Monday, June 13, 2016
When I first read the Baylor University Board of Regents FINDINGS OF FACT, it was immediately obvious that these were not factual findings at all, not in any sense that lawyers would recognize. They were normative conclusions almost completely unsupported by detailed facts, particularly with respect to the individuals who have been publicly shamed by the Board. Say what you will about Pepper Hamilton's report on the Penn State Jerry Sandusky debacle, that report at least contained a detailed, chronological factual narrative. Not so with Baylor's findings, which were promulgated by the Regents under Pepper Hamilton's guidance. Want to find out what Ken Starr did to warrant removal? His name is nowhere mentioned in the findings. Is Starr mentioned by title? Yes, the President and Chancellor are referenced exactly three times. "A Special Committee of the Board of Regents, on behalf of the University, accepted the President and Chancellor’s recommendation to engage Pepper in order to ensure objectivity, and Pepper was provided with unfettered access to personnel and data." Wow. What an indictment! It was Starr who recommended, almost immediately after learning about Baylor's problems, that Pepper Hamilton be hired in the first place. "Pepper interviewed witnesses across multiple departments, including the President’s Office..." There you go! Fire the bastard! Pepper Hamilton was given unfettered access to his office. How about Coach Art Briles? Surely his dastardly deeds would be dealt with in the findings. But Briles is not mentioned by name or by his Head Coach title. There are six references to "coaches" in the Findings, but no way of telling if Briles is one of them or even knew or approved of what the others did.
So I was all set to call for releasing the real report, the Pepper Hamilton Report of Internal Investigation. You know what I'm talking about, right? The report that law firms produce after conducting internal investigations of purported misconduct for companies and other entities? The kind of report that companies typically do NOT release except to DOJ, but that universities, such as Penn state, do? But then I read the Board of Regents' Statement posted on Baylor's website and realized that there is no report! That's right folks, the Board met with Pepper Hamilton from time to time and was "updated" with factual findings. "Over the course of the investigation, a special committee of the Board of Regents was periodically updated on Pepper's work. Additionally, in early May, Pepper presented their findings of fact and recommendations to Board leadership in Philadelphia and was onsite to brief the full Board during its May meeting in Waco. While no written report has been prepared, the Findings of Fact reflect the thorough briefings provided by Pepper and fully communicates the need for immediate action to remedy past harms, to provide accountability for University administrators and to make significant changes that can no longer wait." Translation: the Pepper Hamilton investigation was structured in such a way that no written report would be generated. This was obviously done for reasons of litigation and public relations strategy.
Now the Baylor Board can pretend that it has issued detailed findings admitting its sins in the interest of transparency. It isn't true. There is not one fact in the findings justifying the firing of Starr, or even Briles for that matter. There isn't any information about any improprieties that may or may not have been committed by Board members themselves. The conflict of interest here is palpable, as the Board is currently being sued and can probably expect more suits in the future. Do we really think that no member of the Board ever intervened in any manner in Baylor's athletic programs?
There is only one action the Baylor Board can take to assure its students and alumni that the full facts of the scandal, and the justifications for the Board's actions and inactions in the wake of its findings, are set out for all to see. Release the factual materials actually presented to the Board and/or its subcommittee by Pepper Hamilton, with appropriate redactions to protect any victims. Release all interview summaries. Release all PowerPoint presentations. In the alternative, Pepper Hamilton can be directed to draft the report it should have done in the first place. Only then can the Baylor Board say that it has come clean.
Thursday, May 26, 2016
The Supreme Court this week in Foster v. Chatman (14-8349, decided May 23,2016) reversed a Georgia murder conviction because the prosecutors violated the requirement of Batson v. Kentucky, 476 U.S. 79 (1986) that lawyers not use race-based peremptory challenges to remove jurors. The Court, in an exquisitely detailed factual analysis by Chief Justice Roberts, dissected the prosecutors' purported reasons for challenging two prospective African-American jurors and found them disingenuous.
