Monday, August 4, 2014

ABA Annual Meeting - Roundtable Discussion Regarding White Collar Crime and China

For those attending this year's ABA Annual Meeting in Boston, I wanted to alert you to a roundtable discussion occurring on Friday, August 8 from 3-5pm (Room 308, Level 3, Hynes Convention Center) entitled Navigating the White Collar Crime Landscape in China.

The event, which is co-sponsored by the Chinese Business Lawyers Association, will focus on emerging trends and challenges in the field of white collar crime in China.  The event will begin with short presentations by a host of experts in the area, each of whom will offer their own unique insights.  Following these brief introductory remarks, everyone in attendance will participate in an open dialogue.  During the discussion portion of the program, panelists and audience members are encouraged to ask questions and share insights and experiences.  It is anticipated that a wide variety of topics will be discussed and analyzed during this roundtable discussion, including strategies for conducting corporate internal investigations, advice for dealing with government agencies, best practices for corporate compliance, and current trends regarding cybercrime and corporate espionage, whistle-blower programs, anti-corruption enforcement, money laundering, and trade violations.  

I will be moderating the program and will be joined by the following featured discussants:

Ronald Cheng - USAO, Central District of California

William McGovern - Kobre & Kim LLP, Hong Kong

Karen Popp - Sidley Austin LLP, Washington DC

Zaldwaynaka (Z) Scott - Kaye Scholer LLP, Chicago, Illinois

Philip Urofsky - Shearman & Sterling LLP, Washington, DC

Keith Williamson - Alvarez & Marsal, Hong Kong

Debra Yang - Gibson Dunn, Los Angeles, California

It should be a wonderful event.  I hope to see some of our readers there. 

(LED) 

August 4, 2014 in Conferences, International | Permalink | Comments (0) | TrackBack (0)

Sunday, August 3, 2014

The Development and Evolution of the U.S. Law of Corporate Criminal Liability

Article by Sara Sun Beale (Duke) - The Development and Evolution of the U.S. Law of Corporate Criminal Liability (SSRN)-

In the United States, corporate criminal liability developed in response to the industrial revolution and the rise in the scope and importance of corporate activities. This article focuses principally on federal law, which bases corporate criminal liability on the respondeat superior doctrine developed in tort law. In the federal system, the formative period for the doctrine of corporate criminal liability was the early Twentieth Century, when Congress dramatically expanded the reach of federal law, responding to the unprecedented concentration of economic power in corporations and combinations of business concerns as well as new hazards to public health and safety. Both the initial development of the doctrine and the evolution in its use reflect a utilitarian and pragmatic view of criminal law.

This article describes the evolution of the practice of corporate criminal liability and sentencing, arguing that administrative responses by the Department of Justice and the U.S. Sentencing Commission have responded to widespread criticism of the existence of corporate liability as well as the breadth of the respondeat superior standard of liability. As a result of this evolution in enforcement, only a very small number of corporations are convicted, and the penalties imposed on those that are convicted are adjusted to reflect corporate culpability. Nevertheless, the broad potential for criminal liability has significant consequences for a wide range of corporate behavior. Corporations have powerful incentives to perform internal investigations, cooperate with both regulators and prosecutors, and actively pursue settlement of claims of misconduct. To avoid criminal liability, corporations also enter into deferred prosecution agreements that often require changes in corporate business practices and governance as well as monitoring to ensure compliance. The purpose of these administrative responses attempt is to reduce or eliminate the negative effects of imposing criminal liability while exploiting the law’s power to deter criminal behavior, improve corporate citizenship, and bring about beneficial structural reforms.

The persistence of the doctrine of respondeat-superior-based corporate criminal liability and its limitation in practice shed light on three key aspects federal criminal law. First, the Sentencing Guidelines have served as a more limited substitute for comprehensive criminal code reform. Second, the federal justice system lacks the resources to process the vast majority of cases falling under the criminal code, and prosecutorial discretion is relied upon to select a small fraction of cases for prosecution. Finally, like corporations, all defendants receive incentives for cooperation that may effectively compel them to plead guilty and/or assist in the investigation and prosecution of others.

