Friday, June 8, 2012
The New York Times this Monday reported that Bank of America (BOA) executives, including its then chief executive, Kenneth D. Lewis, in 2008 concealed from shareholders about to vote whether to approve the bank's purchase of Merrill Lynch that the expected losses that the bank would absorb from the purchase were far greater than reflected in the proxy documents they had received relating to the purchase. See here. Further, according to the report, Mr. Lewis at the meeting at which the stockholders voted whether to accept the deal, in response to a question about whether the purchase would dilute or add to the bank's income in coming years, sidestepped the question and referred the questioners to the proxy statement, which he knew seriously understated the loss. In court papers, the shareholders' lawyer called this response referencing the inaccurate proxy statement "materially false when made."
According to the Times, Mr. Lewis in recently-filed court papers claimed he had been advised by the bank's counsel, Wachtell, Lipton, Rosen & Katz, and by other bank executives that it was not necessary to disclose the actual projected losses.
The question of whether one must correct earlier inaccurate statements is sometimes murky, at least in law, and I would hesitate even to attempt to second-guess Wachtell Lipton, a highly-respected law firm, if in fact it did tell Mr. Lewis he need not correct the proxy statement before the vote. I do, however, find it hard to believe that Wachtell Lipton would have advised him to give the shareholders an obfuscating, misleading and arguably false statement.
There may well be wholly legitimate and defensible reasons for Bank of America to withhold the revised loss statements or for Mr. Lewis to answer as he did. The civil case, in which Mr. Lewis apparently has not asserted his privilege against self-incrimination, may provide these.
In the proxy statement, the projected loss of BOA profits from the merger was three percent in 2009, and nothing (and perhaps even a slight gain) in 2010. In the estimate provided to the executives before the vote but not communicated to the shareholders, it was 13 percent in 2009 and 2.8 percent in 2010. According to the Times, BOA's purchase of Merrill Lynch, which was ultimately urged by the government, required an additional $20 billion in bailout money beyond what the bank had received earlier. In addition, when Merrill's fourth-quarter losses were disclosed along with the bailout, shareholders in four days lost half of their value in BOA stock -- roughly $50 billion.
I suspect that there will be some governmental interest in this matter, if there is not already. I do not contend that Mr. Lewis' statement violated securities, criminal or other laws or regulations. If regulations did not prohibit him from concealing the latest reports from the voting shareholders, however, they should have. This may be another instance of questionable conduct that clear and specific regulations would have prevented.
Sunday, June 3, 2012
Corporate Social Responsibility and Supply Chains Practice: Proposed Dodd-Frank Conflict Minerals Rules
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.
Some have been claiming that corporate prosecutions are down in numbers. It certainly has not seemed that way, so I was glad to see the numbers, which demonstrate that corporate sentencings have been average over the past few years.
Lisa Rich, Director of the Office of Legislative and Policy Affairs at the United States Sentencing Commission provided the following corporate statistics for the recent Federal Sentencing Conference (although I have reworded some of what she provided): In FY 2011, there were 160 organizational cases and 151 pled guilty and 9 were convicted after jury trials. Probation was ordered in 111 cases and 31 had court ordered compliance/ethics programs. Three cases received credit for self-reporting and 44 received credit for cooperating with the government. But of the approximately 74 cases in FY2011 for which the Commission had Chapter 8 culpability information, there were no entities receiving full credit for having an effective compliance program. Not one of the 74 cases received credit under subsection (f).
These statistics do not reach the full corporate efforts by DOJ since they fail to include non-prosecution agreements or deferred prosecution agreements that have not gone through chapter 8. So some bottom line observations: 1) if the government decides to prosecute a corporation - it has an incredibly high chance of success; 2) more emphasis needs to be put into teaching corporations how to operate an effective compliance program; 3) studies need to examine whether by using deferred and non-prosecution agreements the government is increasing prosecutions against corporate individuals (it certainly seems likely that this would be the case).
