Thursday, July 7, 2016

The Law Behind the FBI’s Decision to Recommend No Charges in Clinton Email Investigation

Guest Bloggers Ziran Zhang & Eugene Gorokhov (Burnham and Gorokhov, PLLC):

Recently, Professor Podgor wrote two informative posts covering FBI Director James Comey’s public statement about the FBI’s year-long investigation into Hillary Clinton’s use of private e-mail servers, its recommendation that no criminal charges be filed (here), and AG Loretta Lynch’s acceptance of the FBI’s recommendation (here). Professor Podgor noted many unusual aspects about Director Comey’s statement, including the fact that the FBI does not usually publicize its recommendations.  The short version of Director Comey’s speech is that the FBI did find “evidence of potential violations of the statutes regarding the handling of classified information,” but is recommending against criminal prosecution for a variety of reasons.  This post examines two questions: (1) Is Director Comey right when he says that the evidence indicated potential violations of federal laws?  (2) if so, why is the FBI recommending against prosecution? 

What laws did Hillary Clinton’s conduct potentially violate?

While the FBI’s investigation undoubtedly looked at many federal statutes, the one that Director Comey referenced in his statement appears to be 18 U.S.C. 793(f), which makes it a federal crime for anyone  “through gross negligence" to permit  classified information "to be removed from its proper place of custody or delivered to anyone in violation of his trust, or to be lost, stolen, abstracted, or destroyed[.]”

In this case, classified information was undoubtedly removed from its proper place of custody.  According to Director Comey, of the approximately 30,000 emails provided by Hillary Clinton, 110 contained classified information at the time they were sent or received. (Another 2,000 emails were later determined to contain classified information, although those were not formally classified at the time they were sent or received).  A small number of emails also contained documents with markings that indicated the presence of classified information. Comey noted that “none of these e-mails [containing classified information] should have been on any kind of unclassified system,” let alone “unclassified personal servers not even supported by full-time security staff[.]” 

Whether the act of communicating classified information through personal servers constitutes “gross negligence” is a more difficult question to answer. The Supreme Court has called “gross negligence” a “nebulous” term “lying somewhere between the poles of negligence at one end and purpose or knowledge at the other[.]” Farmer v. Brennan, 511 U.S. 825, 836 n.4 (1994).

Reported decisions of prosecutions under 18 U.S.C. § 793(f) are rare. In one case, a Marine Corps intelligence officer pled guilty to a violation of § 793(f) where he inadvertently packed classified documents into his gym bag along with his personal papers and took the classified documents home. United States v. Roller, 42 M.J. 264 (CAAF 1995). Former FBI Agent James J. Smith, who had an affair with suspected Chinese spy Katrina Leung, was also charged under this provision for taking classified documents to Leung’s home, resulting in Leung covertly copying the documents without Smith’s knowledge.  Smith later pled guilty to a charge of false statements.

Director Comey opined that the use of a private server was “extremely careless” and that any “reasonable person” in Hillary Clinton’s position would know better than to use an unclassified system to discuss classified information. A jury looking at the full evidence, including the actual content of the emails and the context in which these events occurred, may have agreed with Comey, or may have decided that although negligent, Clinton’s conduct did not rise to gross negligence.

Why did the FBI recommend that no criminal charges be filed? 

Director Comey’s primary reason for not recommending criminal charges in this case appears to be the lack of precedent for criminal charges in similar cases in the past.  According to Director Comey, “[a]ll the cases prosecuted involved some combination of: clearly intentional and willful mishandling of classified information; or vast quantities of materials exposed…; or indications of disloyalty to the United States; or efforts to obstruct justice.” Whereas “in similar circumstances,” “individuals are often subject to security or administrative sanctions”

While the decision to prosecute is ultimately up to the prosecutor, what some may not realize is that in federal cases, the prosecutor’s decision to bring criminal charges is governed by the United States Attorney’s Manual. USAM 9-27.000, titled “Principles of Federal Prosecution” contains the DOJ’s written guidance to prosecutors about decisions to initiate or decline prosecution. Specifically, 9-27.220(A) instructs prosecutors to file criminal charges in all cases where there is a violation of federal law and the evidence is sufficient to obtain a conviction, unless one of three grounds exist:

  • Lack of a substantial federal interest;
  • The defendant is subject to prosecution in another jurisdiction; or
  • The existence of adequate non-criminal alternatives to prosecution.

In this case, both the first and third grounds are potential reasons that a federal prosecutor can rely on to justify not bringing any charges. 

The first ground, “substantial federal interest,” is a composite factor that weighs a number of considerations including federal law enforcement priorities, the nature and seriousness of the offense, the deterrent effect of prosecution, the personal characteristics of the individual, and the probable sentence upon conviction.  Nationally, the DOJ’s number one law enforcement priority is protecting U.S. citizens from national security threats.  See Memorandum re: Federal Prosecution Priorities. However, a prosecutor can potentially justify declining prosecution based on Hillary Clinton’s personal characteristics and the nature and seriousness of the offense.

The third ground, the existence of adequate non-criminal alternatives, appears to have been the one that Director Comey relied upon.  In this case, for example, Hillary Clinton could potentially face security and administrative sanctions such as revocation of her security clearance, and such a sanction may be “adequate” in light of past practice. (How such a sanction would work if Clinton is elected President, however, is a question we can’t answer). 

Concluding remark

The FBI’s investigation uncovered sufficient evidence for a reasonable jury to find that Hillary Clinton did violate the law. However, the federal government does not (and should not) bring criminal charges in every case. If Director Comey is right that individuals in similar circumstances in the past were only subjected to administrative sanctions, then its decision to recommend no prosecution in this case may be the right one. 

