Wednesday, June 5, 2013

Sideshow: DC District Court Staff's Failure to Unseal the James Rosen Affidavit

by: Solomon L. Wisenberg

FBI Special Agent Reginald Reyes' affidavit supporting DOJ's search warrant application for Fox News Reporter James Rosen's Google email account was ordered unsealed in November 2011. But it wasn't actually unsealed by the DC U.S. District Court's staff until late May of 2013. In other words, the affidavit was only unsealed several days after AG Holder testified that, "[w]ith regard to potential prosecution of the press for the disclosure of material, that is not something that I have ever been involved in, heard of, or would think would be a wise policy." Once the affidavit and search warrant application were unsealed, it became clear that Holder's testimony was inacurrate, as he had personally authorized the search warrant application. See here for yesterday's post on this issue.

DC Chief Judge Royce Lamberth is not happy about his staff's failure to unseal the affidavit and related documents. Here is Chief Judge Royce Lamberth's 5-23-2013 Order expressing his unhappiness.

(wisenberg)

June 5, 2013 in Congress, Current Affairs, Investigations, Judicial Opinions, Legal Ethics, Perjury, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 4, 2013

The Holder Mess

by: Solomon L. Wisenberg

“Well, I would say this. With regard to potential prosecution of the press for the disclosure of material, that is not something that I have ever been involved in, heard of, or would think would be a wise policy.” Attorney General Eric Holder testifying under oath before the House Judiciary Committee on May 15, 2013.

"For the reasons set forth below, I believe there is probable cause to conclude that the contents of the wire and electronic communications pertaining to SUBJECT ACCOUNT, are evidence, fruits and instrumentalities of criminal violations of 18 U.S.C. [Section] 793 (Unauthorized Disclosure of National Defense Information), and that there is probable cause to believe that the Reporter has committed or is committing a violation of section 793(d), as an aider and abettor and/or co-conspirator to which the materials relate." FBI Special Agent Reginald B. Reyes' May 28, 2010, Affidavit in Support of Search Warrant Application for Fox News Chief Washington Correspondent James Rosen's Google email account. The warrant was authorized by Attorney General Holder.

Note than in addition to identifying "the Reporter" as a probable aider, abettor and/or criminal co-conspirator, the affidavit explains that the Department of Justice is not bound by the Privacy Protection Act, otherwise prohibiting warrants for First Amendment work product, precisely because "the Reporter" was "suspected of committing the crime [18 U.S.C. Section 793(d)] under investigation."

There is no doubt that AG Holder gave false testimony to House Members under oath. He is an idiot if he did so intentionally, and he isn't an idiot. What should Holder have done to fix this mess? Corrected the record, of course. In the immortal words of Richard Nixon, "that would have been the easy thing to do."

Holder should have said: "Dear Representatives Goodlatte and Sensenbrenner. I screwed up. My testimony to you is now inoperative. I forgot that I authorized this affidavit, which clearly identifies a 'Reporter' as somebody under investigation for a crime. I did not intentionally try to deceive you. My statement was careless and overbroad. Please accept my apologies."

But the Attorney General apparently cannot not bring himself to do anything as straightforward as that. Instead he spends days sending out spinmeisters, most recently, and regrettably, Deputy Assistant AG Peter Kadzik, as reported here by Sari Horwitz in today's Washington Post.

How sad. Can you imagine anything like this happending under Attorney General Griffin Bell? Bell, a genuine protector of our civil liberties, most likely would have nixed the supboena in the first place. But if Bell had authorized it, he never would have shied away from the ensuing controversy or hidden behind his DOJ underlings.

Mr. Holder has received his fair share of undeserved, demagogic criticism from the kooky right. He deserves what he's getting now. 

Here is a copy of the Reyes Affidavit.

(wisenberg)

June 4, 2013 in Congress, Current Affairs, Investigations, Legal Ethics, Perjury, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Friday, March 29, 2013

White Collar Criminal Law is Heating Up?

Two news items today highlight that the white collar area continues to be a key component of the criminal justice system.  In Atlanta we see a Fulton County Grand Jury issuing indictments for claims that an alleged test cheating scandal involves criminal activity. See Michael Winerip, NYTimes, Former Atlanta Schools Chief Is Charged in Testing Scandal

And the headline of the Tampa Bay Times is FBI Raid Signals End of Universal - an article describing the FBI raid of Universal Health Care.

(esp)

March 29, 2013 in Investigations, News, Searches | Permalink | Comments (1) | TrackBack (0)

Wednesday, December 26, 2012

Wiretaps

Monday, December 17, 2012

HSBC Settlement: The Unanswered Questions

by: Solomon L. Wisenberg

You can debate all day whether the government should allow any financial institution to get too big to fail. You can also debate whether such an institution, if it is too big to fail, should be too big to prosecute, even when it engages in blatantly criminal conduct over a lengthy period of time. However, you cannot seriously debate whether to prosecute senior bank officials of an international mega-bank who knowingly directed the criminal enterprise in question. Corporations only act through agents. Those agents are human beings.

