Sunday, October 3, 2010
Kiobel v. Royal Dutch Petroleum - the Second Circuit looks at whether a corporation can be held liable under the Alien Tort Statute (ATS). Circuit Judge Jose Cabranes in his decision asked "whether a plaintiff bringing an ATS suit against a corporation has alleged a violation of customary international law." He holds "[t]he concept of corporate liability for violations of customary international law has not achieved universal recognition or acceptance as a norm in the relations of States with each other. Inasmuch as plaintiffs assert claims against corporations only, their complaint must be dismissed for lack of subject matter jurisdiction." (citation omitted). Circuit Judge Leval, authoring a concurring opinion, agreed that the "claims pleaded against the Appellants must be dismissed," but noted that he could not join "the majority’s creation of an unprecedented concept of international law that exempts juridical persons from compliance with its rules. The majority’s rule conflicts with two centuries of federal precedent on the ATS, and deals a blow to the efforts of international law to protect human rights."
Commentary - One has to wonder whether this case can be used to show why corporate criminal liability should be treated differently on occasion from individual liability?
Norex Petroleum v. Acess Industries - the Second Circuit looks at "whether a United States federal court can properly hear a claim under the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. § 1961 et seq, arising from allegations of a conspiracy which primarily involves foreign actors and foreign acts." The court refers to the recent decision in Morrison v. National Australian Bank Ltd., 130 S. Ct. 2869 (2010) and holds, "that absent an express intention by Congress of extraterritorial effect, a statute applies only domestically." The court notes that "RICO 'is silent as to any extraterritorial application.'" The court states that "Morrison wholeheartedly embraces application of the presumption against extraterritoriality, finding that 'unless there is the affirmative intention of the Congress clearly expressed to give a statute extraterritorial effect, we must presume it is primarily concerned with domestic conditions.'" (citations omitted).
Commentary - As RICO is both a criminal and civil statute, will this mean that prosecutors can not apply RICO extraterritorially?
Wednesday, September 8, 2010
Guest Blogger - Dan Cogdell
As the Justice Department prepares a grand jury investigation of possible crimes involved in the BP oil spill, ex-CEO Tony Hayward is looking smarter for leaving this country for reasons beyond his lack of popularity.
Multiple indictments are likely to be sought, charges could reach well up the corporate ladder and British citizens who are not in this country when indicted might have protection from “double criminality,” which prevents extradition unless the same action is a criminal offense in both countries. It’s very possible the Justice Department will stretch the envelope and that could put their use of U.S. laws in a place not covered by European Union law.
There is no question the federal government is taking dead aim at environmental crimes in the BP oil spill or that the legal artillery is formidable. Federal prosecutors were already ramping up their environmental crime filings before the Deepwater Horizon started spewing oil into the gulf. Now, with massive public pressure, this could be the environmental version of the Enron prosecutions.
This week (8/23-8/27) the U.S. Coast Guard and the Interior Department are holding hearings in Houston to further investigate the BP disaster. Witnesses who invoke the Fifth Amendment may not look like team players, but they will be taking the smartest path.
Expect prosecutors to take fullest advantage of the powerful and far-reaching tools they have available. Expect them to issue more than just wrist slaps and corporate fines out of the Refuse Act, the Migratory Bird Treaty Act and the Clean Water Act. Expect them to seek jail time. There is a lot going in their favor.
Prosecutors will most assuredly rely on the “Responsible Corporate Officer Doctrine,” which allows Clean Water Act violations to be directed at even top corporate officers. Prosecutions under this theory have resulted in convictions of people who were not even at work sites and, in one case, not even working for a company but had “honorary power.” (See United States v. Hanousek, 176 F. 3rd 1116 (9th Cir. 1999), cert. denied, 528 U.S. 1102 (2000), and United States v Brittain, 931 F2d 1413 (10th Cir. 1991)) The “Responsible Corporate Officer Doctrine” may be the prosecutor’s ticket to tag BP’s hierarchical elite while soothing the related political nightmare currently facing the U.S. government.
In a Clean Water Act misdemeanor case, the government does not have to prove that anyone intentionally caused this enormous harm. Negligence is a comfortably lower bar for these prosecutors. And this isn’t BP’s first rodeo. A company culture that prosecutors contend encourages money-saving over safety has landed BP in the government’s sights time and time again, and will only bolster the prosecutor Howard Stewart’s efforts.
Whether BP employees or contractors believe they are targets or not, they must balance the idea of seeing justice done with protecting themselves and their employer. Taking the Fifth at this point may be the least popular but most prudent move.
