White Collar Crime Prof Blog

In the News & Around the Blogosphere

DOJ Press Release, Parker Drilling Company Resolves FCPA Investigation and Agrees to Pay $11.76 Million Penalty; Corporate Crime Reporter, Parker Drilling Gets FCPA Prosecution Deferred, to Pay $11.76 Million

DOJ Press Release, Former Investment Banker and His Associate Plead Guilty in San Francisco to
Insider Trading Scheme

Phil Willon, LATimes, Charges filed in San Bernardino airport corruption probe

Adam Kaufmann & Arthur Middlemiss Join Lewis Baach PLLC - see here

(esp)

Will the "Public Safety Emergency Exception" Apply in White-Collar Cases?

The government decision to delay Miranda warnings, and also the first appearance before a judge and the assignment of counsel, for Dzhokhar Tsarnaev, the surviving alleged Boston Marathon bomber, was a tactical one, no doubt based largely on an evaluation that any admission Tsarnaev makes is unnecessary to a government case (eyewitnesses, an admission, videotapes, possession of explosives, flight, etc.) which appears to be overwhelming.

The broad "public safety emergency exception" which the government asserts is a questionable Department of Justice attempt to expand the narrow exception announced in New York v. Quarles, 467 U.S. 649 (1984).  The government's aggressive stance is based in part on a belief that Miranda does not prescribe a procedural requirement for police questioning, but is only a prerequisite for the admissibility at trial of statements made by a defendant.  Under such reasoning, government agents are free to violate the dictates of Miranda (and perhaps other constitutional rights) with no harm to their case except a return to the status quo ante.

Aggressive law enforcement tactics against criminal suspects accused of particular heinous crimes, such as terrorism, murder, kidnapping and large-scale drug dealing, gradually work their way into the general law enforcement toolbox.  Tactics used against drug dealers and organized crime figures, such as extensive electronic surveillance, undercover agents, forfeiture of assets and disallowance of attorneys' fees, and exceedingly high bail requests, for instance, are no longer uncommon in white collar cases.

I wonder whether the "public safety emergency exception" is so far off.  If it is acceptable under this exception to allow the government to disregard Miranda and Federal Rule of Criminal Procedure 5(a)(1)(A) (requiring agents to bring one arrested before a court "without necessary delay") in order ostensibly to prevent future terrorist crimes, will it also become acceptable to detain for 48 hours and question without Miranda warnings, for instance, those who have provided inside information about unknown persons to whom they might have provided such information in order to deter imminent or future insider trading or  those who have hacked computers about accomplices or others who might commit imminent or future computer crimes?

(goldman)

Administrative Judge Reverses Suspension of Stevens Prosecutors

An administrative judge for the Merit Systems Protection Board has overturned the DOJ internal decision finding reckless misconduct for violating Brady obligations by two prosecutors of Senator Ted Stevens, Joseph Bottini and James Goeke, and ordering their suspensions.  See here. 

The administrative judge ruled that DOJ had violated its own disciplinary procedures which require a rank-and-file DOJ attorney in the Professional Misconduct Review Unit to review OPR findings and determine whether misconduct had occurred.  The career attorney who reviewed the OPR findings, Terrence Berg (now a federal district judge in Michigan), decided in favor of the prosecutors, but his ruling was reviewed and reversed by his superiors, who found that misconduct had occurred and suspensions were appropriate.  Review and reversal by the superiors, said the administrative judge, was improper procedurally, and the rank-and file attorney's decision was non-reviewable and final.

I lack sufficient familiarity with administrative law to opine whether this decision is wrong  (although Prof. Bennett L. Gershman has made a strong case that it is).  See here.  I recognize that prosecutors, like those they prosecute, are entitled to due process.  However, procedural infirmities aside, the actions of the prosecutors were clear enough and serious enough to warrant on the merits a finding of misconduct and a suspension.  See here.

