Monday, November 25, 2013
NACDL White Collar Criminal Defense College at Stetson - March 19 - 22, 2014
The NACDL White Collar Criminal Defense College at Stetson is a “boot-camp” program for practitioners wishing to gain key advocacy skills and learn substantive white collar law. The program will cover client retention, investigation in a white collar case, handling searches and grand jury subpoenas, and dealing with parallel proceedings. Participants will have the experience of negotiating a plea, making proffers, and examining which experts to hire and how to protect the client in this process. Interactive sessions with top white collar practitioners will allow the participants to learn trial skills such as opening statements, cross-examination, jury instructions, closing arguments, and sentencing – all in the context of a white collar matter.
Stetson University College of Law
1401 61st St. S.
Gulfport, FL 33707
Loews Don CeSar Hotel
3400 Gulf Boulevard
St. Pete Beach, FL 33706
For more information, see here.
Friday, November 22, 2013
Catherine Martin Christopher has a new article titled, "Whack-a-Mole: Why Prosecuting Digital Currency Exchanges Won't Stop Online Laundering." The SSRN abstract states:
Law enforcement efforts to combat money laundering are increasingly misplaced. As money laundering and other underlying crimes shift into cyberspace, U.S. law enforcement focuses on prosecuting financial institutions’ regulatory violations to prevent crime, rather than going after criminals themselves. This article will describe current U.S. anti-money laundering laws, with particular criticism of how attenuated prosecution has become from crime. The article will then describe the use of Bitcoin as a money-laundering vehicle, and analyze the difficulties for law enforcement officials who attempt to choke off Bitcoin transactions in lieu of prosecuting underlying criminal activity. The article concludes with recommendations that law enforcement should look to digital currency exchangers not as criminals, but instead as partners in the effort to eradicate money laundering and — more importantly — the crimes underlying the laundering.
Thursday, November 21, 2013
Monday, November 18, 2013
How many federal appellate opinions begin like this?
"An attorney's reputation is her most valuable possession. It forms the basis for her peers' view of her and plays an important role-often a determinative one-in how she advances in her career. This case began with a government attorney's unauthorized filing of a motion for sanctions against Debra K. Migdal, an attorney who has served as an Assistant Federal Public Defender for nearly 25 years. It quickly took on a life of its own, resulting in two district-court orders strongly, publicly, and, we conclude, erroneously reprimanding Migdal. Because the record does not support any basis for these orders, we VACATE the sections of the first order pertaining to sanctions, REVERSE the second order in its entirety, and DISMISS the sanctions proceeding against Migdal."
And how many of them end like this?
"This opinion closes the book on a regrettable chapter in Debra Migdal's career, clears her of all claims that her conduct in this matter was sanctionable, and removes any taint of public censure on her reputation."
As anyone who practices criminal law in the federal court system knows, different districts, and sometimes different judges within a district, have different rules, formal and/or informal, for the issuance of subpoenas demanding early document production pursuant to Fed. R. Crim. Proc. 17(c). Some districts allow prosecutors and defense attorneys to issue the subpoenas, and examine documents, on their own. Other districts require a motion and court order. (Of course, the playing field is uneven, because the prosecution typically has the evidence it needs well before trial through the use of grand jury subpoenas.)
In 2011 Debra Migdal was an Assistant Federal Public Defender in the Northern District of Ohio handling a case in front of U.S. District Judge John R. Adams. At the time, neither the Northern District of Ohio nor Adams had any formal policy regarding the issuance of Rule 17(c) subpoenas. Migdal issued two Rule 17(c) subpoenas on her own, one of which was sent to the custodian of records at the U.S. Border Control, calling for the early production of materials in Judge Adam's court, but on a day she designated that was prior to a scheduled court date. Two previous district court opinions in the Northern District, neither of which were written by Judge Adams, had come to opposite conclusions about the propriety of issuing such subpoenas absent the court's permission. Migdal was unaware of the opinion holding that a court order is necessary.
