Friday, June 3, 2005

Scrushy Jury Can't Decide - Will it be a Mistrial?

CNN and  AP Birmingham Alabama News report the latest jury note to the judge:

"We regret to inform the court that after many days of deliberating we were unable to reach a verdict of either guilty or not guilty of any/all counts."

What can the judge do-

1. Call it a mistrial.

2. Send the jury back to deliberate more.

3. Give them an Allen charge. (see here for explanation)

Stay tuned.

(esp)

June 3, 2005 in HealthSouth | Permalink | TrackBack (0)

Thursday, June 2, 2005

Quiet Day in Scrushy Deliberations

There were no notes from the jury out to the judge in the Scrushy trial today.  There were also no requests for rehearing specific evidence.  That's because the deliberations were put on hold for the day, as a result of an ill juror.  (See AP in Birmingham Alabama News here).   

(esp)

June 2, 2005 in HealthSouth | Permalink | TrackBack (0)

Scrushy Update- What happens When a Jury Can't Remember Everything

Looks like the deliberations in the Scrushy trial continue.  There has been only one note to the judge since our last post here - - with the judge responding by refusing to play back specific testimony from the trial. For details, see AP story in Birmingham Alabama News here.

The AP story in Birmingham Alabama News states that the judge wrote the jury "back in a note released by the clerk's office"  that  "[f]or me to read a small portion of the testimony to you from the lengthy transcript could unduly emphasize one bit of testimony to the exclusion of all other testimony." (see here)

Some may ask whether it is proper to playback specific testimony for a jury that is deliberating, or alternatively to provide that jury with a transcript of that testimony.   Actually it is a question that has come up in several appellate decisions.  In some of these cases because the judge did provide a transcript and the defense was then contesting on appeal, the propriety of this action.

There is one Second Circuit case (United States v. Criollo) that reversed because the district court announced to the jury during defense counsel's summation that the court was not going to readback trial testimony during the deliberations. But that decision was focused on the pronouncement of the judge prior to commencement of the jury deliberation that nothing would be readback.

Most courts give broad discretion to the judge to decide whether to readback testimony during deliberations. But a key factor is whether it will place "undue emphasis on a particular portion of testimony read out of context." (Criollo).  In the case of United States v. Rogers (6th Cir.), the court stated:

"This court has recognized 'two inherent dangers' in allowing a jury to read a transcript of a witness's testimony during its deliberations,... First, the jury may accord 'undue emphasis' to the testimony; second, the jury may apprehend the testimony 'out of context.' . . .  These dangers are 'escalated' if the jury makes the request after reporting an inability to arrive at a verdict..." (citations omitted)

This is not a comprehensive review of all the caselaw out there that deals with this issue, but it sure sounds like the judge is looking at the concerns expressed in some of these decisions in her response to the jury.   

But one does have to feel sorry for the jury in a white collar case that has gone on for some time.  It really is difficult for the jury to remember everything.

(esp)

Addendum- See Wall Street Jrl Article here. (esp)

June 2, 2005 in HealthSouth | Permalink | TrackBack (0)

Tuesday, May 31, 2005

Scrushy Jury Puts Its Nose Back to the Grindstone

After the holiday weekend, the jury in the prosecution of Richard Scrushy returns to work after spending a week hung up on trying to reach unanimity on the first charge of the indictment, the broad conspiracy count.  The jury's frustration was clear when it sent a note to U.S. District Judge Karon Bowdre asking her whether they had to be unanimous on the conspiracy count, and then putting a large "YES OR NO. Please circle one" beneath the question.  That sure sounds like a conversation between a parent and a teenager.  A New York Times article (here) quotes co-editor Ellen Podgor's discussing the potential problems with the conspiracy count, that it can be the easiest to prove but the hardest to explain to jurors in understandable terms.  See her earlier post here discussing the the complexity of conspiracy charges.  Another point noted in the Times article is that Judge Bowdre has allowed the jury to set its own deliberation schedule, and the pressure to reach a verdict may not be there yet to force the deliberations toward a resolution, one way or the other.  The almost contemptuous tone of the jury's note may indicate that the judge needs to take a more active role in moving them forward. (ph)

May 31, 2005 in HealthSouth | Permalink | TrackBack (0)

Thursday, May 26, 2005

Sounds Like the Scrushy Jury Feels the Frustration of the Law

The jury, unable to reach an agreement on the conspiracy count, has asked the judge whether they should move onto other counts.  (see WSJ here and Birmingham News here).  One feels their frustration in that according to these news reports they are asking the judge for a one word answer - yes or no.  We tell law students to think in terms of arguments, not answers, but the reality is that people in the real world want answers.

