Tuesday, March 5, 2013
One of the several troubling aspects of the continuing overcriminalization of federal law is the frequent elevation of a violation of civil regulation to a crime. In United States v. Izurieta, 11th Cir., 11-13585 (February 22, 2013), the Eleventh Circuit addressed this issue.
The defendants in Izurieta were convicted after trial by jury of violating the general smuggling statute, 18 U.S.C. 545, importing goods "contrary to law," by violating a customs regulation, 19 C.F.R. 142.113(c), in failing to redeliver to Customs for exportation or destruction goods purportedly contaminated with E. coli, Staphylococcus aureus and/or Salmonella which had been conditionally released.
The defendants appealed on various grounds -- significantly not including whether the indictment sufficiently charged a crime by relying on the Customs regulation. At oral argument, however, the Court raised this issue sua sponte and ordered supplemental briefing.
Section 545, as pertinent here, reads:
Whoever fraudulently or knowingly imports or brings into the United States, any merchandise contrary to law, or in any manner facilitates the transportation, concealment, or sale of such merchandise after importation, knowing the same to have been imported or brought into the United States contrary to law . . . shall be fined . . . or imprisoned . . . .
The regulation or "law" upon the charges here were based covered the "failure to deliver, export, and destroy with FDA supervision" certain foods found to be adulterated. 19 C.F.R. 141.113(c).
The Court in its opinion recognized a split among circuits on when a regulation constitutes the "law" upon which a Section 545 indictment may be based. The Ninth Circuit in United States v. Alghazouli, 517 F.3d 1179, 1187 (9th Cir. 2008) took what the opinion called "a relatively narrow interpretation" of Section 545 that regulations are included in "law" only when "there is a statute (a 'law') that specifies that violation of that regulation is a crime." The Fourth Circuit in United States v. Mitchell, 39 F.3d 465, 470 (4th Cir. 1994), to the contrary, took what the opinion called a "more expansive" view, deciding that Section 545 criminalizes violations of any regulation "having the force and effect of law" based on a three-prong test.
The Court, while claiming its binding authority, Bobb v. United States, 252 F.2d 702, 707 (5th Cir. 1958) was consistent with the Fourth Circuit's "expansive" approach in Mitchell, applied the rule of lenity and held that the regulation in question did not qualify as a "law" for purposes of Section 545 liability. It found that the regulation in question was primarily to reflect contractual requirements between Customs and the importer and thus was "civil only."
The rule of lenity was premised, it said, on two ideas: first, that "a fair warning should be given . . . of what the law intends to do if a certain line is passed" and, second, that "legislators and not courts should define criminal activity."
This apparent case-by-case approach, of course, does not establish a "bright line" as to when violations of an administrative regulation become a crime. Citizens and attorneys will often have to guess whether a violation of a regulation is a crime; that is, "what the law intends to do if a certain line is passed." The case may, however, curb the government's increasing efforts to convert violations of ostensible civil regulations into crimes.
This case should remind lawyers that the uncertainties in this area require that they pay attention at both the trial and appellate levels to the issue of whether a violation of an administrative regulation is a crime.
(A hat tip to Paul Kish and the Federal Criminal Lawyer Blog)
Tuesday, January 29, 2013
The D.C. Court of Appeals rejected all of Kevin Ring’s appellate arguments, from his claims of an impropriety premised on the district court’s definition of what constitutes an "official act" to a claim of a Federal Rule of Evidence 403 violation. The court’s findings include that "campaign contributions can be distinguished from other things of value." (see here).
The court states "[t]he distinction between legal lobbying and criminal conduct may be subtle, but, as this case demonstrates, it spells the difference between honest politics and criminal corruption." This sentence in the opinion concerns me. Should a distinction that results in imprisonment be "subtle"? "Googling" the word "subtle" a definition provided is "[s]o delicate or precise as to be difficult to analyze or describe." And if this distinction is "subtle," should the rule of lenity be considered? And should a "subtle" difference be considered to "spell[ ] the difference between honest politics and criminal corruption" or as this case finds - spell the difference between freedom and prison.
Irrespective of whether the movie Lincoln wins best picture, unlike Argo, Zero Dark Thirty, Silver Lining Playbook, and the other nominees, Steven Spielberg will be able to say that a federal appellate court has quoted the movie in its decision. Yes, Hon.Tatel held that "[t]he ubiquity of these practices perhaps explains why in Steven Spielberg’s film Lincoln a lobbyist declared, "It is not illegal to bribe congressmen—they’d starve otherwise."