Tuesday, May 29, 2012
David Voreacos & Greg Farrell, Bloomberg Businessweek, Wal-Mart Not Alone in Late Disclosure of Bribe Probe
Mike Scarcella, law.com, At odds in the Stevens case - Internal DOJ report shows fighting over punishment of prosecutors
Dan Ariely, WSJ, Why We Lie (hat tip to David Gerger)
Adam Liptak, NYTimes, A Tough Judge’s Proposal for Fairer Sentencing
Kristen Hays, Reuters, Judge says Enron's Skilling can seek new trial
Mike Scarcella, BLT Blog, DOJ Preparing to Release Internal Probe of Ted Stevens Case
Grant McCool, Reuters, Gupta insider trading jury to hear Rajaratnam tapes; Walter Pavlo, Forbes, Prosecutors Say Rajat Gupta Close To Rajaratnam, But Does It Matter?; NYDaily News, Rajat Gupta's trial: Prosecutors play FBI wiretaps
Samuel Rubenfeld, WSJ, Former NY Lawmaker Bruno Faces New Corruption Charges
Robert Barnes, Washington Post, Supreme Court faces pressure to reconsider Citizens United ruling
AP, Washington Post, Jurors in John Edwards’ campaign corruption trial take weekend break, resume Monday
John May, The FCPA Blog, Facilitation: A Jury Question
Patricia Hurtado & Seth Stern, Bloomberg, U.S. Said to Start Probe of $2 Billion JPMorgan Loss
Michael Pollick, Herald Tribune, Marian Morgan's big mistake: Not taking a plea
Mike Scarcella, BLT Blog, Roger Clemens Presses Constitutional Dispute with Congress
Friday, May 25, 2012
The DOJ filed a motion to voluntarily dismiss (Download USA v Lindsey, etc., et al.___ecf.ca9.uscourts) in the U.S. Court of Appeals for the Ninth Circuit the FCPA case involving Lindsey Manufacturing Co., its CEO and CFO. The government had filed an appeal on December 1, 2011 following an Order of District Judge Howard Martz, who ruled that the Lindsey prosecution had been tainted by a pervasive pattern of flagrant government misconduct. Contributing Blogger Solomon Wisenberg posted here excerpts from this initial Order. By today's dismissal, the government is finally dropping this prosecution and it also ends the efforts to get the company to forfeit $24 million.
Attorney Jan Handzlik of Venable LLP stated, "This is a great day for the fair administration of justice. We couldn't be happier for Keith, Steve and the 110 loyal, hard-working employees of Lindsey Manufacturing Company. This dismissal further vindicates Dr. Lindsey's belief in our system of justice and in his innocence. Keith and Steve were steadfast in their belief that the government had not played fair and that the truth would come out."
Congratulations also go to Janet Levine (CrowellMoring), who also represented an accused in this case. Both Jan Handzlik and Janet Levine were the inaugural recipients of the White Collar Criminal Defense Award given at the NACDL White Collar Criminal Defense College at Stetson (see here).
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.
Saturday, May 19, 2012
Sitting on the bench in a high profile case is not easy on any lawyer or the judge for that matter. Everyone is scrutinizing your motions, your rulings, and even what you may be wearing. Co-blogger Solomon Wisenberg noted here how the judge has the ability to move the Clemens trial along. This may be true - but I am not sure that he should.
Giving time for each attorney to state their objections, restate their objections, preserve the record, and yes, restate them even again, is important for everyone. Judge Walton is noted for giving defendants a fair trial - albeit he is also known for being tough if one is convicted. This is all the more reason to make sure that everything is properly on the record, should the defense be unsuccessful at trial.
I am firmly convinced that when prosecutors or defense counsel deliberately clog up a case with needless motions and objections, the jury may eventually catch on. And when prosecutors deliberately attempt to break the stride of the defense counsel or weaken the presentation with objections and distracting arguments, don't always assume it will benefit the prosecution. And keep in mind, that if there is a conviction the appellate court gets to read the entire record and they will have the opportunity to see the motions being made, the arguments supporting the motions, and they will have the opportunity to discern whether one side was deliberately wasting time with worthless motions.
So making sure everything is on the record, and that all arguments are heard is not such a bad thing.
Thursday, May 17, 2012
Judge Walton says that the jury is bored at the Clemens trial, and of course he blames the lawyers. Maybe he should look in the mirror. The proceedings would have moved much faster had the Court put a stop to the government's pettifogging objections to cross-examination questions that allegedly strayed beyond the scope of direct.
The judge has also, according to the latest press reports, characterized Rusty Hardin's lengthy cross-examination of Brian McNamee as confusing.
I stopped in on the trial yesterday morning during Hardin's cross-examination of McNamee. Although there was no smoking gun moment, it was an accomplished cross that ably exposed McNamee's shifty, evasive personality. Near the end, Hardin asked a perfectly acceptable question, the point of which was to stress that McNamee would have been valuable to Clemens as a private trainer irrespective of McNamee's ability to provide illegal drugs. The prosecution objected. Rather than simply ruling on the objection, Walton engaged in an unnecessarily lengthy exchange with the attorneys on the finer points of evidentiary law. You would have thought they were discussing the Ex Post Facto Clause or the Magna Carta.
