Thursday, February 16, 2017
As many readers know, I am heavily involved in planning international white collar crime conferences with the American Bar Association Criminal Justice Section. These have become wonderful learning and networking opportunities for those with an interest in the many issues in the field that transcend national boundaries.
I’m excited to announce the next international conference offering will occur on April 5, 2017 in Hong Kong. The event will focus on Global Investigations and Compliance: From Regulatory Trends to Leveraging Innovation and Technology. I expect this conference to be a wonderful compliment to the successful Global White Collar Crime Institute the American Bar Association held in Shanghai in 2015. If you attended the Shanghai event, I hope you will join us again and reconnect with the many colleagues and contacts you established at that earlier conference. If you were not in attendance in Shanghai, I hope you will join us in Hong Kong and be introduced to the growing network of international professionals making these American Bar Association white collar conferences an important part of their network.
Seating is limited for this event, and I hope you will register today to reserve your spot (click here to register). I look forward to seeing many of you in April.
Official ABA Event Description
PwC Hong Kong and the American Bar Association are hosting a full day seminar with four robust panel discussions followed by a networking reception. The panel sessions will focus on a number of pertinent topics, such as exploring regulatory updates, international investigations, navigating cross-jurisdictional issues in Southeast Asia, and the future of blockchain technology in compliance programs. The content for these panels will be delivered by leading experts, including prominent attorneys in the US and Asia, US regulators, consulting professionals, corporate executives, professors, and others. The target attendees for this event are international and Hong Kong/China based legal and corporate professionals focused on white collar crime and compliance.
- Regulatory Update: Recent Trends in Enforcement
- Current State of International Investigations
- Navigating Cross-Jurisdictional Issues in the South Asian Market
- Block-chain Technology: What does it mean for the Future of Compliance Programs?
More information here.
Saturday, February 4, 2017
An important issue to watch this year is the ongoing battle over access to data collected by companies and stored overseas. This issue heated up last year when Microsoft won its Second Circuit challenge of a 2013 warrant for emails housed in an Irish data center. In the Second Circuit decision from July 2016, the court determined that U.S. law did not allow the enforcement of warrants for customer email content housed overseas, even though Microsoft is a U.S. service provider.
Last week, the Second Circuit denied rehearing the Ireland case by a divided 4-4 vote. The decision contains a number of interesting arguments from the judges and is worth a read for those involved in cases with international data issues.
The Second Circuit decision now sets the case up for a possible Supreme Court challenge by the government. According to Orin Kerr, writing in the Washington Post, however, Senator Sessions indicated during his confirmation hearings that he might seek a legislative remedy to address the Microsoft issue. Either way, this topic is one to keep an eye on in 2017.
Friday, December 30, 2016
Each year this blog has honored individuals and organizations for their work in the white collar crime arena by bestowing "The Collar" on those who deserve praise, scorn, acknowledgment, blessing, curse, or whatever else might be appropriate. With the appropriate fanfare, and without further ado, The Collars for 2016:
The Collar for the Best Left Hand Turn – To the Supreme Court following Justice Scalia’s death in affirming both insider trading and bank fraud convictions.
The Collar for Failing to Deliver the Goods – To the government for prosecuting Fed Ex and then needing to dismiss the case following opening statements.
The Collar for Needing New Glasses – To James Comey so that he can read Agency policy to not do anything election related within 60 days of an election.
The Collar for Sports MVP – To the world of tennis, which stole some of the focus from FIFA this year with the BBC's allegations of significant match-fixing.
The Collar for Slow and Steady – To Britain's Serious Fraud Office, which, after announcing the implementation of DPAs in October 2012, entered into its first DPA in November 2015 and its second in July 2016.
The Collar for Quick and Steady – To the DOJ, which, according to Professor Brandon Garrett’s website, has entered into well over 100 DPAs and NPAs since October 2012.
The Collar for Best Reading of this Blog– To the Supreme Court in reversing Virginia Governor Bob McDonnell’s conviction, this blog’s 2015 case of most needing review.