Thursday, January 3, 2013
The Ninth Circuit issued an opinion in United States v. Philips, a case that includes issues related to mail fraud, money laundering, forfeiture, and alleged government misconduct. The court reversed the district court decision to deny the government's forfeiture application, and affirmed other aspects of the case, including the money laundering conviction. All but one, that is - the mail fraud conviction. Here the court rejected the government's arguments and reversed the conviction.
In a opinion written by District Judge Jed Rakoff (yes, sitting on the Ninth Circuit by designation) we are finally getting to see what we hope he will include in a Part II to his famed mail fraud article published in 18 Duq. L. Rev. 771 (1979-80) titled Federal Mail Fraud (Part 1).
Hon.Rakoff does not cite to himself in this opinion, but his incredible knowledge of this statute definitely shows.He dissects the Supreme Court's decision in United States v. Maze and concludes that "[h]ere as in Maze, the success of Phillip's fraudulent scheme did not depend in any way on the use of the mails."
Too many take for granted the enormous power of the government in its use of the "stop-gap" provision. But it is also important to remember that there are limits - constitutional ones - with this statute. Thank you, Judge Rakoff for reminding us of this. And thank you Washington Appellate Project atty Lila Silverstein for making this argument.
(esp)(with a hat tip to Evan Jenness)
Wednesday, December 5, 2012
The U.S. Court of Appeals for the Second Circuit in a 2-1 split vote overturned the misdemeanor conviction of a former Orphan Medical, Inc. (now Jazz Pharmaceuticals Inc.), sales representative who had been charged with "misbranding" under 21 U.S.C. § 331(a) and (a)(1). The sales representative, Alfred Caronia, and Dr. Peter Gleason (now deceased) had been charged with conspiring with Orphan to promote Xyrem, a powerful depressant known as the "date rape drug," for various off-label purposes. Although the trial record showed that Caronia and Gleason were caught on tape speaking to a physician (who was cooperating with the government) about various off-label uses, and even though Gleason and Orphan had pleaded guilty, Caronia fought the charges, arguing that his off-label promotion was truthful, accurate and not misleading and, therefore, was constitutionally protected free speech. While the trial court recognized that off-label promotion implicated speech, it denied Caronia's motion to dismiss and he was later convicted.
On appeal, Caronia continued to press his First Amendment argument. The government responded that Caronia's off-label speech was relevant only as "evidence" of Caronia's intent that Xyrem be used off-label and that the First Amendment does not proscribe the use of speech as evidence of criminal intent. Although the Second Circuit majority acknowledged that the FDA regulations don't criminalize off-label promotion per se, it ultimately concluded that Caronia's conviction rested entirely on his speech and that, under Sorrell v. IMS Health, 131 S. Ct. 2653 (2011) and Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of N.Y., 447 U.S. 557 (1980), the First Amendment required that his conviction be vacated. In arriving at its decision, the majority reasoned that because the FDA regulations effectively regulated "content" (favoring on-label speech and disfavoring off-label speech) and discriminated among speakers (penalizing manufacturers, but not physicians, academics and other speakers), it was required to apply "heightened scrutiny" to the regulations. Under the heightened scrutiny standard, the majority found that while the government had substantial interests in ensuring drug safety, public health, and the effectiveness and integrity of the FDA drug approval process, the FDA's off-label regulations neither directly advanced those interests nor were narrowly drawn to further the interests served. For example, the majority noted numerous examples of less restrictive regulations that could effectively advance the Government's interests, including "warning or disclaimer systems" that could alert physicians that the certain uses have not been FDA-approved.
The dissent took the government's view that what was at issue was Caronia's intent that Xyrem be used off-label and that Caronia's off-label speech could have been properly used as evidence of his intent to sell off-label without implicating the First Amendment and putting into question the FDA's well-established regulatory scheme. As the dissent noted in its first paragraph: "By holding, instead, that Caronia's conviction must be vacated - and on the theory that . . . he was in fact convicted for promoting a drug for unapproved uses, in supposed violation of the First Amendment - the majority calls into question the very foundations of our century-old system of drug regulation."
Given the significant implications of the Caronia decision in the area of qui tam false claims act litigation, particularly for pharmaceutical, medical device and other life science companies, as well as for the medical community, we anticipate further developments and will be monitoring those carefully.