The trial judge has great discretion to move a case along--even a big case. This doesn't mean that the Court should prevent either side from putting on its evidence or vigorously questioning witnesses. The Clemens case would benefit from quicker bench rulings on objections, particularly objections that only serve to break the other side's pace and stride. The government objections that I witnessed on Wednesday did not merit the lengthy treatment they were given by the Court.
Tuesday, May 15, 2012
Few things are more exhilarating to a criminal defense attorney than turning the government's witness into your own. This is exactly what Rusty Hardin did with Yankees GM and Senior VP Brian Cashman to close out last week's testimony in the Roger Clemens trial. It's not as if Cashman provided that much to the government in the first place. He testified on direct that the Yankees acquired Clemens from Toronto after the 1998 season. Clemens contemporaneously asked the Yankees to hire Toronto strength coach Brian McNamee. Cashman declined. There is no evidence that Clemens pressed the matter further at the time. Clemens was injury plagued in 1999, and had his worst ERA ever. After getting shelled in a 1999 playoff game at Fenway Park, Clemens asked Cashman to hire McNamee for the 2000 season. Cashman obliged. In 2000 Clemens rebounded with a great year.
On cross Hardin established that Clemens had experienced a very poor season with the Red Sox ten years previously, yet similarly rebounded the next season with a banner year. Hardin also had Cashman confirm that Clemens never complained when the Yankees ultimately fired McNamee. And Cashman smeared McNamee's character in response to Hardin's questions concerning the circumstances of McNamee's firing. Sprinkled throughout Cashman's responses to Hardin were glowing testaments to Clemens' work ethic, competitive spirit, decency, and sportsmanship.
At the end of the day, the Court accepted proposed questions for Cashman from the jury. One of them was as follows:
"Over the years that you've known Roger Clemens, is it fair to say you admire him as a great player and a leader?"
Judge Walton, who has been needlessly Talmudic in his approach to cross-examination questions veering "beyond the scope" of direct, nevertheless allowed the question, transposing it slightly. He asked Cashman:
"[O]ne of the jurors wants to know what your feelings are about Roger Clemens as a player and as a leader."
Here was Cashman's out of the ballpark response:
"One of the greatest players that I've ever seen, one of the best people, which goes to his leadership abilities. He, you know, he worked harder than everybody. He led by example. So a lot of times, you know, someone like Roger Clemens was given a great deal of ability. But not everybody honors that ability with the work ethic they put behind it. Roger did that.
And Roger at the same time was inclusive. You know despite his, you know, extreme accomplishments and his abilities and therefore celebrity that came from that, you know, his leadership is also shown in the fact that he, you know, treated the 25th man the same way he'd treat maybe the second best player on the team as well as the support staff. So, you know, there's a lot of aspects of being a leader. It's, you know, a true leader leads everybody, you know, the good ones and the bad ones. Roger led them all. So, he was a great player, a hard worker. His work ethic as well as his leadership ability was unquestionable."
Thursday, May 10, 2012
The white collar crime blog, for two years (see here and here), has given the collar for the case most needing review to the case of Sholom Rubashkin. The case has an incredible gathering now from a spectrum of individuals and groups across political and ideological views. The Petition for Cert is here and background on the case is here. Here are some of the interesting updates on this case -
Washington Legal Foundation - Urges High Court to Review Unreasonably Harsh Sentence for Small-Business Owner
Amici Brief for Justice Fellowship & Criminal Law & Sentencing Professors and Lawyers - Download 11-1203 amici brief (a wonderful brief authored by David Deitch and Alain Jeff Ifrah that points out the jurisdiction split among Circuits and why it is important for Appellate "judges to state on the record that they have considered each non-frivolous argument for variance under the factors listed in Section 3553(a)" and how and why each such argument affected the sentence imposed.
Amicus Brief of the Association of Professional Responsibility Lawyers (APRL) - Download APRL Amicus Brief in Rubashkin (a strong brief written by W. William Hodes that provides the importance of this case from the perspective of "an independent national organization of lawyers and legal scholars whose practices and areas of academic inquiry are concentrated in all aspects of the law of lawyering." The brief focuses on the jurisdiction split regarding Rule 33 of the Federal Rules of Criminal procedure. The brief also points out important ethics issues that warrant review in this case.)
Hopefully, someone is listening.