(ZZ & EG)

July 7, 2016 in Investigations, Prosecutions, Prosecutors | Permalink | Comments (0)

Comey's Pronouncement and Lynch's Recusal Both Inappropriate

The declination to prosecute Hilary Clinton and the public announcement of that decision by FBI Director Comey, were, in my opinion, wholly proper.  When an investigation of a public figure receives widespread notice, it should be incumbent on the prosecuting agency to make public a decision not to prosecute.

However, the severe criticism of Ms. Clinton  by Director Comey was inappropriate.  I do not know enough to assess the accuracy or fairness of his report and do not challenge it.  However, the FBI (either acting, as here, as the surrogate prosecutor, or otherwise) should not, in the absence of sufficient evidence to recommend charges,  issue a public declaration of fault in any case, let alone one that affects a presidential election.  By his pronouncement, Comey, obviously knowingly, did so.  That he had no business doing.

The Department of Justice is also at fault.  Attorney General Lynch should never have agreed to meet with Bill Clinton, the husband of the target of a criminal investigation under her supervision, even if he were a past President and even just to exchange pleasantries.  I do understand how Attorney Lynch, a classy and courteous person, would have been reluctant to refuse to meet a past President, but propriety should have trumped gentility.   Worse, she never should have abdicated the responsibility of the Department of Justice  to determine whether to prosecute.  If she felt she were or appeared to be personally tainted by the meeting, she should at most have recused herself and left the decision to her deputies, not have turned it over to an investigating agency.

The American system of justice essentially places the responsibility of investigation on the investigators and the decision to prosecute based on the results of that investigation to the prosecutors.  Effective prosecution often involves an integration of and input from both agents and prosecutors, but the prosecutors still should be the sole and final deciders of whether to prosecute.  There is an inherent bias on the part of investigators, wanting a positive and public result of their work, in favor of arrest and prosecution.  The prosecutors, more knowledgeable about the law and the workings of the court system than the investigators, should act as  a buffer and, giving regard to the investigators, make the determination whether to prosecute.  That is an important check in the criminal justice system's checks and balances.  I hope this unusual situation does not serve as a precedent.

July 7, 2016 in Celebrities, Current Affairs, Government Reports, Investigations, Prosecutors | Permalink | Comments (0)

Wednesday, July 6, 2016

AG Loretta Lynch's Statement Contrasted With FBI Director Comey's Statement

Attorney General Loretta Lynch issued a statement today regarding the DOJ's decision to close the investigation without charges. (see here). It's 3 1/2 lines shows the proper way to handle a declination of prosecution.  It simply tells the individual and public that the investigation is over and that there will be no charges.

Unlike FBI Director Comey's comments it does not state opinions and hypotheticals.  Further, it does not carelessly accuse a person of conduct that they did not and will not have an opportunity to refute in a legal forum. One also has to give AG Lynch credit for removing herself from the decision-making function and leaving this matter to career prosecutors.  

From the perspective of process - Attorney General Loretta E. Lynch gets an "A" in my book.

(esp)

July 6, 2016 in Investigations, Prosecutions, Prosecutors | Permalink | Comments (0)

Tuesday, July 5, 2016

Comey's Statement on Hillary Clinton's Use of E-Mail

FBI Director James B. Comey spoke this morning regarding the FBI's investigation of Hillary Clinton's Use of a Personal E-Mail System.  See his remarks (here), which are unique in many ways:

1.  Most investigations do not receive a formal statement saying that no charges will be recommended.  ("we don’t normally make public our recommendations to the prosecutors"). Most individuals are left hanging without receiving a statement such as this or a statement from DOJ.  Often folks may go through a lengthy investigation and but for the statute of limitations, they may never know it was over.

2.  By not recommending that she be charged, but by stating negative comments about her actions (calling her "careless") she is left without the opportunity to demonstrate the truth or falsity of these statements.  That said, having a statement that their recommendation to DOJ is that she not be indicted, is probably appreciated.

3.   It is important to remember that an investigation such as this is one-sided -  that is, the government is running the show. The FBI has no obligation to review or consider exculpatory evidence and one has to wonder if they shared what they found with defense counsel and gave them the opportunity to respond after they had reviewed the specific documents in question. Government investigations typically are not a give and take with defense counsel - they are the government accumulating as much evidence as they can to indict an individual and one only hears from the defense if and when there is a trial.

4. Is it the FBI's role to speak about hypotheticals when they have no hard facts?  For example, FBI Director Comey stated - "It could also be that some of the additional work-related e-mails we recovered were among those deleted as 'personal' by Secretary Clinton’s lawyers when they reviewed and sorted her e-mails for production in 2014."

5. The accusations about what her lawyers did were unnecessary statements that had no place in this FBI statement.  The statement that the "lawyers cleaned their devices in such a way as to preclude complete forensic recovery,"  seems like a proper  action on the part of counsel - especially since they are dealing with the alleged classified documents.

6.  Their statement about deficiencies in the security culture of the State Department ("While not the focus of our investigation, we also developed evidence that the security culture of the State Department in general, and with respect to use of unclassified e-mail systems in particular, was generally lacking in the kind of care for classified information found elsewhere in the government.") - To rectify this problem clearly takes money -  will Congress authorize money for better technology and security within the State Department?  

My Conclusions - It sounds like FBI Director James Comey's office did an extensive investigation and concluded that criminal charges are not in order - as it should be when a mens rea is lacking. It would be nice if this special instance of telling the individual that they are recommending against indictment were used in all cases when they have a recommendation for no indictment. When they do provide an announced recommendation of non-indictment, the FBI should limit their statement to just that. There is no need to tarnish a person's reputation in the process - especially when there is no concrete evidence to support the hypotheticals. Finally, becoming technologically savvy is difficult as the technology is constantly changing.  Perhaps we need to re-examine our technological infrastructure across the board with the government -something we should have learned post-Snowden.  Perhaps this can be put on the agenda of the next President.