The Collar for the Longest Attempt to Justify a Decision – To the 11th Circuit for its 124-page decision in United States v. Clay that attempts to justify how “deliberate indifference” meets the Global Tech standard.
The Collar for Worst Schmoozing at an Airport – To former President Bill Clinton for causing AG Loretta Lynch to accept the FBI’s decision-making after Bill Clinton came abroad her airplane.
The Collar for the Most Underreported Settlement – To Trump University’s agreement to pay $25 million settlement in the Trump University case.
The Collar for Mandating Corporate Backstabbing – To Deputy AG Sally Yates, who keeps insisting her memo that promoted a corporate divide from its constituents – widely referred to as the “Yates Memo” -- should be called the Individual Accountability Policy.
The Collar for the Pre-mature Weiner Release – To James Comey for his overly excited announcement about the former Congressman’s emails.
The Collar for Community Service to Russia – To all those who failed to investigate and release reports on computer hacking that caused the release of information during the election.
The Collar for the Quickest Backpeddling – To Rudy Giuliani for “clarifying” his statement that he knew about a confidential FBI investigation related to Hillary Clinton’s emails.
The Collar for Best Game of Hide and Seek – To Donald J. Trump for explaining that he could not release his already-filed tax returns because he was under an IRS audit.
The Collar for Best Self-Serving Confession – To the Russian Sports Federation for admitting there was systematic doping of Olympic athletes (but Putin didn't know about it).
The Collar for Quickest Recantation (aka the "Mea Culpa Collar") – To DOJ Chief Leslie Caldwell for criticizing overly aggressive AUSAs at a Federalist Society function and apologizing to DOJ attorneys a few days later.
The Collar for Best Judicial Watchdog – To Judge George Levi Russell III of the United States District Court for the District of Maryland for his post-trial decision reversing the conviction of Reddy Annappareddy and dismissing the indictment with prejudice based on prosecutorial misconduct.
The Collar for Never Giving In – To Josh Greenberg and Mark Schamel who tirelessly and brilliantly represented Reddy Annappareddy post-trial and secured his freedom.
The Collar for Best Money Laundering – To the New York City and Los Angeles real estate developers who sell eight-figure condo apartments to anonymous LLP's owned by foreign officials and their families.
The Collar for the Best Child – To Don Siegelman’s daughter, who continues to fight to “Free Don.”
The Collar for the Best Parent – Retired years ago and renamed the Bill Olis Best Parent Award –not awarded again this year since no one comes even close to Bill Olis, may he rest in peace.
(wisenberg), (goldman), (esp)
December 30, 2016 in About This Blog, Current Affairs, Deferred Prosecution Agreements, Government Reports, Investigations, Judicial Opinions, Money Laundering, News, Prosecutions, Prosecutors | Permalink | Comments (0)
Tuesday, November 15, 2016
The Attorney General, or in cases in which the Attorney General is recused, the Acting Attorney General, will appoint a Special Counsel when he or she determines that criminal investigation of a person or matter is warranted and -
(a) That investigation or prosecution of that person or matter by a United States Attorney's Office or litigating Division of the Department of Justice would present a conflict of interest for the Department or other extraordinary circumstances; and
(b) That under the circumstances, it would be in the public interest to appoint an outside Special Counsel to assume responsibility for the matter.
FBI Director James Comey:
- F for failure to resign in protest when Attorney General Lynch kept the email investigation within the confines of DOJ. If there was ever a case justifiying the appointment of a Special Counsel, this was it. You appointed a Special Counsel to investigate the Plame Email leak when you were Acting Attorney General in the Bush Administration. You should have insisted on the same course of conduct here on threat of resignation. You had the standing and reputation to pull it off. You didn't. You blew it, and later apparently tried to make up for it through your inappropriate prejudicial public pronouncements.
- F for letting Attorney General Lynch off the hook and effectively announcing the non-prosecution recommendation. Prosecutive decisions belong to prosecutors, not FBI agents or FBI officials.
- F for publicly smearing Ms. Clinton while announcing that no charges would be brought against her. If you don't indict, you don't smear, unless you are under a statutory duty to file a report.
