White Collar Crime Prof Blog

Man Bites Dog, Hell Freezes Over, Fifth Circuit Reverses Child Porn Conviction For Insufficient Evidence

The decision was handed down earlier this week in U.S. v. Moreland. The majority opinion was written by Judge Dennis, who was joined by Judge DeMoss. From a practitioner's viewpoint, it is most notable for its discussion of every conceivable mitigating gloss on Jackson v. Virginia. The dissent, by Judge Jolly, had some fun with this: "The record does not reflect whether the jury box had more than twelve chairs, but we do know—and we know for sure—that two more jurors are trying to crowd into the box." The case involved two computers that three different people, including the Defendant, had access to.

 (wisenberg)

Blago Gets 14 Years

The Washington Post, via AP, has the story here.

(wisenberg)

FCPA Bombshell: The Lindsey-Lee Order

"In this Court’s experience, almost all of the prosecutors in the Office of the United States Attorney for this district consistently display admirable professionalism, integrity and fairness.

So it is with deep regret that this Court is compelled to find that the Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court’s rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court."

"Consequently, the Court throws out the convictions of Defendants Lindsey Manufacturing Company, Keith E. Lindsey and Steve K. Lee and dismisses the First Superseding Indictment."

And here it is: Judge Matz's Order Throwing Out the Convictions of Lindsey Manufacturing Company, Keith E. Lindsey and Steve K. Lee.

(wisenberg)

Brady Again: Some Thoughts

Judge Emmet Sullivan's Order in relation to the Stevens case summarizing some of the findings of the special report by Hank Schuelke and William Shields was reported last week by my editor Ellen Podgor here and discussed in depth by my co-editor Solomon Wisenberg here.  I add some thoughts on Brady violations in general.

First, as Mr. Wisenberg points out, few Brady violations are intentional.  Although there are some rogue prosecutors who deliberately conceal what they know is information which would be beneficial to the defendant, the vast majority of Brady violators are well-meaning prosecutors who in their focus on their proof do not realize that certain information would be helpful to the defense.

Second, Brady is counterintuitive.  Requiring a participant in any contest to provide information to his adversary which will decrease his chance of winning goes against the grain.  Expecting a prosecutor who believes that such information is merely a means of enabling a guilty person to get off (since the material in question presumably has not changed the prosecutor's mind that the defendant is guilty beyond a reasonable doubt) to provide it to his opponent is even more problematical.

Third, Brady violations are not uncommon, although few are revealed.  Since Brady violations are done in secret and the concealed evidence is unlikely ever to reach the light of day, most are undetectable.  As Judge Sullivan's Order notes, many of the Brady violations in the Stevens case would never have been revealed but for the exhaustive investigation by the court's appointed investigators.  And, this case, it should be remembered, involved a U.S. Senator represented by Brendan Sullivan, a superb, highly-respected and aggressive lawyer, and an outstanding law firm with considerable resources, not an overwhelmed court-appointed attorney with limited time and resources.

Fourth, as Mr. Wisenberg notes, prosecutors are rarely punished for Brady violations.  Most judges either ignore the violations or gently chide the prosecutors.  DOJ internal reviews of alleged prosecutorial misconduct are viewed by defense lawyers and many judges as whitewashes.  Disciplinary committees historically have treated errant prosecutors gently in the few cases of prosecutorial misconduct of which they become aware, and prosecutions of prosecutors for obstruction of justice and the like for withholding evidence are virtually nonexistent.

Fifth, the legal standards for Brady disclosure are confused.  Most prosecutors and judges think of Brady material as "exculpatory" material, that is, something that might have a significant impact on the determination of guilt, a standard that, to most prosecutors, eliminates all but a very few items of evidence.  In fact, what should be disclosed is evidence "favorable" to the accused, a much broader category than "exculpatory."  Additionally, many prosecutors believe that the standard used by reviewing courts to determine whether non-disclosure of Brady evidence requires reversal -- whether it is "material" -- is the proper standard to be used by a trial prosecutor in the initial disclose-or-not determination.  "Materiality" in this context is essentially a "harmless error" standard of review used to decide whether the withheld evidence mandates reversal, not the standard to determine whether to disclose in the first instance.  Just as a prosecutor's argument in summation may be improper, even if unlikely to result in reversal, concealment from the defense of favorable evidence is improper, even if not so serious that it later will be found "material" by an appellate court.

