Wednesday, December 10, 2014
The Second Circuit's decision in United States v. Newman is out. The jury instructions were erroneous and the evidence insufficient. The convictions of Todd Newman and Anthony Chiasso are reversed and their cases have been remanded with instructions to dismiss the indictment with prejudice. Here is the holding in a nutshell:
We agree that the jury instruction was erroneous because we conclude that, in order to sustain a conviction for insider trading, the Government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit. Moreover, we hold that the evidence was insufficient to sustain a guilty verdict against Newman and Chiasson for two reasons. First, the Government’s evidence of any personal benefit received by the alleged insiders was insufficient to establish the tipper liability from which defendants’ purported tippee liability would derive. Second, even assuming that the scant evidence offered on the issue of personal benefit was sufficient, which we conclude it was not, the Government presented no evidence that Newman and Chiasson knew that they were trading on information obtained from insiders in violation of those insiders’ fiduciary duties.
Monday, December 8, 2014
The Wall Street Journal's Christopher Matthews has a decent background story (subscription required) here. The Matthews piece contains the U.S. Probation Office's recommended sentences for three of the five defendants. How did this happen, you say, if such information, and the Presentence Report itself, is confidential? My guess is that the information is contained in the various sentencing memos submitted by the parties. Different districts, and different judges within districts, have differing policies on what portions of submitted sentencing materials must be filed under seal. The PSR itself is always highly confidential, but sentencing memos often reveal information about recommended sentences and Guideline calculations. The lack of uniformity on sentencing confidentiality in federal district courts throughout the country is unfortunate. Eight years ago the great majority of sentencing memos I filed were under seal. The trend is very much the other way today.
Today's This week's sentencings will no doubt be heavily influenced by the enormity of Madoff's fraud, the draconian white collar Sentencing Guidelines, and the victims--many of whom have submitted letters and impact statements. We can expect many victims to speak up today in court.
Friday, December 5, 2014
Transparency International has released their 2014 Corruption Perceptions Index. The Index contains a wealth of information regarding the perceived levels of public sector corruption in 175 countries and territories. Topping this year’s list with the highest score, thus indicating very low perceived levels of public sector corruption, is Denmark, which received a score of 92. Denmark is followed closely by New Zealand, which received a score of 91. At the bottom of the list are North Korea and Somalia, each with a score of 8. The United States is ranked 17th with a score of 74.
Along with interesting charts, figures, and analysis, the report contains stories of corruption from select locations. These include stories about corruption related to pharmaceuticals, medical care, food aid, education, and rule of law.
A very interesting report worth spending some time examining.
Saturday, November 29, 2014
Michael Edmund Shaheen Jr. died seven years ago today. He was the original head of DOJ's Office of Professional Responsibility ("OPR") and served in that capacity under eight Attorneys General. In March 2014, the National Archives preserved his records as a separate collection, because "future OPR counsels were not granted as much latitude as was Mr. Shaheen," making his papers "a unique set." See Shaheen National Archives Records Request.
Reputations in Washington are made of many things, including money, cunning, connections, power, and privilege. Mike's reputation was built on competence, guts, and a towering integrity. In an era before the phrase was fashionable, Mike quietly spoke truth to power.
Reputations can also be fleeting. Mike touched many lives and because of that I believe that his memory will linger and burnish through the years. His various obituaries, here, here, and here, detail the myriad officials he was not afraid to piss off and on. But they do not do full justice to the man.
Above all, Mike Shaheen was a marevelous raconteur. To spend a leisurely lunch in his presence, listening to his stories, relayed in that lilting Como, Mississippi accent, was a rare pleasure. He was Lebanese on his father's side, and it always amused me to see this man with almost Asian eyes tell front porch stories in a mint julep voice. That the stories were true made it all the more memorable.
I met Mike by chance, in his post-OPR incarnation, through my work for Ken Starr. We ended up going to lunch one day and struck up a friendship. It was a Washington friendship, for the most part confined to lunches and drinks, with one notable exception. We liked the same people and loathed the same people and there was nothing in it--nothing material to gain-- for either one of us. We just enjoyed talking to each other and trading Washington stories.
He has been gone seven years, taken from us too soon. But I will always treasure the memory of his decency and courage. So I raise my glass to Mike. I shall not look upon his like again.