Migdal used Administrative Office of the U.S. Courts Form AO 89, which commands both the appearance and testimony of the witness and, if necessary, the production of documents. In other words, unless the issuer crosses out the part of the authorized pre-printed form calling on the witness to testify, he/she is always commanded to appear and testify, even though in many cases the issuing party is only interested in obtaining documents. By way of contrast, on the federal civil side, there are two authorized subpoena forms, one calling for documents only and one calling for witness testimony.
AUSA Gregory Sasse told the Border Patrol Agent to ignore the subpoena. Sasse then moved to quash the subpoena and asked the court to impose whatever sanctions it deemed appropriate. Sasse wasn't authorized to move for sanctions and his superiors later withdrew this request. But Judge Adams was clearly not happy with Migdal. He held two hearings and publicly sanctioned Migdal under 28 U.S.C. Section 1927 and his inherent authority.
Section 1927 reads as follows:
"Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct."
The Sixth Circuit, noting that nothing whatsoever in the statute's language authorizes the imposition of non-monetary sanctions, ruled that Judge Adams abused his discretion in sanctioning Migdal under 1927.
The Sixth Circuit then rejected the three rationales Judge Adams relied on for sanctioning Migdal pursuant to his inherent authority. (Any sanctions against Migdal required a showing of bad faith on her part.)
1. Adams had ruled that a criminal defendant is entitled to materials under Rule 17(c) "only after requesting-and not getting-the necessary items from the government via Rule 16 discovery." Incredibly, he believed he had the inherent authority to sanction Migdal for failing to follow this protocol. But as the Sixth Circuit pointed out, no such protocol exists under Rules 16 and 17.
2. Adams had ruled that Migdal violated her duty of candor to to the court by commanding production at a hearing that had not been scheduled or requested. (He referred to it as a "fabricated" hearing.) Migdal acknowledged that the subpoenas were defective in this regard, apologized to the court, and argued that she had not acted in bad faith. The Sixth Circuit agreed, emphasizing that: a) AO Form 89 lacks clarity; b) Migdal called for production in Judge Adams' courtroom, so she was obviously not trying to hide anything from the court; c) the longstanding practice in Migdal's office and in many Federal Public Defender Offices, was to issue Rule 17(c) subpoenas without prior court approval; and d) Migdal relied on a prior Northern District of Ohio opinion specifically authorizing issuance of Rule 17(c) subpoenas without prior court approval. Judge Adams noted that he preferred the contrary judicial opinion. "But Judge Adams' inclination to side with one judge's view over that of another obscures the point that Migdal did not act in bad faith when she hewed to at least one judge's reading of the controlling rule."
3. Adams had ruled that Migdal "utterly disregarded Rule 17(c)'s implicit requirement that the court must approve and order early-production subpoenas." (internal quotations omitted). The Sixth Circuit carefully pointed out that reasonable people could disagree on this point, as evidenced by the conflicting district court opinions. That Migdal chose to take a view of Rule 17(c) at odds with Judge Adams' position, at a time when there was no clear controlling authority, could hardly amount to bad faith.
Throughout Judge Jane Stranch's opinion, for a unanimous Sixth Circuit panel, there runs a tone of incredulity at Judge Adams' actions in "branding a blemish on Migdal's reputation." It should never have happened. It should never happen again.
Here is the Sixth Circuit Migdal Vindication Opinion.
Thursday, November 14, 2013
Todd Haugh (Illinois Institute of Technology - Chicago-Kent College of Law) has a new forthcoming article in the Fordham Law Review - here. The SSRN Abstract states -
“So why did Mr. Gupta do it?” That question was at the heart of Judge Jed Rakoff’s recent sentencing of Rajat Gupta, a former Wall Street titan and the most high-profile insider trading defendant of the past 30 years. The answer, which the court actively sought by inquiring into Gupta’s psychological motivations, resulted in a two-year sentence, eight years less than the government requested. What was it that Judge Rakoff found in Gupta that warranted such a modest sentence? While it was ultimately unclear to the court exactly what motivated Gupta to commit such a “terrible breach of trust,” it is exceedingly clear that Judge Rakoff’s search for those motivations impacted the sentence imposed.