In sum, under current conditions, Brady just doesn't work.  More explicit guidelines, as recently published by DOJ, will help, as would standing court orders making a violation contemptuous (as has seemingly not happened in Stevens) and stronger punishments for violations by judges, prosecutorial agencies, and disciplinary committees (and perhaps also a statute criminalizing deliberate and knowing Brady violations).  But, in the end, the only real solution to Brady violations may just be, as Mr. Wisenberg suggests, open discovery in criminal cases.

(goldman)

Judge Matz Will Throw Out Lindsey-Lee FCPA Convictions Due To Government Misconduct

Maybe FCPA isn't such a slam dunk after all if you take the government to trial. Bloomberg's Businessweek has the story here. The announcement was made in open court yesterday. A written opinion is due today. The Court is apparently relying on its supervisory power, so we can expect a vigorous government appeal. The ruling covers Defendants Lindsey Manufacturing, Keith Lindsey, and Steve Lee.

(wisenberg)

Speaking Truth To Power

Here is Judge Rakoff's Order Rejecting Proposed SEC-CITIGROUP GLOBAL MARKETS INC.Settlement. Here is the New York Times story. Judge Rakoff's Order repeatedly refers to Citigroup as a "recidivist." It is difficult to believe this Order would have ever seen the light of day had the Court truly believed that a comprehensive law enforcement effort was underway to investigate and hold accountable the persons and institutions whose actions "depressed our economy and debilitated our lives."

(wisenberg)

Lindsey Hearing And Probable Ruling This Tuesday

"I don't know if there was a stench that developed in this case, but there was a bad odor at times, and so the issue that I'm inviting both sides to address is...whether either through a finding of due process violations or in the exercise of my supervisory power...something akin to the whole being greater than the sum of its parts justifies throwing out this conviction, because a lot of the parts that led up to this conviction are extremely troublesome."  U.S. District Court Judge Howard Matz during 6-27-11 post-trial hearing.

The briefs are in and the hearing is set for this Tuesday at 10:00AM in the Lindsey Manufacturing FCPA prosecution. At issue is the Lindsey-Lee Defendants' Motion to Dismiss the Indictment With Prejudice Due to Repeated and Intentional Government Misconduct. A potential bad sign for the Government, as if it needed another one, is the Court's November 16th Order requiring the U.S. Attorney's Office to file certain Government and Court exhibits in the record by November 18. The Court had already publicly criticized the Government for its use and handling of some or all of these exhibits. The Government filed the exhibits in question on November 17, and they are now available through PACER. 

Judge Matz has previously characterized the Government's investigation and prosecution of the case as "extraordinarily sloppy at best." He was apparently so troubled by the Government's actions that he generated and kept a post note during trial in order to keep track of them.

(wisenberg)

Some Further Thoughts On Judge Sullivan's Order

My colleague Ellen Podgor recently commented here on Judge Emmet Sullivan's 11-21-11 ORDER in In Re SPECIAL PROCEEDINGS, the ancillary proceedings initiated by Judge Sullivan to investigate the multiple Brady violations committed by DOJ prosecutors in U.S. v. Theodore Stevens. The ensuing investigation was conducted, on Judge Sullivan's behalf, by veteran DC lawyers Hank Schuelke and William Shields, who have now issued a report that is, I hope, only temporarily under seal.

It is obvious from reading his Order that Judge Sullivan is still outraged. That's a good thing. Until enough federal judges get hopping mad about systemic DOJ Brady violations, we will have no real legislative discovery reform at the federal level.

In addition to the points highlighted by Professor Podgor, Judge Sullivan's Order notes the following findings and conclusions by Schuelke and Shields:

1. "[T]he investigation and prosecution of Stevens were 'permeated by the systematic concealment of significant exculpatory evidence which would have independently corroborated his defense and his testimony, and seriously damaged the testimony and credibility of the government's key witness.'"

2. "[A]t least some of the concealment was willful and intentional, and related to many of the issues raised by the defense during the course of the Stevens trial."