(esp)

July 5, 2016 in Government Reports, Investigations, News | Permalink | Comments (0)

Tuesday, June 21, 2016

Abramowitz Decries Effect of Corporate Prosecutions on Employees

Elkan Abramowitz, one of the best and most-respected white collar crime defense practitioners in the nation, last week received the Robert Louis Cohen Award for Professional Excellence from the New York Criminal Bar Association.   At the dinner at which he received the award, Mr. Abramowitz spoke thoughtfully about the pernicious effect of prosecutions of corporations, particularly on the rights corporate employees. 

The recent focus on perceived corporate wrongdoing, he said, "has seriously impeded the rights of individual employees caught up in the web of ... corporate investigations."  He pointed out that the "simple threat"of a corporate investigation has forced corporations "to conduct internal investigations upon any suspicion of wrongdoing" and, because corporations rarely, if ever, can risk going to trial, they will end up disclosing alleged criminality to the prosecutors to work out the best deal they can.   The results as to the corporations themselves are non-prosecution or deferred prosecution agreements "which typically give the prosecutors much more power over the corporation than [they] would have if the corporation were actually convicted of a crime in court."  The results as to corporate employees are at the insistence of prosecutors as a condition for a deal with the corporation that "the heads of individual employees be handed to them on a silver platter." 

Mr. Abramowitz made a distinction between investigations by prosecutors who "hopefully most of the time" investigate without bias toward a particular result and corporations which in an internal investigation "are incentivized to find out and expose criminality."   Thus, corporate employees are explicitly made to understand that if they refuse to testify they will be terminated and often told that their legal fees will not be paid if they chose to defend themselves."  And, since these individuals accordingly sometimes choose not to hire counsel and to talk to internal investigators, the information presented to prosecutors by corporations often provides "more ammunition" than an investigation conducted by the FBI, police or another federal agency.

The results are, Mr. Abramowitz said, cases against individuals "that might never have been brought without the corporation's coercion."   Thus, he believes, "Whatever social utility is believed to be served by this system,..this outsourcing of a purely governmental function is extremely dangerous and [causes] great injustices to individuals working in companies under investigation."

Mr. Abramowitz's observations of the systemic changes, most obviously the role of corporations and their special prosecutors (who, interestingly, he did not mention specifically) as quasi-prosecutors, are right on the mark.   And, he is quite correct that the prosecution of individuals coerced into giving up their rights to silence and to counsel in response to their employer's demands "flies in the face of the restraining values of our society as expressed in the Bill of Rights."  However, I suspect that most prosecutors and many others (including those liberals and others who like Bernie Sanders are still complaining that no individuals from the big institutions involved in the 2008 financial crisis were jailed) would not say that on balance the addition of corporations to those ferreting out financial crime is a negative one.  After all, that addition presumably has or will result in more indictments, convictions, and jail sentences of individuals who have committed financial crimes.  While I too bemoan the incursion into fundamental individual rights as a result of corporate prosecutions, I suspect Mr. Abramowitz and I are in the minority.

 

June 21, 2016 in Attorney Fees, Defense Counsel, Deferred Prosecution Agreements, Investigations, Prosecutions, Prosecutors | Permalink | Comments (0)

Monday, June 13, 2016

The Baylor Findings of Fact: All Too Transparent.

When I first read the Baylor University Board of Regents FINDINGS OF FACT, it was immediately obvious that these were not factual findings at all, not in any sense that lawyers would recognize. They were normative conclusions almost completely unsupported by detailed facts, particularly with respect to the individuals who have been publicly shamed by the Board. Say what you will about Pepper Hamilton's report on the Penn State Jerry Sandusky debacle, that report at least contained a detailed, chronological factual narrative. Not so with Baylor's findings, which were promulgated by the Regents under Pepper Hamilton's guidance. Want to find out what Ken Starr did to warrant removal? His name is nowhere mentioned in the findings. Is Starr mentioned by title? Yes, the President and Chancellor are referenced exactly three times. "A Special Committee of the Board of Regents, on behalf of the University, accepted the President and Chancellor’s recommendation to engage Pepper in order to ensure objectivity, and Pepper was provided with unfettered access to personnel and data." Wow. What an indictment! It was Starr who recommended, almost immediately after learning about Baylor's problems, that Pepper Hamilton be hired in the first place. "Pepper interviewed witnesses across multiple departments, including the President’s Office..." There you go! Fire the bastard! Pepper Hamilton was given unfettered access to his office. How about Coach Art Briles? Surely his dastardly deeds would be dealt with in the findings. But Briles is not mentioned by name or by his Head Coach title. There are six references to "coaches" in the Findings, but no way of telling if Briles is one of them or even knew or approved of what the others did.

So I was all set to call for releasing the real report, the Pepper Hamilton Report of Internal Investigation. You know what I'm talking about, right? The report that law firms produce after conducting internal investigations of purported misconduct for companies and other entities? The kind of report that companies typically do NOT release except to DOJ, but that universities, such as Penn state, do? But then I read the Board of Regents' Statement posted on Baylor's website and realized that there is no report! That's right folks, the Board met with Pepper Hamilton from time to time and was "updated" with factual findings. "Over the course of the investigation, a special committee of the Board of Regents was periodically updated on Pepper's work. Additionally, in early May, Pepper presented their findings of fact and recommendations to Board leadership in Philadelphia and was onsite to brief the full Board during its May meeting in Waco. While no written report has been prepared, the Findings of Fact reflect the thorough briefings provided by Pepper and fully communicates the need for immediate action to remedy past harms, to provide accountability for University administrators and to make significant changes that can no longer wait." Translation: the Pepper Hamilton investigation was structured in such a way that no written report would be generated. This was obviously done for reasons of litigation and public relations strategy.