Addendum -  Birmingham News reports here that the judge did give a "yes" answer, but also "read a one-page written answer to jurors."

(esp)

May 26, 2005 in HealthSouth | Permalink | TrackBack (0)

Wednesday, May 25, 2005

Who Does Understand Conspiracy?

Perhaps one of the hardest subjects to teach in criminal law is the law of conspiracy. It is therefore not surprising that the Scrushy jury is having trouble understanding this particular aspect of the case. (see here and here) After the usual and unusual (see here) preliminary aspects of the  jury instructions, the court's instructions in this case then proceed through each count of the indictment, defining the elements that the government needs to prove in order to convict the defendant of these crimes.  Although the first count is conspiracy, the court tells the jury that she will describe this one after she has finished with the others, since conspiracy includes these other offenses. That's the first clue that this charge is complicated.

The accused, Richard Scrushy is charged with conspiracy under 18 U.S.C. s 371, the general conspiracy statute that tacks on an underlying offense to a general conspiracy charge.  Unlike some other conspiracy statutes in the federal code (RICO and drug conspiracies), this statute explicitly requires that the government prove an overt act on the part of the defendant.  Other conspiracy statutes often do not require proof of an overt act.  That's the second clue that this charge is complicated.

Conspiracy under 18 USC 371 is divided into two possible choices.  One possible approach is a conspiracy to defraud, where the deprivation is to the United States government.  Under this portion of the statute it is not necessary to show an underlying specific offense.  It is enough if there is a deprivation of the federal government.  In contrast, a conspiracy to violate a specific provision of the Code, such as wire fraud, etc. requires that the government prove the agreement was to commit the crime alleged.  In this case the alleged agreement was to commit numerous different crimes.  That's the third clue that this charge is complicated.

The government in federal cases has the option of charging both the underlying conspiracy and the specific offense, thus charging the defendant with two different crimes for the same exact conduct. Some states do not permit this double charging and the Model Penal Code prohibits it "unless the prosecution proves that the conspiracy involved the commission of additional offenses not yet committed or attempted." (Dressler's, Understanding Criminal Law).  So jurors are left to figure out not only the substantive offense on a jury form, but also whether there was an overt act regarding the individual conspiracy acts - even when the conduct is exactly the same as some of the specific counts they are considering. That's the fourth clue that this charge is complicated.

Couple that with 78 pages of jury instructions, and that number does not even include the numerous pages of verdict forms with explicit questions for the jury to answer-- and you ask why the jury is confused and wants explanations in lay people's terms?   

(esp_

May 25, 2005 in HealthSouth | Permalink | TrackBack (0)

Scrushy Trial Confusion - Not Surprising

Not surprisingly, the jurors deliberating in the trial of former CEO of HealthSouth, Richard Scrushy, are having difficulty reaching a verdict.  According to the Birmingham News here and Wall Street Journal here, the jurors in the case have sent a second note to the judge saying they are having difficulty reaching a consensus and asking for an explanation, this time in "layman's terms." We reported on the jury instructions here, and one can find the 78 pages of jury instructions here.  The problems may be focused on the conspiracy charge.

The trial was several months and there are a good number of counts including conspiracy, securities fraud, wire fraud, mail fraud, false statements, and yes- a first time ever SOX charge.

Everytime I teach the course in white collar crime, I see law students struggle to grasp the meaning of terms within some of these statutes.  For example, the instruction on wire fraud includes the following statement:

"To 'deprive another of the intangible right of honest services' means to violate a duty, or to cause another to violate his duty, to render honest services to HealthSouth, including its shareholders and its Board of Directors. The Government must prove beyond a reasonable doubt that Mr. Scrushy intended to breach a fiduciary duty, and that he foresaw that HealthSouth, including its shareholders and its Board of Directors, might suffer economic harm or risk economic harm as a result of that breach."

The instructions provide the following definition of "honest services":

"'Honest services' means the duty of an officer or employee of a company to act honestly and faithfully in dealings with the company, and to transact business in the best interest of the company, including a duty to disclose any material information on which the company, its shareholders, and Board members are entitled to rely in making business decisions."

One has to admit that these are not particularly easy concepts to understand. So it is not surprising that the jury in this case is asking for an explanation in "layman's terms."  The problem is, I'm not sure that any judge could do better in defining these statutes then what has already been stated.  Perhaps the problem is vagueness, ambiguity, and basic understandability - problems that Congress needs to correct.