This search by judges sentencing white collar defendants — the search to understand the “why” motivating defendants’ actions — is what this article explores. When judges inquire into defendants’ motivations, they necessarily delve into the psychological justifications defendants employ to free themselves from the social norms they previously followed, thereby allowing themselves to engage in criminality. These “techniques of neutralization” are precursors to white collar crime, and they impact courts’ sentencing decisions. Yet the role of neutralizations in sentencing has been largely unexamined. This article rectifies that absence by drawing on established criminological theory and applying it to three recent high-profile white collar cases. Ultimately, this article concludes that judges’ search for the “why” of white collar crime,
which occurs primarily through the exploration of offender neutralizations, is legally and normatively justified. While there are potential drawbacks to judges conducting these inquiries, they are outweighed by the benefits of increased individualized sentencing and opportunities to disrupt the mechanisms that make white collar crime possible.
Wednesday, November 13, 2013
Sean Radcliffe & T. Markus Funk, Investigating Alleged Board Member Misconduct, ACC Docket
Brandon L. Garrett & David Zaring, Dealbook, For a Better Way to Prosecute Corporations, Look Overseas
Zoe Tillman, BLT Blog, D.C. Circuit Weighs Ex-Congressional Aide's Corruption Fight
Monday, November 11, 2013
Sunday, November 10, 2013
Gretchen Morgenson has another one of her outstanding articles, Earnings, But Without The Bad Stuff, in today's NY Times. The piece explores some unintended effects of the SEC's Regulation G, which "allows companies to use non-traditional metrics in financial reports, but only if they present generally accepted accounting measures [GAAP] alongside so that investors can compare the two." According to Morgenson, and Jack Cieselski of Charm City's R.G. Associates, more companies are using Regulation G to put forward "[m]anagement's recommended measures." This in turn spurs other companies to do the same in order to stay competitive. My gut response is: "So what?" As long as the company is disclosing fully accurate figures according to GAAP, what do I care if they want to present alternative numbers alongside? After all, companies are still prohibited from presenting false or misleading non-GAAP figures, and the SEC has gone after companies who do this.
Tuesday, November 5, 2013
The defendant was charged with two counts of allegedly mailing threatening communications (18 U.S.C. § 876) and two counts of intentionally conveying false and misleading information (18 U.S.C. § 1038(a)(1)). The defendant challenged the "government's introduction of testimony by a handwriting expert pursuant to Federal Rules of Evidence 702 and 403." In this case it was a report and expert testimony of a US Postal Service handwriting analyst. The district court found that under the Daubert and Kumho standards "that the science or art underlying handwriting analysis falls well short of a reliability threshold when applied to hand printing analysis." This case was handled by Stephen J. Meyer (Madison, Wisconsin).
Monday, November 4, 2013
See Peter Lattman & Ben Protess, NYTimes, SAC Capital Agrees to Plead Guilty to Insider Trading
TRAC (Transactional Records Access Clearinghouse) is reporting a decline for 2013 of white collar prosecutions. (see here). Their statistics, which I assume to be accurate, demonstrate a decline of 45% from 10 years ago and 6.8 % from last year. TRAC does a superb job of providing current statistics as provided to them from the DOJ.
But one has to question these statistics for several reasons. Most importantly is the fact that a solid definition of white collar crime is lacking. Will it include RICO? How about RICO with mail fraud counts? How about RICO with robbery counts? And the typical "short-cut" offenses used by the government, like obstruction of justice, perjury, and false statements. These could be economic crimes underlying the conduct, or they could easily be street crimes. The problem is the statistics do not offer that insight.