Sunday, October 7, 2012
An interesting issue is presented to the Supreme Court on cert - defense witness immunity. The case of Walton v. the United States presents an issue that has plagued many a defense counsel - what do you do when you have a critical defense witness who will not testify without immunity. The government has the ability to give a witness immunity and often they do so in criminal cases to secure cooperation for the prosecution. But shouldn't the defense also be allowed this immunity when the evidence that would be offered is exculpatory to the defendant? This cert petition presents strong arguments showing the differing views among the circuits on defense witness immunity.
The Walton Petition also has a post-Global Tech issue. (for background on Global Tech, see here and here). The obvious is argued - Global Tech applies to criminal cases. The Court used criminal law doctrine in deciding the case, so of course it should apply to criminal law decisions. I am covering Global Tech in both criminal law and white collar crime classes because it summarizes the law on willful blindness. If the Court was using this criminal standard for a civil case and remarking that this is how it gets handled criminally, therefore, of course, it must be the appropriate standard for a criminal case. Even in his dissent, Justice Kennedy notes that "[t]he Court appears to endorse the willful blindness doctrine here for all federal criminal cases involving knowledge." He didn't like that they were doing this, but it was pretty clear that this is what they did. This cert petition, if granted, will send this message loudly and clearly to the Fifth Circuit.
Filing a separate cert petition is James Brooks. Argued here by attorneys Gerald H. Goldstein and Cynthia Eve Hujar Orr are that "[t]he jury instructions here not only failed to require that Brooks take deliberate steps to blind himself to the illegal purpose of his conduct, but additionally instructed the jury that he did not need to 'know' or even suspect that his conduct was unlawful."Global Tech clearly requires both.
Petition for Cert for Brookes - Download Brooks Petition for Writ of Certiorari
Thursday, August 23, 2012
Professor Douglas Berman, in his excellent blog, Sentencing Law and Policy, quoting a Denver Post article, writes that after a federal judge rejected a plea agreement urged by both parties because it included a standard appellate waiver, the prosecutor came back with a harsher offer, albeit one without an appellate waiver, which the defendant accepted. See here and here.
Senior District Judge John Kane of Colorado refused to accept a deal involving Timothy Vanderwerff, a defendant accused of child pornography, because of the waiver provision. That deal provided that the government would seek no more than 12 years in prison and the defendant seek no less than five. The judge said that "indiscriminate acceptance of appellate waivers undermines the ability of appellate courts to ensure the constitutional validity of convictions and to maintain consistency and reasonableness in sentencing decisions."
In court papers Vanderwerff's attorney, federal public defender Edward Harris (who worked with me years ago) wrote that the prosecutors refused to agree to the same sentencing position deal without the appeal waiver and instead took a much harsher position.
One possible lesson from this case is that well-meaning judges, reacting to the government's increasing efforts to expand the terms of plea agreements to limit a defendant's ability to appeal and appellate courts' ability to review, might actually do harm to the individual defendant before them in rejecting a bargained-for agreement. Another possible lesson is that the government does not take kindly to judges interfering with its de facto power to set plea bargaining parameters and may demonstrate its displeasure by treating even acquiescent defendants more harshly when the judge rejects a plea deal it has offered.
Whether the defendant will ultimately suffer is unclear, because the court now, presumably subject to appeal by either side (as well as any applicable mandatory minimums), has the ultimate power to set the defendant's sentence and may well choose to sentence him under the posture both sides agreed upon in the original plea bargain.
Friday, August 10, 2012
The BLT reports here on the amicus brief filed by former federal prosecutors and judges in Ali Shaygan v. United States. At issue is whether the government can be fined and sanctioned under the Hyde Act, which covers vexatious, frivolous, or bad faith prosecutions, when the charges brought have an objectively reasonable basis in fact. In other words, can federal prosecutors act out of improper motives of bad faith and malice if they have a pretextual fig leaf to cover their actions? The WSJ Law Blog reports here on the brief, which was signed by yours truly, and greater lights.
Tuesday, August 7, 2012
And there it is. Right on page 24 of the Second Circuit's opinion in U.S. V. Mahaffy, posted here yesterday. "None of this [the government's various rationales for withholding exculpatory and/or impeaching SEC transcripts] excuses the government's misconduct. The transcripts contained substantial Brady material, much of which was easily identified as such." In fact, an SEC attorney, cross-designated as a Special AUSA in the first squawk-box trial, identified some of the material as potential Brady to his trial team superiors before the first trial commenced.