Now the Baylor Board can pretend that it has issued detailed findings admitting its sins in the interest of transparency. It isn't true. There is not one fact in the findings justifying the firing of Starr, or even Briles for that matter. There isn't any information about any improprieties that may or may not have been committed by Board members themselves. The conflict of interest here is palpable, as the Board is currently being sued and can probably expect more suits in the future. Do we really think that no member of the Board ever intervened in any manner in Baylor's athletic programs?

There is only one action the Baylor Board can take to assure its students and alumni that the full facts of the scandal, and the justifications for the Board's actions and inactions in the wake of its findings, are set out for all to see. Release the factual materials actually presented to the Board and/or its subcommittee by Pepper Hamilton, with appropriate redactions to protect any victims. Release all interview summaries. Release all PowerPoint presentations. In the alternative, Pepper Hamilton can be directed to draft the report it should have done in the first place. Only then can the Baylor Board say that it has come clean.

(wisenberg)

  

 

 

June 13, 2016 in Current Affairs, Investigations, News | Permalink | Comments (0)

Saturday, April 9, 2016

Settlement by Trump Required Alleged Victims to Tell DA They Don't Want to Assist

The New York Times reported on Tuesday, April 5 that Donald Trump, contrary to his asserted practice of refusing to settle civil cases against him, had settled a civil fraud suit brought by disgruntled purchasers of Trump SoHo (New York) condos setting forth fraud allegations that also were being investigated by the District Attorney of New York County ("Donald Trump Settled a Real Estate Lawsuit, and a Criminal Case Was Dismissed").  The suit alleged that Trump and two of his children had misrepresented the status of purchaser interest in the condos to make it appear that they were a good investment.

What made this case most interesting to me is language, no doubt inserted by Trump's lawyers, that required as a condition of settlement that the plaintiffs "who may have previously cooperated" with the District Attorney notify him that they no longer wished to "participate in any investigation or criminal prosecution" related to the subject of the lawsuit.  The settlement papers did allow the plaintiffs to respond to a subpoena or court order (as they would be required by law), but required that if they did they notify the defendants.

These somewhat unusual and to an extent daring conditions were no doubt designed to impair the District Attorney's investigation and enhance the ability of the defendants to track and combat it, while skirting the New York State penal statutes relating to bribery of and tampering with a witness.  The New York statute relating to bribery of a witness proscribes conferring, offering or agreeing to confer a benefit on a witness or prospective witness upon an agreement that the witness "will absent himself or otherwise avoid or seek to avoid appearing or testifying at [an] action or proceeding" (or an agreement to influence his testimony). Penal Law 215.11 (see also Penal Law 215.30, Tampering with a Witness).  Denying a prosecutor the ability to speak with prospective victims outside a grand jury makes the prosecutor's job of gathering and understanding evidence difficult in any case.  Here, where it is likely, primarily because of a 120-day maximum residency limit on condo purchasers, that many were foreigners or non-New York residents and thus not easily served with process, the non-cooperation clause may have impaired the investigation more than it would have in most cases. 

A clause requiring a purchaser to declare a lack of desire to participate, of course, is not the same as an absolute requirement that the purchaser not participate.  And, absent legal process compelling one's attendance, one has no legal duty to cooperate with a prosecutor.  It is questionable that if, after one expressed  a desire not to participate, his later decision to assist the prosecutor voluntarily would violate the contract (but many purchasers would not want to take a chance).  The condition of  the contract thus, in my view,  did not violate the New York statutes, especially since the New York Court of Appeals has strictly construed their language.  People v. Harper, 75 N.Y.2d 373 (1990)(paying victim to "drop" the case not violative of statute).

I have no idea whether the settlement payment to the plaintiffs would have been less without the condition they notify the District Attorney of  their desire not to cooperate.  And, although the non-cooperation of the alleged victims no doubt made the District Attorney's path to charges more difficult, the facts, as reported, do not seem to make out a sustainable criminal prosecution.  Allegedly, the purchasers relied on deceptive statements, as quoted in newspaper articles, by Mr. Trump's daughter Ivanka and son Donald Jr. that purportedly overstated the number of apartments sold and by Mr. Trump that purportedly overstated the number of those who had applied for or expressed interest in the condos,  each implying that the condos, whose sales had actually been slow, were highly sought.  A threshold question for the prosecutors undoubtedly was whether the statements,  if made and if inaccurate, had gone beyond acceptable (or at least non-criminal) puffing into unacceptable (and criminal) misrepresentations.

Lawyers settling civil cases where there are ongoing or potential parallel criminal investigations are concerned whether payments to alleged victims may be construed by aggressive prosecutors as bribes, and often shy away from inserting restrictions on the victims cooperating with prosecutors.  On the other hand, those lawyers (and their clients) want some protection against a criminal prosecution based on the same allegations as the civil suit.  Here, Trump's lawyers boldly inserted a clause that likely hampered the prosecutors' case and did so within the law.  Nonetheless, lawyers seeking to emulate the Trump lawyers should be extremely cautious and be aware of the specific legal (and ethical) limits in their jurisdictions.  For instance, I personally would be extremely hesitant to condition a settlement of a civil case on an alleged victim's notifying a federal prosecutor he does not want to participate in a parallel federal investigation.  The federal statutes concerning obstruction of justice and witness tampering are broader and more liberally construed than the corresponding New York statutes.