Wednesday, November 19, 2014
Special Prosecutor Mike McCrum has survived an attempt to quash the Rick Perry indictment based on alleged procedural irregularities connected to McCrum's appointment. Courthouse News has the story here. The Order Relating to Authority of Attorney Pro Tem, written by Assigned Judge Bert Richardson, appears to be carefully and thoughtfully crafted. We can expect a similar approach to the more substantive constitutional issues awaiting Judge Richardson's pen.
Monday, November 17, 2014
The American Bar Association Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes has released its final report. The report contains significant proposed amendments to the existing federal sentencing guidelines for economic offenses. As to the general structure, the proposed guidelines fit on a single page and contain only three sections for specific offense characteristics, compared with the nineteen sections currently contained in USSG section 2B1.1. The three sections in the proposal are “loss,” “culpability,” and “victim impact.”
The loss section contains only six levels of loss, from more than $20,000 to more than $50,000,000. As currently drafted, a loss of more than $50,000,000 would result in a 14 point increase in the defendant’s offense level. This is a significant amendment from USSG section 2B1.1, which contain 16 levels of loss, the most significant of which increases a defendant’s base offense level by 30 points. It is important to note, however, that the Task Force makes clear in its commentary that it is most focused on the proposed structure of the economic crimes guidelines. The report states, “First, we feel more strongly about the structure of the proposal than we do the specific offense levels we have assigned. We assigned offense levels in the draft because we think it is helpful in understanding the structure, but the levels have been placed in brackets to indicate their tentative nature.”
The remaining two specific offense characteristics – Culpability and Victim Impact – are presented in a manner that allows for consideration of various factors before determining where a defendant falls on a range from low to high. For example, culpability is either “Lowest Culpability,” “Low Culpability,” “Moderate Culpability,” “High Culpability,” or “Highest Culpability.” According to the commentary, a defendant’s culpability level will depend on an “array of factors,” including the correlation between loss and gain. In many ways, this portion of the proposal looks similar to the recently adopted Sentencing Council for England and Wales “Fraud, Bribery and Money Laundering Offences – Definitive Guidelines.” As described in my previous post, these guidelines for England and Wales utilized a “High Culpability,” “Medium Culpability,” and “Low Culpability” model.
Finally, the proposal contains an interesting offense cap for non-serious first time offenders. The proposed guidelines state, “If the defendant has zero criminal history points under Chapter 4 and the offense was not ‘otherwise serious’ within the meaning of 28 U.S.C. section 994(j), the offense level shall be no greater than 10 and a sentence other than imprisonment is generally appropriate.” According to the commentary, in making such a decision, the court should consider (1) the offense as a whole, and (2) the defendant’s individual contribution to the offense.
As the U.S. Sentencing Commission has stated, addressing federal sentences for economic crimes is one of the Commission’s policy priorities for the 2014-2015 guidelines amendment cycle. It will be interesting to watch the Commission’s response to the ABA CJS Task Force proposal.
Friday, October 31, 2014
Earlier this month, I had the pleasure of once again attending the ABA Criminal Justice Section’s annual International White Collar Crime Institute in London. This year’s event included a host of excellent speakers from around the world addressing some of the most pressing issues in the field. I thought I would take just a few moments to share some of the insights and themes from the conference.
First, there was much discussion about deferred prosecution agreements in the UK. Though a very common means of resolving a criminal investigation in the US, DPAs only became possible in the UK earlier this year. Thus far, no DPAs have been announced in the UK. That might be about to change, however, as several speakers informed the audience that there are rumors in London that the first such DPA may be entered into towards the end of this year. We’ll be keeping an eye out for this significant development.
Second, many speakers pointed out important differences that exist globally when discussing white collar crime and enforcement. For example, in the UK, the SFO prefers that corporations not interview employees during an internal investigation. Once the US DOJ becomes involved, however, the DOJ tends to insist on interviews, thus creating a conflict of approaches. As another examples, the trend of requiring monitors as part of settlements is beginning to lose favor in the US. By comparison, the UK is currently moving towards monitorships. As a final example, the role of whistleblowers remains drastically different around the globe. In the US, whistleblowers and whistleblower incentive programs like the FCA and Dodd-Frank are generally considered important tools for discovering misconduct. In France, by comparison, whistleblowing is discouraged. In fact, according to our speakers, in France it would be illegal for an employer to require employees to engage in any form of whistleblowing. These are just a handful of examples of the significant differences that exist around the world and that create complex issues for resolution in cross-border criminal investigations and prosecutions.