I find it ironic that DOJ's finding of misconduct was (according to the administrative judge) based on DOJ's own procedural misconduct.  More seriously, however, I find extremely troubling the notion that a DOJ prosecutor's misconduct should be finally determined by a fellow career DOJ prosecutor.  Defense lawyers, for instance, are not entitled to have their alleged misconduct weighed by a fellow defense lawyer.

A prosecutor's alleged misconduct ideally should be determined by the appropriate state bar disciplinary committee, not a fellow prosecutor (or fellow prosecutors).  Of course, bar disciplinary committees, as several commentators have pointed out, have been extraordinarily hesitant to discipline prosecutors, especially with respect to Brady violations.

DOJ has the right to appeal to the three-judge Merit Systems Protection Board.  It will be interesting to see if it does.

(goldman)

White Collar Criminal Law is Heating Up?

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

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

(esp)

In the News & Around the Blogosphere

Wes Reber Porter, law.com (The Recorder), Viewpoint: Sentencing Guidelines Needn't Be Scrapped

DOJ Criminal Division Head Lanny A. Breuer Returns to Covington As Vice Chair

Amanda Bronstad, NLJ, Ex-Nixon Peabody partner's co-defendant draws 10-year sentence in Ponzi scheme

Larry A. Mackey and Jason R. Barclay of Barnes & Thornburg represented a real estate executive who received a full acquittal in a 13-count federal jury trial 

Mark Niesse & Bill Rankin, Atlanta Jrl Constitution, Charges expected in APS test-cheating scandal

(esp)

In the News & Around the Blogosphere

Peter Lattman, NYTimes, SAC Capital to Pay $616 Million in Insider Trading Cases

Paul Kish, Federal Criminal Lawyer Blog, Divided Atlanta Federal Appeals Court Upholds Florida Mail Fraud and Bribery Conviction: the Latest Saga in the "Honest Services" Debate

Mary M. Chapman, NYTimes, Former Mayor of Detroit Guilty in Corruption Case

Adam Nossiter, NYTimes, U.S. Embassy Criticizes Pardons in Nigerian Corruption Cases

Nate Raymond, Thomson Reuters, Rakoff says sentencing guidelines should be 'scrapped'

Robert W. Wood, Forbes, Ernst & Young's $123M Non-Prosecution Agreement Over Tax Shelters: Priceless

Michael Pollick, The Herald Tribune, Danish lawyer charged in Morgans' Ponzi scheme

Deon Daugherty, Houston Business Journal, Judge accepts Transocean’s $400M criminal settlement

(esp)

In the News & Around the Blogopshere

David Oscar Markus, Southern District of Florida Blog, A Call to the Judiciary

Sherri Qualters, National Law Jrl, law.com, Lawyer gets home confinement for failing to report
boss's mortgage fraud

Texas State Securities Board, Foreign Notes Scammer Sentenced to 80 Years in State Prison

This Week From 500 Pearl Street

Casey Sullivan, Reuters (Chicago Tribune), Prominent NY prosecutor enters private practice

Thomson/Reuters, Money News, Former Goldman Director Seeks Reversal of Insider Trading
Conviction

Patricia Hurtado, Bloomberg News, Gupta Says in Appeal Trial Judge Hampered Defense Case

Todd Ruger & Jenne Greene, National Law Jrl, Securities bar predicts White will be 'tough sheriff' at SEC

Sherri Qualters, National Law Jrl, Alleged hacker's prosecutor defends case, stressing low
sentence sought

DOJ Press Release, Assistant Attorney General Lanny A. Breuer Announces Departure from Department of Justice

DOJ Press Release, BP Exploration and Production Inc. Pleads Guilty, Is Sentenced to Pay Record $4 Billion for Crimes Surrounding Deepwater Horizon Incident Court Accepts Guilty Plea to Felony
Manslaughter, Environmental Crimes and Obstruction of Congress Prior to Imposing Historic Sentence

DOJ Press Release, Former Chief Financial Officer of Stanford Financial Group Entities Sentenced to Prison for Role in Fraud Scheme and Obstruction 

Katie Couric Show, Cheating? Lying? Why Do We Do It?

