June 16, 2011
NACDL's 1st Annual West Coast White Collar Conference, “Turning The Tables On The Government” – “Finding the Line: Ethical Considerations When Contacting and Interviewing Witnesses,” Thursday, June 16, 2011
Guest Blogger: Darin Thompson, Assistant Federal Public Defender, Office of the Federal Public Defender (Cleveland,OH)
Day One of the seminar concluded with a panel discussion of the various ethical pitfalls surrounding the interviewing of witnesses. Patrick Robbins moderated the discussion. The panel included Blair G. Brown, David Fechheimer, Nina J. Ginsberg, Marc S. Harris, and Steven Singer.
The panel first discussed hypotheticals involving a lawyer who first represents a company (through an audit committee) under investigation. Ms. Ginsberg pointed out the first potential conflict that lawyers face when interviewing employee witnesses under these circumstances is that the witness’s interests may be adverse to the company client. She further noted that such adverse interests would preclude dual representation as well. She discussed the burdens the model rules place upon lawyers interviewing witnesses. Model Rule 4.3 requires an explanation of the lawyer’s role, prior to interviewing, where the witness may be confused regarding the lawyer’s role, and that this explanation approaches that required by Miranda warnings. As Mr. Brown noted, these warnings are in the interest of the lawyer as well, as they will protect the company and the lawyer from subsequent motion, though he doubted that the warnings ever approach the standard of Miranda. The panel agreed that the overriding goal of representing the company by ferreting out information, and convincing the government that the company is being aggressive in its investigation, runs directly contrary to strong warnings. Marc Harris noted that it was common to demand cooperation from employee witnesses, upon threat of termination.
The panel discussed the problems presented by the question: “Should I get a lawyer?” Everyone agreed that the question required the lawyer to walk a fine line. The lawyer should not give the witness legal advice by opining whether a lawyer is a good idea, but must accurately answer that the witness has the option to get a lawyer.
The next hypothetical involved a lawyer advising an AUSA that he represents all current employees of the corporation and the current and former CFO and CEO, but the AUSA sends the agents to interview the employees. Mr. Brown started his response by cautioning against such blanket assertions of representation unless the facts truly warrant it. He continued by noting that the state ethics rules may provide the best barrier to this kind of conduct. The panel agreed, with Mr. Singer noted that many state ethics rules specifically include corporate employees as represented parties.
Marc Harris noted that another fine line exists when advising all employees of a company that they need not talk to agents, and that flatly advising against it may constitute obstruction of justice. Ms. Ginsberg further cautioned that it created an impression on the part of the employees that they are being represented. Mr. Brown noted that Model Rule 8.4 allows a lawyer to advise a client’s employee not to talk to an adverse party.
One questioner noted that the trend toward “hyper-co-operativity” on the part of companies has only aggravated the problems faced by the employees on the other side of the hypotheticals discussed.
Another questioner asked about government pressure to not interview government witnesses. Mr. Singer commented that such efforts to intimidate the defense must not be allowed to succeed, and discussed taking steps to protect oneself during those scenarios, i.e., having multiple people present for any interviews.
The final hypothetical involved a grand jury witness taking the 5th Amendment privilege to protect another individual and advising the lawyer he was doing so. Mr. Harris indicated that this is not problematic, but, advising a witness to do so might constitute obstruction of justice, especially if that advice was motivated by a desire for financial gain by securing further employment by the corporation at issue.
June 09, 2011
The United Jewish Appeal-Federation of New York has a Criminal Law Group. Wow. I never knew. SEC Enforcement Director Robert Khuzami recently spoke to its members about questionable tactics routinely engaged in by white collar lawyers (and their clients) during SEC Enforcement Division proceedings. Khuzami's Speech is troubling as it reveals clearly unethical and potentially illegal behavior, including: improper signalling to witnesses regarding substantive testimonial responses, representation of multiple witnesses with clearly adverse interests, representation of multiple witnesses who adopt virtually identical and implausible explanations of events, witnesses who "don't recall" dozens of basic and uncontroverted facts documented in their own writings, scorched earth document production, suspect recantation of damaging testimony after deposition breaks, and window-dressing internal investigations that scapegoat mid-level employees. Khuzami laments these tactics and notes that they often backfire by increasing Enforcement Division skepticism of the entity or person under investigation and by damaging the future credibility of counsel who encourage such behavior. But employment of at least some of these brazen tactics should do more. The people and entities who engage in them should go straight to secondary, as they say at the border. If this had been done in Bernard Madoff's case, after he was caught red-handed lying during a regulatory examination, his fraud would have been uncovered years ago. The message from the SEC should be clear. You don't get to lie or obstruct justice during Enforcement Division investigations or SEC exams. Hat tip to Jonathan Hardt of Wilmer Hale for bringing this speech to my attention.
April 23, 2011
Lauren Stevens Case To Start Tuesday: Has The Government Overcharged?
The federal criminal trial involving former GlaxoSmithKline ("GSK") Vice President and Associate General Counsel Lauren Stevens commences this Tuesday in Greenbelt, Maryland. When I first read the Indictment, without knowing anything else about the facts, it struck me that the government may have overcharged. That is probably not a good sign for the feds, since the Stevens charging instrument is a classic one-sided speaking Indictment that seeks to put the United States' case in the best possible light.
The crux of the prosecution theory is that Stevens, who headed up a team of inside and outside GSK counsel responding to an FDA inquiry, withheld information about off-label marketing of Wellbutrin. Specifically, Stevens allegedly learned that several doctors, paid by GSK and speaking at GSK-sponsored events, promoted off-label (weight-loss) use of the drug. GSK's responses were part of a voluntary production pursuant to a written request from the FDA's Division of Drug Marketing, Advertising, and Communications ("DDMAC"). Stevens allegedly agreed, orally and in writing, to provide DDMA with "materials and documents presented at GSK-sponsored promotional programs, even if not created by, or under the custody or control of GSK." But, according to the Indictment, Stevens knowingly failed to produce numerous off-label promotional and presentation materials, provided to GSK by the doctors in question, with intent to obstruct an FDA proceeding. Rather than focusing entirely or primarily on this failure to produce, the Indictment lumps in many other broad statements contained in Stevens' various cover letters to the government. It seems to me that at least some of these statements are open to differing interpretations. Perhaps the government should have more narrowly honed in on the failure to turn over the presentation/promotional materials.