We are not talking about technical matters here. This is not a question of whether each party to a complex transaction understood the fine print which revealed, or obscured, that an investment bank was betting against the deal it was pushing.  According to the published reports and press statements, obvious narcotics-related money laundering was repeatedly facilitated by the bank, despite multiple regulatory warnings. The sources of funds connected to outlaw regimes were intentionally and repeatedly hidden. If this stuff happened, people did it. And they were no doubt high-ranking people.

No credible person will contend that the prosecution of corrupt bank officers can ever endanger the financial community. No matter how important the institution or high-ranking the officer, employees are fungible. The global financial impact of prosecuting these officers, no matter how important they think they are, will always be negligible.

Assistant AG Lanny Breuer said at his press conference that individual prosecutions were not being ruled out. (Similar statements were made at the time of the robo-signing settlement press conference, and we all know what an avalanche of individual DOJ prosecutions followed in the wake of that!) But other comments Breuer made, discussing how hard it supposedly is to prosecute the individuals involved, appear to be window-dressing rehearsals for future DOJ declinations.

Reporters should not let this issue slide into oblivion. The DOJ does not typically comment upon pending investigations of individuals. (Of course this does not stop some FBI and IRS agents from telling all of a target's friends that he is being criminally investigated, thereby ruining the target's life.) Here is an occasion where the policy should be ignored, particularly since the DOJ can comment on a pending investigation without revealing the names of the subjects and targets. 

The question every self-respecting reporter should be asking AG Holder and Assistant AG Breuer is not whether individual indictments have been ruled in or out. The questions to be asked at every opportunity in the coming weeks and months are:

"What is the status of the investigation?"

"Is there really any investigation?"

"Are you treating this investigation like you treat the investigation of other individuals suspected of facilitating murder and drug crimes?"

Here is an account by Rolling Stone's Matt Taibbi of his appearance on Eliot Spitzer's Viewpoint program discussing the HSBC settlement. Taibbi's account contains a link to the Spitzer interview. Hat tip to Jack Darby of Austin's Krimelabb. com for alerting me to this posting. Taibbi also has an interesting opinion piece about the HSBC settlement on his Rolling Stone TAIBBLOG.

(wisenberg)

December 17, 2012 in Current Affairs, Deferred Prosecution Agreements, International, Investigations, Money Laundering, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Thursday, November 29, 2012

BP: Can Civil Remedies Be More of a Sting

We recently saw BP settling with a record $4 billion in criminal fines and penalty. See here. And as noted then -

"The guilty plea entered by BP provides that the 'Department agrees
that, if requested to do so, it will advise any appropriate suspension or
debarment authority that, in the Department's view, the defendant has accepted
criminal responsibility for its conduct relating to the Deepwater Horizon
blowout, explosion, oil spill and response by virture of this guilty plea and
that BP is obligated pursuant to this agreement to cooperate in any ongoing
criminal investigation by the Department relating to the Deepwater Horizon
blowout, explosion, oil spill and response.'  But it does state that '[n]othing
in this agreement limits the rights and authority of the United States of
America to take further civil or administrative action against the defendant
including but not limited to any listing and debarment proceedings to restrict
rights and opportunities of the defendant to contract with or receive
assistance, loans and benefits from United States government agencies.'" 

Reports are showing now that it is federal regulators that are temporarily suspending BP from government contracts.  Although as noted on law.com by Jenna Greene, Feds slam BP's ethics, bar oil giant from contracts  it is unclear how long of a period  this suspension will last. (see also Michael Pearson, CNN, The spill: How much should BP suffer?)

The real question will be whether the criminal fine or the civil suspension will carry the most deterrence and punishment.  This raises an important issue of whether corporate criminal liability is really the best route, or whether civil remedies can provide better compliance with the law and regulations. Most importantly, it is good to see regulators acting.  It would be even better if regulatory actions were proactive, as opposed to reactive - after something has occurred.

(esp)

November 29, 2012 in Environment, Investigations, News | Permalink | Comments (0) | TrackBack (0)

Monday, September 24, 2012

Deferred Prosecution Agreements - Definitely A Plus

On September 13th Assistant Attorney General Lanny A. Breuer spoke to the New York City Bar extolling the virtues of DOJ's strategy for corporate prosecutions (see here). Former co-blogger Peter Henning here, also authored an article which focuses on the use of deferred prosecution agreements by the government.