Mike Scarcella, BLT Blog, Prosecutors Mounting New Case Against Blackwater Security Guards

(esp)

Irving R. Kaufman Memorial Securities Law Moot Court Competition

Announcement from the Fordham Law Moot Court Board

Each spring, Fordham University School of Law hosts the Irving R. Kaufman Memorial Securities Law Moot Court Competition. Held in honor of Chief Judge Kaufman, a Fordham Alumnus who served on the United States Court of Appeals for the Second Circuit, the Kaufman Competition has a rich tradition
of bringing together complex securities law issues, talented student advocates, and top legal minds.

This year’s Kaufman Competition will take place on March 22-24, 2013. The esteemed final round panel includes Judge Paul J. Kelly, Jr., of the Tenth Circuit; Judge Boyce F. Martin, Jr., of the Sixth Circuit; Judge Jane Richards Roth, of the Third Circuit; and Commissioner Troy A. Paredes, of
the United States Securities and Exchange Commission. The competition will focus on two issues that arise in the fallout of Ponzi schemes: whether the “stockbroker safe harbor” of the Bankruptcy Code applies to Ponzi scheme operators, and the application of SLUSA, which was recently granted cert by the Supreme Court.

We are currently soliciting practitioners and academics to judge oral argument rounds and grade competition briefs. No securities law experience is required to participate and CLE credit is available.

Information about the Kaufman Competition and an online Judge Registration Form is available on our website, www.law.fordham.edu/kaufman. Please contact Michael N. Fresco, Kaufman Editor, at KaufmanMC@law.fordham.edu or (561) 707-8328 with any questions.

(esp)

Casey Anthony Seeks Bankruptcy Protection for Legal Fees

Casey Anthony, who was acquitted of murdering her daughter Caylee Marie in 2011, has filed for bankruptcy in federal bankruptcy court in Florida.  She has listed approximate assets of $1,100 and debts of $800,000, including $500,000 due Jose Baez, one of her defense attorneys.  See here.  I was pleased to see no debt listed for my colleague and friend Cheney Mason, who as Baez' co-counsel, added gravitas, savvy and experience to Ms. Anthony's defense team.

It is not surprising for a criminal defense lawyer not to be paid a large part of the legal fees owed to her.  I venture that the average criminal defense lawyer is "beat" for some 10-20% of her fees.  And I do not know how much Baez actually did receive in fees, but I am sure nothing like the fees many white-collar lawyers and firms often receive for representation in criminal matters of institutions or individuals, even those who never get close to being indicted.  Of course, the Anthony case did provide Baez considerable fame.

(goldman)

New Head of Antitrust

DOJ Press Release, Attorney General Eric Holder Welcomes Bill Baer as Assistant Attorney General for the Antitrust Division  Baer, a Stanford Law grad, comes to Antitrust from Arnold & Porter.

(esp)

In the News & Around the Blogosphere

Mike Scarcella, BLT Blog, AG Eric Holder's Chief of Staff Announces Departure

Covington & Burling, An Analysis of the FCPA Resource Guide

Perkins Coie, New FCPA Guidance by DOJ & SEC: Important, But No Sea Change

Catherine Dunn, Corporate Counsel, DOJ and SEC's New FCPA Guidance Provides a Desktop Compliance Reference for Companies (w/ a hat tip to Ryann McConnell)

William Shepherd Named Chair of ABA's Criminal Justice Section

Lawrence Cunningham, KIlling N.Y.'s Horses for an Extra Buck

(esp)

In the News & Around the Blogopshere

DOJ Press Release, Former Fair Financial Company CEO Sentenced In Indianapolis to 50 Years in Prison for Role in $200 Million Fraud Scheme Two Other Fair Financial Executives Sentenced Today for Roles in Scheme

The Economic Times, US prosecutors oppose Rajat Gupta's plea to remain free on bail; Basil Katz, Appeals court to hear arguments on ex-Goldman director's bail

Tu Thanh Ha, The Globe and Mail, Third Quebec Mayor Resigns Amidst Corruption Allegations