Part of Stevens' defense will entail her purported reliance on the advice of outside counsel in sending GSK's written responses to the FDA. The original Indictment was thrown out by Judge Roger Titus, because federal prosecutors incorrectly instructed the grand jury that reliance on the advice of counsel is only an affirmative defense. In fact, good faith reliance on advice of counsel negates the specific intent element under the federal obstruction and false statement statutes at issue in the trial.
This prosecution should strike terror into the hearts of inside and outside counsel throughout corporate America. Of particular note is that the FDA inquiry into off-label Wellbutrin marketing did not involve a compelled production and was not even quasi-criminal in nature.
Attached for our readers' benefit are some documents setting out the government's case and what are likely to be key portions of Ms. Stevens' defense.
April 23, 2011 in Arthur Andersen, Corruption, Current Affairs, Defense Counsel, Fraud, Grand Jury, Judicial Opinions, Legal Ethics, Obstruction, Prosecutions, Statutes | Permalink | Comments (0) | TrackBack
March 13, 2011
The Vic Kohring Catastrophe: Some Reflections Upon Rereading the Ninth Circuit's Opinion
I'm calling it the Vic Kohring Catastrophe, and it should be one for the DOJ, but so far the patience of Congress and the district courts in the face of DOJ's repeated blockbuster Brady violations seems infinite. Here are the things that really stand out for me from the majority opinion. (All of the judges voted to reverse, but the dissenter would have dismissed the indictment with prejudice.)
1. The government withheld information from the defense that its star witness, Bill Allen, was under investigation by the Anchorage Police for sexual exploitation of minors. The government also possessed and withheld evidence that Allen encouraged the minors to lie and arranged for one of them to be unavailable to testify against him. In other words, he suborned perjury and endeavored to obstruct justice. It is jaw-droppingly incredible that this information was not disclosed to Kohring. It is jaw-droppingly incredible that, even after its motion to dismiss the Ted Stevens indictment, the government did not disclose this information to Kohring until his defense team asked for it and the case was remanded to the district court. As the Ninth Circuit patiently explains, this was highly relevant impeaching evidence, and the defense would have been able, at a minimum, to ask Allen questions about it. If he had lied, the government would have been obligated to correct his perjurious testimony. What could the AUSA(s) have possibly been thinking when he/she/they failed to disclose this information? That it was immaterial or cumulative? Line AUSAs have no business making such determinations. Neither do their superiors. If it hurts, turn it over. It is hard enough for the prosecutive mind set to even understand all of the information in a case that might be Brady material. If we make them the arbiters of what is material and cumulative, the answer will usually be weighted in favor of non-disclosure.
2. Many of the non-disclosed materials were FBI 302s and IRS reports of interviews with key government witnesses. I've said it many times before and will say it again. No prosecutor has any business withholding the 302 of a testifying government witness. First, the prosecutor is not as qualified to find impeaching and exculpatory material in a 302 as is the defense attorney, who is looking at the case from a defense perspective. Second, and of far more importance, the AUSA cannot sit there in court and determine on the fly, in a white collar case involving dozens or hundreds of witnesses, which of a given witness's testimonial statements are inconsistent with his myriad 302s. Yes, we know, the 302 isn't Jencks if the witness has not adopted it, but the risk is too great that it will become Brady. Almost all offices in almost districts turn these statements over before trial. Why wasn't it done here in a high-profile public corruption case?
3. The government withheld many handwritten interview notes containing exculpatory information. This points to a widespread problem. Most AUSAs in white collar cases still don't believe themselves under a duty to turn over handwritten interview notes or to reveal the exculpatory information reflected in these notes. The Ogden Memo does not fully solve this pervasive problem. Such handwritten notes can qualify as Jencks when the agent testifies and, as with 302s, may contain Brady information, either before trial starts or when an agent or another witness testifies. (It is very rare for an agent's handwritten notes to exactly match his or her final 302 report.) One of the handwritten notes that the government failed to turn over to Kohring was from an interview of Allen and indicates that: "Allen said he NEVER ASKED VIC TO DO ANYTHING IN EXCH. for cash or [unintelligible] or some benefit." Pretty important in a Hobbs Act-bribery case, no?
4, The government's failure to agree to a special verdict and/or special interrogatories clearly hurt its harmless error argument on appeal. Since the Ninth Circuit has no way of knowing what evidence, including the improperly withheld evidence, the jury might have relied on in reaching its general verdicts, the withheld evidence cannot be considered harmless. Opposition to special verdict forms and interrogatories is often short-sighted, and was clearly so in this case.
5. Finally, why wasn't all of this immediately revealed to Vic Kohring's defense team when DOJ moved to dismiss the Stevens indictment? The Stevens dismissal was obviously made at a very high level. Who knew about and failed to authorize disclosure to Kohring of this patently exculpatory material?
September 30, 2010
NACDL's 6th Annual Defending the White Collar Case Seminar – “Prosecutors Behaving Badly: More Unethical Conduct or Just More Discovery of Misconduct?,” Thursday, September 30, 2010
Guest Blogger: Darin Thompson, Assistant Federal Public Defender, Office of the Federal Public Defender, Northern District of Ohio
Moderator: Gerald Goldstein
NACDL’s Defending the White Collar Case seminar kicked off with a panel discussion on prosecutorial misconduct. The “Prosecutors Behaving Badly” hypothetical presented the panelists with the story of a federal investigation and trial regarding kickbacks paid by a construction company to a state university in exchange for a contract. The initial criminal investigation involved the corporation, the CEO, and 2 other executives who would eventually be charged and tried. An internal investigation was simultaneously conducted by the construction company.
