge and the gun possession offense -- you should be able to guess where this is going. The girlfriend, who had denied knowing anything about the weapon at the time of the search, then submitted an affidavit stating that it was hers and she lied because she did not want to lose custody of her child. When contacted by the prosecutor, the girlfriend changed her story back and said she and the defendant had concocted the affidavit, which was false. At this point, the prosecutor subpoenaed the defense attorney (who had since withdrawn because of the perjury and obstruction) to testify about his communications with the defendant and the girlfriend, and to turn over all documents related to the representation. The district court found that the government had established a prima facie case for the crime-fraud exception -- no great surprise there -- and ordered the defense attorney to comply with the subpoena. The defendant appealed on the ground that the subpoena was overbroad by seeking all communications and work product from the representation, without any specification of the communications that were related to the alleged crime or fraud.
Before the Fifth Circuit, the government argued that once a court finds the crime-fraud exception applies, then the protections of the attorney-client privilege and work product doctrine disappear and all parts of the relationship are open to inquiry. The court rejected that argument, stating:
We conclude that the proper reach of the crime-fraud exception when applicable does not extend to all communications made in the course of the attorney-client relationship, but rather is limited to those communications and documents in furtherance of the contemplated or ongoing criminal or fraudulent conduct . . . The orders compel Former Counsel to bring all written statements of Appellant and Witness and all notes, records, and recordings of interviews of Appellant and Witness. Moreover, because the court’s orders compel Former Counsel to appear and order that he cannot assert any attorney-client or work product privilege, no boundary exists as to the extent of his compelled testimony. The court’s application of the crime-fraud exception was overly broad because it lacked the requisite specificity to reach only communications and documents no longer protected by the attorney-client and work product privileges.
The Fifth Circuit's analysis is sensible because the attorney-client relationship can be quite extensive, and a finding that the purpose of some communications with the attorney involved a possible crime or fraud by the client cannot mean that the entire relationship is no longer subject to the protections of the privilege or work product doctrine. If the sole purpose of the client contacting the attorney is to seek assistance in a crime or fraud, then the Fifth Circuit acknowledges that such a situation may call for compelling the attorney to testify about all aspects of the relationship. But I suspect those situations are comparatively rare, at least when there is an on-going relationship between the lawyer and client, and the legal representation relates to more common business transactions, not drug deals, loan sharking, etc. (ph)