Philip Van Doorn, The Street, Schapiro to Exit SEC, Walter Named Chairman

(esp)

BP: Can Civil Remedies Be More of a Sting

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

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

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

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

(esp)

Billion Dollar "Unauthorized Trade" Suggests Criminal Statute Prohibiting "Reckless Trading"

 As the New York Times reports (see here), once again a trader has apparently taken an enormous bet with his employer's money and lost, thereby costing his employer, a small Connecticut brokerage firm, millions of dollars and threatening its continued existence.  David Miller, described by the Times as a "journeyman" with a career that includes stints at some of Wall Street's less distinguished firms, bought roughly $1 billion of Apple stock hours before Apple was to announce its earnings for his employer Rochdale Securities in what the firm's president called an "unauthorized trade."  When the announced earnings were below expectations, Apple's stock price fell and the firm was then forced to sell the securities at a considerable loss.

I have no idea whether Miller's trading was a calculated effort of his own to secure a huge gain for his employer and perhaps a corresponding large bonus for himself, an execution of a strategy approved by supervisors, a ministerial error resulting from a "fat finger" (as Rochdale has reportedly told potential financial rescuers) or something else.   However, this situation, along with better-known recent examples of purportedly unauthorized trades which have caused massive losses (some of which, potentially at least, might eventually be borne by taxpayers) lead me to wonder whether there should be a criminal statute prohibiting "reckless" trading of other people's money.  Many statutes, generally state, prohibit reckless behavior which causes, or just puts people at risk of, death or physical harm, including in New York reckless assault, reckless endangerment, and reckless driving.  I wonder whether just as the law criminalizes reckless conduct which may cause physical harm, it should criminalize reckless conduct which may cause monetary harm.  Such a statute might criminalize conduct when one "takes a substantial and unjustifiable risk in making trades with money other than his own and that such risk is a gross deviation from the standard of conduct a reasonable person would observe in that position."  (Cf. N.Y. Penal Law Section 15.05).

The bonus system which gives great incentives to hugely successful trading by one whose own funds are not put at risk (at least directly) and lesser disincentives to hugely unsuccessful trading encourages taking long-shots.  Perhaps that is the way the markets should work.  However, contrary to my visceral feeling that governments enact too many penal statutes, I believe a prohibition of reckless trading which results in severe financial loss might be worthy of consideration.

(goldman) 

Terwilliger And Team Move To Morgan Lewis

DC has its share of outstanding white collar practitioners, but some of the very best of them don't often make it into the news. Why? Because they are quietly busy, around the clock and the globe, protecting the reputations, pocket-books, and other interests of their clients. They do this by conducting internal investigations, defending against government inquiries, creating state of the art compliance programs, and offering sound strategic advice. The whole point is to keep your clients out of the news. Two of the very best of these trusted white collar counselors are former Deputy AG George J. Terwilliger III and my old friend Bob Bittman, who are moving this Thursday from White & Case to Morgan Lewis. Terwilliger and Bittman will be Partners in the White Collar Litigation & Government Investigations Group. George and Bob are moving over with experienced white collar hands (and fomer AUSAs) Dan Levin and Matt Miner. Here is the Morgan Lewis Press Release. Congratulations to George, Bob, Dan, and Matt.

(wisenberg)

Deferred Prosecution Agreements - Definitely A Plus

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

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

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

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

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

(esp)  

Pepper Hamilton and The Freeh Group Join Forces

With corporate internal investigations as a multi-million dollar business, it is not surprising to see this new alliance - see here.