 

April 9, 2016 in Celebrities, Civil Litigation, Current Affairs, Defense Counsel, Fraud, Investigations, Legal Ethics, News, Obstruction, Prosecutors | Permalink | Comments (0)

Monday, March 21, 2016

New Paper re Internal Investigations and Privilege

I have just published a new article in the Compliance Elliance Journal entitled "Internal Investigations and the Evolving Fate of Privilege."  

Abstract

In 1981, the United States Supreme Court delivered a landmark ruling in Upjohn Co. v. United States. The decision made clear that the protections afforded by the attorney-client privilege apply to internal corporate investigations. This piece examines the fundamental tenets of Upjohn, discusses some recent challenges to the applicability of privilege to materials gathered during internal investigations, and considers the manner in which the international nature of modern internal investigations adds complexity and uncertainty to the field.

The article is available for free download here

(LED)

March 21, 2016 in International, Investigations, Privileges, Scholarship | Permalink | Comments (0)

Friday, November 27, 2015

Extortion, Government Style.

If you  want to know why companies settle with the government, even when they aren't guilty of anything, look no further than Ally Financial LLC's $98 million "no admit or deny" settlement with the Consumer Financial Protection Bureau (CFPB) over alleged racial bias in auto lending. As Wednesday's Wall Street Journal reports here, the CFPB chose questionable statistical methods, had questionable legal authority, and used the threat of unfavorable action by the Federal Reserve and the FDIC in a wholly separate matter, to coerce a settlement. Ally was eager to receive approval from the Fed and FDIC to convert to holding company status, in order to avoid having to shed some of its business units. The Fed was only too happy to oblige CFPB in its bullying tactics. As an internal CFPB memo makes clear, a Fed finding of improper discrimination would "most likely result in the denial of holding company status," but the Fed "also indicated that if Ally takes prompt and corrective action, it would consider such a factor in its determination."   The House Financial Services Committee Report, Unsafe at any Bureaucracy, carefully documents CFPB's sordid tactics . Incredibly, CFPB referred the matter to DOJ. This kind of stuff happens, and dictates business litigation strategy with the government, quite often. So, when people complain that the failure to prosecute corporate insiders is inevitably suspicious in light of large civil settlements, I always want to know the industry, the company and other important details.

(wisenberg)

 

November 27, 2015 in Civil Enforcement, Congress, Current Affairs, Government Reports, Investigations, News | Permalink | Comments (0)

Tuesday, November 24, 2015

Yates Memo Hot Topic

Sally Yates' new DOJ Memo has been a hot topic. (see here, here, here).  Check out Sara Kropf's terrific entry here reporting and questioning the Yates Memo influence in a recent indictment of a corporate employee. 

But one wonders if this DOJ claim that they have changed their policy is anything new. Has DOJ forgotten Enron and Jeff Skilling, who remains incarcerated?

My take continues to be that all the Yates really does is make it official that companies have to throw individuals under the bus  (see here). And knocking NPAs and DPAs is not the answer.  Yes, the terms within these documents are often offensive. (see here)  But getting compliance from companies and changing corporate culture is an important goal and one needs to remain focused on how best to achieve this goal.  Working with companies, as opposed to against companies, is the best way to foster compliance.  Likewise, pitting individuals within a company against the entity and the entity's counsel is not the answer.

(esp) 

November 24, 2015 in Deferred Prosecution Agreements, Investigations, News, Prosecutions, Prosecutors | Permalink | Comments (0)

Wednesday, October 28, 2015

The Growing Role of Technology and Big Data in White Collar Cases

Three recent articles confirm the growing significance of technology and big data to both the general practice of law and the field of white collar crime in particular.

The first article, appearing in Enterprise Tech, is entitled Big Data Plays Arresting Role in White Collar Crime.  The piece discusses the manner in which analytical tools and big data are making it easier for law enforcement to discover and understand fiscal anomalies.

The second article, appearing earlier this year in Forbes, reiterates the role of big data in white collar investigations.  In the article, entitled Analysis of Big Data Leads to Big Arrests in Medicare Part D Fraud, Walt Pavlo explores the important role of technology in the arrest of 243 people in an alleged $712 million scheme.

The final article, appearing in the ABA Journal, is entitled What the Jobs Are: New Tech and Client Needs Create a New Field of Legal Operations.  This article is not about white collar crime.  However, it does offer a detailed discussion of the use of technology and data to increase the efficiency of law firm management and the provision of legal services.  When read in combination, the three pieces provide a fascinating glimpse into the future of legal practice and the important role technology and big data are already playing in a changing landscape. 

(LED)

October 28, 2015 in Investigations, News, Science, Web/Tech | Permalink | Comments (0)

Wednesday, October 7, 2015

Making the Yates Memo Work: Two Reform Proposals

The Yates Memo is all the rage. DOJ is saber-rattling at various CLE events and bloggers are holding forth on what it actually means. But wanting isn't getting. The question remaining is how to make sure that the company coughs up, or an investigation reveals, wrongdoing that occurred at the highest levels.

Here are two modest reform proposals I offer free of charge to the DOJ and FBI, based on my own experience defending individuals and. far less often, companies under investigation.

1. Modify Standard DOJ Proffer Letters. Mid-level corporate employees often possess very damaging information about those higher up the food chain. But these same mid-level employees can themselves be the subjects or targets of DOJ. At some point the employees are given the opportunity to proffer in front of the lead prosecutor. But the standard DOJ Proffer Agreement is riddled with loopholes. Assume that the proffer session does not result in a plea or immunity agreement and the employee is indicted. The primary loophole allows the government to use the proffered statement against the client at trial if the statement is in any way inconsistent with the defense presented. That's not much protection, which is why most seasoned white collar attorneys will not let a client with exposure proffer in front of DOJ. Thus, DOJ loses valuable information. DOJ should offer true non-Kastigar immunity for the information revealed in its proffer sessions. Nothing is lost by doing this, but much can be gained.