Finally, I’ll briefly mention the panel I moderated. The panel examined collateral consequences of conviction around the world. Collateral consequences are an issue that is garnering much attention in the United States today. This is partly because of the ABA’s collateral consequences website, which is an excellent tool for researching the collateral consequences that might be applicable in a particular case. The website also gives some incredible insights into the breadth and scope of these collateral consequences. In Illinois, for examples, there are 2,266 statues, rules, and regulations imposing various collateral consequences. These include things like losing the right to vote, the right to drive, and the right to hold public office. One might lose a public pension, a business license, or even parental rights. One might lose access to public housing and food stamps. The list is voluminous. One of the most unusual collateral consequences in Illinois makes it a felony for a felon to “knowingly own, possess, have custody, or reside in residence with… an unspayed or unneutered dog or puppy older than 12 weeks of age…." Our conversation in London revealed that the trend of expanding collateral consequences is not limited to the United States. In the UK, prosecutors are now more likely to put forward collateral consequences during a prosecution and the courts are becoming more likely to impose them on individual defendants.
While there are many other fascinating issues that were covered during the conference, including discussion of virtual currencies, anti-bribery initiatives, whistleblowing generally, financial regulations, anti-trust prosecutions, and cyber security, I’ll stop here. But I hope this gives some insight into the complexities of international white collar crime in a global environment where significant differences abound.
Wednesday, October 29, 2014
James (Jimmy) LaRossa, one of New York City's top criminal defense lawyers, died recently. LaRossa, according to the New York Times obituary, see here, was "'the last of the gladiators' -- his characterization of defense lawyers." He was an old-fashioned criminal trial lawyer who tried big case after big case, often with little time for preparation. For him, cooperators were snitches and cooperation akin to treason. He was an extremely talented lawyer -- with great courtroom presence and a lightning quick mind. He was probably the best cross-examiner I have ever seen in a courtroom.
Although not the "last" of the "gladiators," LaRossa was one of a dying breed -- the "warriors" who were combative, never brought their clients to the prosecutor's office to make a proffer, and fought the government at every turn. The criminal defense bar and the practice of criminal law have in many ways changed in the last decade. Defense lawyers today are, as a rule, less experienced and therefore less skilled at trial, less antagonistic toward the government, and more willing to make cooperation deals so that their clients -- and they themselves in a sense -- become part of the prosecution team. LaRossa's death marks not only the loss of a "gladiator" but hastens the end of an era.
Monday, October 27, 2014
Imagine being so angry at prosecutorial shenanigans in one of your cases that you decide to write a book. A book that names names and settles scores. A book that details the Brady violations you believe occurred in your client's trial. A book that compares those purported violations to the undeniable Brady errors judicially noticed in the Ted Stevens prosecution. A book that identifies the DOJ officials connected to both your case and the Ted Stevens case and traces the rise, high within the ranks of DOJ and the White House, of the prosecutors you loathe. A book with a forward by none other than Ninth Circuit Chief Judge Alex Kozinski. Imagine this and you have imagined Sidney Powell's Licensed to Lie: Exposing Corruption in the Department of Justice.
This book is a terrific read, particularly for anyone making a living in the world of federal white collar investigations and trials. Both the federal white collar specialist and the intelligent lay reader should find it engrossing. I particularly enjoyed the "you are there" descriptions of defense strategy sessions and courtroom hearings.
Powell played a minor role on the Arthur Andersen appellate team and the lead role in the post-trial defense of Enron Barge defendant, and former Merrill Lynch executive, Jim Brown. She covers most or all of the Enron Task Force sins that have long been the subject of controversy in the white collar defense bar, including the practices of: providing mere summaries, rather than full interview reports, of exculpatory materials to the defense; withholding certain exculpatory information altogether; withholding agent notes of witness interviews; creating composite 302s that fail to reveal changing witness statements over time; designating potential defense witnesses as targets, in effect threatening them with prosecution if they testify; convincing compliant trial judges to approve clearly faulty jury instructions.
Powell reminds us as well that every Enron-related conviction that went up on appeal resulted in a partial or complete reversal. And although she had no involvement in the Ted Stevens case, Powell does an excellent job of summarizing, based on two publicly released investigations, the multiple material Brady/Giglio violations that occurred in that prosecution.
And yet this book, as informative and fun to read as it is, has some problems.
For openers, Powell sees the world in black and white terms. You are with her or against her on this ride, and God help you if get on Sidney's bad side. You tend to get painted in black and white terms. Ergo:
Enron Task Force Chief Andrew Weissman is "a narrow faced man with a beak of a nose."