One clearly has to credit the government with raising the bar in the corporate world to comply with legal mandates. Corporations throughout the world now have strong compliance programs and conduct internal investigations when questionable activities are reported to them.  Likewise, post-Arthur Andersen, LLP, corporations are shy to go to trial - although there are some who have done so successfully (e.g. Lindsey Manufacturing- see here).

When the government first started using deferred and non-prosecution agreements, in a prior administration, there were government practices that were questionable.  For example, allowing for huge sums to money to go to a former attorney general as a monitor, giving a chair to a law school that happened to be the same school the US Attorney graduated from, and negotiating for continuing work with the government as part of the agreement. (see Zierdt & Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing-here)  Without doubt there were terms within the agreements that needed revision. Some terms that give complete control to prosecutors in deciding who can determine breaches of agreements present problems. But many of the questionable practices are not seen in recent deferred prosecution agreements, and this is good. 

Agreements that still provide an imbalance between corporate misbehavior and individual miscoduct is creates an imbalance, but much of this is created by the fact that corporations have greater resources and can control the discussion with DOJ, to the detriment of the individual. Clearly there needs to be a better recognition of corporate constituents during the internal investigations, the subject of a forthcoming article that I author with Professor Bruce Green (Fordham) titled, Unregulated Internal Investigations: Achieving Fairness for Corporate Constituents.  But this issue may not be one strictly for DOJ to resolve.

What is particularly impressive about the DOJ use of deferred prosecution agreements today is that it uses an educative model to reform corporate misconduct. One can't put a corporation in prison, so with fines as the best alternative it is important to focus on motivating good conduct.  Corporate deferred and non-prosecution agreements are an important step in achieving this positive result.  So, it is important to credit today's DOJ with how it is tackling the problem of corporate misbehavior.

(esp)  

September 24, 2012 in Deferred Prosecution Agreements, Investigations, News, Prosecutions, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Tuesday, September 11, 2012

IRS Whistleblower Birkenfeld Hits The Jackpot

Reuters reports here on the astounding award. Yours truly and other luminaries are quoted.

(wisenberg)

September 11, 2012 in Investigations, Prosecutions, Qui Tam, Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 24, 2012

Serious Financial Allegations Deserve Criminal Investigation

My learned and astute co-editor, Solomon Wisenberg, bridled at the thought of a criminal investigation of the Libor bank scandal (see here), which he believes will be a waste of time, and of the JP Morgan Chase trading loss (see here), which he believes lacks evidence of criminality.  While I do not know enough about these matters to dispute his reasons, I nonetheless strongly believe a criminal investigation is warranted in both instances.

Financial manipulations which cost shareholders and customers of large institutions millions (or billions) of dollars require criminal investigation, and, if identifiable provable criminal wrongdoing is found, criminal prosecution.  It has become clear that those institutions and their employees are incapable or unwilling to police themselves, and, as Mr. Wisenberg points out, the responsible regulatory agencies have often been asleep at the switch or even compliant.

That is not to say that every massive financial loss involves criminality or that weak or questionable criminal prosecutions should be brought to soothe the popular thirst for criminal punishment.  It is not to say that genuine defenses, such as estoppel due to government approval or acquiescence, should not prevent prosecution.  But for the huge financial institutions, even a penalty of almost a half billion dollars, as in the Barclays Bank "deferred prosecution" deal (effectively a "non-prosecution" deal), is merely a cost of doing business passed on to shareholders.  And for many of the traders and manipulators, who always weigh risk but rarely morality, only the risk of a criminal prosecution (which for them involves potential prison sentences) will have any serious deterrent effect.

To be sure, criminal investigations, even without prosecutions, may deter innovation and creativity in financial vehicles and dealings (although I am not so sure that is a bad thing).  Additionally, investigations themselves cause mental distress, potential loss of reputation, and considerable legal fees.  Criminal investigations, therefore, should not be started without careful consideration by law enforcement or prosecutorial agencies.  But massive losses of other people's money should almost always require an examination beyond a regulatory or civil one by our historically inept financial regulatory agencies.

Every death by other than natural causes, every fire of any proportion, and every serious automobile accident is reviewed by authorities for possible criminal prosecution.  Is there any reason an unusual massive financial loss of other people's money should be exempt from scrutiny for possible criminality?  I think not.

(goldman)

July 24, 2012 in Current Affairs, Deferred Prosecution Agreements, Fraud, Investigations | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 17, 2012

Freeh Report on Paterno Reaches Speculative But Reasonable Conclusion

Joe Paterno was buried a second time last week -- partly by a report of former judge and FBI Director Louis Freeh and partly by accounts like that of the New York Times, which in a four-column lead story headlined "Abuse Scandal Inquiry Damns Paterno and Penn State," wrote "Mr. Freeh's investigation makes clear that it was Mr. Paterno . . . who persuaded the university president and others not to report Mr. Sandusky to the authorities . . . ." (emphasis added).  See here.  A reading of the report, however, shows that its conclusions as to Paterno are based on hearsay, innuendo and surmise.  While a report such as the Freeh Report certainly need not be based on court-admissible testimony, if indeed the evidence referred to in the report constituted the sole basis for a criminal and/or civil charge against Paterno, the case undoubtedly would be thrown out and would not reach a jury.