3. Schuelke and Shields "found evidence of concealment and serious misconduct that was previously unknown and almost certainly would never have been revealed--at least to the Court and to the public--but for their exhaustive investigation."

4. Schuelke does not recommend criminal contempt proceedings, because "in order to prove criminal contempt beyond a reasonable doubt under 18 U.S.C. [Section] 401 (3), the contemnor must disobey an order that is sufficiently 'clear and unequivocal at the time it is issued'... [but] no such Order existed in this case. Rather, the Court accepted the repeated representations of the subject prosecutors that they were familiar with their discovery obligations, were complying with those obligations, and were proceeding in good faith."

5. "Mr. Schuelke also notes that '[i]t should go without saying that neither Judge Sullivan, nor any District Judge, should have to order the Government to comply with its constitutional obligations, let alone that he should feel compelled to craft such an order with a view toward a criminal contempt prosecution, anticipating its willful violation.'"

6. "Mr. Schuelke 'offers no opinion as to whether a prosecution for Obstruction of Justice under 18 U.S.C. [Section] 1503 might lie against one or more of the subject attorneys and might meet the standard enunciated in 9-27.220 of the Principles of Federal Prosecution.'" 

It is clear that most or all of this Report is going to be publicly released. It will be interesting to compare it to DOJ OPR's report, assuming that DOJ decides to release it. Two attorneys for two of the prosecutors under scrutiny have already announced that OPR's report clears their respective clients. DOJ has a long history of ignoring the critical comments of federal judges. The latest example of this took place in reference to the prosecution of former Blackwater employees. Despite Judge Ricardo Urbina's scathing factual findings regarding the conduct and credibility of the original set of prosecutors, they were treated to a laudatory/fawning DOJ press release upon reassignment. Urbina, like Sullivan, is one of the most respected federal judges in the country and his factual findings were not questioned or disputed on appeal. 

Some final thoughts.

1. For every Emmet Sullivan (or Ricardo Urbina or Howard Matz) there are 10 federal judges who unquestioningly accept the Government's representations regarding Brady issues, irrespective of non-frivolous matters brought to their attention by the defense bar.

2. The defense attorney has an obligation to ferret out Brady issues through the filing of detailed, fact-specific Brady motions closely tied to the formal allegations in the case.

3. We must rapidly move toward open discovery in the federal criminal system, with appropriate safeguards in place to protect witnesses where necessary. The presumption, however, must always be in favor of open discovery. Many states have gone this route without any disastrous consequences. It is appalling that civil litigants have substantially more access to discovery at the federal level than do people who are literally fighting for their liberty.

4. In the meantime, federal prosecutors must be relieved of the burden of determining whether exculpatory information is material. DOJ already recommends this in the Ogden Memo, but it should go one step further and require it. The rule should be: IF IT HURTS MY CASE IN ANY WAY, TURN IT OVER! When a man judges himself, the verdict is always in his favor. When a federal prosecutor, in the heat of trial or pretrial battle, is deciding whether exculpatory evidence is material, the verdict will too often be that it is not. Let's end this invitation to injustice.

5. Of course, federal prosecutors do not think like criminal defense attorneys. That's okay. We don't want them to! But this is the very reason why they cannot ultimately be trusted to make the determination of what is or is not exculpatory. The competent defense attorney headed to trial or sentencing is constantly thinking about anything that will help the defense. Prosecutors are not trained or inclined to do this. Even when they are trying to fulllfil their Brady obligations, AND THE VAST MAJORITY OF FEDERAL PROSECUTORS ARE TRYING TO DO THIS, they cannot be trusted to spot the issues. This difference in outlook/inclination/thought processes really comes to the fore during the period leading up to sentencing hearings, when the prosecutor looks at the defense attorney like a deer in the headlights when reminded of his/her obligation to provide any and all mitigating evidence!

6. Please. Let's have no more: "We understand our Brady obligations and intend to abide by them." Congress should pass a statute requiring some form of detention for any prosecutor who utters this bromide.