One set of issues discussed by the panel involved legal representation during the investigation. In the hypothetical, one law firm represented: (1) the CEO; (2) the construction company; and (3) the two executives who would eventually be charged (this representation was paid for by the construction company, and was subject to a conflict waiver). Additionally, another partner in the same firm conducted the internal investigation on behalf of the construction company. Multiple panel members commented that it would be virtually impossible to ever get an effective waiver under these circumstances. U.S. Attorney for the District of the New Jersey, Hon. Paul J, Fishman, explained how he would approach a District Court Judge and seek to disqualify any attorney attempting to provide representation under these circumstances. The prosecutor would later use admissions made to the attorney who conducted investigation against the two executives at trial.
Another set of issues involved the prosecutor’s obligation (if any) to disclose Brady material during plea negotiations. During this investigation, the prosecutor was involved in plea negotiations with a whistleblower. At first, counsel for this whistleblower indicated that he had not been present during any incriminating discussions between the two charged defendants and the CEO, and that the two charged defendants had merely told him about these discussions. After the prosecutor balked at providing a favorable plea bargain in exchange for this second hand information, counsel for the whistleblower indicated that “after serious reflection, his client does recall several occasions when he overheard direct conversations between [the two executives who would eventually be charged] and their CEO, as well as several of the College Trustees.” The panelists agreed that the prosecutor’s disclosure obligations during plea negotiations were at best not clear. The prosecutor could not deny the prior inconsistent statement existed; however, the law is unclear regarding an obligation to turn over Brady material during plea negotiations. The panel noted that U.S. v. Ruiz, 536 U.S. 622 (2002) did not answer this question with regard to exculpatory evidence. In Ruiz, the Supreme Court held only that the prosecutor had no obligation to turn over impeachment evidence, because this obligation was closely connected to trial. In light of Padilla v. Kentucky, 130 S.Ct. 1473 (2010- holding that a defendant was denied the effective assistance of counsel during plea negotiations where he was not advised of the immigration consequences of his plea of guilty) this issue appears to be ripe for litigation.
Many panelists noted that another way to address this problem is through a re-write of Criminal Rule 16. Professor Ellen Yaroshefsky expounded upon this, noting how many jurisdictions already offered complete open-file discovery. One panelist, David Markus, argued strongly that there is a seeming disconnect between the tenor of Attorney General Eric Holder’s statements in favor of openness and the undercurrent of resistance to efforts to address these problems.
This same Brady material/prosecutorial ethics issue re-presented itself during the trial of the two executives, at which time the prosecutor again failed to disclose this information. Additionally, the prosecutor did not disclose that the witness had been “reimbursed” for his out-of-pocket expenses. No specific Brady request is made by defense counsel, however, there was no doubt among the panelists that this initial description by the whistleblower’s counsel would constitute a prior inconsistent statement by this whistleblower, and had to be disclosed. Nor was there any doubt that the failure to disclose the reimbursement was also flagrantly improper.
August 02, 2010
House Ethics Committee Accuses Representative Maxine Waters Of Violating Ethics Rules
No details on the specific allegations. The Wall Street Journal news alert is here.
July 24, 2010
Alberto Gonzales Materials
Here is Assistant AG Ronald Weich's letter to House Judiciary Committee Chairman John Conyers explaining DOJ's declination in the matter of former Attorney General Alberto Gonzales and the firing of U.S. Attorney David Iglesias. And here is George Terwilliger's statement celebrating the declination. Terwilliger and Bob Bittman of White & Case represented Gonzales in the investigation.
December 15, 2009
Government Misconduct Results in Dismissal of Backdating Case
It is rare that a judge uses supervisory powers to correct an injustice, but sometimes it is the right action - especially when there has been government misconduct. The Hon. Cormac J. Carney used his supervisory powers to dismiss the case against former Broadcom's Henry Nicholas III, and former CFO William Ruehle, stating:
"Based on the complete record now before me, I find that the Government has intimated and improperly influenced the three witnesses critical to Mr. Ruehle's defense. The cumulative effect of that misconduct has distorted the truth-finding process and compromised the integrity of the trial."
The court noted how the government had intimated three witnesses. He includes how the government improperly leaked items to the press, put a witness through "30 grueling interrogations," pressured the company to terminate the employment of this witness, and obtained a plea from a witness for crimes he did not commit - and there were more improprieties noted by the court. The court ends with the words from the Supreme Court decision in Berger, and then states: "I sincerely regret that the government did not heed the righteous words of the Supreme Court."
Court's Order -Download RUEHLE_DEC__15
(esp)(blogging from Atlanta)
November 06, 2009
Martha Neil, ABA Jrl Law News Now, 2 Lawyers Charged in Claimed $1.1M Client Embezzlement Scheme
Vesselin Mitev, Law.com, New York Law Journal, Disbarred Attorney Pleads Guilty to Guardian Account Thefts
Linda Sandler & Carlyn Kolker, Bloomberg, Ropes & Gray Lawyer Cutillo ‘Fueled’ $20 Million Insider Scheme ; DOJ Press Release, Manhattan U.S. Attorney Charges 14 Defendants With More than $20 Million in Insider Trading- Charged Defendants Include Hedge Fund Managers, Trading Firm Executives, Lawyers, and Corporate Insiders; Five Already Have Pleaded Guilty To Insider Trading Charges
Jordana Mishory, Daily Business Review, law.com, Fla. Firm's Attorneys Rally Their Defenses as Partner Faces Fraud Allegations - FBI and IRS agents raided the law firm Wednesday, seizing 44 boxes of evidence, hard drives and trash
(esp)(blogging from Portland, Oregon)
October 02, 2009
NACDL's 5th Annual Defending the White Collar Case Seminar - "Getting Paid, Not Charged--Avoiding Indictment by Collecting Fees Ethically," Friday, October 2, 2009
Guest Blogger: Jon May, Chair, White Collar Crime Section, National Association of Criminal Defense Lawyers
Over the last ten years, and particularly as a result of the indictment of prominent Miami Attorney Ben Kuehne, criminal defense counsel have had cause to be concerned that they could be the subject of prosecution solely for taking a legitimate legal fee. In this morning’s presentation by Jane Moscowitz and Martine Pinales, lawyers found reasons to be hopeful that such fears may be overblown, at least as to potential prosecution. Forfeiture of fees, on the other hand, remain a significant concern.