In a Slate article, my friend and colleague, the prolific and invaluable Prof. Bennett Gershman ("How Prosecutors Get Rid of Black Jurors," May 26,2016) writes that, notwithstanding Batson and now Foster, prosecutors will continue to "remove black persons from jury service with impunity simply by concocting purportedly race-neutral reasons." He points out that the Foster reversal occurred only because of the random discovery of the prosecutors' file containing telltale notations and comments about their intentions to strike black jurors.
I agree with Prof. Gershman. Prosecutors will continue to use race as a basis, sometimes the predominant or even only basis, in their determinations which jurors to challenge. And, so will defense lawyers. Given the limited knowledge lawyers have about the predelictions and potential biases of jurors, especially in jurisdictions which prohibit or severely limit lawyer questioning of jurors. a juror's's race is perceived by trial lawyers, reasonably I believe (although not to my knowledge based on any scientific proof), as an indication of how he will vote in the jury room, just as how he will vote in the voting booth.
As Prof. Gershman states with respect to prosecutors (generally applicable also to defense lawyers), "Prosecutors have long believed that striking black jurors improves their chances of convicting a black defendant. Prosecutors assume that black people are more likely than white people to have negative feelings about government, to have had bad experiences with the police, are more likely to have been targeted for arrests and forcible stops than white people, are more likely to have been imprisoned for minor drug crimes, and are more likely to believe that crimes against black victims are prosecuted less aggressively than crimes against whites." Thus, generally, prosecutors (and defense lawyers) believe that, all other things being equal, black jurors are more likely to acquit black defendants than other jurors. (I am not aware of any empirical studies of how race affects jury decisions. Empirical studies of jury verdicts are, it seems, far fewer than analyses of voting decisions.)
Accordingly, prosecutors and defense lawyers, both seeking to win (and believing that jury composition is a major factor as to whether they will), and therefore desiring jurors likely to favor their clients, consider race in their jury selection decisions and, when challenged (as are prosecutors more often than defense lawyers) employ less than candid justifications for their choices. And, since judges are hesitant to call lawyers, especially prosecutors, liars, the lawyers' justifications, if at all plausible, are almost always accepted. Compliance with Batson's dictates therefore is essentially, as Prof. Gershman states, "a charade," commonly violated by prosecutors (and also by defense lawyers).
To be sure, there are some differences between race-based challenges by prosecutors and by defense lawyers. Prosecutors' race-based challenges more often are exercised in order to deprive a defendant from a cross-section of the community and a jury including some of his peers; defense lawyers' race-based challenges are more often designed to reach those goals. Prosecutors' race-based challenges more often deprive black citizens of the right to serve on juries; defense lawyers' challenges enhance that (but diminish the right of whites and others to serve). Additionally, to discriminate - which is what challenging a juror based on race is - is presumably more invidious if done by an agent of the state than a private citizen. But race-based challenges by either side are common, and violate the constitutional principles of Batson.
Batson, therefore, simply does not work. Both sides commonly violate its principles to achieve their own goals. It may be considered a noble experiment with a lofty goal that has failed, or perhaps an example of a short-sighted Supreme Court just not realizing how things are done down in the pits. What can or should be done? I am sure many trial lawyers, both criminal and civil, prosecutor or defense counsel, would prefer it be eliminated. Prof. Gershman mentions a proposal to limit peremptory challenges to situations where attorneys give a "credible reason" for their exercise, what I call a challenge for "semi-cause." Another proposal he mentions is to track carefully all prosecutorial challenges similar to the way police stops are tracked. An obvious way is to eliminate all peremptory challenges, as Justice Marshall had suggested in Batson. And, of course, professional sanctions against lawyers who violate Batson might help enforce its dictates. (However, the history of lack of sanctions against prosecutors for other areas of prosecutorial misconduct suggests increased sanctions would have little effect). Lastly, more lengthy voir dire of jury panels, especially if by lawyers and not judges, would provide the litigants with a greater basis to exercise challenges than racial generalizations.
As Prof. Gershman says, "[Batson] diminishes the integrity of the criminal justice system." The decision in Foster is unlikely to solve that problem.