(esp)

August 3, 2014 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, August 1, 2014

White Collar Over-Criminalization: Deterrence, Plea Bargaining, and the Loss of Innocence

New Article by Professor Lucian Dervan - White Collar Over-Criminalization: Deterrence, Plea Bargaining, and the Loss of Innocence published in 101 Kentucky Law Journal.  The abstract states:

Overcriminalization takes many forms and impacts the American criminal justice system in varying ways. This article focuses on a select portion of this phenomenon by examining two types of overcriminalization prevalent in white collar criminal law. The first type of over criminalization discussed in this article is Congress’s propensity for increasing the maximum criminal penalties for white collar offenses in an effort to punish financial criminals more harshly while simultaneously deterring others. The second type of overcriminalization addressed is Congress’s tendency to create vague and overlapping criminal provisions in areas already criminalized in an effort to expand the tools available to prosecutors, increase the number of financial criminals prosecuted each year, and deter potential offenders. While these new provisions are not the most egregious examples of the overcriminalization phenomenon, they are important to consider due to their impact on significant statutes. In fact, they typically represent some of the most commonly charged offenses in the federal system.

Through examination of the Sarbanes-Oxley Act of 2002 and examples of these two types of over criminalization within that law, this article seeks to understand whether new crimes and punishments really achieve their intended goals and, if not, what this tells us about and means for the over criminalization debate and the criminal justice system as a whole.

(esp)

August 1, 2014 in Scholarship, Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 30, 2014

In the News & Around the Blogosphere

Amanda Bronstad, NLJ, Indictments for Two Former Attorneys General in Utah

Oral Argument in the 11th Circuit on Don Siegleman, former governor, postponed to October 13, 2014 - two issues: 1)sentencing; 2) conflict of interest

DOJ- Antitrust Division - Lloyds Banking Group Admits Wrongdoing in Libor Investigation, Agrees to Pay $86 Million Criminal Penalty

Matt Zapotosky & Rosalind S. Helderman, Washington Post, Jury chosen in McDonnell corruption case

(esp) 

July 30, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, July 25, 2014

In re Kellogg Brown & Root – Privilege, Internal Investigations, and International White Collar Crime – Part II of II

In last week’s post, I discussed the recent case of In re Kellogg Brown & Root (“KBR”) from the perspective of privilege issues and internal investigations generally.  Today, I would like to focus our consideration of the KBR case on international investigations and privilege issues. 

In the KBR matter, a whistleblower alleged that the defense contractor defrauded the government by “inflating costs and accepting kickbacks while administering military contract in wartime Iraq.”  During the whistleblower’s case, he sought discovery of materials from an internal investigation of the matter previously conducted by KBR.  As discussed last week, the U.S. Court of Appeals for the District of Columbia Circuit concluded that the whistleblower was not entitled to the materials, stating that the “same considerations that led the Court in Upjohn to uphold the corporation’s privilege claims apply here.” 

In rendering its opinion, the DC Circuit offered several important clarifications regarding the applicability of the attorney-client privilege to internal investigations.  One of those was to note that Upjohn v. US (1981) does not require the involvement of outside counsel for the privilege to apply. 

From In re KBR:

First, the District Court stated that in Upjohn the internal investigation began after in-house counsel conferred with outside counsel, whereas here the investigation was conducted in-house without consultation with outside lawyers. But Upjohn does not hold or imply that the involvement of outside counsel is a necessary predicate for the privilege to apply. On the contrary, the general rule, which this Court has adopted, is that a lawyer’s status as in-house counsel “does not dilute the privilege.” In re Sealed Case, 737 F.2d at 99. As the Restatement’s commentary points out, “Inside legal counsel to a corporation or similar organization . . . is fully empowered to engage in privileged communications.” 1 RESTATEMENT § 72, cmt. c, at 551.

While this is accurate with regard to domestic internal investigations, one must be cognizant of the fact that various jurisdictions around the globe interpret the privilege differently.  When an internal investigation crosses borders, a failure to examine the breadth and scope of attorney-client privilege protections in the relevant jurisdictions could unexpectedly expose vast quantities of materials to production or seizure.  

Take for example, the case of Akzo Nobel Chemicals Ltd. v. European Commission (European Court of Justice 2010).  The case involved an antitrust investigation during which a dawn raid was carried out on Akzo’s Manchester, England, offices.  During the raid, two emails were seized.  The emails were an exchange regarding relevant antitrust issues between a general manager and the company’s in-house counsel.  Despite the fact that such communications would almost certainly be privileged under U.S. standards and the ruling in In re KBR, the European Court of Justice rejected Akzo’s position that the emails were protected under the EU rules of privilege.  Relying on an earlier ruling, the European Court of Justice reiterated that in EU investigations the attorney-client privilege only applies where (1) the communication is given for purposes of the client’s defense and, (2) the communication is with an independent lawyer, which does not including in-house counsel.  See AM&S v. Commission (European Court of Justice 1982).  The Akzo court went on to state, “It follows, both from the in-house lawyer’s economic dependence and the close ties with his employer, that he does not enjoy a level of professional independence comparable to that of an external lawyer.”