Wednesday, May 9, 2012
I mentioned in a recent post that Reggie Walton is a fair judge. That fairness was on display again yesterday in the Roger Clemens trial, when Walton prohibited federal prosecutors from introducing testimony and documents pertaining to Clemens' fat salary as a pitcher. Walton correctly concluded that the prejudicial effect of this evidence outweighed its supposed probative value. It is a very rare federal judge who will bar this kind of "lavish lifestyle" evidence. The government always wants it in, ostensibly to show that a defendant's alleged criminal conduct was part of an effort to maintain a lavish lifestyle. In reality, prosecutors simply want to prejudice the defendant in the eyes of jurors by showing them how rich he is, how "high-on-the-hog" he lives, and how different he is from you and me.
Wednesday, May 2, 2012
Amanda Bronstad, NLJ, Guilty pleas to bribing overseas officials
Mike Scarcella, BLT Blog, In Gulf Spill Probe, DOJ Charges Former BP Engineer with Obstruction
Mathew Huisman, BLT Blog, After Three-Decade Run, D.C. Boutique Janis, Schuelke & Wechsler Dissolves
Jesse J. Holland, Google (AP), Ray of hope for imprisoned ex-Gov. Ryan's appeal
Sara Randazzo, Am Law Daily, Manhattan D.A. Launches Criminal Probe of Ex-Dewey Chair Davis; Firm Opens Internal Inquiry (registration required)
Karen Sloan, NLJ, Baltimore looks to Justice Department for its next dean
Mark Touhy, Paul Enzinna, & Lauren Cury, Corporate Counsel, An In-House Counsel Corporate Corruption Playbook
Sue Reisinger, Corporate Counsel, law.com, Will Wal-Mart Regret Not Disclosing Its Bribery Investigation Sooner?
AP, Washington Post, Ex-aide to John Edwards takes the witness stand against the former presidential candidate (hat tip to Ivan Dominguez)
Sunday, April 15, 2012
Brian Baxter, AmLaw Daily, Megaupload Hires High-Profile Quinn Emanuel Laterals for Criminal Defense
Michael Pollick, Herald-Tribune, In flipping fraud case, wife won't join husband in prison
Mike Scarcella, BLT Blog, Lawyer Charged In Trial Scheme Wants Sanctions Against Prosecutors (hat tip to Ivan Dominguez)
Jenna Greene, BLT Blog, Goldman Sachs Settles SEC Case Alleging Misuse of Nonpublic Information
Tuesday, April 10, 2012
Mike Scarcella, BLT Blog, Clemens Quarrels With DOJ Over Access To Law Firm's Notes
Attorney Michael Volkov joins LeClairRyan here
Mike Scarcella & Todd Ruger, National LJ, law.com, Competing fixes for bribery law - DOJ to issue new guidance, as Congress weighs big reforms
A. Brian Albritton, False Claims Act & Qui Tam Law Blog, Wellcare Health Plans Agrees to Pay $137.5 Million to Resolve False Claims Act Case; DOJ Press Release, Florida-Based Wellcare Health Plans Agrees to Pay $137.5 Million to Resolve False Claims Act Allegations; AP, Miami Herald, Bondi: Florida to get $54 million from settlement
Katheryn Hayes Tucker, Daily Report, Nursing home lawyer-owner is convicted of health fraud - Judge finds that U.S. paid defendant $33 million for 'worthless services'
Jennifer Peltz, AP, Ex-Tyco CEO loses parole bid in New York
David Voreacos, Bloomberg, U.S. Tax-Evasion Probes Said to Slow as Prosecutors Transfer
Peter Jackson, AP, Daily Times, 3 Pa. GOP corruption defendants get probation
Wednesday, March 14, 2012
Saturday, March 10, 2012
Kelly Kennedy, USA Today, Experts seek alternatives to excluding drug companies
Mike Scarcella, BLT Blog, AG Holder: Ted Stevens Report Has "Disturbing" Findings
AP Fox News, Ohio corruption verdict caps long-running case
Campbell Robertson, NYTimes, In Alabama, 2nd Corruption Trial Ends in Acquittals
DOJ Press Release on the Stanford Case, Allen Stanford Convicted in Houston for Orchestrating $7 Billion Investment Fraud Scheme
American Greed, CNBC, Best Places to Go to Prison
Wednesday, February 22, 2012
Dominique Strauss-Kahn is once again in trouble with the law in relation to an investigation involving sexual activity. Strauss-Kahn was detained overnight in Lille, France, for questioning in a French investigation related to an alleged prostitution ring that purportedly supplied women for sex parties with Strauss-Kahn in Brussels, Paris and Washington.