2. Demand Independent Internal Investigations. The first question every prosecutor should ask the corporation's outside attorney who is conducting an internal investigation or tendering an internal investigation report to DOJ is, "What is your reporting chain?" If outside counsel is not reporting to the Audit Committee or some other independent entity within the corporation there is absolutely no assurance that culpable upper management will be identified. Management can edit the final report and its conclusions to protect top executives and throw lower level employees to the DOJ wolves. Meanwhile, employees are less likely to truthfully cooperate with the internal investigation if they think the boss is reviewing interview reports every night after drinks. I am astounded at how often internal investigations are reported right up the chain of command at small and large publicly traded companies. DOJ prosecutors can make it clear that the procedural independence of the internal investigation will affect how the company is treated.

(wisenberg)

October 7, 2015 in Fraud, Government Reports, Investigations, Prosecutions, Prosecutors | Permalink | Comments (0)

Friday, September 18, 2015

GM Deferred Prosecution Agreement and the "New" DOJ Corporate Prosecution Policy

Just days ago, DOJ came down with a new corporate directive (discussed here) describing a shift in investigation policy.  The new focus would be on the prosecution of individuals within the entity.  It states:

"2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.

Both criminal and civil attorneys should focus on individual wrongdoing from the very beginning of any investigation of corporate misconduct. By focusing on building cases against individual wrongdoers from the inception of an investigation, we accomplish multiple goals. . . . "

So much for this new policy, as the GM Deferred Prosecution Agreement comes before any individual prosecutions. (see Corporate Crime Reporter here).  It has the company paying $900 million, accepting responsibility, agreeing to cooperate, and providing information to the government.  

Both the old DOJ approach and this new one, that seems to exist only on paper and not in practice, have problems.  Both have the company serving as "agents" of the government.  Both have the company doing the investigative work for the DOJ.  Both have the company "throwing employees under the bus." And both show a disrespect for individual attorney-client relations.  

Corporate and individual criminal actions are a problem that needs to be corrected.  But as previously said, pitting the entity against its constituents will not correct misconduct.  And telling the public that you intend to take a different approach and just days after you do the opposite fosters a lack of trust. It also demonstrates the importance of Congressional action as opposed to reliance on DOJ internal guidelines.

(esp)

September 18, 2015 in Deferred Prosecution Agreements, Investigations, Prosecutions, Prosecutors | Permalink | Comments (0)

Thursday, September 3, 2015

Privilege and Internal Investigations

Earlier this year, the Wall Street Journal ran an interesting story about several cases in which U.S. courts refused to recognize the attorney-client privilege for communications between in-house counsel and overseas companies.  The article focused on two cases in particular – Wultz et al. v. Bank of China Limited and Anwar et al. v. Fairfield Greenwich Limited

Just recently, Janet Levine, Gail Zirkelbach, Derek Hahn, and Danielle Rowan wrote an article in the Summer 2015 edition of the ABA CJS Criminal Justice magazine on the topic of The Evolving Landscape of Legal Privilege in Internal Investigations.  Along with the Bank of China case, the article provides summaries of three other cases involving the privilege issue during internal investigations – In re Kellogg Brown & Root, Inc. (KBR) (previously discussed on this blog here and here), Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Trust Fund IBEW (previously discussed on this blog), and Paterno v. NCAA).

As an update to the above excellent reads, it is important to note that the U.S. Court of Appeals for the District of Columbia recently released another opinion in the KBR matter.  This opinion vacated additional orders by the District Court that would have required KBR to turn over the materials at issue in the case.  See In re Kellogg Brown & Root, Inc., -- F.3d –, 2015 WL 4727411 (August 11, 2015).

According to the appellate court in the new KBR opinion:

More than three decades ago, the Supreme Court held that the attorney-client privilege protects confidential employee communications made during a business’s internal investigation led by company lawyers. See Upjohn Co. v. United States, 449 U.S. 383, 101 S. Ct. 677, 66 L. Ed. 2d 584 (1981). In this case, the District Court denied the protection of the privilege to a company that had conducted just such an internal investigation. The District Court’s decision has generated substantial uncertainty about the scope of the attorney-client privilege in the business setting. We conclude that the District Court’s decision is irreconcilable with Upjohn. We therefore grant KBR's petition for a writ of mandamus and vacate the District Court's March 6 document production order. 

The issue of attorney-client privilege in the internal investigation context is one that is growing in both complexity and significance.  Keep an eye out for more court decisions on this issue in the future as companies, attorneys, and courts struggle to find a balance in today’s complex legal and business environment.

(LED)

September 3, 2015 in Civil Litigation, Investigations, Judicial Opinions, Privileges | Permalink | Comments (0)

Friday, July 10, 2015

Holder Returns to Covington & Burling

Though it may come as no surprise given his long history with the firm, Covington & Burling has announced that former United States Attorney General Eric Holder will return to the firm.  Holder previously worked at the firm from 2001 to 2009.  According to the release, Holder will be in the "firm’s Washington office and focus on complex investigations and litigation matters, including matters that are international in scope and raise significant regulatory enforcement issues and substantial reputational concerns."  

Holder also recently gave an interview to The American Lawyer, in which he discusses his return to private practice and his plans to work on a mix of projects at the firm, including pro bono and access-to-justice issues.  In addition, The American Lawyer published an article on the subject of Holder's return.