The Kuehne prosecution is an instance of ideology trumping common sense. Benedict P. Kuehne is the most unlikely of government targets. As Jane Moscowitz, who is one of his attorneys observed, Ben is the best of all of us. He is not just a leader of the bar—having been the President of the Miami-Dade County Bar Association and a member of the Board of Governors of the Florida Bar—he has devoted countless hours to pro bono activities on behalf of organizations representing the interests of African-Americans, Hispanics, Gays and others. He was also one of Al Gore’s principal attorneys during the Florida recount. Not surprisingly, he was Roy Black’s choice for counsel when Roy Black needed an attorney to vet the legal fees he was to be paid to represent notorious Colombian cartel leader Fabio Ochoa.
Roy Black was ultimately paid $5 million for his representation of Ochoa. Ben Kuehne earned approximately $175,000 for vetting this fee. Ben was indicted for conspiracy to launder, what the government recognized, and the indictment stated, was a bona fide legal fee. This is despite the fact that the money laundering statute 18 U.S.C. Sec. 1957 contains a specific exemption for the receipt of funds necessary to preserve the Sixth Amendment. It was the government’s position before the District Court and just recently before the Eleventh Circuit in their appeal from the dismissal of this count, that the decision of the Supreme Court in Caplin and Drysdale nullified this exemption. The district court, however, was persuaded that it was the intent of Congress to protect counsel from prosecution, even if attorney’s fees could be forfeited. It appears from the tenor of the oral argument, which I was present to see, that the government’s theory is being met with the same level of skepticism that it received by Judge Cooke.
Martin Pinales discussed his experience dealing with government efforts to seize legal fees. Even in instances where the AUSA states that she has no intent to seize fees, counsel can be faced with a post trial effort by the government’s money laundering/forfeiture counsel to claw back those fees. Strategies were discussed for dealing with that problem. One way is to be paid by a third party from monies totally unconnected to any alleged criminal activity. Where money is obtained from the defendant, it is important to insure that the money did not come from any source named in a forfeiture count. And counsel should do due diligence even as to assets that could be later characterized as a substitute asset. It was also important to have your retainer agreement tie fees received to services provided. Where the funds are clearly substitute assets, counsel who takes these steps will have a better chance of demonstrating that they are bona fide purchasers for value in later forfeiture proceedings.
During the seminar, other important issues were raised. In many districts, counsel do not have to worry about their fees if their clients cooperate. Doesn’t that create a conflict of interest? You can charge a flat fee so long as you can demonstrate that it was earned. But don’t call it non-refundable (unless you practice in Florida, but it still has to be reasonable). The final irony, and outrage, discussed was the fact that the indictment against Ben also includes forfeiture count. The government is seeking to forfeit from Ben, the $5 million that Roy Black received.
October 01, 2009
NACDL's 5th Annual Defending the White Collar Case Seminar - "Choppy Waters - The Ethics of Privilege and Disclosure," Thursday, October 1, 2009
Guest Blogger: Peter D. Hardy, Post & Schell, P.C. (Philadelphia, PA)
Moderator: Gerald B. Lefcourt
Gerald Lefcourt noted that it has been over 46 years since the Brady decision was issued, yet we still have no firm definition of Brady that most federal prosecutors can follow. There are varying and conflicting practices amongst prosecutors in regards to definitions and the proper time frame for disclosures. Moreover, incidents of Brady violations or potential violations are not uncommon.
Robert Cary represented Senator Ted Stevens. The heart of the defense was a note that Senator Stevens had sent to Bill Allen, the key government witness and the builder making improvements on the Senator’s chalet, which stated in part that the Senator wanted to make sure that Allen got fully paid, and that “friendship is one thing, but compliance with these ethics rules is another[.]” The government responded to this note by eliciting testimony from Allen that the note was just the Senator trying to concoct a cover story. After the guilty verdict, the second FBI agent on the case filed a self-described whistleblower complaint regarding conduct by the prosecution team. The Court ordered the government to provide discovery regarding the complaint, and a new prosecution team was put in place. New discovery contradicted directly the government’s theory and evidence at trial that Allen regarded the note as a mere cover story. Carey described the Attorney General as a hero for moving to dismiss the case. All of this happened only after a long trial and post-trial process (as well as Senator Stevens losing his re-election bid). Judge Sullivan, who oversaw the case, is to be commended for being careful and not simply taking the government’s word.
So, what should be done? Judge Gertner explained that the solution needs to involve the rules (ethical, court, and criminal procedure). The case law has slid into an outcome-determinative approach, which makes it very hard for the prosecutor to predict. The materiality standard is colliding with the harmless error doctrine. Brady had more to do with a failure to turn over evidence impugning the system, rather than predictions regarding potential outcomes. The definition of Brady should be re-assessed, and there also should be deadlines set for when information should be turned over: for example, 28 days before.
Professor Green described how the ABA code of ethics set forth in the 1970s a discovery rule for prosecutors: you must turn over information that would tend to negate the guilt of the accused. Everyone had assumed that this rule overlapped with Brady. But, the rule is not co-extensive with Brady – for example, it does not have a materiality standard. Rather, it categorically requires the disclosure of favorable information, or information which might lead to favorable evidence. A materiality test is really directed at post-conviction review, and is not well suited to govern the conduct of prosecutors at the time they are making their discovery decisions. Defense attorneys also need to know about exculpatory information in order to assess a case and decide whether or not to proceed to trial.