Dan Cogdell is a Houston-based criminal defense attorney with Cogdell & Ardoin who has represented numerous clients in environmental and white-collar criminal cases.
Wednesday, August 18, 2010
Many of the recent corporate settlements with the government have focused on violations of the Foreign Corrupt Practices Act. This one is somewhat unique in that the $298 Million Dollars being forfeited are for violations of the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). A DOJ Press Releasestates that "[t]he violations relate to transactions Barclays illegally conducted on behalf of customers from Cuba, Iran, Sudan and other countries sanctioned in programs administered by the Office of Foreign Assets Control (OFAC)." The forfeiture was part of a deferred prosecution agreement with DOJ and the NY County District Attorney's Office.
Barclay's press release notes that it "worked closely and constructively with the US Authorities." They noted that "[t]he US Authorities have recognised Barclays substantial cooperation in the resolution." It sounds like 100,000 members of Barclay's staff will be going through training programs.
See also Mike Scarcella, BLT Blog, Judge Approves $298M Settlement Between DOJ, Barclays Bank; William McQuillen & Jesse Westbroook, Barclays Follows Citigroup With Court Rejection of U.S. Accord
Sunday, March 14, 2010
"I wanted to begin by reaching out to law professors who might be interested in signing on to a amicus brief in support of a petition for writ of certiorari. Max Huffman(Indiana) and I are writing an amicus brief in the case British American Tobacco v. United States. The cert. petition is part of a massive case brought by the U.S. against the tobacco companies. Various cert. petitions have been filed, including a government petition seeking recovery of a $280 billion disgorgement award. Details about the underlying case can be found on SCOTUSblog.
"The amicus brief that we are writing is on a narrow issue focused on how a court should interpret the geographic reach of federal law (the extraterritoriality question). The brief is being submitted to encourage the Court to grant certiorari and review the decision of the D.C. Circuit. The brief clarifies the history and application of the effects test and shows how that history bears upon the proper interpretation of whether Congress intended a statute to reach extraterritorial conduct. The brief does not take a position on the underlying merits: the federal government's use of RICO to prevent and restrain an alleged scheme to deceive American consumers about the health risks of smoking.
"If you are a law professor who would consider signing on to the amicus brief, please email me at email@example.com, and I can send you a draft. A draft will be completed Monday, and we hope to finalize within the next week or so (it's on a tight filing deadline). Because the effects test applies in a number of contexts (antitrust, securities, trademark, labor law, environmental law, criminal law etc.), the D.C. Circuit's decision, if left to stand, could have far-reaching implications. Legal commentators have also lamented the doctrinal incoherence in how courts approach legislative jurisdiction. This would be a good opportunity for the Court to clarify what is now a confused area of law. More information about the case and the amicus brief is included below.
"The petitioner's cert petition implicates the question of whether RICO applies to the overseas conduct of foreign corporations. The D.C. Circuit did not directly address whether Congress intended RICO to apply extraterritorially -- an issue on which the lower courts are divided. Instead, it found: (1) that when domestic effects are felt in the United States, regulation of foreign conduct of a foreign corporation does not implicate extraterritorial jurisdiction; and (2) that it need not decide whether RICO applies extraterritorially so long as the foreign conduct has substantial effects in the United States. Because the D.C. Circuit found a domestic effect, it presumed that Congress intended RICO to regulate abroad. The case raises interesting questions about the role of the presumption against extraterritoriality and the effects test. It implicates at least a three-way circuit split on how the courts determine legislative (prescriptive jurisdiction).
"The amicus brief attempts to show how the D.C. Circuit's opinion has added confusion to the existing circuit split. It also suggests that the D.C. Circuit erred by disregarding the presumption against extraterritoriality. The brief argues that the effects test sets the outer limits, under international law, of Congress's legislative jurisdiction, but does not serve as a canon of construction that overrides the presumption against extraterritoriality. The brief highlights how assuming legislation applies extraterritoriality can cause harm and undermine the meaningful development of international law.
"Max Huffman and I have previously written about these issues. Max's excellent article on the Foreign Trade Antitrust Improvements Act can be found here. I have written two pieces on international law, the effects test, and extraterritoriality. They can be found here and here."