(wisenberg)

Fourth Circuit Affirms 100 Year Sentence

The Fourth Circuit issued an unpublished opinion affirming Defendant Okun’s convictions and 100 year sentence. U.S. Attorney, Neil H. MacBride, states regarding this opinion:

"Financial fraudsters make calculated, rational decisions, and the threat of spending as much as 100 years in prison can begin to change corporate culture and behavior. Today’s opinion confirms that it is just for fraudsters who rob the life savings of their victims to spend the rest of their lives – or at least a big chunk of it – behind bars."

Interestingly the court notes in its opinion that the defendant operated a "Ponziesque" scheme, resulting in losses in excess of $125 million dollars." The court notes that the defendant's conviction on twenty-three counts resulted in a sentence of "1200 months' imprisonment, a sentence 3600 months below the advisory Guidelines sentence."

Some may argue that judges are issuing below guidelines sentences in white collar cases. But this case demonstrates the absurdity of issuing guideline sentences. Do you know anyone who has lived 400 years? Is that reasonable?

(esp)(blogging from Washington, D.C.)

Bruno Conviction Vacated

Opinion - Download 10-1885_opn. Commentary to follow.

(esp)(hat tip Jack E. Robinson)

Honest Services and Section 666 Includes Fraud Committed by a Foreign Worker

Second Circuit - United States v. Bahel - Honest Services -  Post-Skilling, courts have struggled with what gets included as bribery and kickbacks and what gets omitted from the new contours of honest services. In Bahel, the defendant was convicted of four counts of mail and wire fraud premised on a deprivation of the United Nations, his former employer, and a 666 violation and conspiracy. Issues of immunity were considered, but the court said that the "United Nations expressly waived Bahel's immunity" and that irrespective he waived the issue. The court held that "Section 1346 is broad enough to encompass honest services fraud committed by a foreign worker at the United Nations."

Bahel also argued "that ‘[n]o reading of [18 U.S.C. § 666] could plausibly be extended to the charges in this case,’ because ‘[t]he United States’ membership in the United Nations is not a "federal program" under [Section] 666(b), and the contributions made to the United Nations under the United States treaty obligation in the U.N. Convention and Charter is not a "benefit" or "form of Federal assistance" under that same sub-section.’ Bahel argues accordingly that Section 666 cannot reach the conduct at issue in this case."  The court, however, held that "the United Nations Participation Act, which authorizes the payment of the United States' dues to the United Nations (UN), is both a "federal program" and a "benefit" within the meaning of section 666, which encompasses bribes as well as illegal gratuities."

(esp)

Reyes Conviction Affirmed

Gregory Reyes, former CEO of Brocades's conviction for securities fraud and making false filings with the SEC, falsifying corporate books, and false statements to auditors was affirmed by the Ninth Circuit.  The prior conviction had been vacated because of prosecutorial misconduct.  Convicted after a new trial, he argued that the case should be "dismissed because of (a) prosecutorial misconduct, (b) insufficient evidence of materiality to support his conviction, and (c) various evidentiary and instructional errors at trial."  The court rejected these arguments and affirmed the conviction.

Opinion here.

(esp)

Yesterday in Fraud

Some noteworthy white collar decisions from the federal circuits, published on 10-3-11:

U.S. v. Gilchrist (9th Cir. 2011) (Guidelines obstruction enhancement okay even if defendant did not know of pending criminal investigation)

U.S. v. King (9th Cir. 2011) (Section 1001 conviction upheld even though false statement was made to state agriculture official)

 U.S. v. Leslie (2nd Cir. 2011) (Imprisonment not withdrawal from conspiracy for purposes of establishing Guidelines loss)

U.S. v. Lee (7th Cir. 2011) (Post-prison MVRA seizure of retirement funds is limited by CCPA)

(Wisenberg)

Concealment in Money Laundering Cases

The Third Circuit, in United States v. Richardson, discusses "proceeds" and "concealment" in an alleged drug money laundering case. The court finds insufficient evidence "to establish knowledge of a design to conceal" and vacated the money-laundering conviction. This case may be helpful in white collar cases involving money laundering charges.

The lawyer handling this appeal was Ellen C. Brotman.