Paul Shechtman described federal plea agreements in New York which require waivers by the defendant of either impeachment and/or all exculpatory information. These plea waivers apparently run afoul of the rules just described by Professor Green. Current cases strongly suggest that prosecutors need more education regarding their obligations under Brady, in order to be better able to appreciate the exculpatory value of evidence. We need to reassess Brady, which has been hijacked by the materiality doctrine. The burden now is on the defendant to show materiality. In Brady, Justice Marshall wrote in dissent that the test instead should be harmless error, in which the government has the burden to show that the conviction should not be reversed. The materiality requirement invites courts to preserve convictions, despite poor decisions and poor decision-making processes by prosecutors.
Larry Thompson described a case in Detroit in which the prosecutor made false statements to the Court, and actually was prosecuted himself. Judge Gertner noted that part of the problem here is lack of meaningful remedies. There is professional discipline, but discipline is unlikely.
The panel then turned to attorney client privilege. Gerald Lefcourt noted that internal investigations, performed not by agents but corporation lawyers, can be disastrous for employees. No company wants to go to trial and become the next Arthur Anderson, so companies will go out of their way to avoid prosecution. The DOJ in effect has “outsourced” its investigations to corporation lawyers. Indeed, at least one employee has been prosecuted for obstruction of justice for allegedly lying to corporate counsel performing an internal investigation.
Larry Thompson stated that the strict application of the doctrine of respondeat superior is a problem for both employees and companies. If just one person acts as rogue employee, then all of the training and compliance efforts by the company may be for naught. Corporations really cannot go to trial, because the collateral consequences can be terrible. In an investigation, as corporate counsel, you need to find out what happened and you need your employees to talk to you. In the wake of the dismissals in the US v. Stein case (the KPMG criminal tax case), DOJ will be reluctant now to get involved in how a corporation deals with its own employees during its internal investigations.
The DOJ has changed what it has said about what constitutes cooperation by a corporation. Knowing or feeling that it has all the power, DOJ has imposed great demands upon corporations and its employees, and threatened the corporation with its own destruction. Gerald Lefcourt asked, is the government thereby coercing employees to speak, sometimes against their own interest? Are the protections provided by the warnings under Upjohn sufficient?
Paul Shectman represents many high-level employees of corporations. When he is asked to represent an employee, he sometimes finds that his client already has incriminated himself. The question is, does the employee know at the time that he is making statements that anything he says can be turned over by the corporation, and therefore nothing is confidential?
Judge Gertner asked about waiving the privilege for one purpose, but not for another. The panel responded that the doctrine of selective waiver is dead. So, if no privilege attaches, what is the purpose of hiring outside counsel?
Gerald Lefcourt asked, shouldn’t the employee be told by the corporation that he should obtain his own lawyer, now, because anything he says can be turned over later and used (by prosecutors, regulators, and civil litigants). Sometimes employees hire their own “shadow counsel,” because they want their own lawyer, but are reluctant to say “no” to the lawyer recommended by the corporation.
Robert Cary stated that the hardest decision for an individual is whether to cooperate or not during the first interview with corporate counsel. There is also a question regarding how many documents an employee can or should obtain from the corporation, particularly before any interview.
A question was posed: now that internal investigation lawyers in effect have been “deputized,” are there conflict of interest issues because the lawyers should advise the employees that they can turn over the information to the government. Paul Schectman suggested that statements/warnings by the corporation’s attorneys to interviewed employees that the information is covered by privilege (held by the corporation), and that the information might be disclosed by the company, likely gives employees a false sense of comfort, because the company may have decided long ago that any notable information will be turned over.
Professor Green argued that you cannot look to the court or ethics rules to solve this problem, because enforcement is rare. Echoing the comment above, the problem with the warnings is the “delusion” by an employee that, at the end of the day, the corporation or its lawyers will care about the employee’s interests.
The Filip Memo of the DOJ now provides that, in lieu of an impermissible request by the government for a company to waive privilege, the company can cooperate by providing the facts obtained during an internal investigation. This is a thin line. Is it purely semantics? Is it “incoherent?” Larry Thompson, however, noted that shareholders of a corporation expect cooperation with the government.
Gerald Lefcourt wrapped up by asking how a fair trial for an individual can take place when a cooperating company retains all of the potentially exculpatory documents? In KPMG, the defense theory was that the company was an instrument of the government, and therefore the government’s own disclosure obligations required KPMG to disgorge its documents to the individuals.
NACDL's 5th Annual Defending the White Collar Case Seminar - "Cyberspace - The Black Hole Where Ethics, Strategy, and Technology Collide," Thursday, October 1, 2009
Guest Blogger: Cynthia Hujar Orr, President, National Association of Criminal Defense Lawyers
Panel Moderator: Gerald GoldsteinPanelists: AUSA Joey Blanch, Blair Brown, Marcia Hofmann, Alexander Southwell
Gerald Goldstein grabbed the attention of the NACDL White Collar seminar telling us that each time we hit the send button on the internet a new government exhibit is created.
Blair Brown spoke about the Balco Investigation, Comprehensive Drug Testing, case and its ground breaking opinions. They answered many previously unanswered questions regarding the operation of the plain view doctrine and appropriate limits and procedures for the execution for computer search warrants. The Baseball Players Association conducted anonymous testing in order to determine whether comprehensive drug testing should be imposed on the sport. However, a search warrant issued for drug test results for specific athletes and promised to screen and limit the search of the computers to records of specific athletes through off site screening procedures. The government rejected assistance on site to produce just the records that the government sought. In fact, the case agent viewed all of the records under the theory that they were in "plain view." Three separate district judges found the government acted in an outrageous fashion, executing general warrants. Blair explained the appropriate limits and procedures that the Court held should have been followed instead.
Alexander Southwell explained the government's application of the Computer Fraud Abuse Act to the public's use of social networks in the context of the Laurie Drew case. Drew had created a fake "my space" account culminating in the suicide of a young woman distressed by the postings from the fake site. The government pressed charges for formation of a fake account, criminalizing the violation of the terms and conditions of a social network. Drew was convicted and the court entered a judgment of acquittal from which the government has taken an appeal. Therefore, the story has not been written on the sweep of the Computer Fraud Abuse Act (CFAA), 18 U.S.C. Section 1030. He explained the difficulty of the criminal law to keep up with technology and the importance for criminal defense lawyers to push back when the government attempts to apply the criminal law to current social practices.