While such a limited application of the attorney-client privilege will not be present in every jurisdiction encountered during an international internal investigation, it is an important issue to consider both when structuring and conducting such inquiries in a cross-border setting.

For more on the dynamics of international internal investigations, see my recent article entitled International White Collar Crime and the Globalization of Internal Investigations (Fordham Urban Law Journal), available for free download here.

(LED)

July 25, 2014 in International, Investigations, Judicial Opinions, Privileges | Permalink | Comments (0) | TrackBack (0)

Sunday, July 20, 2014

Practice Notes: Sauce For The Goose

I enjoy studying upward variance opinions, as they usually contain language and rules that can be used by the defense to support downward variances in other cases. This is true because, whatever specific factors are discussed, federal appeals courts typically speak of what justifies such variances in general terms, not distinguishing between upward and downward excursions.  United States v. Ransom, decided earlier this month by the D.C. Circuit in an opinion by Judge David Sentelle, is no exception. Chester Ransom and Bryan Talbott each pled guilty to a fraud scheme and stipulated to a non-binding Guideline range of 46-57 months. The sentencing court calculated Ransom's range at 46-57 months but upwardly varied to a 72 month sentence. The court calculated Talbott's range at 63-78 months but upwardly varied to a 120 month sentence.

The Court initially held that Ransom's upward variance for lack of remorse was not inconsistent with the three point downward adjustment he received for acceptance of responsibility under Section 3E1.1(a) and (b). The Court in essence stated that one can plead guilty early and cooperate with the government without showing any remorse.

Next the Court rejected appellants' argument that the sentencing court improperly relied on factors in varying upward that the Guidelines had already accounted for. Joining some sister circuits the Court held (internal quotes and citations omitted) that:

It is not error for a district court to enter sentencing variances based on factors already taken into account by the Advisory Guidelines, in a case in which the Guidelines do not fully account for those factors or when a district court applies broader [Section] 3553(a) considerations in granting the variance.

As anyone who does federal sentencing work knows, those broader 3553(a) factors are often the key to obtaining a downward variance if the court is otherwise inclined to do so. To take one example, in the Mandatory Guidelines era it was almost impossible to obtain a downward departure based on family circumstances, but they can, and must, at least be "considered" by the sentencing court under the current regime.  Believe it or not, not every district judge comprehends this simple rule. Ergo, it is nice to have additional case law on one's side.

(wisenberg)

 

July 20, 2014 in Fraud, Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Friday, July 18, 2014

In re Kellogg Brown & Root – Privilege, Internal Investigations, and International White Collar Crime – Part I of II

I am honored to join Ellen Podgor, Lawrence Goldman, and Solomon Wisenberg as a blogger on the White Collar Crime Prof Blog.  My focus on the blog will be matters related to internal investigations and international white collar crime.

To get us started, let’s take a quick look at a new case that relates to both of these topics – In re: Kellogg Brown & Root, Inc., et al.

As readers of this blog will no doubt recall, the U.S. Supreme Court held in 1981 that attorney-client privilege protections may apply to internal corporation investigations.  See Upjohn Co. v. United States, 449 U.S. 383 (1981).  The Court stated:

The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law.  Its purpose is to encourage full and frank communication between attorneys and their clients, and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyers being fully informed by the client. 

Despite the strong language in the Upjohn case, a U.S. District Court in Washington, DC ruled that a whistleblower at Kellogg Brown & Root (“KBR”), a defense contractor, was entitled to production of documents related to an internal investigation.  The lower court concluded that the internal investigation was “undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”

Last month, the U.S. Court of Appeals for the District of Columbia Circuit overruled that lower court decision in the case of In re: Kellogg Brown & Root, Inc., et al. (Decided June 27, 2014).  The court concluded that the “same considerations that led the Court in Upjohn to uphold the corporation’s privilege claims apply here.”