DOJ Criminal Division Chief Michael Chertoff is "sharp-featured."
DOJ's Rita Glavin has "long black hair, sharp features, an easy smirk, and an affinity for androgynous attire."
Original Enron Task Froce Chief Leslie Caldwell is "a short no-nonsense looking woman with closely cropped hair."
FBI Special Agent Raju Bhatia is "smarmy."
Enron Barge Case prosecutor Kathryn Ruemmler, who later served President Obama as White House Counsel, has "a well known passion for expensive Chrisitan Louboutin red-soled stiletto heels." Those heels show up in more than one description of Ruemmler.
Matthew Friedrich, later Acting Assistant AG in charge of the Criminal Division, has "a boyish face that easily appeared smug."
You get the picture. But if you are lucky enough to be on Sidney's side. Well:
Ike Sorkin is "a handsome man with thick gray hair."
Richard Schaeffer is "a tall handsome impeccably dressed New York lawyer."
And so on.
Fifth Circuit Judges who might rule against Powell are suspected of being politically biased or intellectually corrupt. Thus, in describing the panel she drew for her Fifth Circuit argument that Jim Brown deserved a new trial (based on multiple Brady violations), Powell wonders "if [Judge] Graves...might have some connection with Ruemmler. She, logically, would have been the person to advise the president on Graves' nomination and assist Graves in the confirmation process." Powell also wonders "if Friedrich had been part of the confirmation process with [Judge] Southwick. Friedrich's meteoric rise within the department placed him as chief of staff to Attorney General Gonzalez when Southwick was nominated and confirmed." After the panel ruled unanimously against her, in an opinion authored by Judge Jerry Smith, Powell "struggled to grasp how a court that I had respected so much for so long could issue an opinion as result-driven, tortured, and just plain bad as this one was."
Second, Powell posits a past DOJ Golden Age, when prosecutors were fair and committed to doing justice, and contrasts it unfavorably with our present era of so-called corruption. Here's a news flash for Ms. Powell. There was never a Golden Age of prosecutorial fairness in the DOJ. There have always been good prosecutors and bad prosecutors, and Assistant U.S. Attorneys have long played a prosecutorial game quite legally and openly rigged in favor of the house.
Last, but by no means least, Powell refuses to deal seriously, or to deal very much at all, with Judge Jerry Smith's Fifth Circuit panel opinion denying Jim Brown a new trial. Powell passionately argues throughout the book that the government hid Brady material from Brown's trial defense team in a grave miscarriage of justice. Virtually every argument she makes, in front of every federal tribunal, is meticulously rendered in 400 plus pages. But her discussion of Judge Smith's opinion is curiously brief, covering two pages, and fails to address Smith's main points.
The Enron Barge case concerned an allegedly sham transaction between Enron and Merrill Lynch to purchase Enron barges. The government maintained that the deal was a sham, and not a real purchase, because Enron orally promised/guaranteed to take Merrill out of the transaction, by buying back the barges, or finding a third party buyer, within six months. Although Jim Brown and the other Enron Barge defendants saw their fraud convictions overturned by the Fifth Circuit, Brown had also been convicted of perjury and obstruction of justice for grand jury testimony regarding his understanding of the transaction.
Prosecutors refused to disclose the FBI's raw notes of Andrew Fastow's interviews to Brown's trial team, instead providing summaries. The raw notes, unlike the summaries, quoted Fastow as saying that he "never used the word promise" in conversations about a buy-back with Merrill executives. Judge Smith pointed out, however, that "any potential exculpatory value of the passages from the Fastow notes that were not disclosed to the defense is eliminated when we read them in context rather than looking just to the portions of the sentences that Brown cherry-picks."
Smith pointed to other portions of the raw notes and explained that:
The notes say, to give only a few examples, (1) “It was [Enron’s] obligation to use ‘best efforts’ to find 3rd party takeout + went on to say there would be 3rd party b/c AF is manager of third party,” (emphasis added); (2) “LJM was 3rd party + was already found;” (3) “[Fastow] told [Merrill Lynch] that [Enron] would get [Merrill Lynch] out, would get [illegible] or LJM to buy out;” and (4) “Come June 2000, if [Enron] did not have a buyer then LJM would step in to buy out.”
