Thursday, November 9, 2017
Fox News is reporting here that a co-founder of Fusion GPS met with Russian lawyer Natalia Veselnitskaya both before and after her June 2016 meeting in Trump Tower with Donald Trump Jr., Jaren Kushner, Paul Manafort, and others. The Trump Tower meeting primarily involved a discussion of the Magnitsky Act, adoption, and/or dirt on Hillary Clinton, depending on whose version you accept. Trump Jr. has admitted that he showed up in order to hear about the dirt. According to Fox News, the first Veselnitskaya-Fusion meeting occurred "hours before" the Trump Tower meeting during a court hearing and the second Veselnitskaya-Fusion meeting occurred at an unspecified later time. The Trump Tower meeting has always smelled like a set-up to me and this report may fuel more speculation along these lines. As I noted here yesterday, I believe that Special Counsel Mueller already has authority to investigate the Steele Dossier as part of his charter. If he isn't investigating the Fusion GPS/Steele Dossier from top to bottom he should be, since, among other things, it was delivered to the FBI as part of an effort to prove that members of the Trump camp improperly coordinated with the Russian government during the 2016 campaign. If the Steele Dossier contained false information and was given to the Bureau as part of a deliberate effort to mislead the Department of Justice, somebody could conceivably be facing obstruction of justice charges. We need to know more about the Veselnitskaya-Fusion connection, but it is certainly interesting to find out that Fusion GPS had some kind of relationship with Veselnitskaya at the same time that the well-connected Russian lawyer was allegedly trying to entice the Trump team with dirt on Ms. Clinton.
Wednesday, November 8, 2017
Senator Lindsey Graham called over the weekend for a new Special Counsel to investigate the Fusion GPS/Steele Dossier affair and the Uranium One transaction. He has a point about Uranium One, but Fusion GPS is squarely within the scope of Special Counsel Bob Mueller's authority as set out in the Order appointing him. That Order explicitly authorizes Mueller to "conduct the investigation confirmed" by Saint Jim Comey in his March 20, 2017 testimony before the House Permanent Select Committee on Intelligence. The Comey-DOJ investigation was already considering the Steele Dossier as part of its work. Mueller is further authorized to investigate links and coordination between the Russian government and individuals associated with Donald Trump's campaign as well as "matters that arose" from said investigation. Clearly, the Steele Dossier was a matter that arose as part of the overall Russian collusion investigation and may have helped to instigate or prolong it. Finally, as part of the federal regulation governing Special Counsels, Mueller is authorized to investigate any effort to obstruct his investigation, which is a continuation of the original Comey-DOJ investigation. Assuming that the Steele Dossier contains deliberate falsehoods, and was given to the FBI by someone with knowledge of those falsehoods as part of a deliberate effort to obstruct the original DOJ investigation (by unfairly pointing the finger at Trump), this would also be within Mueller's bailiwick. Indeed, I assume that Mueller is already looking at the Steele Dossier as part of an obstruction of justice investigation. He would be derelict in his duty if he were not.
Any new Special Counsel for the Steele Dossier would simply be overlapping with Mueller and would need to hire a staff and get up to speed. I see no need for this, unless something about the Steele Dossier presents a conflict of interest for Mueller. Some commentators shave suggested that the FBI paid Steele for some of his work, or thought about doing so. If any of those agents are still on the investigative team, could it create a conflict? Perhaps, but that could be resolved by removing such agents from the investigation or from the Steele Dossier part of the investigation. And keep in mind that any Special Counsel will almost certainly have to rely on FBI Special Agents to conduct at least some of his/her work. If you think a desire to protect the Bureau automatically creates a conflict then even a new Special Counsel would face the potential for conflict.
Monday, October 30, 2017
As most people have figured out by now, the most interesting development related to the charges unsealed today by Bob Mueller & company is the guilty plea entered into by an apparently marginal Trump Campaign operative named George Papadopoulos. Papadopoulos established direct and indirect contact with some Russians early in the campaign and lied about it later to the FBI. Not a good career choice. Now he has entered into a cooperation agreement and pled guilty under 18 U.S.C. Section 1001 (the Martha Stewart statute) to making false statements to government officials. Even without a downward variance his Guidelines Range is 0-6 months, so he won't be doing any time. According to the U.S. v. George Papadopoulos Statement of the Offense, which is the key document in the case, on April 26, 2016, while Papadopoulos was working on the campaign, one of Papadopoulos's foreign contacts advised him that the Russians had access to "dirt" on Mrs. Clinton and "thousands of emails." Interestingly, the Statement of the Offense does not explicitly say that the emails were offered to the Trump Campaign by the Russians or that Papadopoulos shared the information about the emails with Trump Campaign officials. Here also are the U.S. v. George Papadopoulos Criminal Information, and the U.S. v. George Papadopoulos Plea Agreement.