Marcia Hofmann working for the Electronic Frontier Foundation, a techie ACLU. She encouraged defense lawyers to reach out to EFF when confronting technical issues in your criminal cases. She discussed the evolution of the CFAA covering the cases that were the vehicles that expanded its use. Her discussion opened eyes about conduct that was not traditionally addressed by the criminal law.
AUSA Joey Blanch discussed child pornography in the age of the internet. Cases are exploding and proliferating. Every section of society in every walk of life ends up with people committing these crimes because people think they are anonymous on line. Blanch told the white collar lawyers that they will have a client with a child pornography case and explained how it could arise. Importantly, she discussed the new child pornography offenses effective in October of 2009. She also discussed the circuit split on the Mona Lisa defense. One of the new crimes is the Child Pornography Enterprise offense which creates a 20 year mandatory minimum for participation in child pornography internet groups. That was just the tip of the iceberg.
Using a hypothetical containing common real life circumstances the group guided the audience through what counsel should do in tough circumstances.
April 10, 2009
It's Not Just the Stevens Case - DOJ Needs A Better Compliance Program
A "not guilty" verdict was returned on a drug case in Miami, but what happened during the investigation and prosecution of this case has now resulted in an award of $601,795.88 under the Hyde Amendment. The Hyde Amendment allows for attorney fees when a "prevailing criminal defendant" can demonstrate "that the position the government took in prosecuting him was vexatious, frivolous, or in bad faith." (see Order, infra, citing U.S. v. Gilbert).
Hon. Alan S. Gold, in the Southern District of Florida, issued an Order awarding these attorney fees and enjoined the US Attorneys who practice in that court from "engaging in future witness tampering investigation of defense lawyers and team members in any ongoing prosecution before [this judge] without first bringing such matters to [the judge's] attention in an ex parte proceeding." The judge also issued a public reprimand against the US Attorneys office and specifically 2 AUSAs. And it does not end there, as the judge also makes it clear that a disciplinary body needs to review this matter. (Court's Order - Download 08-20112 (Shaygan) Prosecutorial Misconduct FINAL )
The judge presents a thoughtful Order that gives credit to the USA's office for taking "immediate efforts to investigate" this matter when it came to light. After all, the taping of defense counsel and a defense investigator, by government informants, does present serious concerns. The failure to disclose this material is more problematic. The judge tells of Brady, Giglio, and Jencks issues in this case.
Hon. Alan S. Gold could not have said it better when he stated,
"It is the responsibility of the United States Attorney and his senior staff to create a culture where 'win-at-any-cost' prosecution is not permitted, Indeed, such a culture must be mandated from the highest levels of the United States Department of Justice and the United States Attorney General. It is equally important that the courts of the United States must let it be known that, when substantial abuses occur, sanctions will be imposed to make the risk of non-compliance too costly."
DOJ, the enforcer against corporate misconduct and the one who requests the appointment of monitors in deferred prosecution agreements, may seem to be having its own issues. One has to give the department credit for recognizing their lack of compliance in the Stevens case and agreeing to dismiss it. Likewise one has to give the government credit in this recent Miami case, in that the DOJ stated that they "made serious mistakes in a collateral investigation that was an offshoot of this case and stands ready to pay the additional attorneys' fees and costs incurred by the defendant as a result." Clearly the new AG Holder is taking a strong position against prosecutorial misconduct and sending that clear message to those in his office, something that is wonderful to see happening. But if this were a corporation that had committed misconduct, would these acknowledgments and payment be sufficient? The deferred prosecution agreement would require monitoring, and there would be a need to assure that there was now compliance. Mind you, I am not suggesting that a monitor in another deferred prosecution agreement case, John Ashcroft, be appointed here. But the concern is that both of the cases mentioned here had attorneys who could present these claims. My concern rests with the many cases that might have similar claims of misconduct but no attorney to bring the issues to light.
August 28, 2008
DOJ Offers New Guidelines on Attorney-Client Privilege Issue
On the same day as the Second Circuit issued the Stein (KPMG related) decision (see here), the DOJ issued new guidelines pertaining to principles of federal prosecution of business organizations. The government uses new language with regard to the attorney-client privilege. The guidelines provide that "[e]ligibility for cooperation credit is not predicated upon the waiver of attorney-client privilege or work product protection." Although it is wonderful to see the DOJ finally issuing a statement that will provide guidance to new lawyers in their office to reinforce the importance of the attorney-client privilege, this is not enough.
Guidelines are nothing more than guidelines that serve as internal guidance in the office. Guidelines are not always adhered to, and non-compliance is often left to the department to enforce. (see here) What this new language by DOJ does show is that they support the importance of making sure that the attorney-client privilege remains strong. Legislation, as is proposed, will make this happen.
The Guidelines - Download DOJPrinciples1.pdf
DOJ Press Release - here
Statement by NACDL here.
(esp)(w/ a hat tip to Jack King)
March 20, 2008
The District of Columbia Court of Appeals issued an order disbarring I "Scooter" Libby from the practice of law in the District of Columbia. The Order can be found here.
March 13, 2008
Greenberg Traurig & the Guam Attorney General
The law firm of Greenberg Traurig seems to be recipient of charges filed by the Attorney General's Office in Guam. The case clearly emanates from the days of Jack Abramoff, as he too is included as a defendant and the times of the alleged activity dates back a good number of years. There are 10 charges, some of which are felonies and some are misdemeanors. They include: unlawful influence, official misconduct, and theft. See ABA Jrl Law News Now here; WSJ here; Miami Herald here.
Indictment can be found here.