- F for answering too many questions about the investigation when appearing before the House Judiciary Committee.
- F for releasing confidential FBI investigative reports to the House.
- F for failure to resign in protest given the kid gloves treatment afforded to Ms. Clinton and her aides during the investigation.
- F for your public announcement 11 days before the election.
Attorney General Loretta Lynch:
- F for failure to appoint a Special Counsel.
- F for your tarmac meeting with former President Bill Clinton.
- F for handing over the prosecutive decision to FBI Director Comey. If you needed to recuse, the final call, at that point in time, should have been made by your Deputy AG Sally Yates.
- A for your four line statement announcing the declination. It is the one thing you got right.
President Barack Obama:
- F for failing to insist that AG Lynch appoint a Special Counsel.
- F for your repeated public statements effectively proclaiming Ms. Clinton's innocence. You interfered with a pending investigation and potentially poisoned the jury pool.
- F for handing out use derivative immunity deals like they were candy and reaping no indictments in return.
- F for allowing Cheryl Mills to attend Ms. Clinton's final interview as one of her attorneys.
- F for not recording Ms. Clinton's interview.
These are preliminary grades, subject to revision as more facts are revealed.
Friday, October 28, 2016
It is common in white collar cases for investigations to span over many years. Being essentially document cases, one sees white collar crime investigations lasting the length of a grand jury or sometimes the span of a few grand juries. It is rare that one sees the investigated party receiving a letter at the end saying that we tried to find something in this investigation against you, but we failed. And having a press conference to announce it, is going even further.
Yet, surprisingly that essentially occurred when FBI Director James Comey investigated Secretary of State Hillary Clinton. As I previously noted, I gave an "A" to Attorney General Loretta Lynch for her 3 1/2 line statement closing the investigation (see here), a contrast to FBI Director James Comey's statement that insinuated wrongdoing while also saying a prosecution was not warranted here because "we cannot find a case that would support bringing criminal charges on these facts." (see here). Case closed.
Now enter the current political climate, a climate that has been contentious, exhausting, and embarrassing to our nation. And on the near eve of the final voting we see the FBI Director re-examining his prior decision and as opposed to keeping his investigation secret, as is typically done, he announces to the world that he is re-examining his case. FBI Director Comey states in a letter updating his prior congressional testimony that the F.B.I. was taking "steps designed to allow investigators to review these emails to determine whether they contain classified information, as well as to assess their importance to our investigation." FBI Director Comey is also saying that he "cannot predict how long this would take. . ." (see NYTimes copy of letter here).
Double jeopardy does not apply here, and an investigation can be re-opened. But why is he telling us this? And why is he stating this just 11 days before the election? The most likely answer is that he had no choice given his prior decision earlier this year to go against the typical process of keeping investigations secret. When evidence is given to the DOJ and then presented to a grand jury, Federal Rule 6(e) of the Federal Rules of Criminal Procedure insures that secrecy.
Now just 11 days before Election Day, we are now seeing the ramifications of FBI Director Comey's initial misstep in commenting on an investigation -- how deep those ramifications are won't be known until the final votes are in. If even then.
Also Jamie Gorelick and Larry Thompson, James Comey is Damaging Our Democracy
Tuesday, October 11, 2016
In this second post from the Fifth Annual ABA Criminal Justice Section London White Collar Crime Institute, I will discuss some of the lessons learned and issues discussed during this morning’s panel on international internal investigations.
The panel emphasized that one of the first issues for consideration after the discovery of potential misconduct by a corporate employee is disclosure obligations. One of the issues discussed in this context was the tension the exists when a corporation wants time to develop the facts, but mandatory disclosure requirements restrict the time frame during which this can occur. This is an issue made even more complex in the international context, where the disclosure obligations might vary significantly from one jurisdiction to another. Further, along with mandatory disclosure obligations, there are permissive disclosure considerations. One of the most important, of course, is the decision whether and when to disclosure the issues discovered to the government in an effort to demonstrate cooperation and voluntary disclosure.