Friday, November 27, 2009
How much time is appropriate for a white collar criminal? What if the crime results in death to individuals? Is it no longer a white collar crime? In China it can mean a death sentence. See Sharon LaFraniere, NYTimes, 2 Executed in China for Selling Tainted Milk
Tuesday, June 2, 2009
The US may not be the only government entity proceeding against lawyers, as the UK Financial Services Authority seems to also be heading in this direction. See James Lumley and Caroline Binham, Bloomberg, Lawyers at U.S. Firms Face FSA Insider-Trading Case
Sunday, April 19, 2009
The Ninth Circuit Court of Appeals in U.S. v. Lazarenko tells the story of an international money laundering, wire and mail fraud, and transportation of stolen property case that is much reduced from the original charges/convictions brought by the government. It started as a 53-count indictment, but after the government dismissal of some, and the court dismissal of others, what remained was 14 counts. This decision brings it even lower.
The facts of this case present a unique international flavor, in that Ukrainian law is the specified unlawful activity for the money laundering charges. The breadth of the money laundering statute is clearly reaching international levels when a US jury is being asked to determine whether there has been a violation of another countries laws. Although the Ninth Circuit upholds the money laundering convictions, the court does reverse the interstate transportation of stolen property count.
But the more fascinating part of this decision relates to the wire fraud counts. In reversing the convictions here, the court focuses on the "in furtherance" element of wire fraud. The court states:
"If the government's theory were correct, then it would be possible for an ordinary fraud to be converted into wire fraud simply by the perpetrator picking up the telephone three years later and asking a friend if he can store some fraudulently obtained property in his garage before the police execute a search warrant or later taking the proceeds of fraud and transferring them to another bank. The government's theory extends an already broad statute too far."
It is good to see a court requiring strict adherence to the "in furtherance" element.
(esp) (w/ a hat tip to Evan Jenness)
Monday, February 16, 2009
Fionnan Sheahan, Independent.ie, Government refuses to ask fraud squad to investigate (concerning investigations in banking)
Michael O'Regan, Irishtimes.com, Irish white-collar criminals should be 'in handcuffs'
Thursday, December 11, 2008
Fish & Richardson, PC has a client alert authored by Matthew L. Levine, William B. Mateja, and Franceska O. Schroder titled, "Justice Department Report Shows Enforcement of Export Controls," and has an opening statement - "The Justice Department announced last month that it had filed criminal charges against more than 145 defendants for its Fiscal Year 2008."
Sunday, November 23, 2008
An Exclusive LexisNexis Private Screening at AALS
It is estimated that one million people, mostly women and children, are trafficked around the world each year, lured into involuntary servitude and sexual slavery. The gross and unjust economic exploitation of vulnerable people is a direct result of an absence of Rule of Law. As a company that does business throughout the world, LexisNexis is committed to promoting the Rule of Law. We are proud to sponsor the Somaly Mam Foundation’s efforts to combat and raise awareness of this epic problem. A very effective way to raise awareness and promote action is the film "Holly". Please join us for a private screening of this film on Tuesday, January 6th from 7-9pm at the San Diego Marriott Hotel and Marina (Salon A, North Tower, Lobby Level). Appetizers and refreshments will be served before the film. More details will be available at the AALS booth. Seating at the theater is limited to a maximum of 200. Please RSVP by sending an email to: carrie.irvin@lexisnexis.
Wednesday, July 30, 2008
Back in November 2007, the blog (here) discussed the BAE investigation. Now, David Leigh, The Guardian has an article titled, "Law Lords: Fraud Office Right to End Bribery Investigation in BAE Case" that tells of a recent ruling that supports the right of the Serious Fraud Office (SFO) to cease an investigation. (see also Francis Gibb, Times Online, "SFO 'Courageous' in Dropping BAE Arms Probe ; Forbes -Thomson Financial,House of Lords clears SFO of 'unlawful' conduct in Saudi arms case) It seems the Serious Fraud Office made a decision to stop an investigation involving BAE. The media notes that the reason for terminating the investigation was based on considerations of public interest, but that many were not happy with this decision.
In the United States, prosecutors have enormous discretion in deciding who will be investigated and for what, if any, possible crimes. In considering these discretionary decisions, the DOJ gives deference to executive power. Thus, it is possible that conduct might not be fully investigated if the result would hurt international relations. The public has little recourse in the U.S. to contest the prosecutorial decision-making when an investigation ends.
Stopping an investigation can sometimes be detrimental to the person or entity being investigated. Never having the chance to prove innocence can hurt the person or entity. On the other hand, if the person or entity had possible criminal exposure, ceasing an investigation would likely be very welcomed.