(LED)

July 10, 2015 in Investigations, Media, News | Permalink | Comments (0)

Saturday, June 6, 2015

When is there Entity Liability - Archdiocese of St. Paul and Minneapolis Charged

The DOJ has prosecuted many companies, often resolving the cases with Deferred and Non-Prosecution Agreements.  And on occasion, states have also proceeded against companies alleging corporate criminal liability. But how far does entity liability go, and can you extend corporate criminality to entities like the Archdiocese of St. Paul and Minneapolis.  According to Jean Hopfensperger's article in the Star Tribune, Archdiocese Charged in Sex Abuse Coverup, the Ramsey County Attorney's Office has filed these charges against this entity and that the entity reports it will cooperate in this state investigation.  Will we start seeing states adopting the federal path of proceeding criminally against entities, getting them to cooperate, followed by individual indictments premised upon the information provided? Does it make a difference here that an individual has already been indicted? And will proceeding against this particular entity, present a different model?  And should corporate criminality versus civil liability be used here? 

(esp) 

June 6, 2015 in Investigations, Prosecutors | Permalink | Comments (0)

Tuesday, June 2, 2015

FIFA Indictment Passes on Jurisdiction, Fails on Obstruction

Yesterday I skimmed through the FIFA indictment referred to by my colleague Lucian Dervan on May 26, 2015 ("FIFA Officials Facing Corruption Charges"), primarily to determine how the government justified jurisdiction over alleged criminal activities that largely, seemingly almost entirely, occurred in other nations, a complaint made by none other than Vladimir Putin.  Upon review, I believe the indictment, apparently drafted with that question in mind, facially makes a reasonably strong case for U.S. jurisdiction, based largely, although not entirely, on money transfers through U.S. financial institutions. 

There remains, however,  the question whether the U.S. Department of Justice should assume the role of prosecutor of the world and prosecute wrongs, however egregious, that were almost wholly committed by foreigners in foreign nations and affected residents of those foreign nations much more than residents of the United States.  Our government's refusal to submit to the jurisdiction of the International Criminal Court  is arguably inconsistent with our demand here that citizens of other nations submit to our courts.

On another subject, what struck me as just wrong was a minor part of the indictment, the obstruction of justice charge against Aaron Davidson, one of the two United States citizens indicted (the other, a dual citizen, is charged with procuring U.S. citizenship fraudulently).  While the obstruction of justice count itself (count 47) is a bare bones parsing of the statute, the lengthy 112-page preamble to the actual recitation of counts (to me in clear violation of Fed. R. Crim. P. 7(c), which says the indictment "must be a plain, concise and definite written statement")(emphasis added) describes Davidson's allegedly criminal conduct as follows: "Davidson alerted co-conspirators to the possibility that they would be recorded making admissions of their crimes."

Such advice is provided as a matter of course - absolutely properly and professionally, in my opinion -  by virtually every white-collar or other criminal lawyer representing a target of a criminal investigation.  Since lawyers are given no special treatment different from others,  if these facts justify a criminal conviction, a lot of white-collar lawyers will be counting the days until the five-year statute of limitations has passed since their last pre-indictment stage client meeting.

The obstruction of justice statute is so vague that it gives the government the opportunity to charge virtually any effort by lawyers or others to advise persons under investigation to exert caution in talking with others.  The applicable statute, the one used against Davidson, prescribes  a 20-year felony for "whoever corruptly...obstructs, influences, or impedes any official proceeding, or attempts to do so..." 18 U.S.C. 1512(c)(2).  That catch-all statute, which follows one proscribing physical destruction of tangible evidence,  to me is unconstitutionally vague, but courts have generally upheld it and left the determination of guilt to juries on the ground the word "corruptly," which itself is subject to many interpretations, narrows and particularizes it sufficiently.  I hope that the presiding judge in this case, the experienced and respected Raymond  Dearie, does not allow that count to get to the jury.

 

June 2, 2015 in Corruption, Defense Counsel, International, Investigations, Obstruction, Prosecutions | Permalink | Comments (0)

Tuesday, May 26, 2015

FIFA Officials Facing Corruption Charges

According to CNN, the U.S. Department of Justice is preparing to bring corruption charges against up to 14 senior officials at FIFA, the world's soccer governing body.  The reports from CNN come from "law enforcement officials."  According to the New York Times, several FIFA officials have already been arrested in Switzerland in a "extraordinary early-morning operation." 

FIFA has been under investigation for some time, including with regards to the bidding process for the 2018 and 2022 World Cups, which will occur in Russia and Qatar.  FIFA conducted an internal investigation of the selection process for each event.  The investigation was led by Michael Garcia of Kirkland & Ellis.  Garcia submitted his report to FIFA in September 2014.  FIFA then released a "summary" of the report's findings, which summary Garcia alleged was "erroneous."  Garcia resigned as independent chair of the FIFA Ethics Committee's Investigatory Chamber in December 2014.

One issue that will be interesting to watch in this case is the manner by which the U.S. alleges jurisdiction over the senior FIFA officials despite the fact that alleged corruption occurred overseas and FIFA is an association governed by Swiss law.  According to CNN, the U.S. will allege jurisdiction exists because of the breadth of U.S. tax and banking regulations.  Further, the government will reportedly rely in part on the fact that significant revenue is generated by the U.S. television market.  This is certainly a case we will be hearing a lot about in the coming months. 

(LED)

May 26, 2015 in Corruption, Current Affairs, International, Investigations, Sports, Tax, Television | Permalink | Comments (0) | TrackBack (0)

Thursday, April 30, 2015

False Accusation of Rolling Stone Article Suggests prior Notification of Targets in White-collar Cases

In November Rolling Stone published a blockbuster article about a student's account of being  gang-raped at a University of Virginia frat house.  Within days others, primarily the Washington Post, sharply questioned the truthfulness of the student's claim.  Rolling Stone then commissioned an independent investigation by Steve Coll, the respected Dean of Columbia Journalism School, to review the magazine's reporting, editing and fact-checking.  That report, written by Coll and two colleagues, came out a few weeks ago.  See hereRolling Stone also "withdrew" the article.