The panel also considered the importance of seeking to preserve evidence immediately. As readers know, failure to protect evidence from destruction can both jeopardize the ability of counsel to conduct an effective internal investigation and, potentially, lead to charges of obstruction of justice.
Part of the hypothetical discussed during the panel involved a number of emails being collected by private counsel as part of the internal investigation. These emails came from various parts of the world, including Hong Kong and Amsterdam. While counsel in the U.S. are comfortable with collecting emails and other corporate documents during an investigation without significant impediment, data privacy laws in other countries introduce a number of complexities. In the European Union, for example, there are many restrictions on the transfer of data out of the country. One related issue explored by the panel was whether U.S. prosecutors understand or appreciate the significance of these data privacy obligations. Based on discussions both today and yesterday at the conference, it appears that one of the reasons tension exists in this area is because of the different approaches to these data privacy obligations taken by corporations during pending investigations.
The panel then discussed issues associated with employee interviews during an internal investigation. Here, the panel examined the ways that local employment, criminal, and civil laws can impact the ability of counsel to conduct such interviews. Once again, while few restrictions exist in the United States, a host of restrictions and requirements related to interacting with employees in this way may apply abroad. Can the interview be recorded? Can the employee’s statements be disclosed to the government? Does the employee need to be given notice or provided with representation prior to the interview? What types of disclosures need to be made to the employee before the interview begins? Are interview notes privileged? How do the answers to these questions impact an internal investigator’s strategy? As these questions illustrate, each step of the investigation on the international stage posses various pitfalls and perils.
As part of this panel, we also heard an interesting discussion of the economics of profit and loss calculations in a bribery case. The presentation reminded us of the complexities of profit and loss calculations and the significant impact these calculations might have on the outcome of the case. It also reminded us of the importance of retaining the right experts in any case, particularly one that crosses borders.
The panel as a whole served as a nice reminder of the importance of considering local laws and rules when engaging in a cross-border investigation.
Thursday, September 29, 2016
In white collar cases, prosecutors often stress the signs or "indicia" of fraud inherent in a given defendant's conduct. In the FBI/DOJ investigation of Secretary Clinton we have several signs of incompetence and/or highly irregular conduct on the part of those in charge. The one that stands out most clearly to anyone who practices white collar criminal defense was the decision to allow Cheryl Mills to attend Secretary Clinton's FBI interview. Competent prosecutors do not allow a key witness to participate as an attorney in an FBI interview of the main subject. It just isn't done. It isn't a close question. It is Baby Prosecution 101. Director Comey's attempt to justify this decision during yesterday's House Judiciary Committee Oversight Hearing was disingenuous and disgraceful. According to Comey, the FBI has no power to control which attorney the subject of an investigation chooses to represent her during an interview. This is literally true, but irrelevant and misleading. Prosecutors, not FBI agents, run investigations. Any competent prosecutor faced with the prospect of Ms. Mills's attendance at Secretary Clinton's interview would have informed Clinton's attorneys that this was obviously unacceptable and that, if Clinton insisted on Mills's attendance, the interview would be conducted under the auspices of the federal grand jury. At the grand jury, Secretary Clinton would not have enjoyed the right to her attorney's presence in the grand jury room during questioning. In the event Clinton brought Ms. Mills along to stand outside the grand jury room for purposes of consultation, competent prosecutors would have gone to the federal judge supervising the grand jury and attempted to disqualify Ms. Mills. In all likelihood, such an attempt would have been successful. But of course, it never would have gotten that far, because Secretary Clinton will do anything to avoid a grand jury appearance. So, Director Comey's response was a classic dodge, one of several that he perpetrated during yesterday's hearing. As noted above, the decision to allow Ms. Mills to attend Secretary Clinton's FBI interview was only the clearest example to date of irregular procedures sanctioned by the prosecutors in charge of the Clinton email investigation. More to come on that in a subsequent post.