The relevant evidence involving Paterno is as follows:

  • In May 1998, with respect to an allegation that Sandusky had showered with an eleven year-old on the Penn State campus, Tim Curley, the Penn athletic director, notified his superiors that he had "touched base" with Paterno about the incident and days later sent to them an email "Anything new in this department?  Coach [Paterno] is anxious to know where it stands."
  • In February 2001, after he observed Sandusky sexually molesting a youth in a Penn State shower room, Mike McQueary, a graduate assistant, reported the incident to Paterno, who told him, "You did what you had to do.  It is my job now to figure out what we want to do."  The following day, a Sunday, Paterno reported the incident to Curley and Gary Schultz, a Penn State vice-president.  Paterno waited a day or so not to "interfere with their weekend."
  • Later in the month, Graham Spanier, the Penn State president, Schultz and Curley devised an action plan which included reporting the incident to the state welfare agency.  A day or so later, Curley emailed Schultz and Spanier and said that he had changed his mind about the plan "after giving it more thought and talking it over with Joe [Paterno] yesterday," and now felt that they should instead tell Sandusky to seek professional help and not report him to the welfare authorities unless he did not cooperate.

The first item, the 1998 Curley email, merely demonstrates that Paterno showed an interest in what was happening with reference to the 1998 incident, which ultimately was reported to both the welfare department and the local prosecutor and resulted in no findings or charges.  Paterno reportedly in 2011, after the incident involving Sandusky's 2001 conduct and the failure to report it to authorities raised public attention, denied that he was aware of the 1998 incident.  In fact, Paterno's testimony in the grand jury in which he purportedly denied any such knowledge was in response to an imprecise, general and unfocused question, and his answer was accordingly unclear.  Additionally, the reported statement denying any prior knowledge was by his "family" and not by him.

In any case, while a denial, if made directly by Paterno or even an authorized agent, might arguably be admissible in court as evidence of consciousness of guilt, such evidence is weak proof of guilt since even wholly blameless people often make false statements distancing themselves from wrongdoing.

The second item, Paterno's response to McQueary is by itself of little moment and says no more than that Paterno, having been apprised of the incident, would now have to figure out what he and the others will do.  Of course, one can read into that facially bland statement a more sinister meaning -- that Paterno intended to tell McQueary to remain silent.  Such a meaning, however, is supported only by surmise and suspicion.  The report also states that Paterno waited a day before reporting the information to Curley and Schultz so as not to "interfere with their weekends."  This one-day delay is not meaningful.

The third item, Curley's change of mind after "talking it over with Joe," might, not unreasonably, albeit with a considerable leap, be construed to indicate that Paterno suggested not reporting the incident to the authorities.  However, it might also be that Curley changed his mind on his own after airing his thoughts with Paterno and deciding that the earlier plan was not preferable.  It is, of course, also possible that whatever Curley wrote, his mention of discussions with Paterno (without any direct or indirect report of Paterno's own views) was an attempt by Curley to minimize or shift personal responsibility from himself.  In any case, any probative value this email has as to Paterno's intent is also based on speculation.

Freeh himself seems to recognize that his conclusions are far from "clear."  He mentions that Curley and Schultz contended that they acted "humanely" and sought "the best way to handle vague and troubling allegations," that Paterno had told a reporter he had "backed away and turned it over to . . . people I thought would have a little more expertise," and that Spanier had denied knowledge "Sandusky was engaged in any sexual abuse of children."

He then rejects these explanations and concludes, "Taking into account the available witness statements and evidence, the Special Investigative Counsel finds that is more reasonable to conclude that, in order to avoid the consequences of bad publicity, the most powerful leaders at the University -- Spanier, Schultz, Paterno and Curley -- repeatedly concealed critical facts relating to Sandusky's child abuse from the authorities, the University's Board of Trustees, the Penn State community, and the public at large" (emphasis added).  During a press conference specifically focusing on Paterno's culpability, Freeh, seemingly inconsistently with the qualified "available witness statements and evidence" language of the report, appeared to exaggerate, "There's a whole bunch of evidence here."  He continued, "And we're saying that the reasonable conclusion from that evidence is that [Paterno] was an integral part of this active decision to conceal" (emphasis added).

I tend to agree that Freeh's conclusion is the "more reasonable" hypothesis, but I do so based more on a visceral feeling and some understanding of Paterno's power and status at the university than an evidentiary basis.  The "facts" demonstrating Paterno's "active" role in the cover-up are insubstantial and equivocal.  The case against Paterno is, as a Scotch jury might say, "not proven."  Perhaps we should require more substantial proof before we topple Paterno's statue -- figuratively and actually.