In Luis v. United States, the Supreme Court held that pretrial restraint of untainted assets needed by a criminal defendant to retain counsel of choice violates the Sixth Amendment. But what about pretrial restraint of untainted assets not needed to hire counsel? The Fourth Circuit, alone among federal circuits, permits pretrial restraint of untainted substitute assets, subject to Sixth Amendment concerns. In United States v. Chamberlain, in the Eastern District of North Carolina, the government moved for a post-indictment pretrial restraining order against the defendant's untainted substitute asset pursuant to 21 U.S.C. Section 853(e). Both the defendant and government agreed that the untainted asset in question, a parcel of land, was not needed by Chamberlain in order to secure criminal defense counsel. The defendant opposed the government's motion, arguing that Justice Breyer's language/analysis in Section II.B.1. of Luis foreclosed pretrial restraint of any substitute asset under Section 853, in effect overruling Fourth Circuit precedent. The government maintained that Luis was inapplicable since Chamberlain raised no Sixth Amendment issue. Judge Mack Howard sided with the government. "While the undersigned agrees that the Supreme Court may in fact interpret Section 853 in this way in the future, it has not yet ruled on this issue and has not upset applicable Fourth Circuit precedents governing the instant question presented before this court." Steve West was on the briefs for the government and Elliot Abrams (Cheshire Parker Schneider & Bryan) and Tommy Manning (Manning Law Firm) were on the briefs for Chamberlain. According to Abrams, this all matters at a practical level for the criminal defense bar:
Consider the facts of Luis. There the government established probable cause to believe that the defendant obtained more in illegal proceeds than she currently possesses.
Under Luis, she can use her innocent/substitute assets to pay her attorneys a reasonable fee. But under Billman and its progeny the relation-back doctrine of 853(c) applies to all of those innocent/substitute assets such that, if she is convicted, the government’s ownership interest in all of her assets will be deemed to have vested before she paid her attorneys.
Therefore, if she is convicted, the government can forfeit all funds paid for legal services, despite that a court authorized those payments under the Sixth Amendment.
Section 853(n) does not help because the lawyer’s right vested after the property became forfeitable and because the lawyer had reason to believe that the property was subject to forfeiture. And since forfeiture is mandatory, the court could not exempt those funds from forfeiture.
This would create the same Sixth Amendment problem that Luis solved—people being unable to use their innocent assets to hire counsel. It would also force lawyers to take such cases on contingency, which is ethically improper.
Here are the government and defense briefs and Judge Howard's opinion. U.S. v. Chamberlain - Gov Application Restraining Order, U.S. v. Chamberlain - Response in Opposition to Gov Motion for Restraining Order, U.S. v. Chamberlain-Government's Reply Memorandum, U.S. v. Chamberlain-Defendant's Sur-Reply, U.S. v. Chamberlain-Order Granting Government's Motion.
Judge Howard's Order is being appealed to the Fourth Circuit.
Thursday, May 19, 2016
This just in from the Supreme Court. The Sixth Amendment's Speedy Trial Clause does not apply to the time between conviction, via trial or guilty plea, and sentencing. Justice Ginsburg wrote the unanimous opinion. The Court noted that petitioner did not base his claim on the Due Process Clause and refused to speak to the issue of whether excessive delay between conviction and sentencing might run afoul of Due Process. The Court reserved the question of whether the Speedy Trial Clause may apply in the case of bifurcated procedures, in which facts that could enhance the prescribed sentencing range are determined during the sentencing phase. The Court also left open whether the Speedy Trial right reattaches upon renewed prosecution of a convicted defendant who has prevailed on appeal. Justice Sotomayor wrote a separate concurrence stating that "in the appropriate case" she would consider applying the Barker v. Wingo test to determine whether delay between conviction and sentencing ran afoul of Due Process. Justice Thomas, joined by Justice Alito, wrote separately to say that the Court should not prejudge the Due Process question, but should wait for a proper presentation, argument, and full briefing "before taking a position on this issue." The case is Betterman v. Montana.