In other words, Fastow controlled a captive third party, LJM, and could effectively guarantee that if a buyer could not be found, LJM would take Merrilll out of the transaction in six months. Judge Smith noted that:
[T]he sentences that Brown cites from the Fastow notes do not say that the agreement as a whole was a “best efforts” agreement, pace Brown’s testimony; they say only that Enron would use its “best efforts” to find a buyer but that Fastow guaranteed that LJM2, which he controlled, would be that buyer if no one else was found. Indeed, Fastow admitted that, “[i]f call was transcribed—it should have blown the accounting.”
Now I'm perfectly willing to believe, and in fact I assume, that the Enron Barge defendants, including Jim Brown, got a really raw deal and should never have been indicted. And I'm also willing to hear a good argument that Judge Smith got his Brady analysis backasswards. But in a book devoted to exposing Brady error, written by one of the country's foremost appellate lawyers, I expect more than two pages of cursory, conclusory attacks on a key federal appellate decision. Powell fails to fairly present, much less refute, Judge Smith's specific points (incorrectly referring to his careful 19 page opinion as a "meager" nine pages). I call this a material omission.
Monday, October 6, 2014
Rob Cary's book, "Not Guilty: The Unlawful Prosecution of U.S. Senator Ted Stevens" is a wonderful read and reminder of what needs to be corrected in our criminal justice system. Discovery in a criminal case is incredibly important, and this book emphasizes its importance in the criminal justice system and to society. In white collar document driven cases, the amount of paperwork can be overwhelming. It becomes important to not merely provide discovery to defense counsel, but also that it be given in an organized manner. Dumping documents on defense counsel is not enough. And failing to provide crucial documents, witnesses, and evidence is even more problematic. More needs to be done to correct discovery injustices in society and hopefully this book can serve as the momentum and real-life story to make it happen.
Friday, October 3, 2014
In May, the Sentencing Council for England and Wales issued their "Fraud, Bribery and Money Laundering Offences - Definitive Guidelines." The Guidelines apply to "all individual offenders aged 18 and older and to organisations who are sentenced on or after 1 October 2014, regardless of the date of the offence."
Bret Campbell, Adam Lurie, Joseph Monreno, and Karen Woody of Cadwalader, Wickersham & Taft have a nice piece examining the new Guidelines in the Westlaw Journal of White-Collar Crime entitled UK Issues Sentencing Guideline for Individuals Convicted of White-Collar Offenses (28 No. 11, Westlaw Journal White-Collar Crime 1 (July 25, 2014)).
In reviewing the new Guidelines, it is fascinating to see the difference in approach when compared to the U.S. Sentencing Guidelines. To take just one example, the fraud guidelines for England and Wales focus on "culpability" and "harm." For culpability, the guidelines consider a number of factors indicating whether the person had "High Culpability," "Medium Culpability," or "Low Culpability." The factors include entries such as the role in group activities, the sophistication of the offense, and the motivation behind the actions. In examining harm, there are just five categories of loss, the highest of which is £500,000 or more. Finally, when determining the sentence, there are a limited number of categories and the highest range is 5-8 years in custody.
For anyone who works with the U.S. guidelines, the guidelines for England and Wales are a fascinating read for comparison, and I highly recommend you give them a look.
Wednesday, October 1, 2014
And here it is. DeLay v. State of Texas. To clarify my ealier comments, the majority held that DeLay did not commit or conspire to commit money laundering. He did not launder or conspire to launder criminally derived proceeds, because the facts proved by the State failed to prove a violation of the Texas Election Code. In other words, the State proved no underlying crime.
This just in. The Texas Court of Criminal Appeals has affirmed 8-1 the lower appellate court ruling vacating Tom DeLay's money laundering conviction. Why was the conviction vacated? DeLay's actions, even if proven, did not constitute the crime of money laundering under Texas law at the time he committed them. Here is the brief KPRC-TV story. Hat Tip to Roger Aronoff for the alert.
Sunday, September 28, 2014
Former Wellcare executives, who were convicted, have filed their briefs in the 11th Circuit and a strong amici brief is accompanying them. One of the key issues comes from an 11th Circuit case United States v. Whiteside, where the court held that a false statement charge can't be premised on a statement that is true under an objectively reasonable interpretation of the law. The importance of the falsity of the statement is a key component of a prosecution as without this limitation prosecutorial discretion can be stretched to inordinate lengths.
An equally important issue argued pertains to willful blindness. The Supreme Court's opinion in Global Tech emphasizes the importance of an affirmative act needed for demonstrating willful blindness and how recklessness and negligence will not suffice.