In overruling the lower court’s decision, the DC Circuit offered several important clarifications regarding the applicability of the attorney-client privilege to internal investigations.  First, the court clarified that Upjohn does not require the involvement of outside counsel for the privilege to apply.  Second, the court noted that the privilege may apply even when many of the employee interviews are conducted by non-attorneys, as long as those interviewers are serving as the agents of attorneys.  Third, the court explained that even though the employees in the KBR case were not explicitly informed that the purpose of the interviews were to assist the company in obtaining legal advice, Upjohn does not require any “magic words” for the privilege to apply.  Further, the court noted that the employees in the KBR case knew that the company’s legal department was conducting an investigation and that the investigation was highly confidential.

Finally, and, perhaps, most importantly, the court rejected the lower court’s argument that the attorney-client privilege did not apply in this investigation because KBR was acting to comply with Department of Defense regulatory requirements, not to obtain legal advice.  In ruling on the matter, the appeals court stated, “So long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation and even if the investigation was mandated by regulation rather than simply an exercise of company discretion.”  This is important language from the court, particularly given the increasing regulatory compliance obligations imposed on corporations and the fact that many internal investigations today are instigated at the behest of the government.  See e.g. Computer Associates – discussed here and here.  

In my next post, we’ll consider how the In re: KBR case fits into the larger legal framework of international internal investigations.  In particular, we’ll examine whether attorney-client privilege extends to internal investigations undertaken solely by internal counsel when the investigation extends outside the United States.

(LED)

July 18, 2014 in International, Investigations, Judicial Opinions, Privileges | Permalink | Comments (0) | TrackBack (0)

Welcome Professor Lucian Dervan to the WhiteCollarCrimeProf Blog

Welcome to Professor Lucian Dervan, who is joining the White Collar Crime Prof Blog.  Professor Dervan is a professor of Southern Illinois School of Law, where he also serves as the Director of Faculty Development. A prolific scholar, Professor Dervan is also a member of the Advisory Committee of the NACDL White Collar Criminal Defense College at Stetson.

(esp)

July 18, 2014 in About This Blog | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 16, 2014

Rengan Rajaratnam Acquittal Good for Criminal Justice System

As my editor, Ellen Podgor, noted last week (see here), the winning streak in insider trading cases of the U.S. Attorney's Office for the Southern District of New York ended with the jury's acquittal of Rengan Rajaratnam, the younger brother of Raj Rajaratnam, who was convicted of insider trading in 2011 and sentenced to eleven years in prison.

The U.S. Attorney has done an excellent job in prosecuting insider trading, securing convictions by plea or trial of 81 of the 82 defendants whose cases have been concluded in the district court.  The office has appropriately targeted primarily professional financial people who seek or provide insider information rather than those incidental offenders who by chance have received or provided insider tips and taken advantage of their knowledge.  A few of these trial convictions, however, appear to be in jeopardy.  At oral argument in a recent case the Second Circuit Court of Appeals seemed sympathetic to the contention that a trader may not be found guilty unless he knew that the original information came from a person who had received a benefit, and not only had violated a fiduciary duty of secrecy.  Judge Naomi Reice Buchwald, who presided over the Rajaratnam case, agreed with that contention and thereupon dismissed two of the three counts.

Whether the prospective Second Circuit ruling, if it comes, will make good public policy is another matter.  Insider trading (which fifteen years ago some argued should not be a crime) is, or at least was, endemic to the industry.  Presumably, the U. S. Attorney's successful prosecutions have had a positive step in putting the fear of prosecution in traders' minds.  Such deterrent to a particularly amoral community seems necessary:  a recent study demonstrated that twenty-four percent of the traders interviewed admitted they would engage in insider trading to make $10 million if they were assured they would not be caught (the actual percentage who would, I suspect, is much higher).  See here.

The latest Rajaratnam case, indicted on the day before the statute of limitations expired, was apparently not considered a strong case by some prosecutors in the U.S. Attorney's Office.  See here and here.  Indeed, jurors, who deliberated four hours, described the evidence as "no evidence, period" and asked "Where's the evidence?"  That office nonetheless did not take this loss (and generally does not take other losses) well.  It was less than gracious in losing, making a backhanded slap at Judge Buchwald, a respected generally moderate senior  judge.  A statement by the U.S. Attorney Preet Bharara noted, "While we are disappointed with the verdict on the sole count that the jury was to consider, we respect the jury trial system . . . ."  (Italics supplied.)

Southern District judges, generally out of deference to and respect for the U.S. Attorney's Office, whether appropriate or undue, rarely dismiss entire prosecutions or even counts brought by that office, even in cases where the generally pro-prosecution Second Circuit subsequently found no crimes.  See here.  It is refreshing to see a federal judge appropriately do her duty and not hesitate to dismiss legally or factually insufficient prosecutions.