Thursday, May 5, 2016
NACDL and the US Chamber of Commerce have a Law & Policy Symposium on Thursday May 26, 2016 at the US Chamber of Commerce in Washington, D.C. The title of the program is "The Enforcement Maze: Over-Criminalizing American Enterprise." The morning keynote speaker will be Chair of the House Committee on the Judiciary Bob Goodlatte, with David Ogden, former deputy AG, doing a keynote address later in the day. For the full program, see here - Download Agenda_NACDL-ILR Law Policy Symposium_External Agenda_5-5-16
Wednesday, May 4, 2016
As every veteran litigator knows, who the trial judge is not only a major determinant in the ultimate result of a case, but a major factor in how unpleasant and difficult the lawyer's life will be. There are judges, I suspect fewer than in the past, who are so biased to defendants and hostile to their lawyers, more often to defense lawyers than prosecutors, that the case is a nightmare for the lawyers (and obviously their clients). Reversals of judges for intemperate and biased conduct toward lawyers, or even the generally meaningless criticisms in cases that are not reversed, are rare. Defense lawyers, therefore, rejoice when one of those decisions is issued by an appellate court.
Last week, the Ninth Circuit in an unpublished opinion, United States v. Onyeabor, 13-50431 (April 27, 2016), reversed a conviction by a jury before Central District of California Judge Manuel Real primarily because the judge's remarks "devastated the defense, projected an appearance of hostility to the defense, and went far beyond the court's supervisory role" so that they "revealed such a high degree of antagonism as to make fair judgment impossible." This is not the first time the court has admonished Judge Real, who in 2006 was the subject of a Congressional investigation which considered but did not vote impeachment.
Almost every state has a judicial conduct commission which on occasion removes unfit judges. These commissions generally consist of a combination of judges, lawyers, and laypeople. There is no direct federal analog, although there is a somewhat clumsy apparatus whereby the judiciary itself may impose sanctions and recommend that Congress consider impeachment. Sanctions on federal judges for abusing lawyers and litigants are, to my knowledge, virtually non-existent. Although a federal judge apparently may be removed for beating a spouse (as Alabama District Judge Mark Fuller likely would have, had he not resigned) , he or she will likely not be sanctioned at all for beating up lawyers and defendants.
Sunday, May 1, 2016
"The article rejects suggestions that the rhetorical and regulatory changes occurred because prosecutorial misconduct has become more prevalent. It identifies other social causes: a public awakening to criminal justice problems for which prosecutors bear responsibility; revelations, in particular, regarding the role of prosecutorial misconduct in wrongful conviction cases; new social science understandings about social and psychological predicates for prosecutorial wrongdoing; and reform organizations’ inclusion of systemic prosecutorial reform on their agenda. The article shows how the internet has served as the essential catalyst for shifting public and judicial attitudes. The article concludes by predicting that the old and new approaches to prosecutorial accountability will coexist into the foreseeable future, and that the implications will include both a more active judicial role in critiquing and overseeing prosecutors and increased self-regulation by prosecutors’ offices."
Thursday, April 28, 2016
A wonderful article appeared in the NYLJ back in March concerning textualism in white collar law. Authors Elkan Abramowitz and Jonathan Sack remark on the broadly worded statutes one finds in the white collar arsenal, and how Justice Scalia was a leader in using a textualist approach in interpreting these statutes. The authors of this article reflect on the "exculpatory no" and obstruction of justice as two examples in demonstrating the use of textualism.
With Justice Scalia no longer with us, it will be interesting to see if others pick up this theme in current cases such as former Gov. McDonnell.
Monday, April 25, 2016
The United States Supreme Court accepted cert this morning in Shaw v. United States here. In 2014 the Court had looked at section 1344(2) of the bank fraud statute. (Loughrin v. United States). In contrast to Loughrin, this new case examines subsection (1), specifically the "scheme to defraud a financial institution" and whether it requires proof of a specific intent not only to deceive. The case comes from the 9th Circuit where the court examined the question of "whether that means the government must prove the defendant intended the bank to be the principal financial victim of the fraud." The Ninth Circuit held that although there needs to be an intent to defraud the bank under section 1, there is no requirement that the bank "be the intended financial victim of the fraud." Other circuits, however, have "held that risk of financial loss to the bank is an element that must be proven under section 1344(1). Stay tuned...