And yes, I can't help but wonder  if there might be less criminal charges filed if the law were clearer.  More would understand exactly how to conform their conduct to the law and be on notice of what was legal and what was not.  Perhaps compliance could be enhanced with simplicity. 

(esp)

May 25, 2005 in HealthSouth | Permalink | TrackBack (0)

Sunday, May 22, 2005

Everything in Birmingham, Alabama Isn't Scrushy

While the jury will continue to deliberate on the charges pending against Richard Scrushy, after questioning the judge as to what happens if they all can't agree (see AP in Birmingham News here), another case has concluded.  This case involved charges against two former HealthSouth employees and the verdict was Not Guilty.   

The case against these two former HealthSouth executives included charges under the Foreign Corrupt Practices Act (FCPA) and related to a contract in Saudi Arabia.  The "not guilty" verdict was found despite the testimony of two individuals who testified under terms of a plea agreement they entered. (see here). 

Reporter Michael Tomberlin of the Birmingham News reports  that the "jury determined the money paid . . . could have been due to a legitimate consulting contract, as the defense had argued."   

The FCPA includes several affirmative defenses that allow the defense to present arguments such as the payments being legal in the country where made, or that the payments were "reasonable and bona fide expenditure[s]."

(esp)

May 22, 2005 in HealthSouth | Permalink | TrackBack (0)

Friday, May 20, 2005

Jury Instructions in Scrushy

Looks like the jury in the Scrushy case is asking the court a question (see Birmingham News here) which appears to relate to a conspiracy count.

It is not surprising to see a jury having some difficulty with jury instructions in a white collar case.  The instructions in this case are 78 pages in length (see here) and even includes a glossary of terms for the jury (pages 20-23).  One particular difference from street crime cases, found in some white collar matters involves the court speaking to possible civil collateral matters.  For example, in this case, the jury was instructed that:

"Related Civil Suits

As I instructed you at the beginning of the trial, your deliberations in this case concern only the government’s allegations that Mr. Scrushy violated certain laws and is subject to criminal penalties because of that conduct. This case is NOT about claims against Mr. Scrushy or HealthSouth by shareholders or employees who lost money because of the fraud. Those matters are civil matters, and many civil cases have been filed about what compensation, if any, those people are entitled to receive. Those cases, although arising from the fraud at HealthSouth, involve different legal issues and standards, and have a different burden of proof. Those civil cases have not been tried and will not be tried until some time after the end of this criminal case to protect all parties’ right to a fair trial here.

Please remember that the issue before you is whether the Government has proven beyond a reasonable doubt that Mr. Scrushy committed the criminal acts the Government has alleged in this case. Penalties for any violations so proven are provided by the law and, if necessary, will be addressed by the court after you reach a verdict. Any civil liability Mr. Scrushy may owe to shareholders or employees will be determined later under the civil laws that apply to those cases. Therefore, you should not consider in any way in your deliberations any concerns that you might have about losses sustained by shareholders or employees. Those claims will be addressed elsewhere."

(esp)

May 20, 2005 in HealthSouth | Permalink | TrackBack (0)

Thursday, May 19, 2005

Scrushy Will Not Be A Quick Verdict

Looks like the jury will not be reaching an immediate verdict in the Scrushy case.  According to the Birmingham News here , the jury has asked the court to replay tapes of FBI wired Bill Owens, former HealthSouth finance chief, talking with Scrushy.  Although Scrushy proclaims this as a positive sign, I would imagine that the government also considers this as positive.

Tapes can be very damaging evidence in a trial.  Sometimes it is not the content, but rather the language and description of events that can be a problem to the defense.  On the other hand, the concept of  a snitch wiring him or herself up to talk to someone who is unaware they are being taped is not particularly appealing to some juries.  There can also be problems related to the quality of tapes and their accuracy. 

(esp)

May 19, 2005 in HealthSouth | Permalink | TrackBack (0)

Scrushy - To The Jury

Scrushy case is off in the hands of the jury.  See here.

(esp)

May 19, 2005 in HealthSouth | Permalink | TrackBack (0)

Wednesday, May 18, 2005

Closing Arguments in Scrushy-Part II

The defense closing has been full steam ahead.  The Birmingham Alabama News reports the details here.  And as anticipated, a key issue is whether Scrushy "knew."  A second strong defense argument appears to be the - "holes" in the government case.

When a case comes down to what the defendant "knew,"  the credibility or lack thereof of the witnesses who testify can be crucial. And in this case the jury will not have Scrushy's testimony to balance against the witnesses who did in fact testify.  The jury also will not have a cross-examination of Scrushy to consider.  What they do have is witnesses who received "deals."   