(goldman)

July 17, 2012 in Celebrities, Current Affairs, Investigations, Media, News, Sports | Permalink | Comments (1) | TrackBack (0)

Libor: The Regulatory Mind And the Prosecutorial Mind (2)

As I mentioned here last Wednesday:

"By ignoring material financial falsehoods, the regulators and examiners allow frauds to continue and decrease the likelihood of future accountability through the criminal process."

The New York Fed's Friday data dump reveals beyond question that some of its officials, including Timothy Geithner, were aware of intentionally misreported Libors by 2008 at the latest. Today's Wall Street Journal editorial lays out the damning transcripts.

What does this mean? For openers it means that DOJ's announcement of a criminal investigation is a joke. Regulators and government officials at the highest levels knew of the misrepresentation. By not immediately raising bloody hell and putting a stop to it they either sanctioned the conduct, rendering it non-criminal, or themselves became co-conspirators.

Do you really think DOJ is about to investigate Geithner or drag him into somebody else's criminal defense? Get real. These people can't even prosecute robo-signers.

(wisenberg)

July 17, 2012 in Civil Enforcement, Current Affairs, International, Investigations, News | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 11, 2012

Libor: The Regulatory Mind And the Prosecutorial Mind

The news that Barclays officials told the New York Fed in 2007 about potential problems with Libor highlights key differences between the regulatory mind and the prosecutorial mind. It also shows the difficulty in successfully prosecuting white collar fraud in the wake of regulatory incompetence.

When the typical federal prosecutor learns that a financial institution or corporation has lied, his instinct is to prove and charge a crime against the individuals responsible for the falsehood. Virtually any material lie in the context of publicly traded or federally insured entities constitutes a federal crime.

When a regulator learns that he has been lied to, the response is not necessarily the same. A famous example of this occurred during one of the SEC’s many examinations of Bernie Madoff’s shop. Madoff was caught flat out lying to SEC examiners. Did the scope of the examination expand? No. Were prosecutors immediately informed? No. Madoff was given a slap on the wrist. His massive Ponzi scheme continued for several years, claiming thousands of new victims.

While prosecuting S&L fraud twenty years ago, I was appalled to discover repeated instances in which the very fraud I was investigating had been contemporaneously revealed in some format to federal banking regulators and/or examiners who had often done nothing in response. This put putative defendants in the position of arguing that their frauds really weren’t frauds at all, because they had not deceived anyone. They argued that the regulators knew all about their conduct and failed to act, so: 1) it wasn’t deceptive conduct; and 2) they thought they had a green light going forward. Sometimes our targets and subjects were right. Sometimes they had only disclosed the tip of the iceberg.

By ignoring material financial falsehoods, the regulators and examiners allow frauds to continue and decrease the likelihood of future accountability through the criminal process.

But sophisticated fraudsters often reveal their conduct to regulators through a glass darkly. They are hoping that overworked regulators, with whom they are friendly, will miss, or misunderstand, the half-assed disclosures being made. The trick is to disclose just enough, but not too much. The typical regulator, unlike the typical prosecutor, does not distrust mankind or see a fraudster around every corner. The typical regulator has known the institution and executives he is currently monitoring for years. Often his ass has been kissed during that period in perfectly appropriate ways. He has been respected and deferred to. These intangibles, and his workload, may prevent him from noticing or following up on potential red flags.

We don’t have the full story yet on what the New York Fed knew about Barclay’s Libor problems, but the alacrity of the New York Fed’s acknowledgement that it knew something is striking. Timothy Geithner ran the New York Fed at the time, and we know that he has never met a wrist that couldn’t be slapped or a falsehood that couldn’t be excused.

The question remains—how can we bridge the regulatory/prosecutorial mental divide in order to punish real corporate fraud? Here is one answer—by training regulators and examiners to have zero tolerance for misleading or obstructionist behavior. The discovery of any lie or intentionally misleading conduct by a publicly traded or federally insured institution in any context should result in immediate fast-tracking to appropriate civil and/or criminal enforcement officials and/or federal prosecutorial authorities. This does not mean that prosecution should automatically or even usually ensue. It does mean that individuals who actually know something about fraud can take a critical and timely look at red flag behavior.

Once this process is in place, it may create a business climate in which elite corporate and financial institutions, and their officers, directors, and employees, will know that lying in any form will not be tolerated. The success of such a structure depends on the DOJ green-lighting prosecutors fearless enough to investigate and charge the flesh and blood financial elites who commit fraud. Almost every indication to date (outside of the insider trading context) is that current DOJ leadership is not up to the task.