Such judicial actions, when appropriate, are particularly necessary in today's federal system where the bar for indictment is dropping lower and lower.  The "trial penalty" of a harsher sentence for those who lose at trial, the considerable benefits given to cooperating defendants from prosecutors and judges, and the diminution of aggressiveness from a white-collar bar composed heavily of big firm former federal prosecutors have all contributed to fewer defense challenges at trial and lessened the prosecutors' fear of losing, a considerable factor in the prosecutorial decision-making process.  Acquittals (even of those who are guilty) are necessary for a balanced system of justice.

Lastly, it is nice to see a major victory by a comparatively young (43) defense lawyer, Daniel Gitner of Lankler, Siffert & Wohl, an excellent small firm (and a neighbor), in a profession still dominated by men in their sixties or seventies.

 (goldman)

July 16, 2014 in Current Affairs, Defense Counsel, Fraud, Insider Trading, Judicial Opinions, News, Prosecutions, Prosecutors, Securities, Statutes, Verdict | Permalink | Comments (0) | TrackBack (0)

David Gerger & Team Moves to Quinn Emanuel

David Gerger just joined Quinn Emanuel Urquhart & Sullivan, LLP with the opening of their office in Houston. (see here) Gerger will be the managing partner of the new Houston office. He will be joined by Shaun Clarke, who will become Special Counsel and Co-chair of the Houston office’s white collar group.  Also joining the firm will be Dane Ball, Sammy Khalil and David Isaak, who will be Of Counsels to the firm.

Gerger, a top white collar practitioner, has handled cases across the United States including matters related to Enron and the BP Deepwater Horizon oil spill.  David Gerger has also taught as part of the NACDL White Collar Criminal Defense College at Stetson. 

(esp)

July 16, 2014 in Defense Counsel | Permalink | Comments (0) | TrackBack (0)

Sunday, July 13, 2014

Essay by Mark Whitacre - "When Good Leaders Lose Their Way"

Mark Whitacre, the informant from the ADM scandal, tells his story in an Essay in 45 Loy. U. Chi. L.J. 525 (2014).  He discusses three paradigms in white collar cases, including how he and "top executives (my supervisors) at ADM were very focused on the short term when we should have been focused on the long term." He discusses how he ended up in prison, despite being a whistleblower, and how he chose going to trial as opposed to taking a plea. He ends the Essay with some advice, including the importance of work-life balance.

(esp)

July 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 8, 2014

Acquittal in Renjan Rajaratnam Case

Matthew Goldstein & Rachel Abrams, NYTimes, Jury Clears Rengan Rajaratnam in Insider Trading Case

Chrsitopher M. Matthews, WSJ, Jury Acquits Rengan Rajaratnam in Insider-Trading Case

Nate Raymond & Joseph Ax, Reuters, Rengan Rajaratnam cleared, U.S. insider trading streak snapped

He was represented by Daniel M. Gitner of Lankler, Siffert & Wohl LLP.

(esp) 

July 8, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, July 4, 2014

Is The Supreme Court Ready to Reexamine U.S. v. Miller?

Guest Blogger - Jon May

In United States v. Miller, 425 U.S. 435, 96 S.Ct. 1619 (1976) the Supreme Court held that a depositor does not have a reasonable expectation of privacy in the records of his account maintained by a bank pursuant to the Bank Secrecy Act. Justice Powell, writing for the majority of the Court, reasoned that there was no expectation of privacy in the contents of a bank record. According to Justice Powell, “checks are not confidential communications but negotiable instruments to be used in commercial transactions.” Specifically, “financial statements and deposit slips, contain only information voluntarily conveyed to the banks and exposed to their employees in the ordinary course of business.” As such, “The depositor takes the risk, in revealing his affairs to another, that the information will be conveyed by that person to the Government.” Id. at 443-444.

In so holding, the Court did not consider the extent to which the government can obtain information about a person’s most confidential affairs through an analysis of bank account records. But such an analysis was made by Justice Roberts, speaking for a unanimous Court in Riley v. California, which held that the Fourth Amendment prohibits the government from examining the contents of a person’s cell phone absent a warrant.