These issues raise important questions for the 11th Circuit to examine. It is therefore no surprise to see some top criminal law professors signing onto the amici brief.
Behrens Brief - Download Behrens_Brief_-_Filed_Copy
Farha's Brief - Download Farha_Brief_2014 09 19-1
Clay's Brief - Download Clay_Brief_-_Filed_Copy
Friday, September 26, 2014
Yesterday's announcement that Attorney General Eric Holder will be stepping down from his position makes one think back about all that he accomplished while in office.
Many have been critical of his handling of white collar cases, but few have focused on the enormous number and amount of fines given to entities during his term. There has been a growing list of deferred and non-prosecution agreements entered into between entities and the DOJ (see here). Internal investigations are becoming routine by companies and hopefully corporations are realizing the cost-benefit of monitoring employees to adhere to the law.
Although discovery issues have not been resolved, there is certainly more focus by this Office on the importance of making sure that favorable evidence is given to defense counsel. With more time, emphasis and some new legislation this issue could move even further ahead.
Most recently we see that DOJ is taking the ethical position in rethinking its position on waivers with guilty pleas. (see here) Some districts, unfortunately, were asking for plea waivers on ineffective assistance and prosecutorial misconduct claims. This practice, used by only some offices, suffered from ethics problems causing some states, like Florida, to have to issue an ethics opinion prohibiting this practice. It is nice to see DOJ stepping to the plate to stop this conduct.
And recently we have also seen that AG Holder has been at the forefront of enforcing the Sixth Amendment Right to Counsel. A good number of state attorney generals stood up to take this position in Gideon v. Wainwright, filing an amicus brief in support of the right to counsel for indigent defendants. AG Holder's stance on this has been admirable.
Clearly our criminal justice system needs a good bit more work, but it is promising to see what one Attorney General has accomplished. Let's hope his successor continues advocating as a "minister of justice."
Thursday, September 18, 2014
Appellate Court Reverses Conviction Based on Last-Minute Prosecutorial Provision of Brady Material "Buried" in Mass of Discovery
Two of the many issues relating to prosecutorial disclosure of Brady material are the timing of the disclosure and the identification of the material as exculpatory. Many, perhaps most, prosecutors believe that they have satisfied their ethical and constitutional obligations under Brady by providing the exculpatory material just before trial (or before the witness affected testifies) without any specification that it is Brady material. Courts rarely -- almost never -- reverse a conviction because the Brady material was provided late or without any signal that it is exculpatory material.
In this connection, yesterday an intermediate New York appellate court in Brooklyn upon an appeal of a denial of a post-conviction motion unanimously reversed a kidnapping conviction because of the untimely disclosure of Brady material in a "document dump" on the eve of trial. The prosecutors there had during jury selection delivered the documents "interspersed throughout a voluminous amount of other documentation, without specifically identifying the documents at issue at the time of delivery," thereby, said the court, "burying" them. By doing so, the prosecution "deprived the defendants of a meaningful opportunity to employ that evidence during cross-examination of the prosecution's witness." People v. Wagstaffe, A.D.3d -- (2d Dept., Sept. 17, 2014). See here.
The prosecution's case was based exclusively on the testimony of a witness under the influence of drugs and alcohol at the time of the event who testified that she saw the defendants force the 16-year old victim into a car. The documents, police requests for records for both defendants, would have revealed that the defendants were being investigated one day prior to the initial police interview with the witness, contrary to the testimony of one of the investigating officers that the interview led them to the defendants. Thus, the documents, said the court, would "bear . . . negatively upon the credibility of [the witness] and the investigating detectives," issues of "primary importance in this case."
Too often appellate courts, often while giving lip service to the notion that Brady material should be provided to the defendant in time for him or her to use in a meaningful fashion, accept the view that a few minutes before cross-examination is sufficient, or that the defense lawyer's failure to request an adjournment is fatal to the defense appeal. Too often courts distinguish between Giglio impeachment of witness material and other Brady material and accept that it is acceptable that the former be given as late as just before cross-examination. Too often courts expect defense counsel to find the Brady "needle in a haystack" in a pile of discovery or 3500 material provided shortly before trial.
It is refreshing for an appellate court to accept the practicality that a harried on-trial defense lawyer cannot be expected to appreciate immediately the significance of a single item or a few items of paper provided at the last-minute and/or together with a mass of other less significant documents. It is refreshing for a court not to accept the prosecutorial tactic or custom to provide a "document dump" to conceal a page or a few pages of significant exculpatory material.