Monday, September 26, 2016
In the recently-released hit movie "Sully," about a pilot who landed a disabled US Airways plane on the Hudson River after its engines hit a flock of geese shortly after taking off from LaGuardia Airport, the film's heroes, Capt. Chesley B. Sullenberger lll (the "Sully" of the title), played by Tom Hanks, and the co-pilot Jeff Skiles, played by Aaron Eckhart, worry that the agency investigating the water landing, the National Transportation Safety Board ("NTSB") will publicly criticize them for making a dangerous water landing rather than just turning around and returning to LaGuardia. In the movie, the agents appear adversarial and close-minded and looking to blame the pilots based on simulated tests and preliminary expert evaluation.
NTSB released a statement regretting that the filmmakers had not asked it to review the film before its release, and the now-retired leader of the NTSB inquiry complained that the film unfairly characterized the agency as prosecutorial. According to the New York Times (Negroni, "'Sully is Latest Historical Film to Prompt Off-Screen Drama" Sept. 9, 2016), the NTSB maintained that its investigations are primarily meant to understand how humans and machines fail to prevent accidents, and not to blame individuals. (Later that week, however, the NTSB strongly criticized the pilot and crew of a Delta airplane that had skidded off a LaGuardia runway).
While "true story" films often veer from accuracy, as this one apparently did, one of the film producers denied that the film took creative license as to the pilots' fears, saying that the film was told through the perspectives of the pilots, who felt under "extreme scrutiny." And, Mr. Sullenberger, in an e-mail to the Times, wrote that the film accurately reflects his state of mind. "For those who are the focus of the investigation, the focus of it is immense," he wrote, and that the investigative process was "inherently adversarial, with professional reputations absolutely in the balance."
The contrasting viewpoints of the former NTSB investigator and its investigatee, Mr. Sullenberger, demonstrates the not uncommon disconnect in perception between how those who investigate and those who are investigated. Investigators view their behavior, even if aggressive and apparently hostile, as just rightfully doing their jobs. Those being investigated, no matter how innocent or blameless they might be, often feel that the investigators are biased and out to get them, regardless of their blameworthiness or lack of it.
To be sure, investigators often believe that an aggressive, hostile, unbelieving manner is a good way to reach the truth. Those being questioned often view that type of investigation and interrogation as a means to reach a predetermined result regardless of its accuracy.
Investigators - and I include criminal prosecutors - often lack sensitivity to how those they investigate perceive them or the psychological toll their investigations take. They rarely understand, in Sully's words, "the [immense] intensity " that affects an individual, including the innocent. Investigators virtually never take into consideration how heart-wrenching, all-consuming and destructive an investigation may be to an individual when they determine whether and how to investigate. They generally believe, and judges rarely disagree, they (and especially the grand juries prosecutors nominally act for) have an absolute right to investigate and question (with some constitutional and statutory restraints) anyone. In the movie, and in real life, the investigation consumed and heavily worried the pilots, members of a profession known for calm and equanimity. One would expect people in other walks of life to be more affected.
I do not suggest that prosecutors or agencies forego investigations if based on reasonable suspicion or another more than insubstantial basis. I do suggest, however, in instances where there is little factual or other basis to suggest wrongdoing by an individual, that prosecutors and agencies consider the human cost and anguish an investigation or the manner in which it will be conducted may cause the person being investigated or interrogated.
As a young lawyer just out of a prosecutor's office, I worked for a state investigative commission with subpoena power. Its chair, a prominent Wall Street lawyer and former bar association president, was hesitant to issue subpoenas to individuals without a substantial basis to believe there was wrongdoing, a hesitancy which bothered its ex-prosecutor lawyers (including me), who used to issue subpoenas like street vendors issue flyers. As Sully's situation suggests, some hesitancy in starting investigations, issuing subpoenas or harshly interrogating witnesses based on how it would affect the individuals involved may be appropriate.
Thursday, September 1, 2016
The case against Reddy Annappareddy is over. The Government's case has been dismissed with prejudice by U.S. District Court Judge George Russell because of a pattern of government misconduct that shocks the conscience. As soon as I obtain a copy of today's hearing transcript we will post it. Congratulations are in order for Mr. Annappareddy and his Womble Carlyle defense team of Mark Schamel and Josh Greenberg. Greenberg's relentless motions work over the past 11 months has been particularly brilliant. Anybody who does white collar work in the federal courts knows how difficult it is to obtain a result like this, post-trial. This is a magnificent victory.