February 11, 2008
Lerach Draws a Two-Year Prison Sentence
William Lerach became the first partner from law firm Milberg Weiss to be sentenced for his role in paying kickbacks to representative plaintiffs in class actions in which the firm served as lead counsel. U.S. District Judge John Walter sentenced Lerach to two years in prison -- he will serve about eighteen months of that in a federal correctional institution or work camp -- along with 1,000 hours of community service, two years supervised release, and a $250,000 fine. The Judge stated that "[t]his whole conspiracy corrupted the law firm and it corrupted it in the most evil way" in giving Lerach the maximum sentence under the plea agreement. Lerach's lawyers argued for a much reduced punishment of six months in prison and six months home confinement, while the government sought the full two years permissible.
With Lerach sentenced, the other two major cooperators in the case, former name partners Steven Schulman and David Bershad, will have to ponder what this means for them. Each has provided information to prosecutors, and Bershad was especially important because he handled Milberg Weiss' finances. Perhaps the greatest anxiety is being felt by Melvyn Weiss, who with Lerach served as the public face of Milberg Weiss and faces a multi-count indictment that includes RICO and money laundering charges. While those who plead guilty get the benefit of cooperation through a substantially reduced sentence, Weiss has vowed to go to trial to clear his name. Lerach got a particularly favorable deal in light of the potential Sentencing Guidelines range of 27 to 33 months for even the reduced charge to which he pleaded guilty. RICO or money laundering convictions would likely put Weiss in at least a four to five year prison sentence range, and he could easily be bumped up to ten years with various enhancements. Other charges in the indictment include obstruction of justice and false statement counts, and if Weiss is convicted of those that will only exacerbate the sentence. The trial penalty that could be assessed if Weiss is convicted on all counts will be substantial, and he would likely receive a far longer sentence than his erstwhile partner Lerach, who will probably be out of prison not all that long after Weiss' trial is concluded, if it takes place.
The other major remaining defendant in the case is the law firm itself, which still has not entered into a plea agreement. The admissions of Lerach, Schulman, and Bershad that they engaged in criminal conduct while at Milberg Weiss will make any defense nearly impossible under the principle of vicarious liability applied to organizations. Predictions of the demise of Milberg Weiss and its plea agreement have all been proven wrong to this point, however, so I'm not going to hazard another guess about what the firm might do. Judge Walter showed that he is not a softie on this case, so anyone going to trial will do so with some trepidation. An AP story (here) discusses the Lerach sentencing. (ph)
February 01, 2008
Can a Disqualified Lawyer Continue to Help Out?
[Moved up from January 28 with a brief update at the end]
The prosecution of Dickie Scruggs has been fascinating, to say the least, including the view it has provided on the web of connections between the various lawyers in and around the case. The latest filing by Scruggs' defense counsel raises an interesting issue of legal ethics that could present problems down the road. Earlier, Scruggs sought to hire a well-regarded local Mississippi attorney, Kenneth Coghlan, to be part of his defense team in the bribery case. Unfortunately, Coghlan had earlier represented a co-defendant, Steve Patterson, for a brief period before withdrawing, and Patterson has now entered a plea agreement and will testify against Scruggs. Needless to say, this presents a clear conflict of interest problem, despite the waivers by both Scruggs and Patterson because of the possibility that privileged information will be made available to Scruggs' defense team or Coghlan cannot provide effective representation because of his confidentiality obligations to Patterson -- the privilege lasts forever, of course. Not surprisingly, Senior U.S. District Judge Neal Biggers denied Scruggs' motion to have Coghlan appear as his counsel on January 16.
Scruggs' defense team has filed a motion to reconsider, arguing that the waivers by Scruggs and Coghlan dissipate any problems from the potential conflict created by the confidential information received from Patterson. No great surprise there, and it's doubtful Judge Biggers will grant the motion because allowing conflicted counsel to appear would be playing with fire. The interesting issue, especially from a legal ethics point of view, is the following statement in the defense filing (available below):
In the event that the Court does not permit Mr. Coghlan to enter an appearance on behalf of Mr. Scruggs, the undersigned counsel wishes to notify the Court that counsel intends to consult with Mr. Coghlan on issues related to local custom and practice, jurisdiction, jury selection and other strictly legal and procedural (i.e., non-evidentiary issues) that may be pertinent to the defense of the case but which do not implicate any attorney-client privileged communications or information. Mr. Coghlan will have no role in the trial of this matter and will not render any legal advice or consultation to Mr. Scruggs. Furthermore, Mr. Coghlan will not be consulted regarding the specifics of either Mr. Scruggs’s or Mr. Patterson’s alleged involvement in the conduct at issue in the Indictment.
Can it be that a lawyer prohibited from representing a defendant because of a potential conflict of interest can continue to work on the case? That strikes me as a bit odd. While Coghlan was not disqualified by Judge Biggers, because he had not yet entered an appearance to represent Scruggs in the case, the district court's denial of the appearance motion seems to me to be the functional equivalent of disqualification under Wheat v. United States. In that case, the Supreme Court gave trial judges broad discretion to disqualify lawyers because of potential conflicts of interest, especially based on concurrent or prior representation of co-defendants. If a lawyer is disqualified due to a potential (or even actual) conflict, I take that to mean the lawyer may not continue any form of representation under the professional responsibility rules. Therefore, can Coghlan consult on Scruggs' case without representing him in court?
It is not clear whether Coghlan would have an attorney-client relationship with Scruggs, or only be a "consultant" to the lead defense lawyer, John Keker. An argument can be made that Mississippi Rule of Professional Conduct 1.9(a) would allow Coghlan to continue to represent Scruggs, only not in court. The Rule states: "A lawyer who has formerly represented a client in a matter shall not thereafter: (a) represent another in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client consents after consultation . . . ." Because Patterson agreed to waive any conflict of interest claims against Coghlan, it could be that the continuing representation does not violate the rule. But if Coghlan continues to represent Scruggs, only not appear in court, that seems to go against the spirit of Judge Biggers order, which looked to be based on the district court's authority under Wheat to disqualify an attorney due to the potential conflict. Judge Bigger's decision may have been to remove Coghlan from representing of Scruggs to protect against any possibility of an ineffective assistance claim by Scruggs if there was a conviction.