The first thing to ask, if CNN's Friday night report is accurate, is who leaked? Because if the leak came from the government or court staff it is almost certainly an illegal violation of a sealed court order and/or grand jury proceedings. And if it came from the defense attorney of the party to be charged, who told him or her? The whole point of sealing something is so that the public doesn't know about it. All a courthouse staffer, moonlighting as media lookout, could have legitimately told the press is that "we saw so and so going into the court's chambers" or something along those lines.
Second, why would charges be sealed in the first place? Perhaps because the prosecution is afraid that someone will flee. That is the only legitimate reason I can think of to place an indictment under seal. If it was placed under seal to give government agents the opportunity for an early morning arrest it wouldn't surprise me one bit, given Andrew Weissman's dismal track record for hardball, heavy-handed tactics. (It will be interesting to find out someday just exactly what the government told a federal magistrate in order to get that no-knock warrant to search Paul Manafort's residence.)
Is it possible that the sealing was done in order to protect a defendant from having to spend the weekend (or at least one night) in DC jail? Unlikely. For defendants who do not turn themselves in by mid-morning in DC, the possibility of a night in jail is real. But if the prosecutors really cared about that, why not bring the charges on a weekday morning and allow the defendant to turn himself in the next day? This is done all the time.
Is it possible that the pending indictment report, true or false, is a deliberate ruse to see who will attempt to flee? In other words, does the government actually want someone to try to flee? After all, flight can be used as evidence of guilt in court. Unlikely, but anything is possible with Weissman in the number two slot.
We should find something out today. Here is Politico's excellent background piece by Darren Samuelsohn.
If there are any charges, expect them to be ancillary in nature. Look for false reporting violations or false statements to government agents. More to come.
The Indictment is out and we will try to get it up as soon as possible. It is obvious that the prosecutors did the right thing in allowing Paul Manafort and Rick Gates to turn themselves in and that, in all likelihood, one of the defense attorneys leaked the news to CNN. Grand jury secrecy rules do not apply to witnesses or to those who receive their information from witnesses.
Thursday, October 19, 2017
It's not every day that a federal district judge accuses the government of misleading the Court and demands corrective action. But it's happening in the Urbana Division of the Central District of Illinois. I posted here in March regarding the federal case against former Congressman Aaron Schock. Among other items of alleged government misconduct, the defense maintained that prosecutors improperly commented to grand jurors on Schock's failure to testify, in violation of his Fifth Amendment Privilege Against Self-Incrimination. The defense relied in part on an affidavit by a dismissed grand juror. After unequivocally denying the grand juror's allegation, the government clarified the record, more than six months later, admitting that government counsel "commented on or addressed Mr. Schock's testifying or decision not to testify before the grand jury" on eleven occasions. U.S. District Judge Colin Bruce was not amused, and ordered the government to review each of its previous filings "to ensure that no more false or misleading claims were made." Judge Bruce also gave the government 14 days to file a memo "detailing any further misrepresentations or misleading statements." Here is Judge Bruce's Order Requiring Government Memorandum re Misrepresentations. The government responded yesterday, denying that it had misrepresented anything to the Court, asking the Court to reconsider its finding regarding misrepresentation, and representing further that it had not intentionally made any materially misleading statements in its prior filings. Here is the Government's Compliance with the Court's October 3 Order and Motion to Reconsider. Schock, represented by George Terwillliger, Bob Bittman, Benjamin Hatch, Nicholas Lewis, and Christina Egan of McGuire Woods in DC and Chicago and by Jeffrey Lang of Lane & Waterman in Davenport, Iowa, wasted no time, not even a day, in firing back. Here is Schock's Motion to Strike or in the Alternative Leave to File a Response. Here as well is Schock's Proposed Response to Government's Compliance. In a future post, I will examine the nature of the government's comments to the grand jurors.
Saturday, September 16, 2017
According to Reuters, Deputy Attorney General Rod Rosenstein said on Thursday that there may be changes to the Yates Memo "in the near future." As discussed at length on this blog (see here, here, here, and here; see also here for an article on the Principles of Prosecution and the Yates Memo), the Yates Memo was released by the DOJ in 2015 in response to criticism that the government had failed to prosecute individuals, particularly on Wall Street, related to the financial crisis of the late 2000s. The Yates Memo responded by focussing federal prosecutors on targeting individuals and requiring that corporations provide significant information on employee conduct to receive credit for cooperating with the government. The Yates Memo states, "[t]o be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct."