(esp)

FCPA In The Trenches

I get emails almost every day touting the latest FCPA seminars, webinars, panel discussions, compliance programs, and treatises. Many of these events are no doubt helpful to the white collar practitioner. But what really happens in the trenches for the few brave individuals who take the government to trial in FCPA cases? What do the final FCPA jury instructions look like? The following links are to selected portions of actual instructions given to juries by federal district courts in some recent prominent FCPA cases. Enjoy.

Bourke_Final_Jury_Charge Selected Instructions[1]

U.S. v. Green Selected Jury Instructions

Lindsey Manufacturing Selected Jury Instructions

PatelFinalJuryInstructions

Hat tip to Todd Foster for the Patel instructions.

(Wisenberg)

 

Kevin Ring Sentencing

 Hon. Ellen Segal Huvelle issued a 42 page memorandum opinion regarding the sentencing of Kevin Ring. It was accompanied by a two page chart that includes what were the government recommendations in other related cases (here).  The court notes the sharp difference in recommendationbetween the government and defense in this case - a 17 year difference. The case comes from the Jack Abramoff lobbying scandal that caused several Greenberg Traurig lobbyists to "pled guilty to participating in an influence peddling and bribery scheme." 

A key issue raised by the defense is "that the government is retaliating against him for exercising his Sixth Amendment right to trial." The court notes that "the government cannot retaliate against defendant for exercising his rights."  The detailed sentencing methodology follows with the court's conclusion of a guidelines range of 46-57 months.

See also Doug Berman, Sentencing Law & Policy Blog here; Mary Jacoby, Main Justice, Judge Rejects Recommended Sentence for Ex-Abramoff Lobbyist

(esp)

Eighth Circuit Affirms Rubashkin Case

One of the 2010 White Collar Crime Blog Awards went to the Sholom Rubashkin case. (see here).  It gave it a "collar  for the Case Most Needing Review - Sholom Rubashkin’s 27 year sentence."

The Eighth Circuit has now reviewed that case, but unfortunately for Rubashkin, with a result that does not change its prior outcome.  The court held that "Rubashkin did not make a timely recusal motion . . " and that "[a]fter studying the lengthy record we find no evidence that the district court's decision to remain on the case prejudiced Rubashkin's verdict."  The court also concluded "that Rubashkin's money laundering convictions were lawful and did not merge with any other of his crimes."  Finally, the court upheld the sentence, saying that "the district court's loss calculation" was not error.  The Eighth Circuit states, "[s]entences within the guideline range are presumed to be substantively reasonable."

And so for now, Rubashkin's 27 year sentence remains. Top law professors who are key sentencing experts wrote an amici brief in this case, in support of Rubashkin. Hopefully, the Supreme Court will re-examine this case.

Opinion here.

See Linda Friedman Ramirez, International Criminal, Extradition and Immigration Defense News, White Collar Crime: 8th Circuit Affirms Rubashkin's Conviction and Sentence (Agriprocessor Fraud Offenses)

See also Doug Berman, Sentencing Law & Policy, Eighth Circuit panel unanimously affirms Rubashkin federal convictions and lengthy prison sentence

(esp)

Government Successful in Yet Another Post-Skilling Case

In United States v. Langford, the Eleventh Circuit Court of Appeals found sufficient evidence in reviewing a post-Skilling case. The court notes in this decision that "[w]e have not expressly explored at length what manner of concealment, if any, is necessary to prove honest services mail or wire fraud.  However, we have said that honest services fraud 'may be proved through the defendant's non-action or non-disclosure of material facts intended to create a false and fraudulent representation."(citations omitted).  There is also an interesting question of "in furtherance" here.

(esp)(w/ a hat tip to Linda Friedman Ramirez)

Reversal of Award Shows Difficulty of Successful Hyde Amendment Action

As the double jeopardy decision in the Roger Clemens case, discussed in this blog previously here, here, and here, demonstrates, meaningful sanctions for prosecutorial misconduct are rarely imposed. Last week, the Eleventh Circuit, in overturning a district court order that the government reimburse approximately $600,000 in legal fees to an acquitted physician under the Hyde Amendment, (Pub. L.　105-119, 111 Stat. 2519, reprinted in 18 U.S.C. § 3006(A), Historical and Statutory Notes), re-emphasized that successful actions under that provision will be exceedingly rare. The Hyde Amendment provides that the court may award a defendant in a criminal case attorney’s fees and litigation expenses when the court finds that "the position of the United States was vexatious, frivolous, or in bad faith."