Hopefully, this decision will be affirmed on appeal (if taken or allowed) to New York's highest court, the Court of Appeals, and will be a bellwether for other courts, and not ignored or consigned to history as an aberrant decision of an intermediate appellate court.
Monday, September 15, 2014
I wanted to alert readers to the upcoming 3rd Annual American Bar Association Criminal Justice Section White Collar Crime Institute. This one and a half day event will occur in London, UK at the offices of Berwin Leighton Paisner (Adelaide House, London Bridge) from October 13-14, 2014. This has been a wonderful event in past years and this year's program looks outstanding. The conference will bring together panelists and participants from around the globe to talk about issues including corporate espionage and cybercrimes, international money laundering and sanctions, cross-border evidentiary concerns, whistleblowers, deferred prosecution agreements, and international internal investigations. Further, special focus will be paid to fraud and bribery cases from the perspective of top prosecutors from various countries.
On Monday, October 13, we will also welcome Michael J. Garcia as our keynote luncheon speaker. Mr. Garcia is a partner at Kirkland & Ellis LLP in New York City. He serves as the Independent Chair of the Investigatory Chamber of the FIFA Ethics Committee. Prior to joining Kirkland & Ellis LLP, he served as the Senate-confirmed United States Attorney for the Southern District of New York (SDNY). Mr. Garcia spent two years as Assistant Secretary for Immigration and Customs Enforcement at the Department of Homeland Security. From 2001 to 2002, Mr. Garcia served as Assistant Secretary of Commerce for Export Enforcement. From 1992 to 2001, Mr. Garcia was a federal prosecutor with the SDNY. He personally prosecuted a number of high-profile terrorism cases, including the 1993 bombing of the World Trade Center and the 1998 bombing of U.S. embassies in East Africa.
I will be leading a discussion panel on Monday addressing the issue of collateral consequences. This is a significant issue for all defendants, including individuals and corporations charged with white collar offenses. The panel will examine the growth of collateral consequences in the United States, in the United Kingdom, and around the globe. We will also discuss current trends in this area and examine the most important collateral consequences for consideration during white collar criminal investigations and prosecutions. It should be a great conversations, and I look forward to being joined on the panel by Amanda PINTO QC (Barrister at 33 Chancery Lane, London); William N. SHEPHERD (Partner at Holland & Knight, West Palm Beach, FL), Joe D. WHITLEY (Chair, White Collar Crime and Government Investigations Group, Baker Donelson, Atlanta, GA), and Roger A. BURLINGAME (Kobre & Kim LLP, London, UK).
I hope to see some of you there.
Monday, September 8, 2014
The Economist has an excellent article examining the criminalizing of American companies. The piece, entitled “A Mammoth Guilt Trip,” covers a lot of ground, including many of the most pressing issues in the field of corporate criminal liability today. The article begins by examining some of the incredible financial settlements we’ve seen this year. As the piece notes, while the $5.5 billion the DOJ collected in direct payments in 2013 was impressive, it will certainly be “dwarfed by this year’s tally.” Also examined in the article are issues such as the questionable and opaque ways the government spends settlement funds, the growth in regulatory crimes, the often prohibitive costs of corporate compliance, the inability of many companies to risk proceeding to trial, and, of course, the lack of individual prosecutions following the 2008 financial collapse. Finally, the article contains some great data from Professor Brandon Garrett at the University of Virginia Law School. Professor Garrett maintains a list of government actions against corporations since 2000. In total, the list contains information regarding 2,163 corporate convictions and guilty pleas, along with 313 deferred and non-prosecution agreements. It all makes for a fascinating read.
Wednesday, September 3, 2014
Last month Prof. Douglas Berman reported in his indispensable Sentencing Law and Policy blog about a ten-year prison sentence imposed by SDNY judge Richard Berman upon defendant Rudy Kurniawan, who had sold counterfeit wine to the very rich, including billionaire William Koch (one of the less political Koch brothers), and allegedly profited by over $28 million (see here by scrolling down to August 10, "Can wine fraudster reasonably whine that his sentence was not reduced given wealth of victims?" See also here). Some of the ersatz wine sold for as much as $30,000 per bottle.
Having a somewhat perverse sense of humor, I found it somewhat amusing that the 1% paid astronomical sums for and presumably sometimes drank the same wine that the other 99% of us drink. However, neither the judge nor the prosecutor (nor certainly the defendant and his lawyer) viewed the sentencing proceeding as a laughing matter.