(wisenberg)

July 11, 2012 in Civil Enforcement, Current Affairs, Fraud, Insider Trading, Investigations, News | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 27, 2012

Barclays Bank to Pay - $160 Million - as Part of Non-Prosecution Agreement

A DOJ Press Release reports, Barclays Bank PLC Admits Misconduct Related to Submissions for the London Interbank Offered Rate and the Euro Interbank Offered Rate and Agrees to Pay $160 Million Penalty

Some highlights of the press release -

  • "Barclays Bank PLC, a financial institution headquartered in London, has entered
    into an agreement with the Department of Justice to pay a $160 million penalty
    to resolve violations arising from Barclays’s submissions for the London
    InterBank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR),
    which are benchmark interest rates used in financial markets around the world..."
  • "To the bank’s credit, Barclays also took a significant step toward accepting
    responsibility for its conduct by being the first institution to provide
    extensive and meaningful cooperation to the government."
  • "Barclays’s cooperation has been extensive, in terms of the quality and type of
    information and assistance provided, and has been of substantial value in
    furthering the department’s ongoing criminal investigation." 
  • "The agreement requires Barclays to continue cooperating with the department in
    its ongoing investigation."
  • "As a result of Barclays’s admission of its misconduct, its extraordinary
    cooperation, its remediation efforts and certain mitigating and other factors,
    the department agreed not to prosecute Barclays for providing false LIBOR and
    EURIBOR contributions, provided that Barclays satisfies its ongoing obligations
    under the agreement for a period of two years.  The non-prosecution agreement
    applies only to Barclays and not to any employees or officers of Barclays or any
    other individuals."

Commentary - As a non-prosecution agreement it does not go through the courts and DOJ has the power to enforce or proceed should it believe there is a violation of the agreement. It also sounds like the white collar defense bar may have some new clients as the government has secured the cooperation of the company to go after individuals.

See also Jenna Greene, BLT Blog, Barclays Agrees to Pay $360M to Settle with CFTC, DOJ
over Interest Rate Manipulation

(esp)

June 27, 2012 in Defense Counsel, Deferred Prosecution Agreements, Investigations, Prosecutors, Settlement | Permalink | Comments (1) | TrackBack (0)

Tuesday, June 19, 2012

Reactions to Gupta Verdict

The jury deserves credit - they clearly evaluated all the counts as evidenced by their finding of guilt in some and not guilty in others.  The judge deserves credit - Hon. Jed Rakoff is a leading scholar and superb jurist. 

But should this be a crime? And exactly what is the crime? Should individuals who obtain little or no personal profit be subject to criminal penalties?

And what evidence should a jury hear during the trial?  Should wiretaps that are select conversations of the government be allowed to be used against a defendant in a securities fraud case, when this crime is not included in the criminal activity of our wiretap laws (see here)?

There is an interesting interplay here.  On one hand we have someone being convicted for using "secret" information - the insider trading. On the other hand we have the government using "secret" information to convict the individual - the wiretaps.  I keep wondering if there is anything that can be "secret" anymore.  In this information age it seems like information is so accessible that it is difficult to claim anything as being "insider."

 (esp)

June 19, 2012 in Investigations, Securities, Verdict | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 23, 2012

FBI Investigates JPMorgan Chase Trading Loss. Why?

Here is a Huffington Post piece from several days ago on the FBI probe of JPMorgan Chase's $2 billion trading loss. Can anybody tell me what the crime is here? Doesn't there have to be a potential crime before the FBI investigates? Can somebody please identify that potential crime? The probe is a farce, and the mainstream press's failure to ask the most obvious question is par for the course.

(wisenberg)

May 23, 2012 in Investigations, Media | Permalink | Comments (1) | TrackBack (0)

Tuesday, May 15, 2012

Should the NFL Bounty Case Be Looked at By Outside Agencies?

Some years ago, I represented a landlord who was indicted and convicted for offering a bounty to a thug if he beat up the leader of the tenants' committee, which was opposing a rent increase.  This behavior does not seem all that much different from what the National Football League has alleged New Orleans Saints linebacker Jonathan Vilma did.  Vilma, four other players, and his coach Sean Payton and others, have been disciplined by NFL Commissioner Roger Goodell for allegedly conspiring to offer rewards to teammates to maim opposing players, particularly star quarterbacks.

News about this alleged conspiracy has been widely publicized, but I have yet to read of any current or impending federal or state criminal or legislative inquiry.  While certain violence in football is accepted, deliberate maiming goes beyond any acceptable norms.  Nonetheless, it would not surprise me that neither federal nor state prosecutors, especially in the New Orleans area, where Vilma and his alleged player co-conspirators played, view such an investigation as crowd-pleasing.  Realistically, it is quite possible that a New Orleans jury would nullify and acquit Vilma even if there were convincing evidence against him.