So before we start saying that the administration is prosecuting less white collar offenses, we need to determine how they are compiling the statistics and what is and is not being included as a white collar offense.
(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports).
Sunday, November 3, 2013
Friday, November 1, 2013
The three-lawyer Coral Gables criminal law firm of Hirschhorn & Bieber has joined the Orlando-centered multi-city law firm of Gray Robinson. See here. Their move from a small criminal law practice to a much larger firm reflects a trend of many of "the best and the brightest" of the criminal defense bar leaving small firm practices to join large firms, a trend about which I have mixed feelings. See here.
On the one hand, superb lawyers like Joel Hirschhorn and Brian Bieber, with significant criminal trial experience and demonstrated willingness to stand up to the government when appropriate, add expertise, energy and a degree of combativeness to the often too compliant white collar criminal defense bar.
On the other hand, the loss of two excellent lawyers from the ranks of the general criminal defense bar with its willingness and ability to represent the most unpopular and most in need of able, experienced and vigorous counsel saddens me. Although Brian Bieber vowed that his group will retain its "boutique" identity, I fear that there will be pressures from others in their new firm not to handle certain cases for image and economic reasons. I hope, and I would not be surprised, that these two dedicated lawyers resist.
I wish them luck.
Business Week has the story here. Former BDO Seidman CEO Denis Field, represented by Sharon McCarthy of Kostelanetz & Fink LLP, was acquitted on all seven counts he faced. Paul Daugerdas, former head of now-defunct Jenkens & Gilchrist's Chicago office, was convicted on seven of 16 counts. The original convictions against Daugerdas and Field were thrown out by SDNY Judge William Pauley after a juror's misconduct was brought to light.
Thursday, October 31, 2013
The opinion is in United States v. Kyle. Although not a white collar prosecution, the ruling applies to all federal criminal cases in the Ninth Circuit. The Ninth Circuit noted that when a district court goes beyond giving the reasons for its rejection of a plea agreement and starts discussing hypothetical agreements that it might accept, "it crosses over the line establsihed by Rule 11."
Wednesday, October 30, 2013
In United States v. Miller, the Sixth Circuit today reversed three of four counts of conviction in a mortgage fraud prosecution. The court held that appellant Miller did not unlawfully "use" a means of identification within the meaning of 18 U.S.C. Section 1028A, the Aggravated Identity Theft statute, when he falsely stated that two named individuals had given him authority to act on behalf of an LLC. Since Miller did not steal their identity, pass himself off as them, or purport to be acting on their behalf as individuals, he is not guilty of violating the statute. The government had argued for a broader construction, but the Sixth Circuit applied the rule of lenity.
The court also reversed a Section 1014 count, because it was bottomed on Miller's signing of a loan renewal and modification agreement. Since the modification and renewal agreement did not repeat the false statement contained in the original loan papers, Miller could not be guilty under Section 1014. The court indicated that Miller had engaged in fraud and false pretenses during the loan modification process. But this was not enough to support a Section 1014 conviction, which requires a knowingly false statement.
Tuesday, October 29, 2013
USA Today has this story. Here is the interesting part, at least to federal sentencing aficionados. Renzi took the government to trial. Judge David Bury calculated Renzi's U.S. Sentencing Guidelines range at 97-121 months. (The government asked for a 9-12 year sentence.) Judge Bury downwardly varied to 36 months. This is striking, and yet another example of the Guidelines losing their luster in white collar cases. Under the law the Guidelines must be considered, but in an increasing number of cases they are being considered and ignored or discounted.
Monday, October 28, 2013
We live in an age of massive arrogance, misconduct and lawlessness--individual, governmental and corporate. In the realm of federal criminal investigations, as each new outrage reveals itself, a federal law enforcement flak is trotted out to announce that "this program is entirely legal" or "you can trust us not to abuse our power" or my all-time personal favorite, "we have always done it this way."