If Judge Biggers understood his decision to be a disqualification under Wheat, then hiring Coghlan as a "consultant" looks more like a subterfuge to get around the effect of the court's order. If a lawyer has a conflict of interest due to possessing privileged information, then that attorney must be completely removed from the case. The whole idea behind screening lawyers with conflicts is that they can have no contact with the attorneys representing a client, so the lawyer cannot be consulted for general knowledge and background with a promise that no confidential information will be passed. Moreover, if Coghlan is not representing Scruggs, then discussions with him would not necessarily be privileged, although they could qualify for protection under the attorney work product doctrine.
When a judge decides to disqualify an attorney from a case, I always assumed that it meant the lawyer was completely removed from any aspect of the client's legal representation. The Scruggs prosecution once again presents a new and interesting twist. It remains to be seen whether the U.S. Attorney's Office will seek a complete disqualification if Coghlan continues to do some work on the case, but it would not surprise me to see the prosecutors challenge this type of consultation on behalf of Scruggs. (ph)
UPDATE: Judge Biggers denied the motion for reconsideration in a short opinion (available below), stating that Scruggs could hardly complain about a lack of defense help with "five eminent attorneys" already on his team. Interestingly, the Judge passed on making any decision about whether Coghlan could continue to help out with Scruggs' defense, stating in a brief footnote at the end of the opinion, "As to the extra-judicial matters for which the defendant states he intends to employ Mr. Coghlan, the court has no opinion at this time." I suspect that if Coghlan starts showing up in the courthouse for hearings the judge may express an opinion. (ph)
Adventures in Witness Recollection
Preparing your client for a hearing is a must for every attorney. But offering to have your client's memory fade in exchange for favors is a major problem, as illustrated in a recent SEC case. The SEC filed an administrative action (here) to bar an attorney licensed in New York from appearing before the Commission because of what he told the attorney for a brokerage firm and its president who were being investigated. The attorney's client came to the SEC's attention as a potential witness, and so the attorney began dealing with the investigators seeking to arrange her testimony. At the same time, the attorney also had some conversations with the brokerage firm's lawyer that were rather revealing. How did the SEC learn what was said, you might ask? Well, it seems that the brokerage firm's attorney taped the conversations, as summarized in the administrative filing:
During the taped conversations, Respondent requested that Blumer [the brokerage firm's president] arrange for a "severance package" (i.e., removing his client as the co-signer on two car leases with Blumer and paying her salary) for his client. In return for this severance package, Respondent indicated that his client might not cooperate with the Commission and/or that her recollection of the relevant events might "fade." In the last of these conversations, Blumer’s attorney asked Respondent "what package" his client wanted to "not cooperate." Respondent stated, "Get her off those leases and, you know, your salary, and you can even pay it out over a year." Blumer’s attorney then asked, "what will we get if they do that, she won't cooperate or she won't remember?" Respondent stated "probably both."
New York is a one-party consent state for taping telephone calls, so there's no problem on that front. Can't you trust the attorney you're trying to extort in exchange for having your client's memory "fade" a little bit? It seems not, and the New York attorney may find himself in a bit of hot water with the Bar authorities who tend to take a dim view of such conduct. Whether the U.S. Attorney's Office takes an interest in a possible obstruction of justice case remains to be seen. Be careful what you offer in exchange for favorable testimony, it can cost you your career. (ph)
January 31, 2008
Is the Government Going Soft in the Lerach Sentencing
It isn't every day that federal prosecutors point to the collateral consequences of a white collar defendant's guilty plea as a reason to impose a lighter sentence, but that seems to be what happened in the recommended sentence for leading plaintiffs lawyer William Lerach. The government's sentencing memorandum, available below, tries to walk a fine line between advocating for a higher sentence than the one recommended by the Probation Office while still adhering to the plea agreement that capped Lerach's potential prison term at twenty-four months for his role in making secret payments to representative plaintiffs in cases litigated by his former firm, Milberg Weiss. So in the same filing prosecutors asked for a higher Sentencing Guidelines calculation to trigger the maximum twenty-four month sentence, nine months longer than recommended in the Presentence Report. Then in defending the decision to limit the potential punishment to a maximum of two years, the government states:
Defendant, who will be sixty-two years old upon commencement of his sentence, now stands in disgrace before the profession of which he considered himself a national leader, and the courts before which defendant practiced. Given what is surely an ignominious conclusion to an otherwise successful career, a period of incarceration greater than twenty-four months is not necessary to promote the sentencing goals set forth in Section 3553(a).
While that position is nothing new in argument by defense lawyers on behalf of their clients, I don't recall seeing prosecutors point to the reputational effects of a guilty plea as a justification for a sentence lower than the one called for in the Guidelines.
In Lerach's case, it is an odd argument because his reputation was built at least in part on the very conduct involved in the prosecution. In a different section of the brief seeking a higher sentence, albeit still within the twenty-four month limit, the government asserts that "[t]he conduct at issue amounted to a systematic effort to obstruct and undermine the lawful functioning of the judicial system in hundreds of lawsuits brought in federal and state courts throughout the United States." So Lerach attacked the heart of the legal system, while the "ignominious conclusion" of his career argues in favor of some measure of leniency. Part of his prominence in the profession likely contributed to his ability to pursue class action lawsuits while making the secret payments, so the loss of prestige is not just a tangential result of his crime. I almost get the feeling that portraying Lerach's fall from grace as a justification for a lighter sentence is a bit like the person convicted of setting fire to his home for the insurance money begging for mercy because he's now homeless -- this isn't so much a "collateral consequence" as a direct result of one's choice to commit a crime.
So, have prosecutors gone soft? The language arguing for a more limited sentence is sure to be used in other white collar cases in which a defendant suffers from collateral personal and career consequences as a result of a guilty plea or conviction. It may be that prosecutors have to take this almost schizophrenic approach because the plea agreement ended up being potentially too favorable to the second most powerful lawyer at Milberg Weiss, which itself is under indictment. You learn to live with your deals, but the rhetoric used in defending this one could come back to haunt prosecutors later on. (ph)