Strauss-Kahn contends that he had no reason to believe that the women at these parties were prostitutes. His French lawyer bared that defense to French radio in December, "People are not always clothed at these parties. I challenge you to tell the difference between a nude prostitute and a classy lady in the nude." Reuters article, see here. This lack of scienter defense ironically appears to be the converse of what many believed would have been Strauss-Kahn's defense had the New York case in which he was accused of sexual assault gone to trial. In that case, it was expected that his defense would have been that he did believe that the woman in question was a prostitute.
The investigation, in which eight people have been charged, involves alleged misuse of corporate funds to pay for the services of the prostitutes. Engaging prostitutes is not illegal in France (although it is in Washington), but if the investigators determine that Strauss-Kahn had sex with prostitutes he knew had been paid for out of company funds, he might be charged as a beneficiary of that misuse of funds. Most likely, it will be difficult to prove that Strauss-Kahn, even if he were found to have known the women involved were prostitutes, knew how they were paid.
High-profile cases in other jurisdictions often affect prosecutorial priorities. One wonders whether this case will lead American prosecutors to scrutinize corporate books to determine whether corporate funds have been used to supply prostitutes to customers, political figures and others. I suspect that such payments (and consequent tax deductions as business expenses) are not wholly uncommon, at least for non-public businesses. Any resulting cases, involving both sex and corporate corruption, are sure to draw media attention.
Tuesday, February 7, 2012
Joelle Scott, Forbes, Bharara's Wiretaps: The Latest Insider Trading Charges
Mike Scarcella, BLT Blog, Federal Appeals Court Upholds Abramoff Associate's Plea Deal (w/ a hat tip to Ivan Dominguez)
BLoomberg, Rajat Gupta May Face More Charges, U.S. Says
Kevin McCoy, USA Today, Swiss bank indictment details tax evasion ploys; Lynnley Browning, Reuters,
U.S. indicts Wegelin bank for helping Americans avoid tax
Shannon Green, Corporate Counsel, law.com, Was Penn State's GC Counsel for University Officials?
Mike Scarcella, BLT Blog, DOJ Considers Abandoning Its FCPA Sting Prosecution
Tuesday, January 24, 2012
Joe Paterno is dead, his legacy as one of the greatest coaches in the history of sports tarnished by his termination -- unjust, I believe -- on the grounds that he inappropriately failed to pursue vigorously an allegation of child sex abuse (see here, here and here).
Paterno's death and absence as a witness will likely have little or no effect on the trial of Jerry Sandusky, the former Penn State assistant coach who was the subject of the allegation reported to Paterno by a Penn State graduate assistant coach, Mike McQueary. Paterno's only information about the Sandusky issues appears to have been the hearsay report by McQueary, and thus it is unlikely that he would have been a witness.
Paterno's unavailability, however, may have a considerable impact on the trials of Tim Curley, the former university athletic director, and Gary Schultz, a former university senior vice president, both of whom have been charged with failure to report the suspected child abuse and perjury. Both have been charged with falsely testifying that McQueary, when he spoke with them, did not mention serious or criminal sexual conduct. McQueary, whom the grand jury report (presumably written by the prosecutors) deemed "extremely credible," testified that he reported the specific act to both Curley and Schultz, and seemingly also to Paterno. Paterno's grand jury testimony, however, apparently was that what McQueary related to him was far less specific, and thus more ambiguous. Accordingly, while the grand jury report indicated that Paterno would be a corroborative witness for the prosecution in that he was told by McQueary of the alleged "sexual exploitation" and then reported what McQueary had said to Curley and Schultz, his testimony would apparently also have to an extent corroborated their defenses that McQueary was less explicit than he now claims.
In another highly-publicized investigation involving a former college sports coach, former Syracuse University assistant basketball coach Bernie Fine, it has been reported that two of the four men who had accused Fine of molesting them when they were children have admitted that they committed perjury in connection with the case. One has admitted that he lied when he claimed Fine molested him. The second, the only one whose allegations fall within the applicable criminal statute of limitations, while still claiming that abuse occurred, has admitted doctoring purportedly supporting emails.
The Fine situation is a reminder that not every allegation of child sexual abuse is true. Indeed, in my experience, there is a far higher percentage of false accusations of sexual misconduct than of any other criminal activity. Thus, such accusations should be scrutinized especially carefully before they are acted upon by law enforcement or others.