"We have always done it this way," is particularly pernicious, because, generally speaking, the longer a practice has been engaged in by law enforcement, the more likely it is to be unlawful. This is because such practices typically begin inside of law enforcement agencies without the benefit of legal advice and review by DOJ prosecutors. The prosecutors find out about these practices in after-the-fact, incremental, and desultory fashion and often do not pay attention to, or care about, the unconstitutional or improper nature of said practices.
"We have always done it this way," as an excuse for impropriety, can also be false. What is really meant is "we have always done it this way since 9-11, because now we can pretty much do whatever we want." The original Stellar Wind warrantless wiretapping program and various forms of parallel construction are good examples of this phenomenon. These questionable practices go on until some person with integrity, sanity, and authority, a Jack Goldsmith or a Donald Verrelli, steps forward to remind everybody that the emperor has no clothes.
This post will be the first in an occasional series about current improper and/or "worst practices" taking place within federal law enforcement.
One such practice is the composite interview report. Federal law enforcement agents are required to write interview reports of the witness interviews that they conduct. The most common report is the FBI 302. Prosecutors read and rely upon these reports in conducting their investigations. These reports are often handed over to the defense as potential Jencks material (witness statements, usually of a testifying case agent) or Brady/Giglio material (statements containing exculpatory or impeachment information). The vast majority of such reports are records of a particular interview at a particular place and time.
But a composite interview report purports to document several interviews occurring over an extended time period. A key witness might be interviewed six times during the course of a year. The composite interview report memorializes in one document the information obtained in all of the interviews without revealing what particular statement was made in which distinct interview.
What is wrong with this practice? The accused does not get an accurate picture of the interview subject's story as it evolves, which it inevitably does. Take the following example. Jane Doe, a key government witness in a bank fraud prosecution, is interviewed nine times between 2007 and 2009. The 16-page composite interview report presents an overall narrative of what Jane allegedly told the agents. According to the composite interview report, Jane said that the defendant told her in 2006: "I am scared about the government's investigation. I don't look good in stripes."
The problem is that Jane did not reveal this tidbit until the seventh government interview. That Jane sat through six government interviews without revealing this highly incriminating statement by the defendant says a lot about her credibility. A good defense attorney will have a field day with this information on cross. But the defense attorney does not know about this information because the composite interview report will not pinpoint when Jane revealed the defendant's bombshell admission. The Giglio material gets hidden through the format of the composite report.
Assume further that Jane's seventh interview occurs two weeks before the new bank managers are about to announce a major layoff. These same managers are cooperating closely, and regularly, with the FBI and FDIC in an effort to avoid having the bank shut down. Perhaps Jane is becoming a better witness, because she wants to become indispensable to the FBI and have the agents put in a good word for her with bank officials. A composite interview report will reveal nothing about the crucial timing of Jane's key disclosure.
In the above hypothetical, the prosecutor is still duty bound to reveal that Jane did not remember the defendant's admission until her seventh interview. Why? Because the tardy nature of Jane's revelation weakens her credibiltiy as a witness and is therefore impeaching and exculpatory. But what if the prosecutor does not know the precise timing of Jane's bombshell, because he is only looking at a composite report? Or, what if the prosecutor participated in the interview, but does not remember or focus on the tardiness of Jane's recollection, because he is only reviewing the composite report? What happens is that the material exculpatory information gets buried--a constitutional violation.
In reality, the prosecutor may be directing the agents to file a composite report for the precise purpose of limiting exculpatory disclosures. Hiding exculpatory evidence seems to me to be the whole point of the composite interview report. Even if he is not explicitly directing the agents to create a composite 302, the prosecutor implicitly ratifies the composite 302 by tolerating its creation. Any AUSA worth his salt will have no problem directing the case agent to prepare individual interview reports of each interview session. The case agent does not technically work for the prosecutor, but as a practical matter he takes orders from the prosecutor regarding the conduct of the investigation. As an AUSA, I would have never tolerated a composite 302, as described above, for one moment.