Wednesday, April 20, 2016
Judge Valerie Caproni, the Southern District of New York judge presiding over the case of convicted former New York State Assembly Speaker Sheldon Silver, has unsealed papers submitted by United States Attorney Preet Bharara alleging that the convicted politician had affairs with two women who allegedly received favorable treatment from him in his professional capacity. The women, whose names were redacted from court papers (but identified, with accompanying photos, by the New York Daily News) were allegedly a prominent lobbyist who dealt regularly with Silver in his official capacity and a former state official whom Silver allegedly helped get a state position.
The government, whose efforts to introduce evidence of the relationships at trial were rebuffed by the judge, argued it should be able to provide such evidence at sentencing, purportedly to demonstrate that these relationships and favors provided by Silver demonstrated a pattern of abuse of power and possibly to rebut any evidence, including Silver's 50-year marriage, of Silver's good character. The judge seemed to accept the first argument, stating that she viewed this information "as a piece with the crimes for which Mr. Silver stands convicted," although "not exactly the same since no one is suggesting a quid pro quo, but of a piece of a misuse of his public office, and that's why I think it is relevant."
Generally, a federal judge has a right to consider virtually any information on sentencing, but I am uneasy about the injection of information of extramarital affairs of a defendant into the sentencing decision. If "no one is suggesting a quid pro quo," as Judge Caproni said, I question its relevance. Unless there is some basis that Silver did something favorable for these women because of their alleged sexual relationships - which I would call a "quid pro quo - I wonder whether his alleged actions constitute a "misuse of public office."
There, of course, is a difference between allowing a party to present evidence or argument at sentencing and factoring that information into the sentencing decision, and, absent specific facts, I am hesitant to say the material should not be considered. I am troubled, however, by the possibility that a defendant's alleged marital infidelity will become a regular part of a prosecutor's sentencing toolbox.
I am relatively sure that my first boss, from almost fifty years ago, Frank Hogan, the legendary and exemplary longtime District Attorney of New York County, would not have proffered such evidence, but Mr. Hogan was a man with a perhaps old-fashioned notion of fair play in a perhaps gentler age in which prosecutors rarely took aggressive (or even any) positions on sentencing (and the press did not publicize the dalliances of public officials).
(I note that Mr. Silver, whom I never met or spoke with, or contributed to, appointed me three times (and failed to reappoint me a fourth) to serve on the New York State Commission on Judicial Conduct).
Sunday, April 17, 2016
Last week in a significant opinion involving mens rea and the federal aiding and abetting statute, 18 U.S.C. Section 2(a), the First Circuit threw out a conviction based on faulty jury instructions.
The instruction allowed the jury to convict the defendant if she “knew or had reason to know” that her husband had been previously convicted of a criminal offense punishable by a term of over one year.
The court ruled that the “had reason to know” language impermissibly allowed for conviction on a theory of negligence.
Here is the key language:
“Notwithstanding Xavier and its progeny, we therefore adhere to our view that, in order to establish criminal liability under 18 U.S.C. § 2 for aiding and abetting criminal behavior, and subject to several caveats we will next address, the government need prove beyond a reasonable doubt that the putative aider and abettor knew the facts that make the principal's conduct criminal. In this case, that means that the government must prove that Darlene knew that James had previously been convicted of a crime punishable by more than a year in prison. Having so concluded, and before turning to consider the effect of this holding on this appeal, we add several important caveats.”
The chief caveat imposed by the court was that “knowledge” can be established through a “willful blindness” instruction, if "(1) the defendant claims lack of knowledge; (2) the evidence would support an inference that the defendant consciously engaged in a course of deliberate ignorance; and (3) the proposed instruction, as a whole, could not lead the jury to conclude that an inference of knowledge [is] mandatory."