In Riley Justice Robert’s rejected the government’s argument that an individual did not enjoy an expectation of privacy in those records maintained in electronic devices carried on the person. In so holding, Justice Roberts analyzed the expectation of privacy in a very different way than did Justice Powell. According to Justice Roberts, the arrest of an individual may diminish the person’s expectation of privacy, but it does not do away with it entirely. Slip op. at 20. Justice Roberts pointed out that cell phones are mini-computers which just “happen to have the capacity to be used as a telephone.” This gives people the ability to lug around “every picture they have taken, or every book or article they have read” without the need to schelp around the kind of trunk that the Court would require a search warrant to search under Chadwick.

Seizing the contents of a cell phone gives the government the ability to reconstruct the sum of an individual’s private life, “reconstructed through a thousand photographs labeled with dates, locations, and descriptions….” Justice Roberts observed that while “A person might carry in his pocket a slip of paper reminding him to call Mr. Jones; he would not carry a record of all his communications with Mr. Jones for the past several months, as would routinely be kept on a phone. Id. at 23. Indeed, “it is no exaggeration to say that many of the more than 90% of American adults who own a cell phone keep on their person a digital record of nearly every aspect of their lives—from the mundane to the intimate.” Id.

For example, the government could readily learn everything about an individual’s “private interests or concerns—perhaps a search for certain symptoms of disease, coupled with frequent visits to WebMd.” Further, “Data on a cell phone can also reveal where a person has been.”  Id. As a result a person’s “specific movements down to the minute, not only around town but also within a particular building,” could be uncovered. Id. at 24. A mere examination of the “apps” found on a cell phone could reveal whether a person was a Democrat or a Republican, whether they had an addiction, or were pregnant, etc. Id.

Almost everything that can be said regarding the violation of an individual’s privacy resulting from the government’s search of the person’s cell phone can be said about a search of a person’s bank accounts. You can even trace their movements through time through their credit card charges. Consequently to the extent that it is reasonable for society to expect that the government have a search warrant or a grand jury subpoena as a condition of invading that zone of privacy, the same could be said of searches of an individuals banking records. It appears that this sort of argument, which would have fallen on deaf ears 15 years ago, may find a receptive ear in the courts today.  Lawyers may wish to argue now that Miller’s narrow view of society’s expectations regarding privacy are no longer valid.

(jm)  

July 4, 2014 | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 2, 2014

BNP Paribas Conviction Commendable, But Length of Investigation and Failure to Prosecute Individuals Raise Questions

Both the Department of Justice (DOJ) and the District Attorney of New York County (DANY) deserve commendation for the criminal conviction of France's largest bank, BNP Paribas, and the securing of penalties of approximately $9 billion (including $2.25 billion to New York State's bank regulatory agency, the Department of Financial Services), and, for the first time, a seemingly not insignificant collateral sanction imposed by a regulator (although how significant remains to be seen).  BNP for ten years falsified transactions in order to be able to use the American banking system to do business with Sudan, Iran and Cuba, countries deemed rogue states by the U.S. government (but not necessarily by France).  See here.  While I accept that those crimes were serious crimes, I would much have preferred a prosecution-to-conviction of an American bank whose wrongs made it and its bankers much richer while making millions of other Americans much poorer.

The investigation, according to a story in the New York Times (see here) began in 2006 under the venerable New York County District Attorney Robert Morgenthau, whose expansive view of jurisdiction included the planet of Saturn (one of his bureaus was called "DANY Overseas"), when an Israeli-American DANY financial analyst developed a lead from reviewing the court papers of a civil suit against Iran brought by a grieving lawyer father whose daughter was killed in a terrorist suicide bombing in Gaza in 1995.  See here.  The investigation was continued by District Attorney Cyrus Vance when he took office in 2009.

No individuals have been indicted (although 13 have been required to leave their jobs), perhaps because the statute of limitations had run during the lengthy investigation.  One wonders why such an important investigation took seven to eight years and has resulted (at least so far) in no indictment of individuals.  Perhaps it was due to the difficulty to forge cooperation between federal and state law enforcement agencies.  New York's federal and state prosecutors have not always played well together.

In any case, the appearance of the District Attorney of New York as a player in the prosecution of big banks is a welcome step.  New York is, as Mr. Vance said, "the financial capital of the world," and therefore probably the financial crime capital of the world.  Perhaps strong prosecutorial action by a local prosecutor -- in a sense a competitor with DOJ for high-profile cases -- will goad DOJ into stronger actions against financial institutions.  Although the U.S. Attorney's Office under Preet Bharara has done a creditable job in fighting insider trading, it -- and DOJ -- had not until six weeks ago (see here) secured a criminal conviction against a major financial institution.