Of course, case agents usually take handwritten notes of each interview report. Why can't the prosecutor solve his Brady/Giglio composite interview problem by reviewing these notes and turning over any Brady/Giglio materials to the defense? Because prosecutors rarely do this. Most of them are under the incorrect impression that handwritten interview reports never need to be turned over to the defense once they are "incorporated" into a final 302. But this is only true if the final interview report includes the Brady/Giglio material contained in the rough interview notes. And the composite interview reports that we have been discussing, by their very nature, hide Brady/Giglio material.
Many prosecutors never even review agent interview notes, simply assuming that the agents will transfer all relevant information from the notes to the final interview report. But agents are not trained or programmed to decipher exculpatory information. Some piece of information that is unimportant to the agent, might be critical to the seasoned criminal defense attorney. For example, the timing of Jane Doe's recollection in relation to her fear of an impending layoff, and the significance of that timing, is not likely to even register with the typical case agent or federal prosecutor. They are simply not hard-wired to look for such impeaching information, and would in all sincerity be shocked to be accused of hiding it. This professional myopia would not be a problem, in our hypothetical case, if there were nine interview reports for Jane Doe's nine interviews. The diligent defense attorney would have learned about the proposed layoff through case investigation and would immediately recognize the added potential significance of Jane Doe's belated bombshell. She not only forgot about the defendant's supposed confession through the first six interviews, but conveniently remembered it in time to help stave off her forced retirement. All of this is lost, if her interviews are compressed into a composite 302 that does not account for the nuanced changes in Jane's story from interview to interview.
When you step back and think about it, in addition to all of its other problems, the type of composite interview report that I have been discussing is an inherently false and artificial document. It is not in fact a report of a law enforcement interview. It is a narrative report of several different interviews that distorts those individual interviews by failing to identify what was asked and what was said in each particular interview session.
The composite interview report as I have described it is a sham and a disgrace. No ethical prosecutor should tolerate it. No ethical FBI SAC should tolerate it. James Comey should not tolerate it. Astonishingly, current FBI policy does not explicitly prohibit the use of composite interview reports. This must change.
Friday, October 25, 2013
According to the New York Times (Deal Book), the Federal Housing Finance Agency has announced its own $4 billion dollar settlement with JPMorgan Chase, covering the bank's sale of mortgage-backed securities to Fannie Mae and Freddie Mac in the period (2005-2007) leading up to the financial crisis. FHFA's original suit alleged that JPMorgan Chase, and predecessor entities Bear Stearns and WAMU, sold mortgage-backed securities to Fannie and Freddie without sufficiently full disclosure of their risky nature. This FHFA settlement was supposed to be part of the broader $13 billion dollar tentative settlement that has been the subject of so much public speculation in the past week. Apparently FHFA got tired of waiting for the broader deal to be finalized. Here is the signed settlement agreement and FHFA press release, posted on FHFA's web site. Under the terms of this particular settlement agreement, JPMorgan Chase pointedly does NOT admit "any liability or wrongdoing whatsoever, including, but not limited to, any liability or wrongdoing with respect to any of the allegations that were or could have been raised in the Actions." Further, "[t]he Parties agree that this Agreement is the result of a compromise within the provisions of the Federal Rules of Evidence, and any similar statutes or rules, and shall not be used or admitted in any proceeding for any purpose including, but not limited to, as evidence of liability or wrongdoing by any JPMorgan Defendant." Deal Book reports that the broader non-FHFA portion of the $13 billion tentative settlement includes fine payments "to prosecutors in California." I had not heard this before today. Hard to believe that any fines will be paid to prosecutors by JPMorgan Chase unless such fines are part of a final agreement to shut down the ongoing federal criminal investigation being run out of California.