As we write this post U.S. District Court Judge George Russell is holding a hearing on Defendant's Motion to Dismiss with prejudice. I have previously discussed this case here and here. The motion is bottomed on various alleged prosecutorial errors and misdeeds. In a bad omen for the Government, Judge Russell only set arguments on the Motion to Dismiss (despite the pendency of other motions) and summarily denied the Government's motion to delay the hearing. The Government wanted a delay in the wake of an onslaught of defense motions, authored by Womble Carlyle's Josh Greenberg, alleging additional Government misbehavior, including destruction of potentially exculpatory evidence at a time when the Defendant's Motion for New Trial was filed and awaiting a decision. The Government later joined in the Motion for New Trial after admitting that it presented false material testimony to the jury. Meanwhile, in a filing that can only be described as stunning, the Government yesterday attempted to defend its admitted document destruction. Here lies the Government's Response Re Document Destruction.
Monday, August 29, 2016
Things are getting personal in U.S. v. Annappareddy. I posted here last week about this District of Maryland case in which the Government ultimately admitted to having presented false evidence to the trial jury, and grudgingly joined Defendant's new trial motion--granted the next day by Judge George Russell. Now the Government has admitted to "disposal" of certain documents while defendant's New Trial Motion was pending in March 2015. Annappareddy's current trial team was not notified of the disposal until August 19, 2016, and claims, in Defendant's Motion for Extension of Time to File Motions In Limine, that some of the destroyed documents were exculpatory in nature. No court order authorized the destruction at the time it was accomplished.
The DOD/OIG Evidence Review Disposal Sheet from March 11, 2015 states that AUSA Sandy Wilkinson determined that the items in question "were not used as exhibits in trial and would not be used in future proceedings against Annaparreddy." In other words, Wilkinson acted unilaterally, apparently consulting no one on the defense team before making her decision. The Government's response to the allegation is a footnote stating in part that "in early March 2015, after the trial, the government began to clean up papers and documents not used from the Washington Blvd collection and store the trial exhibits post- trial. The government began purging the contents of several unused boxes. These were items Defendant and his own attorneys had reviewed at length and were never marked as exhibits or used in any way by them at trial. Yet they couch their complaint again in the most accusatory of tones. "
Well, yes. Destruction of potential evidence prior to final judgment on appeal is quite rare, if not unheard of, in federal criminal practice. That an AUSA would do it on her own is remarkable. The Government's Response to Annappareddy's Motions to Limit Government Evidence complains further that Annappareddy's new lawyers don't play nice in the sandbox, unlike the original trial lawyers--you know, the ones who lost after the Government presented false testimony. That's right, Ms. Wilkinson. Lawyers tend to get angry when false testimony is put in front of the jury and potentially exculpatory evidence is destroyed.
The case is far more involved, and the issues more complex, than I can do justice to here. Annappareddy has moved to dismiss with prejudice and a hearing on that motion is set for September 1. Failing that, the defense wants to limit the Government's evidence at a new trial to the evidence presented at the first trial. One thing absent from the Government's papers that I have had an opportunity to review is any recognition of the emotional, financial, and strategic harm suffered by defendants when the Government screws up, forcing a new trial. It's as if Ms. Wilkinson wants a cookie and a pat on the back for deigning to agree that Reddy Annappareddy gets to go through the whole damn thing again.
Thursday, July 7, 2016
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).
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)
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.
Wednesday, July 6, 2016
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.
Tuesday, July 5, 2016
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.
Tuesday, June 21, 2016
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.
Monday, June 13, 2016
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.
Saturday, April 9, 2016
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.
Monday, March 21, 2016
I have just published a new article in the Compliance Elliance Journal entitled "Internal Investigations and the Evolving Fate of Privilege."
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.
Friday, November 27, 2015
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.