In virtually every other area of business activity where there is a tenable allegation that a person had conspired to maim a competitor or opponent, there would be a serious prosecutorial investigation.  In sports, what is ordinarily considered criminality, at least physical criminality, is often given a bye.

One might think that Congress has a legitimate reason and special responsibility to investigate alleged orchestrated maiming in professional football, a national sport/business.  The National Football League, as it is now, exists due to Congressional largess.  Congress has given the NFL a special exemption to antitrust rules which allows it to function as a lucrative monopoly with an all-powerful commissioner.  Professional football (which to my wife's chagrin I watch virtually every fall Sunday), if fairly and properly played, is a dangerous game, as reflected by the frequent injuries and limited career span of its players, and the reported unusual rates of early brain damage, suicides and deaths among its retirees.  When improperly played -- played with a purpose of injuring others -- it is even more brutal.

Of course, just as an indictment might not be popular with local fans, a Congressional investigation into football brutality would probably not be favorably received by the voters back home, who like their contact sports (at least professional sports) such as football and hockey to be rough.  Congress appears to be more interested in whether baseball players engage in taking illegal drugs, which, if it harms anyone, hurts only themselves or perhaps also competing players who perform at a comparative disadvantage without such presumed aids.  Such an investigation also continues to feed the anti-drug attitude Congress has fostered and to justify the harsh drug laws Congress has enacted.  Of course, Congress might also be gunshy in view of the embarrassment that the baseball steroid investigation and resulting Roger Clemens trial became.

This is not to say that I presume Vilma is guilty.  I have not seen or heard any concrete evidence that he in fact did orchestrate a bounty program.  The NFL investigation was conducted in secret and with only a sparse controlled public report by the NFL of its findings.  Vilma's attorney, in a letter roughly equivalent to a motion for discovery in a criminal case, has asked for 17 points of information.  The NFL's response is essentially that its special counsel, Mary Jo White, a respected and liked, and generally prosecution-minded, former United States Attorney, has reviewed the secret evidence and has found it sufficient.  The NFL also claims that it had shared some of the evidence with the alleged offenders and the NFL Players Association.  The association, while supporting the players' right to arbitration, presumably represents both Vilma and the alleged offenders, and is barely a substitute for a single-minded advocate on Vilma's behalf.

Thus, Vilma, subject to possible reversal by arbitration or court action, will be punished with a suspension of one year (a significant time in a football player's limited career span), and the loss of millions of dollars without even rudimentary due process.  And, unlike many persons suspended or fired from jobs, Vilma is practically unable to ply his trade anywhere else besides the monopolistic NFL.

I do not know enough about the NFL's collective bargaining agreement, which apparently allows the Commissioner to be both prosecutor and judge, or about labor law to know whether Vilma has been treated properly.  I do, however, have a visceral feeling that he deserves more rights than a secret investigation and a conclusory decree by a commissioner with dictatorial power.

(goldman)

May 15, 2012 in Congress, Current Affairs, Investigations, Prosecutors, Sports | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 1, 2012

Tom Dewey May Be Rolling Over in His Grave

In an ironic twist, the New York County (Manhattan) District Attorney's Office is investigating the recently-deposed chairman of Dewey LeBouef, the firm that still carries the name of Thomas Dewey, the near-president who rose to national prominence as a gangbusting nonpolitical Manhattan District Attorney.

The investigation, apparently based on facts brought to the District Attorney's attention by disgruntled partners as the firm teeters on the verge of extinction, concerns whether the former chairman, Steven H. Davis, committed financial improprieties.  One area of investigation reportedly is whether Davis misled investors, presumably insurance companies and/or banks, about the firm's financial condition, see here, perhaps involving its commitments to highly-compensated partners, many lateral hires.  American Lawyer last month announced that it was revising the figures it published based on the firm's report of its finances since those numbers differed from what the firm reported to the media.  The firm defended its numbers, claiming that it used different methodologies at different times. 

Certainly, different financial reports made at different times using different methodologies for different purposes may reasonably be different.  And, even giving false figures to American Lawyer may not be criminal (I hesitate to state so definitively in this day of overcriminalization of law and overreaching by law enforcement).  However, false statements to lenders or investors, who potentially will incur severe losses, because of the firm's inability to pay its debts, is a less certain matter.

The firm has mounted its own internal investigation -- by two of its partners.  While I have no reason to believe that the investigation will be less than thorough and fair (and will likely save considerable money), the firm might have more prudently hired independent investigators invulnerable to accusations of conflict of interest, if only for public relations purposes.  Of course, if the firm dissolves, any internal investigation may fall by the wayside.