(goldman)

July 2, 2014 in International, News, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Monday, June 30, 2014

Berke and Farah Set Up Shop

Campaign finance law-election law-lobbying law gurus Elliot Berke and Bill Farah have left McGuire Woods to form their own political law/white collar shop at Berke Farah LLP. Helping them out as senior consultant is veteran DC white-collar hand John Kern, who will also maintain his separate practice. Elliot, Bill, and John are something of a rarity in DC. Seasoned professionals who quietly and discreetly get the job done with a minimum of self-promotion. (Although Elliot comes from the GOP side, he was one of the first members of the campaign finance bar to criticize the dubious prosecution of former Senator John Edwards.) Best of luck to them all.

(wisenberg)

June 30, 2014 in Defense Counsel | Permalink | Comments (0) | TrackBack (0)

Friday, June 27, 2014

The Importance of the Fourth Amendment

This past Wednesday's Supreme Court decision in Riley v. California stressed the importance of law enforcement needing to obtain a warrant if they sought to search digital information contained on a cell phone that had been seized from the individual.  From this decision we can see that the Fourth Amendment is alive and well in the Supreme Court.

But is that the case in the Manhattan District Attorney's Office? Larry Goldman notes here on the White Collar Crime Prof Blog that the District Attorney's Office recent prosecution in a computer related case had 4th Amendment problems.  And this morning's New York Times article by Vindu Goel and James McKinley, Jr., Facebook Bid to Shield Data From the Law Fails, So Far shows how the Manhattan district attorney's office has been obtaining Facebook information using demands for documents from Facebook without notification to the individuals who posted the information on Facebook, and precluding Facebook from notifying them. Admittedly in this instance the Manhattan DAs Office did obtain a warrant, but Facebook and individuals who had items being obtained from Facebook were precluded from fighting the warrant.  According to this article, Facebook has continued to fight these warrants and hopefully a court will see the importance of having oversight when it comes to overbroad computer related searches. 

One of the possible ramifications of what the Manhattan D.A. is doing it that when cases eventually come to court, the overbreadth of these searches will be raised. And hopefully attorneys handling these cases will have been alerted by this posting, the New York Times article, and other media sources who may be reporting on these events.  But it is hard to believe that all the information received by the Manhattan DA will be used for a prosecution, and many of these individuals will never know that their privacy had been compromised. As we move further into a digitial age, the principles of the Fourth Amendment need to be maintained. Judges reviewing these search warrants need to provide clearer oversight when granting a warrant, especially when terrorism is not the focus of the search. 

(esp) 

June 27, 2014 in Investigations, Prosecutors, Searches | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 24, 2014

Evidence Suppressed in New York State Prosecution of Aleynikov

One of the more fascinating cases around is the case of former Goldman Sachs programmer Sergey Aleynikov.  Aleynikov was convicted in the Southern District of New York for stealing secret high-frequency trading computer code from Goldman Sachs and sentenced to eight years in prison.  His conviction was reversed by the Second Circuit on the grounds that his actions were not covered by the federal statutes under which he was charged.  Aleynikov had already served a year in prison.

Then, Manhattan District Attorney Cyrus Vance, apparently provided the testimonial and tangible evidence used in the prosecution of Aleynikov by the U.S. Attorney, decided to prosecute him in state court under state statutes, a decision I criticized because it violated at least the spirit of double jeopardy protection (see here).  Last week, a New York State judge threw out much of the evidence underlying the state prosecution on the ground that Aleynikov's arrest and related searches by federal agents were not supported by probable cause that he committed the underlying federal crimes, even though the agents acted in good faith.  See here.  New York has rejected on state constitutional grounds the "good faith exception" to unlawful searches applicable in federal courts.  Compare People v. Bigelow, 66 N.Y.2d 417 (1985) with United States v. Leon, 468 U.S. 897 (1984).  Mr. Vance's choice now is either to concede that the judge's suppression has made his case untriable and make an interlocutory appeal or go forward to trial without that evidence (or, of course, move to dismiss the case).

Ironically, Goldman Sachs, the purported victim of Aleynikov's alleged criminality, is laying out millions of dollars to afford Mr. Aleynikov the energetic and aggressive defense his lawyer, Kevin Marino, is providing.  A New Jersey federal judge last October ordered Goldman to advance Mr. Aleynikov's legal fees based on a corporate bylaw that required it to advance legal fees for officers charged in civil and criminal proceedings.  Aleynikov v. Goldman Sachs (Civ. No. 12-5994, DNJ, October 22, 2013).