According to reports, Rosenstein said, "It is under review, and I anticipate that there may be some changes to the policy on corporate prosecutions." It is unclear how far the review extends or whether possible changes extend beyond the Yates Memo and include revisions to the larger Principles of Federal Prosecution of Business Organizations contained in the U.S.A.M. Whatever changes are made, it is unlikely that the focus on individuals will diminish. Attorney General Sessions has publicly commented on his commitment to holding individuals accountable for corporate misconduct. We will have to wait, therefore, to see whether significant changes or mere reiterations of current policy priorities are on the horizon.
Monday, May 15, 2017
I imagine we will know more about Rod Rosenstein's Memo, and its timing in connection with FBI Director Comey's firing, later this week. Based on the publicly available information, it appears that that when Rosenstein met with the President last Monday he was asked for his views on Saint Jim. Rosenstein no doubt articulated his disapproval of Director Comey's appallingly improper conduct during the 2016 election, a disapproval shared by legions of current and former DOJ prosecutors and FBI Special Agents. He was asked to memorialize his thoughts in a memo, and given a quick turnaround time. If this is how it played out, there was nothing wrong with the President's question, nothing wrong with Rosenstein's answer, nothing wrong with the President's request for a memo, nothing wrong with Rosenstein's decision to obey the request, and nothing wrong with the resulting memo itself. Nothing at all. Comey's conduct, as Rosenstein's Memo makes clear, was a gross deviation from standard DOJ practices, a clear overstepping of authority, and an improper smearing of an American citizen who just happened to be a major political candidate. As devoted readers of this Blog no doubt remember, I detailed Director Comey's myriad shortcomings here just after the election. To make matters worse, Director Comey refused to acknowledge his mistakes and improprieties and continued to publicly justify his shocking behavior in increasingly bizarre fashion. Some have suggested that Rosenstein's Memo "reads like an op-ed" or is "deeply troubling." I expect this kind of nonsense from the political opposition and the resisters, but when I see it from former colleagues of Rosenstein it makes we want to puke. The President is Rosenstein's superior. He asked for Rosenstein's opinion. He asked for Rosenstein to memorialize his thoughts in writing on a fast timetable. Each of these was a reasonable request. Should Rosenstein have refused the request, protesting that he needed more time to prepare a memo? He didn't need more time to detail Comey's indiscretions. Any schoolboy or schoolgirl reasonably competent in Civics could have done so.
The problems arose with what happened next. When Rosenstein learned that the White House was disseminating a false version of events to the effect that Comey's firing was solely the result of Rosenstein's Memo, he is reported to have quickly complained to the White House Counsel that he did not want the facts massaged and would not be comfortable staying in an Administration where this was happening. Translation: "Tell the President's people to quit lying. Stop the phony stories now." And the phony stories stopped. Then the President, in his typical foot-in-mouth way, admitted that Comey's handling of, and public comments about, the Russia investigation played a part in the firing. Think about that for a moment. Because of Rosenstein's status and sterling reputation, a reputation much ballyhooed by the Trumpistas, the President's people were forced to instantly and embarrassingly change their false narrative, and the President stumbled into another unforced error. That would not have been possible if the DAG had been a hack or mere factotum. Of course, Rosenstein could have decided to resign. Instead he demanded the truth and got it. It is a judgment call and I don't blame him at all for making the call he did, two weeks into the job.
Make no mistake, there is going to be a thorough investigation of Russian Collusion, either within Main Justice or by a Special Counsel. There are many good reasons for keeping the investigation in-house, as Rosenstein should know having served (along with me) in an Independent Counsel's Office. There are great inefficiencies and delays involved in setting up and running a Special Counsel operation. In disputes between such an office and an uncooperative Executive Branch, who would you rather see the President opposing? A Special Counsel, who he can demonize, or his own DAG, who he has already praised as a man of impeccable integrity? The scarier President Trump gets, the more I need the people around him to be sound, sane, and steady professionals. I want to see people like McMaster, Mattis, and Rosenstein at their stations.
As a matter of public relations, the President's unforced error will make it more difficult for Rosenstein to resist the calls for a Special Counsel. If President Trump's inappropriate comments about the investigation pile up, more and more citizens will be prone to see any declination by the DAG as a whitewash or a cover-up. So keep talking Mr. President. The more you complain about the Russia Investigation, the likelier you are to get a Special Counsel for all of your efforts. Meanwhile, were I Rosenstein, I would react to every Presidential criticism of the investigation with a renewed determination to leave no stone unturned. Hunker down Rod. Your country needs you.
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)