(goldman)

May 1, 2012 in Investigations | Permalink | Comments (1) | TrackBack (0)

Sunday, April 29, 2012

Ten Basic Observations About Discovery Call for New Legislation

Here are ten basic observations regarding criminal discovery.  They send a loud message that the proposed  Senator Lisa Mukowski (Alaska) (along with Senators Inouye, Hutchinson, Begich and Akaka) "Fairness in Disclosure of Evidence Act" legislation is needed to codify the holding in Brady and add teeth to making certain that defendants receive a fair trial.

Ten Basic Premises:

  1. Most prosecutors play by the rules.
  2. One of the rules is you have to give up Brady material.
  3. Brady is going to be 50 years old in 2013.
  4. The ethics rules require prosecutors to give up exculpatory material.
  5. Some prosecutors have no clue what Brady material really is.
  6. In some cases prosecutors can’t tell if something is favorable to the defense because they don’t know what the defense will be presenting.
  7. Discovery in national security cases, terrorism, and cases where someone will get hurt needs to be treated differently.
  8. The chances of prosecutors being caught if they fail to give up Brady material is slim.
  9. If Brady material is not given or given late, most courts will find it to be harmless error.
  10. The chances of a prosecutor being disciplined for not giving up exculpatory material is slim.

(esp)

April 29, 2012 in Investigations, Prosecutions, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Wednesday, April 25, 2012

Should Wal-Mart Be Prosecuted, Really Prosecuted?

I expect that any day now one of my non-white-collar criminal clients will come to my office and ask me to incorporate him to protect him from future criminal liability.  Of course, incorporation does not immunize an individual from criminal liability.  Nor, generally, does it protect small corporations from prosecution.

However, it appears that just as massive corporations are "too big to fail," they are too big to prosecute.  In the wake of the government's destruction of Arthur Andersen because of an ill-conceived, aggressive and ultimately unsuccessful indictment which caused the loss of thousands of jobs, DOJ has been highly reluctant to aggressively prosecute major corporations.

Although there are occasionally indictments of major corporations, most often these are disposed of by "deferred prosecutions," which are essentially delayed dismissals with financial penalties in numbers that are large in absolute terms but meager in comparison to the profits and assets of the corporation.  To be sure, even when prosecuted to conviction, corporations do not go to jail and thus there may be little practical difference between a conviction of a corporation and a deferred prosecution.  However, to the extent a goal of the criminal justice system is to achieve apparent fairness and equality, there is a genuine, if symbolic, reason for the prosecution of the large and powerful, whether they be individuals or corporations.

According to a thorough account in the New York Times this past Saturday, April 21, see here, Wal-Mart in Mexico, where the company has, according to the Times, one-fifth of its stores, engaged in a systemic countrywide scheme in which it spent millions of dollars to bribe hundreds of Mexican officials to gain favorable and expedited treatment and a competitive advantage.  According to the Times, this conspiracy was not, as is often the case in corporate wrongdoing, the act of a rogue individual or group.  Rather, it was orchestrated from the very top of the Wal-Mart Mexican hierarchy.  Additionally, again according to the Times, when reports of this corruption reached Wal-Mart's U.S. headquarters, top executives took great pains to cover up the wrongdoing.

The alleged conspiracy, if the Times report is accurate, appears to be the kind of corporate crime, therefore, that deserves aggressive prosecution (not just an indictment and a deferred prosecution), especially if the government wants the Federal Corrupt Practices Act ("FCPA") to be taken seriously.  Of course, there may be statute of limitations or other fact-finding or evidentiary problems involved in putting together a case involving facts from 2005, the year, according to the article, the bribe payments were made.  It is far easier to write an article reporting corruption than to prove it under the rules of evidence beyond a reasonable doubt.  It will be interesting to see what, if anything, DOJ does with respect to this matter.

(goldman)

April 25, 2012 in Arthur Andersen, Corruption, Deferred Prosecution Agreements, FCPA, International, Investigations, Obstruction, Prosecutions, Prosecutors | Permalink | Comments (2) | TrackBack (0)

Sunday, April 15, 2012

Indemnification Agreements - Pay the Lawyers

Many companies, as part of their compensation and benefits packages, have indemnification agreements that allow for payment of attorney fee expenses to company officers, directors, and others.  Some may be surprised to learn that Fannie Mae and Freddie Mac have such agreements as part of Enterprise Bylaws or individual agreements.  "Between 2004 and October 31, 2011, Fannie Mae advanced $99.4 million in legal expenses to cover the representation of" three former officers "in connection with government investigations and lawsuits stemming from accounting irregularities uncovered in 2004." The Office of Inspector General issued a report that offers some suggestions on reducing future costs. The "evaluation was led by Director of Special Projects David Z. Seide, and Investigative Counsel Stephen P. Learned contributed to its completion."  The report can be found here.

(esp)

April 15, 2012 in Attorney Fees, Government Reports, Investigations | Permalink | Comments (0) | TrackBack (0)