In United States v. Shaygan, 2011 WL 3795469 (11th Cir., August 29, 2011), the Court considered a government appeal of a district court Hyde Amendment sanction for prosecutorial misconduct by acting "vexatiously and in bad faith" in filing a superseding indictment after the defense vigorously pursued a motion to suppress despite a prosecutorial warning that such an attack would lead to a "seismic shift" in the government’s position, in conducting a witness tampering investigation involving surreptitiously recording conversations with a defense investigator and lawyer, and in violating discovery orders. The district court accepted that the initiation of the prosecution and the original indictment was in good faith.

The Circuit Court, seemingly determined to reinforce the "narrow scope" of the Amendment, started its opinion on a dramatic note:

The stakes in this appeal are high: they involve the sovereign immunity of the United States, the constitutional separation of powers, and the civil rights and professional reputations of two federal prosecutors.

The Court found that the district court abused its discretion and held that Hyde Act awards may be granted only when the government’s "overall litigating position" was vexatious, frivolous or in bad faith. Thus, discovery violations and collateral wrongdoing by the prosecutors are not subject to Hyde Act sanctions.

Perhaps more importantly, said the court, the subjective ill-will of the prosecutor, while relevant, is not determinative of whether the government acted in bad faith. "Bad faith is an objective standard that is satisfied when an attorney knowingly or recklessly pursues a frivolous claim." Essentially, the Court, relying on the use in United States v. Gilbert, 198 F.3d 1293 (11th Cir. 1999) of Black’s Law Dictionary definitions of the three key terms in the Amendment – "vexatious, frivolous or in bad faith" – conflated them so that each required that the action be groundless or without reasonable or probable cause. (Compare United States v. Heavrin, 330 F.3d 723 (2003)), which, citing Webster’s Third International, noted that "vexatious" included "the concept of being brought for the purpose of irritating, annoying, or tormenting the opposite party." Id. at 729).

Thus, as long as the prosecution is not objectively baseless or frivolous (or does not violate a constitutional restraint, such as a prosecution because of a defendant’s race), under Shaygan no matter how vindictive or political the prosecutor’s motivation in bringing it or how outrageous his or her conduct in litigating it, the court may not make a discretionary award under the Hyde Amendment to a prevailing defendant. Compare Whren v. United States, 517 U.S. 806 (1996) (subjective intention of officer no basis to invalidate traffic stop which is supported by objective probable cause).

Legal fees for representation in white-collar criminal cases are often astronomical. Sometimes, these fees are reimbursed by an employer or insurance company, but, often, they are borne entirely by the individual defendant. Thus, even defendants whose cases result in dismissal or acquittal are often in a financial sense (among others) punished severely. The Shaygan case reinforces the view that any hope for reimbursement from the government is remote.

(Goldman)

Coram Nobis & 2255 Granted in Post-Skilling Case

Coram nobis is without doubt an extraordinary remedy and one that has limited application. That said, the Eastern District of Pennsylvania granted such a petition in the case of United States v. Lynch and Campenella. The court found that "where an indictment fails to allege any criminal conduct, a petitioner is excused from the showing of actual innocence." 

The smoking gun in this case came from the government when "during both change-of-plea hearings the Government corrected the Court by clarifying that the crime at issue was an undisclosed conflict of interest, rather than bribery." Further the court notes that "[a]t no point during the change-of-plea hearings or in its guilty plea memoranda did the Government mention a quid pro quo bribery theory." 

Enter the Supreme Court's opinion in Skilling and without the bribery, there is problem in the case. Lynch gets a grant of the petition for coram nobis and Campenella a 2255 motion to vacate the conviction and sentence.  

The bottom line - if you have no crime, relief needs to be granted.

Defense counsel on this case was Lisa A. Mathewson (Lynch) and Angie Halim of Ahmed and Zaffarese (Campanella).

Court's Opinion - Download Opinion granting coram nobis

(esp)

Addendum - See also Joseph Tanfani, Philly.com, Fraud convictions overturned for Philly assessor and developer