(goldman)

June 24, 2014 in Attorney Fees, Current Affairs, Judicial Opinions, News, Prosecutions, Prosecutors, Statutes | Permalink | Comments (0) | TrackBack (0)

Thursday, June 19, 2014

DOJ Narrows Basis for Section 1001 Prosecutions

According to a May 12, 2014 article in the National Law Journal (Tony Mauro, "DOJ's Quiet Concession:  U.S. gives up a widely decried charging theory."), the Department of Justice has quietly narrowed the scope of 18 U.S.C. 1001, the statute that makes lying to an FBI or other government agent a five-year felony.  The statute -- perhaps most notably used to send Martha Stewart to jail when the government couldn't make out an insider trading case against her -- makes it a crime to "knowingly and willfully" make materially false statements in any matter under federal jurisdiction, including lying to an FBI agent.  The government now has conceded that, in order to prove that a defendant accused of a Section 1001 violation acted "willfully," it must show that she knew that her action making or providing a false statement was unlawful.

The change in government attitude was mentioned in low-profile submissions to the Supreme Court containing confessions of error.  The Supreme Court has already returned at least two cases to lower courts for further consideration in light of the concessions.

The most questionable use of the statute, in my opinion, has occurred when agents without prior notice confronted an individual about a purported crime she committed and elicited a knee-jerk exculpatory false denial (although such denials are now to my knowledge infrequently prosecuted).  Prosecutors and agents may now have to forego prosecutions where targets or witnesses lie to them (in the field or their offices) or alternatively give those targets and witnesses a warning that a false response to the government questions is unlawful., which, of course, may discourage them from talking.

(Hat Tip to Monroe Freedman and Steve Lacheen.)

(goldman)

 

June 19, 2014 in Investigations, Prosecutors, Statutes | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 18, 2014

Italian Accused of U.S. Antitrust Crime Extradited After Switching Planes in Germany

With the growing internationalization of business crime, the question of when a foreign national may be extradited to the United States for crimes charged in the United States is arising more frequently.  Generally speaking, under the requirement of "dual criminality," a resident of a foreign country charged in the United States will not be extradited if the country he is residing in does not deem his conduct criminal.  If, however, that person travels from his "safe haven" home country to another country (even in transit) where such conduct is criminal, he may be extradited.

As reported in a recent Wilmer Hale article, see here, Romano Pisciotti, an Italian citizen charged with an antitrust bid-rigging violation in 2010, this April was extradited from Germany after the connecting flight on his trip from Nigeria to Italy landed there.  Germany generally criminalizes bid-rigging; Italy generally does not.  Presumably, had Pisciotti not left Italy, he would not have been arrested. 

Pisciotti's extradition demonstrates that foreign residents indicted in the United States who are not extraditable from their home country (some nations, like Germany, will not extradite its own citizens other than to another European Union country or the International Criminal Court, for instance) take a considerable risk whenever they travel away from their country of residence.

(goldman)

June 18, 2014 in Antitrust, International, Prosecutions, Travel | Permalink | Comments (0) | TrackBack (0)

In the News & Around the Blogosphere

DOJ Press Release, Former CEO and CFO of Arthrocare Corporation Convicted for Orchestrating $400 Million Securities Fraud Scheme

Libby Longino, Women and White-Collar Crime

James Aldridge, San Antio Business Journal, Three San Antonio PEO owners sentenced for fraud (discussing the largest tax fraud case in San Antonio - Lawyer Gerald Goldstein represented an individual who received probation - and this was without a 5K1.1).

Paul Hastings Press Release, Seasoned Government Lawyer Joins Paul Hastings in New York as Firm Continues Growth of Investigations and White Collar Defense Practice (John Nowak - who was Deputy Chief of the Business and Securities Fraud Section of U.S. Attorneys Office, ED New York)

Paul Hastings Press Release, Respected White Collar Team Joins Paul Hastings in Washington, DC (Michael Levy, Michael Spafford, Amy Carpenter-Holmes).

Day Pitney Press Release, Robert Appleton, Former U.S. Prosecutor and United Nations Corruption Fighter, Joins Day Pitney's White Collar Defense and Internal Investigations Practice

Blank Rome Press Release, Blank Rome Welcomes New White Collar Defense Of Counsel Jed M. Silversmith

(esp)

June 18, 2014 | Permalink | Comments (1) | TrackBack (0)