Here are some interesting dates. Jury selection in the squawk-box retrial began on March 30, 2009. The government rested on April 14, 2009, as did the defense. The jury returned its verdict on April 22. Ted Stevens had been found guilty in Washington DC in October 2008 and, as Judge Sullivan has noted, "[d]uring the course of the five-week jury trial and for several months following the trial there were serious allegations and confirmed instances of prosecutorial misconduct that called into question the integrity of the criminal proceedings against Senator Stevens." Attorney General Holder moved to set aside the Ted Stevens verdict and dismiss the indictment with prejudice due to gross Brady-related misconduct on April 1, 2009. Judge Sullivan granted the government's motion on April 7, 2009. According to the Mahaffy opinion, the second set of squawk-box prosecutors deliberately chose not to revisit any of the disclosure decisions made by the first trial team. New York prosecutors must not read the DC papers.They did not start to sift through the SEC transcripts until after the second trial concluded.
Monday, August 6, 2012
Here is the Second Circuit's opinion (U.S. v. Mahaffy) from last Thursday in the EDNY's Squawk-Box case, vacating the convictions due to Brady violations and an untenable honest services jury charge.
Thursday, July 12, 2012
Last month, in a thorough 64-page opinion, Southern District of New York Judge William Pauley ordered a new trial for three of four defendants convicted in what he described as "the largest tax fraud prosecution in U.S. history" because a juror, Catherine M. Conrad, had lied her way into being accepted as a juror. United States v. Daugerdas, et al., 09 Cr. 581.
There appears to be little question Ms. Conrad, a suspended lawyer, connived to make herself in her own word "marketable" so that she could have "an interesting trial experience" as a juror. In voir dire, she lied about her education, claiming the highest level she had reached was a B.A. when in fact she had a law degree. She concealed not only her membership in and suspension from the bar but her own criminal convictions -- for shoplifting, DWI, contempt and aggravated harassment -- as well as her husband's extensive criminal history, which included a seven-year prison stay. She made, according to the court, a "calculated, criminal decision to get on the jury."
At a post-trial hearing at which she was granted use immunity, Conrad stated that if the truth were known, "defense counsel would be wild to have me on the jury." In fact, however, Conrad turned out to be extremely biased against the defendants. In a congratulatory letter she sent to the prosecutors after the trial, she said she was "privileged to observe la creme de la creme -- KUDOS to you and your team." In that letter, she mentioned that she had fought against but ultimately had "thrown[n] in the towel" on a not guilty verdict on one of the counts concerning defendant David Parse. At the hearing, she testified that "most attorneys" are "career criminals." Two of the four convicted defendants were practicing lawyers; Parse was a non-practicing lawyer.
Judge Pauley, clearly upset by the need to retry a case which took three months, strongly urged the government to prosecute Conrad. Perhaps concerned that the government might feel that prosecuting her would be inconsistent with its opposition to a new trial, he added, "The prospect of preserving a tainted jury verdict should not temper the Government's resolve to call Conrad to account for her egregious conduct." Any prosecution of Conrad, however, obviously would have Kastigar obstacles because of her immunity.
The judge, following the Supreme Court's decision in McDonough Power v. Greenwood, 464 U.S. 548 (1984), found that in order to obtain a new trial, the moving party must "first demonstrate that a juror failed to answer honestly a material question on voir dire and then further show that a correct response would have provided a valid basis for a challenge for cause" (emphasis added). Apparently, even in a criminal case, the mere existence of a juror who deliberately lied her way onto the jury may not be sufficient to require a new trial. See United States v. Martha Stewart, 433 F.3d 273 (2d Cir. 2006). The McDonough test appears to be "If the juror hypothetically had answered truthfully, would her truthful answers have led to a challenge for cause?" Thus, unknown facts that might have affected her fitness to serve as a juror which would not in any case have been revealed by accurate responses to voir dire questioning presumably should not be considered.
In a lengthy analysis, mingling those hypothetical answers to questions asked during jury selection with, somewhat questionably, facts learned and impressions formed at the post-verdict hearing -- including Conrad's discovered dishonesty, bias and her animus to lawyers -- the court found that the McDonough criteria had been amply met. Accordingly, it ordered a new trial for all the convicted defendants -- except Parse, who the court ruled had "waived" his claim for a new trial since his attorneys knew or "with a modicum of diligence would have known" that Conrad's statements in jury selection were false and misleading and failed to disclose that knowledge to the court.