(esp) (blogging from SEALS '08 in Palm Beach, Florida)
Thursday, July 17, 2008
Simon Bowers, Guardian.co.uk, White-collar crime: SFO boss plans to cut back on prosecutions and investigations - (The Serious Fraud Office is taking a different approach from the U.S. to efforts to combat white collar crime. It seems the SFO "plans to spend less money prosecuting and investigating in order to pursue alternative 'harm reduction' initiatives...")
Wednesday, May 21, 2008
A DOJ Press Release reports that "[a] federal grand jury in the Eastern District of Tennessee returned an 18-count indictment today charging [ ] a Professor Emeritus at The University of Tennessee, and Atmospheric Glow Technologies Inc. (AGT), a Knoxville-based technology company, with conspiring to defraud the U.S. Air Force and disclose restricted U.S. military data about Unmanned Aerial Vehicles (UAVs), or 'drones,' to foreign nationals without first obtaining the required U.S. government license or approval." It further states that "between January 2004 and May 2006, [the individual and company were alleged to have] engaged in a conspiracy to defraud the U.S. Air Force and transmit export-controlled technical data related to a restricted U.S. Air Force contract to develop plasma actuators for a munitions-type UAV, or 'drone,' to one or more foreign nationals, including a citizen from the People’s Republic of China. The Chinese national was a graduate research assistant at the University of Tennessee."
Monday, March 31, 2008
A DOJ Press Release tells of the plea entered by a defense department official in an espionage case related to China. Pleading to a "one-count criminal information charging him with conspiracy to disclose national defense information to persons not entitled to receive it, in violation of 18 U.S.C., Sections 793(d)," the press release states that "the criminal conduct spanned the time period of March 2007 to February 2008." The individual, "a Weapons Systems Policy Analyst at the Arlington, Va.-based Defense Security Cooperation Agency, an agency within the Department of Defense -- provided national defense information on numerous occasions to [ ] , a New Orleans businessman."
Monday, March 24, 2008
A press release of the Department of Justice states that an individual was "found guilty by a federal jury in May 2007 of conspiracy, two counts of attempting to violate export control laws, failing to register as an agent of a foreign government and making false statements to federal investigators." The sentence imposed was 293 months in prison. The press release also states that the defendant is "[a]n engineer who conspired with family members to export United States sensitive military technology to the People’s Republic of China." White collar cases will sometimes implicate military and defense issues.
Thursday, March 13, 2008
The House of Lords denied a request by the United States to extradite a defendant from England to face an antitrust charge related to price fixing in carbon products. The basis was the lack of dual criminality, that price fixing was not made a criminal offense in the United Kingdom until the adoption of the Enterprise Act of 2002. The Lords' decision (available below) rejected the argument that a conspiracy in restraint of trade was an offense at common law:
The common law recognised that an agreement in restraint of trade might be unreasonable in the public interest, and in such cases the agreement would be held to be void and unenforceable. But unless there were aggravating features such as fraud, misrepresentation, violence, intimidation or inducement of a breach of contract, such agreements were not actionable or indictable.
While the defendant cannot be extradited on the antitrust charge, he was also indicted in the United States on obstruction of justice charges related to destroying documents. For those counts, he argued that because price fixing was not a crime in England at the time of his conduct, then he could not obstruct an investigation of such a charge because there could not be an analogous criminal investigation in the U.K. On that issue, the Lords took a different approach:
Destroying documents to prevent them falling into the hands of the investigators may well affect the outcome of that investigation and is, indeed, intended to do so. So the mere fact that the result of the investigation in Mr Norris’ case was a charge of simple price fixing, which does not constitute an offence under English law, is no reason to hold that it would not have been an offence under English law to obstruct the progress of an equivalent investigation by the appropriate body in this country.
The Lords remanded the case to the trial court, however, to consider the defendant's argument that to extradite him now for conduct that took place years earlier would violate his rights under the European Convention on Human Rights. So there will be no extradition quite yet, and the lower court's decision would be subject to appeal, so it may be years before there is a final decision on extradition. (ph)
Tuesday, March 4, 2008
Saturday, February 23, 2008
Three former British investment bankers for NatWest Bank who were charged for their role in helping former Enron CFO Andrew Fastow dress up the company's balance sheet were sentenced to thirty-seven month prison terms. The so-called "NatWest Three" -- David Bermingham, Giles Darby, and Gary Mulgrew -- became a cause célèbre over their extradition from Great Britain under a new treaty between the U.S. and U.K. designed to facilitate the transfer of terrorist suspects. The appeal went to the House of Lords, which upheld the extradition order, and the three have been living in Houston for the past two years. Their guilty plea in November 2007 to wire fraud ended one of the few remaining cases arising from the Enron collapse. A Houston Chronicle story (here) discusses the sentencing.