The report (Sheila Coronel, Steve Coll, Derek Kravitz, "An Anatomy of a Journalistic Failure") is "intended as a work of journalism about a failure of journalism." It is thorough and comprehensive and, as expected, clear and thoughtful.  Although the purpose of the report was to investigate the conduct of Rolling Stone and not the conduct of the student, it treats the student who made the false accusation and continued it over months of questioning by the reporter much too gently and itself is affected by the implicit bias that it suggests motivated the writer.  For instance, it takes pains to state that the student who made the indisputably false accusation may well have in fact been a victim of some predatory sexual act(s), and does not even speculate that she might have made up the incident out of whole cloth.  It expresses its regret that the the widely-disseminated revelation of the false accusation might cast doubt on other campus sex accusations (accepting the questionable estimates that false charges make up  less than 8% of rape allegations) and fails even to consider the possibility that the false claim here might not be such an aberration , and perhaps will serve a salutary purpose by increasing public (and governmental and institutional) awareness that false accusations are not so infrequent. 

To be sure, campus sexual abuse by male students against women is a serious problem and deserves vigorous, but measured and fair, action by universities and, when appropriate, law enforcement, and aggressive reporting on that subject is important to increase public knowledge.  School officials, and magazine and newspaper writers (and also law enforcement officers)  should be mindful, however, that this is an area where accusations are often inaccurate,  exaggerated, and sometimes downright false, and that there are sometimes unjust findings and convictions, by courts and schools, that wrongly destroy the lives of those accused.  Indeed, in my opinion, rape is the area of criminal law in which there are the most intentionally false (as opposed to mistaken) accusations by civilian complainants.

The report demonstrates convincingly that there were a series of errors in the investigation, review, fact-checking and editing of the story before it appeared.  Among those errors was the failure to give the person accused an opportunity to refute the accusations.  "Journalistic practice - and basic fairness - require that if a reporter intends to publish derogatory information about anyone, he or she should seek that person's side of the story."

I could not help but thinking that the defective  oversight  of the Rolling Stone journalists and their seemingly limited concern for the reputations of the institutions accused were nonetheless far greater and far more likely to uncover false accusations than the minimal or nonexistent review by law enforcement  that typically occurs in a criminal case prior to an arrest (and sometimes even after).  Once law enforcement officers decide to make an arrest, why should the accused not be allowed to present beforehand his "side of the story?"  Obviously, in many cases, such as where there is a need for immediate apprehension by a police officer, no pre-arrest review or notification is possible. Further,  in many other cases, for instance where the identity of the alleged perpetrator is unknown, or where there is a reasonable fear that if not arrested he will flee and not be available to face charges, an immediate unannounced arrest is called for. 

However, in many, probably most, white-collar cases, there is no such need. In those cases, as a general rule a prosecutor should notify a target that he is under investigation and seek his "side of the story."  Nonetheless, many prosecutors proceed the "old-fashioned" way by ordering an arrest first without giving the defendant an opportunity to hire a lawyer and present, should he choose to, his side of the story.

Notifying a prospective defendant that he is likely to be arrested and may choose to present his case beforehand has advantages for prosecutors in many situations. The defendant and his lawyer might provide evidence or legal arguments that will persuade the prosecutor to seek lesser charges or not to go forward at all.  Sometimes a plea agreement might be reached with the defendant which will eliminate the need for a time-consuming grand jury presentation.  And, should the defendant decide to cooperate, he may be able to do so proactively and generally more effectively since an indictment often tips off others to steer clear of him.

There are, arguably, certain benefits to law enforcement in making surprise arrests. There is a  possibility that an upset, unprepared  and  uncounseled defendant will make incriminating statements.  And, a defendant may have on his person or in proximity evidentiary items which will be found by a search.  Those advantages, however,  are less likely to occur in white-collar case, where defendants are less likely to make statements without lawyers or carry contraband or evidence.  Another potential benefit to prosecutors  is that at bail hearings a defendant's attorney may not be able to argue  that the defendant did not flee after becoming aware of the charges.  Such an argument, I have found, does not carry as much weight as it should. In any case, prosecutors are unlikely to provide prior notification of their intent to arrest to any who are conceivable flight risks.

For these reasons, the most successful and sophisticated prosecutors in white collar cases, such as the United States Attorney for the Southern District of New York, generally notify white-collar targets of their investigations and give them or their attorneys an opportunity to dissuade, minimize or deal.  Less sophisticated prosecutors of white-collar crimes, often state prosecutors, are more likely to make summary arrests.  These cases, generally not well vetted since there was no input from the accused or his counsel, more often lead to dismissals, acquittals or cheap pleas.

Not only is pre-arrest notification to a prospective defendant more fair to him in that it gives him  an opportunity to defend, explain, negotiate or prepare psychologically, it will benefit judicial and prosecutorial economy of resources by allowing for some matters to be settled with less or no litigation and court involvement.  And, as discussed above, it helps law enforcement.   It should be the default position in white-collar (and many other) cases, and deviated from only when there are genuine countervailing reasons.

 

April 30, 2015 in Attorney Fees, Books, Current Affairs, Investigations, Legal Ethics, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Thursday, April 2, 2015

More on Menendez

Courtesy of NPR.

(wisenberg)

 

April 2, 2015 in Investigations | Permalink | Comments (0) | TrackBack (0)