Judge Pauley felt that Parse's lawyers, the firm of Brune and Richard, knew or at least suspected (or alternatively should have known) that Conrad was an imposter certainly by the start of jury deliberations, but made a decision not to reveal their belief or suspicion to the court. The court was apparently affected by what seems to be a carefully-crafted, literally true but arguably misleading, statement in the lawyers' new trial motion that they were "prompted" by disclosure of Conrad's post-verdict letter to investigate and conduct records searches "in the wake of Conrad's . . . post-verdict letter." The court found that the motion contained "significant factual misstatements" and that its "clear implication" was to give the false impression that Parse's lawyers had no idea of Conrad's true identity until well after the verdict. In fact, as demonstrated in a later letter from the firm, in the firm's e-mails during trial, which were ordered by the court to be produced, and in testimony by the lawyers at a hearing, the firm apparently had concerns about and suspicion of Conrad's deception, initially at voir dire and later, after further record search revelations, during the judge's charge to the jury. A most graphic example was one lawyer's e-mail during the charge, "Jesus, I do think it's her."
The court believed that the attorneys' submission was designed to foreclose any government claim that their pre-verdict knowledge doomed their post-verdict motion on the grounds that they failed to act with "due diligence." The court found unconvincing the attorneys' claim that notwithstanding the similarities between the juror and the suspended lawyer discovered by electronic research -- name, home town, father's occupation, approximate age -- and the juror's use of previously unmentioned legal terms (such as respondeat superior) in jury notes she authored, the attorneys did not believe until after her letter to the government was disclosed that juror Conrad and suspended lawyer Conrad were the same person.
The court thus found that Parse's attorneys had "actionable intelligence" that Conrad was an imposter and that they had been required, but failed, to undertake "swift action" to bring the matter to the court's attention. The court apparently felt that the attorneys had attempted to "sandbag" it by remaining silent about the defect and only raising the issue when and if the trial did not conclude favorably, in effect providing them and their client with an "insurance policy against an unfavorable verdict." By his attorneys' conduct, the court ruled, Parse waived any error.
It may well be that during the trial the attorneys chose not to report their suspicions because they felt that Conrad, who appeared from web research to be potentially anti-government, would be a favorable juror for the defense, and they did not want to lose her. It may also be that, whatever the objective evidence that the juror and the suspended lawyer were one and the same might look like with hindsight, they actually thought that the juror and the suspended lawyer were different people since, as they claimed, they could not believe that the juror -- a lawyer -- would blatantly lie. Under either alternative, the court found, they had an obligation to share their knowledge with the court.
Some may argue that an attorney, in her duty of zealous representation of a client, may remain silent if she learns during jury selection that a juror misrepresented herself. Judge Pauley's contrary view is clear: "An attorney's duty to inform the court about suggested juror misconduct trumps all other professional obligations, including those owed a client." I agree. See New York Rules of Professional Conduct 3.3(b).
Some may also question whether Parse, the client, should suffer from his lawyer's purported misconduct or lack of diligence (of which he had no apparent knowledge). While generally a client is bound by a lawyer's strategic decision, and cannot cry foul if it backfires, Parse did suffer the same denial of a fair jury as the other defendants. Nonetheless, the court held that his attorneys' failure to report waived any objection by Parse, but granted new trials to the other three convicted defendants (whose lawyers apparently had no knowledge of Conrad's deception).
There are several ironies in this case: Parse, about whom, according to Conrad's letter to the prosecutors, the jurors "had qualms," is the only one whose conviction stands. Further, his attorneys were the ones responsible for investigating and presenting the motions which succeeded in a new trial for the others (who joined the motion), but not for him. And, lastly, if Conrad had told the truth at voir dire and revealed her suspension from the bar and her and her husband's criminal record, she undoubtedly would have been successfully challenged -- whether by cause or peremptory -- on the motion of the prosecution she so strongly favored, and not be the defense she despised.
Thursday, June 28, 2012
So let's see - President Obama wins on the health care decision with the Supreme Court, and later the same day the Attorney General is held in contempt of Congress. So which item ends up at the top of a blog. Was this political?
Don't overlook the Supreme Court's Alvarez decision today when reading about another important decision issued by the Court today - the one that upholds the Affordable Care Act. The Court's finding the Stolen Valor Act unconstitutional opens up some First Amendment arguments in the criminal sphere.
The test provided by the plurality decision is that "there must be a direct causal link between the restriction imposed and the injury to be prevented."