(esp)

In the News & Around the Blogosphere

Jane Meinhardt, Tampa Bay Business Jrl, Weinberg awarded for work in prosecuting, defending

DOJ Press Release, Eight Individuals and a Corporation Convicted at Trial in Florida in $50 Million Medicare Fraud

King & Spalding Press Release, Former WellCare Executive Rejoins King & Spalding

Jean Eaglesham & Joe Palazzolo, WSJ, Ex-UBS Traders Offered Deal by U.S. in Rate Probe

Rosa M. Abrantes-Metz & D. Daniel Sokol, Harvard Business Law Review, The Lessons from Libor for Detection and Deterrence of Cartel Wrongdoing

James E. Felman is the recipient of the FBA's Earl W. Kintner Award for Distinguished Service of the Tampa Bay Chapter of the Federal Bar Association

Sue Reisinger, Corporate Counsel, SEC Hands Out First Whistleblower Payment, Hints at More
To Come

(esp)

New York D.A. Brings State Prosecution After Second Circuit Vacates Federal Conviction

Sergey Aleynikov, a former Goldman Sachs programmer whose federal conviction for stealing source code from the firm's computers had been vacated by the Second Circuit on the grounds that the statutes under which he was prosecuted did not cover his conduct, has been charged by Manhattan District Attorney Cyrus Vance with state charges relating to the same activities.

Arguably, the Fifth Amendment double jeopardy clause does not apply here because the United States and the State of New York are separate "sovereignties."  That "dual sovereignties" exception to the double jeopardy clause has been occasionally questioned but generally remains in force.  One possible exception that may apply here since presumably the D.A.'s case will rely on the federal investigation and prosecution (the federal case agent signed the affidavit supporting the state complaint) is when the two governments are acting in concert. 

Although there may be no federal constitutional bar because of the "dual sovereignties," New York statutory law does in some circumstances preclude a state prosecution after a trial for the same or similar offenses in another jurisdiction.  See New York Criminal Procedure Law Article 40.  Additionally, there is always the possibility that eventually the New York Court of Appeals, which recently has dusted off the New York State Constitution's equivalent of the Bill of Rights (Article 1, Section 6) in Fourth Amendment Cases, may apply the state's constitutional double jeopardy bar more broadly than federal courts have applied the federal constitutional bar.

A New York Times article (see here) about the case quotes Joshua Dressler, an Ohio State University law professor, as saying that this case provides "an exceptionally justifiable reason for the state prosecutor to use a state law to bring a prosecution."  I disagree.  Mr. Aleynikov has already undergone the trauma and expense and disruption of life that a criminal trial entails.  He has already served almost one year in prison for a crime he did not commit.  Even if convicted on state charges, I predict he will never serve an additional day in jail.

Thus, in some ways Mr. Aleynikov is a poster boy for application of the double jeopardy clause.  This case does not involve a situation in which a dismissal or acquittal in the initial proceeding was tainted by misconduct or was so bizarre that it seems viscerally unjust.  Rather, Mr. Aleynikov's case was reversed by a highly-respected court because a highly-respected prosecutorial office charged and convicted him and sent him to prison under statutes that did not apply.  This is not the kind of case that justifies a prosecutorial end-run around the Constitution. 

The Department of Justice's "Petite Policy" concerning federal prosecutions after state trials, as it has been applied, militates against a second prosecution after an unsuccessful prosecution in another jurisdiction when the first prosecution was generally fair.  Apparently, the New York County District Attorney has no such policy. 

(goldman)

In the News & Around the Blogosphere

AP, Washington Post, Former Ohio county commissioner in federal corruption case gets 28-year prison sentence

Benjamin Weiser, NYTimes, Bronx Councilman Is Convicted of Fraud and Loses Seat

Basil Katz, Reuters, Key cooperator in Galleon insider cases gets probation

Sophia Tareen, Boston.com, Ex-Ill. Gov. Ryan contests corruption convictions

DOJ Press Release, Pfizer H.C.P. Corp. Agrees to Pay $15 Million Penalty to Resolve Foreign Bribery Investigation SEC and Companies Agree to Civil Disgorgement of $45 Million

 DOJ Press Release,Gibson Guitar Corp. Agrees to Resolve Investigation into Lacey Act Violations

 DOJ Press Release, Former Alabama Governor Don Siegelman Re-Sentenced on Bribery, Conspiracy, Fraud and Obstruction of Justice Charges  

Ryan McConnell, Daniel Trujillo, and Katelyn Richardson, Corporate Counsel, Playing Moneyball in the Compliance Department

(esp)