Meanwhile the Wall Street Jrl reported on some of the ethics issues underlying the case here.  (esp)

May 18, 2005 in HealthSouth | Permalink | TrackBack (0)

Closing Arguments in Scrushy Trial-Part I

Closing arguments have started in the Scrushy trial with the prosecution calling the accused the "the quintessential micromanager."  (see AP in Birmingham News here)   Clearly the government is trying to demonstrate that Scrushy had the knowledge and intent required for the crimes charged.

CEOs reading and listening to this are likely troubled by this description.  On one hand the government is sending a message in some of the recent trials that you need to know what is going on in the company.  But here, knowing too much and being involved in too much is being held to be a problem. 

Obviously, some will argue that it all comes down to what is really happening in the company. That is, you need to know what is going on, but also need to correct improprieties that may be occurring, and most certainly you shouldn't be causing, participating in, or allowing illegalities to occur. It sounds simple, but for the CEO at the top, the job is becoming more difficult and the responsibilities greater.

(esp)

May 18, 2005 in HealthSouth | Permalink | TrackBack (0)

When White Collar Crime Trials Turn Into Cures for Insomnia

While the field of white collar crime is (sometimes) considered interesting, and perhaps even "sexy," the trials themselves can be quite laborious, as some of the recent well-known prosecutions have shown that the proceedings can drag on over months.  Tom Kirkendall has a terrific post (here) on his Houston's Clear Thinkers blog about the Enron Broadband Services trial in which the government now estimates that its case-in-chief will take an additional 7-10 days, much to the chagrin of the jurors already laboring through a tedious proceeding.  The trials in the HealthSouth (Scrushy) and Tyco (Kozlowski and Schwartz) cases both began in late January and are only now heading for the jury. For the Tyco case being prosecuted by the Manhattan DA, this is a significant improvement over the first trial, in which the prosecution case lasted for 18 weeks while this time it only took 13 weeks.  Last year, the prosecution of former senior executives of Cendant lasted for five months, and the jury deliberations went on for over a month.  The jury could not reach a verdict on one defendant in that case, former chairman Walter Forbes, and his retrial is scheduled to begin in September.  White collar cases are rarely simple affairs, and usually involve a number of documents and a stream of transactions that need to be placed in a larger context.  Yet, prosecutors sometimes become enamored with the details of a case, especially when they know the evidence so well that everything seems important, and interesting. Will these drawn out trials have a negative effect on the jury's view of the government's case? (ph)

                                                                         

UPDATE (5/18): Larry Ribstein has an interesting take on the travails of the Enron Broadband Services jury here.

May 18, 2005 in Enron, HealthSouth, Prosecutions | Permalink | TrackBack (0)

It's a Small World After All

As the prosecution of Richard Scrushy enters its final phase, with closing arguments set for today, the various sideshows should be coming to an end (see earlier post here on the investigation into a Wall Street Journal story on the dismissal of a juror).  Judge Karon Bowdre released a transcript of a hearing held in November 2003, shortly after the original indictment and her assignment to the case, in which she informed the counsel that she had a prior relationship with Scrushy's daughter and ex-wife from when their show horses were boarded together.  Indeed, Judge Bowdre's horse was in a stable owned by Scrushy and she met him on a few occasions.  Neither side took up her recusal offer, no doubt because the contacts were probably no more extensive -- and perhaps even much less -- than other federal district court judges in Birmingham.  Scrushy's prominence in the business community likely put him in contact, in one way or another, with most of the judges or members of their families.  The hearing transcript also has Judge Bowdre stating that she was not very happy with drawing the Scrushy prosecution, a feeling that has probably grown stronger since the trial started back in January. An AP story (here) discusses the hearing in November 2003. (ph)

May 18, 2005 in HealthSouth | Permalink | TrackBack (0)

Saturday, May 14, 2005

Commentary on Scrushy Case

Listen to co-blogger Peter Henning, as he comments on the Scrushy case here as part of a special on "Scrushy and Sarbanes-Oxley."

(esp)

May 14, 2005 in HealthSouth | Permalink | TrackBack (0)

Another Delay in Scrushy Case

According to the Birmingham News, there is another delay in the Scrushy trial (see here).  Looks like closing arguments will now be on Wed. And an even more interesting question is whether there has been an ethical violation by one of the attorneys in the case. It seems that the Wall Street Jrl article here, contains a statement  that refers to " two lawyers familiar with the case."  The issue involved the dismissal of a juror. It seems that the lawyers involved in the case are all under a gag order that prohibits them from discussing the case with the media. The Birmingham News reports that the judge assembled all the lawyers in the case to make certain that none had violated her order. And it sounds like none have done so. (see Birmingham News Report here)

This  case presents an interesting study of ethics in the courtroom. The judge has issued rulings that demonstrate a strict adherence to proper courtroom conduct.  See here and here.  And now we have the judge stopping to see if a court order has been violated.