Justice Kennedy (joined by Roberts, Ginsburg, and Sotomayor) found that the respondent who lied about receiving a Congressional Medal of Honor, in direct contravention of a federal criminal statute - the Stolen Valor Act of 2005 (18 U.S.C. s 704) had a first amendment protection. The decision reminds us that there are certain content-based restrictions that are permitted -
"Among these categories are advocacy intended, and likely, to incite imminent lawless action, obscenity, defamation, speech integral to criminal conduct; so-called 'fighting words'; child pornography; fraud; true threats; and speech presenting some grave and imminent threat the government has the power to prevent" (citations and parentheticals from the decision omitted here)
This opinion states that "[t]hese categories have a historical foundation in the Court’s free speech tradition. The vast realm of free speech and thought always protected in our tradition can still thrive, and even be furthered, by adherence to those categories and rules." But the Court also notes that there is no "general exception to the First Amendment for false statements." And specifically when considering defamation it says "that falsity alone may not suffice to bring the speech outside the First Amendment. The statement must be a knowing or reckless falsehood."
That said, this opinion distinguishes statutes such as the false statement statute (s 1001); perjury (s 1623) and false representing that one is speaking on behalf of the Government (s 912).
Although this opinion stresses the importance of the military medals - as it should, it questions whether the "government's chosen restriction on the speech at issue [is] 'actually necessary ' to achieve its interest."
The key test used here - "There must be a direct causal link between the restriction imposed and the injury to be prevented."
The opinion ends by stating:
The Nation well knows that one of the costs of the First Amendment is that it protects the speech we detest as well as the speech we embrace. Though few might find respondent’s statements anything but contemptible, his right to make those statements is protected by the Constitution’s guarantee of freedom of speech and expression. The Stolen Valor Act infringes upon speech protected by the First Amendment."
Justices Breyer and Kagan offer a concurrence that stresses that there is a less restrictive way to achieve the government's goal. They suggest using "intermediate scrutiny" here in evaluating this case, but also hold that "[t]he Government has provided no convincing explanation as to why a more finely tailored statute would not work."
Dissenting are Justices Alito, Scalia, and Thomas. They note that the statute is limited in several different ways. They argue that "false statements of fact merit no First Amendment protection in their own right" and that it is a narrow law.
Commentary to follow.
Thursday, June 21, 2012
The Supreme Court issued an opinion in Southern Union Co. v. United States. The company was convicted of a RCRA violation, which carries a penalty of a fine of not more than $50,000 for each day that there is a violation. Justice Sotomayor, writing the opinion for the Court, considered whether juries need to decide the fine given, in order to comply with the Court's prior decisions in Apprendi and Blakely that "reserves to juries the determination of any fact, other than the fact of a prior conviction, that increases a criminal defendant's maximum potential sentence."
The Court held that "where a fine is so insubstantial that the underlying offense is considered 'petty' the Sixth Amendment right of jury trial is not triggered and no Apprendi issue arises." But the Court then went on to say that "not all fines are insubstantial, and not all offenses punishable by fines are petty." The final ruling was that "Apprendi applies to the imposition of criminal fines." And it applied here.
A dissent by Justice Breyer, that was joined by Justices Kennedy and Alito, argued that "the Sixth Amendment permits a sentencing judge to determine sentencing facts - facts that are not elements of the crime but are relevant only to the amount of the fine the judge will impose." They believed that the Court's position would "lead to increased problems of unfairness in the administration of our criminal justice system." They discuss the existing high rate of plea agreements in the case.
The real question here is whether this decision will matter. As noted by the dissent, 97% of federal convictions result from guilty plea. But what went unnoticed is that very few companies - the object of many fines - go to trial. Often these cases are resolved with non-prosecution and deferred prosecution agreements. So will it really make any difference that juries can determine these fines, when the corporation in a post Arthur Andersen LLP world will seldom be going to trial.
Saturday, June 16, 2012
The Tenth Circuit recently affirmed the convictions, but remanded the sentence of Howard O. Kieffer. Kieffer, who for several years was practicing criminal defense law, had a problem - he never went to law school and had no license to practice law. A court in the Eighth Circuit in 2010 upheld his convictions for mail fraud and making false statements. But he was also convicted in 2010 in Colorado for wire fraud and contempt of court. That decision was recently affirmed in the Tenth Circuit with a remand on sentencing here.