As foreign nationals, the NatWest Three will be eligible to apply to the Department of Justice's International Prisoner Transfer Program to serve their terms in Great Britain. The DOJ website on the Program (here) notes that "[w]hen a prisoner is transferred to another country, the completion of the transferred offender's sentence is carried out in accordance with the laws and procedures of the receiving country, including those governing the reduction of the term of confinement by parole, conditional release, or otherwise." The Chronicle article points out that in England a defendant has to serve one-half the prison term and is then released on a type of probation. This is much less stringent than the federal sentencing law, which requires a prisoner sentenced to a term such as those given here to serve 85% of the time, i.e. about two and one-half years.
Among the criteria considered for authorizing a prisoner transfer are acceptance of responsibility, criminal history, seriousness of the offense, and ties to the two nations. Also considered is whether the prisoner will remain in the home country or return to the United States -- rest assured, the NatWest Three are unlikely to darken our shores again any time soon. In addition, according to the Bureau of Prisons Policy Statement (here) on transferring foreign prisoners, the transfer cannot be authorized until the prisoner pays any outstanding fine. In addition to the sentence in this case, U.S. District Court Judge Ewing Werlein ordered the three to repay the $7.3 million they received from the transaction that triggered the charges. While not a fine but restitution, I suspect there won't be a transfer until that money is repaid. Even then, the application process will take at least a few months to complete ,once they begin their prison terms, as the bureaucracy processes the requests. (ph)
Thursday, February 21, 2008
When you are the victim of a $7.2 billion fraud perpetrated by an employee, one would think that there would be a fair measure of self-criticism for not detecting the misconduct. French banking giant Société Générale issued an progress report (available below) on its internal investigation, called "Mission Green," into the losses caused by rogue trader Jerome Kerviel, based on the work of its General Inspection department -- which sounds like the equivalent of the internal auditors -- and reviewed by PriceWaterhouseCoopers. While Kerviel's unauthorized trades began in 2005 or 2006, they increased substantially in size in March 2007, and went undetected until mid-January 2008. That's nine months in which he took increasingly risky positions, estimated to total as much as 50 billion euros at the peak.
The obvious question is how Kerviel could get away with trading such huge amounts when he was a fairly low-level trader dealing in a narrow range of market indexes. The progress report is not particularly critical, making Kerviel's trading the result of what almost seems like just minor oversight glitch:
The General Inspection department believes that, on the whole, the controls provided by the support and control functions were carried out in accordance with the procedures, but did not make it possible to identify the fraud before January 18th 2008. The failure to identify the fraud until that date can be attributed firstly to the efficiency and variety of the concealment techniques employed by the fraudster, secondly to the fact that operating staff did not systematically carry out more detailed checks, and finally to the absence of certain controls that were not provided for and which might have identified the fraud. The Inspection General department has refrained from drawing any conclusions at this stage regarding the responsibility of the front office managers supervising the fraud's author, given the ongoing legal investigation which has not enabled it to interview all those concerned. At this stage of the investigations, there is no evidence of embezzlement or internal or external complicity (i.e. the existence of a third party who knowingly assisted the fraudster to conceal his positions).The investigations are continuing, in particular, to cover a wider area than the activities of the author of the fraud. [Italics added]
Société Générale may give itself only a B- in the internal controls department, but it's hard to see any oversight system that misses such a large amount of unauthorized trading for nearly nine months as anything other than a abject failure. The bank continues to maintain that Kerviel acted alone, and to this point it hasn't identified any accomplices nor even any theft or personal enrichment from the trading. Kerviel admitted his role in the transactions, but asserts that there were warning signs about what he was doing that were ignored by his superiors, or perhaps even worse, they acquiesced in his conduct because at one point he had generated profits for Société Générale of over 1 billions euros. An International Herald Tribune story (here) discusses the report. (ph)
Sunday, February 3, 2008
A DOJ Press Release tells that "the director of a Singapore-based aviation company was arraigned [this past week] in federal court in Brooklyn on charges that she illegally exported controlled U.S. military aircraft components and shipped commercial aircraft components to Iran."
Defendants were "indicted with one count of conspiring to export aircraft parts to Iran and 15 counts of exporting aircraft parts to Iran, in violation of the International Emergency Economic Powers Act (IEEPA); one count of conspiring to export defense articles without a license and two counts of exporting and attempting to export defense articles without a license, in violation of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR); and one count of conspiring to launder the proceeds of the unlawful export of defense articles."