There are also other interesting questions to ask here:  Doesn't it seem like lately in a good number of high profile white collar cases, jurors have been removed? Are the number of jurors in excess of the norms from past cases?  And if they are, why might this be happening?

(esp)

May 14, 2005 in HealthSouth | Permalink | TrackBack (0)

Thursday, May 12, 2005

Down to 48 in Scrushy (Including Forfeiture Counts)

With the defense resting without the testimony of Scrushy himself, it seems that the prosecution has decided not to present additional evidence.  But it is far from over yet.  According to the Wall Street Jrl here, the judge threw out two more counts against the accused. The Birmingham News here reports that it was an obstruction of justice charge and a SOX fraud charge that have been dismissed.  It seems that the judge also has some doubt about the money laundering charges, although so far they remain.  Money laundering, initially passed to combat drug trafficking, shows up more and more as add-on charges with white collar offenses.

There are also still closing arguments to come (starting Monday) and then 48 counts for the jury to consider.  The Birmingham News notes here that 12 of these are forfeiture charges that only come into play if the accused is convicted. The large number of charges can work both ways.  On one hand it can be difficult for the defense to overcome even with a strong case as the jury might come back with a compromise verdict.  On the other hand, the jury can think the prosecution went too far and refuse to accept anything.  Of course, there is always the possibility of guilty as to all counts.  Stay tuned.

(esp)

May 12, 2005 in HealthSouth | Permalink | TrackBack (0)

Wednesday, May 11, 2005

Wrong Again, Naturally!

If you've ever gone to the racetrack, you've seen the tout sheets that proudly display their winning picks for the day.  I am proud to say that I hit the daily double in predictions about testifying defendants: my prognostication back in January (no, I won't search for the link) was that Bernie Ebbers was less likely to testify and Richard Scrushy (much) more likely to take the stand.  Today, the defense rested in Scrushy's trial without calling him to testify. We all know how Ebbers came across to the jury in his testimony.  I won't hazard a prediction on how the jury will come out in Scrushy's case, although I did pick North Carolina in one of my NCAA pools (along with everyone else). (ph) 

May 11, 2005 in HealthSouth | Permalink | TrackBack (0)

Will Scrushy Be the Next Defense Witness?

The trial of Richard Scrushy has turned positively somnambulant over the past week as the defense called two expert witnesses to split hairs about the value of Scrushy's stock options and the effects of the fraud on HealthSouth's share price.  Things may have hit a new low on the interest meter on Tuesday when the defense spent the day reading into the record transcripts of two witnesses who testified last year at the SEC's asset freeze hearing but who have since asserted their Fifth Amendment privilege and refused to testify (with the government unwilling to grant immunity).  If you have ever had the joy of reading a transcript to a jury (grand or petit) you know just how boring the process can be..  That may change in the next day or so, however, as lead defense trial counsel James Parkman has indicated that Scrushy is prepped and ready to take the witness stand.  This will be the key to the defense because the other witnesses will be overshadowed by the direct and, more importantly, the cross-examination of the former CEO. 

Of course, Parkman has hinted that he may not call Scrushy to testify, no doubt trying to keep the government off-balance and creating the possibility that prosecutors would appear unprepared if he were to suddenly rest the defense case.  Given the particular spin on the "Honest-but-Ignorant CEO" defense being used here, which accuses HealthSouth's Five Guilty CFOs (and others) of actively lying to Scrushy for years and not just that the defendant did not pay attention to all that complicated accounting stuff (the Ebbers/Lay variant), it will be difficult for him not to testify to try to counter the extensive testimony about his involvement in all aspects of the company.  This just seems like a very difficult case to rely on the burden of proof, attacking witnesses who entered plea bargains, and accusations that everyone lied and engaged in a grand conspiracy to keep Scrushy in the dark without the defendant saying what he did and did not know.  The trial can move from something just this side of watching paint dry to an edge-of-the-seat drama once Scrushy takes the witness stand. An AP story here discusses the statements of Scrushy's counsel about the possibility of calling him to testify. (ph)

May 11, 2005 in HealthSouth | Permalink | TrackBack (0)