There is one aspect of this Tenth Circuit decision that raises eyebrows. The issue is what constitutes interstate wires for purposes of the wire fraud statute. This is a particularly important issue in these days of the WorldWideWeb. For example, in United States v. Phillips, 376 F. Supp2d 6 (D. Mass. 2005) the court rejected the government argument that “in order to satisfy the elements of this offense, it was not necessary to present evidence that the pertinent wire communications themselves actually crossed state lines, as long as the communications (whether interstate or intrastate) traveled via an ‘instrument of an integrated system of interstate commerce,’ such as the interstate phone system.” Even in the Tenth Circuit in United States v. Schaefer, 501 F.3d 1197 (10th Cir. 2007), the court previously held that one person’s use of the internet, “standing alone” was insufficient evidence that the item “traveled across state lines in interstate commerce.”
So it is surprising to read in Keiffer that the Tenth Circuit is now saying, "“[t]he presence of end users in different states, coupled with the very character of the internet, render this inference permissible even absent evidence that only one host server delivered web content in these two states.”
Clearly Keiffer's conduct was appalling, but the ramifications of the language in this decision could be huge. Could individuals from outside this country be charged with crimes against the United States merely because they put something on the web?
(esp)(hat tip to John Wesley Hall)
Wednesday, June 6, 2012
Guest Blogger – Rochelle Reback
In light of the prevalence of ESI discovery in white collar cases it is ironic that an important principle regarding electronic discovery is developed for us in an indigent's drug smuggling case. But, we'll take it! In United States v. Stirling ( Download Altonaga order granting new trial(1)) yesterday, District Judge Altonaga found that notwithstanding the government’s technical compliance with its ESI discovery obligations under Federal Rule of Criminal Procedure 16(a)(1)(B) by furnishing an exact replica of defendant's hard drive to the defense, the government's electronic discovery dump in this case so seriously impaired the defendant’s trial strategy that there should be a new trial. Not known to defendant's attorney, on the disclosed and mirrored hard drive were some of defendant's Skype chat logs which the government's forensic expert was able to open and view only by using a specialized computer program. The Skype chats were not visible in any other way. But neither the existence of the Skype chats on the hard drive, nor the expert's employment of the specialized program to view them were disclosed to the defense until after defendant testified. In rebuttal the prosecutor called their expert and used these Skype chats to impeach defendant to devastating effect as they contradicted much of his trial testimony. Stirling was convicted.
Under Federal Rule of Criminal Procedure 33, Judge Altonaga ordered a new trial in "the interest of justice," even though the government had warned the defense that if Stirling took the stand and testified falsely, there was [unidentified] evidence on the computer which the Government would use in its rebuttal to impeach him. Finding that this was not like the cases cited by the government where courts have consistently refused to require the government to identify exculpatory or inculpatory evidence within a larger mass of disclosed evidence, Judge Altonaga wrote that the standard of Federal Rule of Civil Procedure 34(b)(2)(E)(ii) should also apply in criminal cases and the government should be required to produce ESI in a "reasonably usable form." She found the government's "technical compliance with its discovery obligations under Federal Rule of Criminal Procedure 16 (a)(1)(B) by the furnishing of an exact replica of the hard drive" to not be enough. The government "never told defense counsel that incriminating Skype chats could be extracted from the disk or that they even existed." Judge Altonaga agreed with defense counsel that "production of something in a manner which is unintelligible is really not production." She ruled that "If, in order to view ESI, an indigent defendant such as Stirling needs to hire a computer forensics expert and obtain a program to retrieve information not apparent by reading what appears in a disk or hard drive, then such a defendant should so be informed by the Government, which knows of the existence of the non-apparent information. In such instance, and without the information or advice to search metadata or apply additional programs to the disk or hard drive, production has not been made in a reasonably usable form. Rather, it has been made in a manner that disguises what is available, and what the Government knows it has in its arsenal of evidence that it intends to use at trial."
One has to wonder if the "interest of justice" result would have been the same if the defendant in this case was not indigent and did not have to seek the court's assistance for experts and more sophisticated computer resources to unlock the hidden mysteries of the electronically stored information.
(reback) –(with hat tips to Donna Elm and Robert Godfrey)
Tuesday, June 5, 2012
The Fifth Circuit affirmed the convictions and sentences in U.S. v. Brooks, a case involving alleged "false reporting of natural gas trades in violation of the Commodities Exchange Act and the federal wire fraud statute."
Although the court distinguishes the Stein decision from the Second Circuit with the facts in this case, both cases had individual defendants who had their attorney fees cut off. In Brooks, the defense claimed it was from government pressure, but the Fifth Circuit said the factual findings were not present to confirm this conduct. The court found that the company's policy on payment of attorney fees was a discretionary policy. But when a company gets a deferred prosecution agreement one has to wonder if there is an incentive to show cooperation, albeit payment of attorney fees can not be a factor used.