To be sure, a $28 million fraud is a serious matter deserving serious punishment. Additionally, the judge seemed to view the crime in part as a public safety violation, declaring "The public at large needs to know our food and drinks are safe, -- and not some potentially unsafe homemade witch's brew," even though this was hardly a contaminated baby food case.
At the sentencing hearing, Kurniawan's attorney argued, reasonably I believe, that his client should be treated somewhat less severely since the victims were exceedingly wealthy. That argument provoked the prosecutor to the Captain Renault-like response that it was "quite shocking" for a lawyer to argue for a different standard for theft from the rich than from the poor.
That retort reminded me of Anatole France's immortal line (although not directly on point), "The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, beg in the streets or steal bread." In my view, a sentencing judge should certainly consider in sentencing the extent of damage to the victim(s). A fraudster who steals a million dollars from a billionaire, notwithstanding the Sentencing Guidelines' overemphasis on absolute figures, should (all things being equal) not deserve as harsh a sentence as one who steals the same amount if it were the entire life savings of a senior citizen.
Prosecutors, when fraud victims are pensioners and widows, argue, I believe reasonably, that the judge should consider the degree of suffering of the victims. Indeed, every seasoned white-collar trial lawyer knows that in a multi-victim fraud case the government is likely to call as "representative" witnesses those most sympathetic victims for whom the monetary loss was most damaging.
I assume that the prosecutor will get over his "shock" when he prosecutes a fraud case where a less than affluent victim's life savings are stolen. I further assume he will not argue that the judge should impose the same sentence she would if the victim were a billionaire for whom the loss figure might be pocket change.
Sunday, August 31, 2014
The New York Times had an interesting article this week by Steven Davidoff Solomon entitled “Keeping Corporate Lawyers Silent Can Shelter Wrongdoing.” The piece centers on the recent decision out of the Delaware Supreme Court in the case of Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW,Del. Supr., No. 614, 2013 (July 23, 2014), and notes that the attorney-client privilege can be used to “shelter potential wrongdoing, perhaps to the detriment of many people, including shareholders.” As discussed at length in the article, the IBEW case permits stockholders to unilaterally breach the attorney-client privilege when there is suspected wrongdoing at a corporation.
The IBEW case is one many have followed in recent years. The controversy began after the New York Times broke the story of potential Foreign Corrupt Practices Act violations by Mar-Mart in April 2012. In response to that initial article, the IBEW, a Wal-Mart stockholder, sent a letter to the company demanding inspection of a number of documents related to the potential FCPA matter, including documents regarding the corporation’s initial internal review of the situation. Wal-Mart declined to provide certain of the documents and, with regard to some of those materials, claimed they were protected by the attorney-client privilege. The issue of whether Wal-Mart could properly withhold these materials from shareholders was litigated at length and finally made its way to the Delaware Supreme Court. In the ruling from last month, the Delaware Supreme Court sided with the IBEW and ordered Wal-Mart to produce the materials. Referring to the Fifth Circuit Court of Appeals case of Garner v. Wolfinbarger (1970), which recognized a fiduciary exception to the attorney-client privilege, the court in IBEW said:
With regard to the other Garner good cause factors, the record reflects that disclosure of the material would not risk the revelation of trade secrets (at least it has not been argued by Wal-Mart); the allegations at issue implicate criminal conduct under the FCPA; and IBEW is a legitimate stockholder as a pension fund. Accordingly, the record supports the Court of Chancery's conclusion that the documentary information sought in the Demand should be produced by Wal-Mart pursuant to the Garner fiduciary exception to the attorney-client privilege.
It is important to note, of course, that the shareholders are meant to keep the information they receive confidential and use it only to decide whether to file a claim against Wal-Mart directors related to the FCPA matter.
In reading the most recent New York Times article, I kept coming back to Upjohn v. United States and the ever present debate regarding the proper role of privilege in the world of internal investigations and potential corporate wrongdoing. In particular, I was drawn to the important language in Upjohn regarding the reasons for applying the privilege: “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.” As the New York Times states in its piece from this week, “the attorney-client privilege for companies is increasingly under attack.” I wonder now what impact the IBEW decision and related issues regarding lawyer whistleblowers, such as in the ongoing Vanguard case, will have on the future of internal investigation strategy and, in particular, the role of internal counsel in such situations.