There is also an interesting question of what constitutes "reports" for purposes of the CEA or CFTC regulations. This is an intriguing issue as one is basically violating federal law through a submission document. The Fifth Circuit rejected a void for vagueness argument here.
The Fifth Circuit also found the Fifth Circuit Pattern Jury Instruction as meeting the recent Supreme Court decision in Global Tech, although they admit it does not use the same language. The question here is whether deliberately closing one's eyes is the same as taking "deliberate actions to avoid learning of the fact," the test set forth in Global Tech. I see a difference in that one is passive and the other is active. The Court seems to be satisfied with the evidence in this case, but one has to wonder if the Fifth Circuit should be quickly looking to change its pattern jury instruction to avoid this issue in future cases.
Then there is the question of defense witness immunity. A witness is on the prosecution witness list and is not called to testify because the prosecution has concerns about the witnesses truthfulness. The witness has not yet been sentenced (the government postponed sentencing for 39 months- obviously to be after this trial) and decides to take the Fifth Amendment. The prosecution called the witness the evening before the witness was to testify, but says the call was to determine if they needed to prepare the witness for cross-examination. The defense argues that the witness has exculpatory evidence for the defense. The defense asks for defense witness immunity and doesn't get it. One has to wonder whether the jury really had full information to resolve guilt or innocence? But the Fifth Circuit held otherwise.
And this is not a case where defendants are receiving light sentences. All the defendants were level one and yet all of their sentences exceeded 11 years imprisonment, with one receiving a 14 year sentence. Whoever thinks white collar offenders are getting off easy, needs to just look at this case to see that this is not the situation.
Thursday, May 31, 2012
As noted here, John Edwards was found not guilty on one count, and the jury was unable to reach a verdict on the remaining counts. Prosecutors should now move on and not retry Edwards on these remaining counts.
The government has expended enough taxpayer money on this case and Edwards most likely has had to incur the cost of his defense. Prosecutors have already hurt Edward's reputation with the evidence presented at trial - so there is no punishment basis for proceeding further. Evidence not presented at trial left the murky question of whether this money was even a political contribution, and the testimony of Federal Election Commissioner Scott E. Thomas that was not heard by the jury raises additional issues on campaign contributions. But the place to resolve this is not in the criminal courtroom. More importantly, if skilled folks can differ on this question then one certainly should not hold someone criminally liable.
No one walks out unhurt by this trial. And that is the huge cost that comes with a prosecution. It is for this reason that prosecutors need to consider carefully prior to charging anyone with criminal conduct.
Wednesday, May 30, 2012
In In re: Pacific Pictures the Ninth Circuit looks at "whether a party waives attorney-client privilege forever by voluntarily disclosing privileged documents to the federal government." The court starts with the principle that "voluntarily disclosing privileged documents to third parties will generally destroy the privilege." The court rejects the petitioners argument that disclosing documents to the government is different from disclosing them to civil litigants and that a selective waiver should apply. The court notes that legislative attempts to change the evidence rules to allow for selective waiver have failed so far.
The court also does not enforce a confidentiality letter between the corporation and the government. The court states:
"The only justification behind enforcing such agreements would be to encourage cooperation with the government. But Congress has declined to adopt even this limited form of selective waiver."
The court rejected a claim that "adopting such a rule will drastically impair law enforcement attempts to investigate espionage against 'attorneys, financial institutions, medical providers, national security agencies, judges, large corporations, or law firms.'"
Entities provide significant materials to the government as part of deferred and non-prosecution agreements. Not having a privilege needs to be considered by corporate counsel in deciding what to give to the government.
Monday, May 21, 2012
Here is the Houston Chronicle's take on today's proceedings in U.S. v. William Roger Clemens. Brian McNamee was allowed to testify on re-direct that he injected three other players with HGH. Judge Walton gave the jury a limiting instruction that the testimony could only be used to bolster McNamee's credibility--not to infer Clemens' guilt. Still, this was a significant break for the government.
I am now batting 0 for 2 in my most recent predictions. I predicted that Judge Walton would strike some of Andy Pettitte's testimony and that the judge would not let McNamee talk about injecting other players. So take this next observation wiht a grain of salt. To me, the jurors' questions at the end of each day show their skepticism regarding the government's case and the credibility of key government witnesses.