Saturday, April 9, 2016
The New York Times reported on Tuesday, April 5 that Donald Trump, contrary to his asserted practice of refusing to settle civil cases against him, had settled a civil fraud suit brought by disgruntled purchasers of Trump SoHo (New York) condos setting forth fraud allegations that also were being investigated by the District Attorney of New York County ("Donald Trump Settled a Real Estate Lawsuit, and a Criminal Case Was Dismissed"). The suit alleged that Trump and two of his children had misrepresented the status of purchaser interest in the condos to make it appear that they were a good investment.
What made this case most interesting to me is language, no doubt inserted by Trump's lawyers, that required as a condition of settlement that the plaintiffs "who may have previously cooperated" with the District Attorney notify him that they no longer wished to "participate in any investigation or criminal prosecution" related to the subject of the lawsuit. The settlement papers did allow the plaintiffs to respond to a subpoena or court order (as they would be required by law), but required that if they did they notify the defendants.
These somewhat unusual and to an extent daring conditions were no doubt designed to impair the District Attorney's investigation and enhance the ability of the defendants to track and combat it, while skirting the New York State penal statutes relating to bribery of and tampering with a witness. The New York statute relating to bribery of a witness proscribes conferring, offering or agreeing to confer a benefit on a witness or prospective witness upon an agreement that the witness "will absent himself or otherwise avoid or seek to avoid appearing or testifying at [an] action or proceeding" (or an agreement to influence his testimony). Penal Law 215.11 (see also Penal Law 215.30, Tampering with a Witness). Denying a prosecutor the ability to speak with prospective victims outside a grand jury makes the prosecutor's job of gathering and understanding evidence difficult in any case. Here, where it is likely, primarily because of a 120-day maximum residency limit on condo purchasers, that many were foreigners or non-New York residents and thus not easily served with process, the non-cooperation clause may have impaired the investigation more than it would have in most cases.
A clause requiring a purchaser to declare a lack of desire to participate, of course, is not the same as an absolute requirement that the purchaser not participate. And, absent legal process compelling one's attendance, one has no legal duty to cooperate with a prosecutor. It is questionable that if, after one expressed a desire not to participate, his later decision to assist the prosecutor voluntarily would violate the contract (but many purchasers would not want to take a chance). The condition of the contract thus, in my view, did not violate the New York statutes, especially since the New York Court of Appeals has strictly construed their language. People v. Harper, 75 N.Y.2d 373 (1990)(paying victim to "drop" the case not violative of statute).
I have no idea whether the settlement payment to the plaintiffs would have been less without the condition they notify the District Attorney of their desire not to cooperate. And, although the non-cooperation of the alleged victims no doubt made the District Attorney's path to charges more difficult, the facts, as reported, do not seem to make out a sustainable criminal prosecution. Allegedly, the purchasers relied on deceptive statements, as quoted in newspaper articles, by Mr. Trump's daughter Ivanka and son Donald Jr. that purportedly overstated the number of apartments sold and by Mr. Trump that purportedly overstated the number of those who had applied for or expressed interest in the condos, each implying that the condos, whose sales had actually been slow, were highly sought. A threshold question for the prosecutors undoubtedly was whether the statements, if made and if inaccurate, had gone beyond acceptable (or at least non-criminal) puffing into unacceptable (and criminal) misrepresentations.
Lawyers settling civil cases where there are ongoing or potential parallel criminal investigations are concerned whether payments to alleged victims may be construed by aggressive prosecutors as bribes, and often shy away from inserting restrictions on the victims cooperating with prosecutors. On the other hand, those lawyers (and their clients) want some protection against a criminal prosecution based on the same allegations as the civil suit. Here, Trump's lawyers boldly inserted a clause that likely hampered the prosecutors' case and did so within the law. Nonetheless, lawyers seeking to emulate the Trump lawyers should be extremely cautious and be aware of the specific legal (and ethical) limits in their jurisdictions. For instance, I personally would be extremely hesitant to condition a settlement of a civil case on an alleged victim's notifying a federal prosecutor he does not want to participate in a parallel federal investigation. The federal statutes concerning obstruction of justice and witness tampering are broader and more liberally construed than the corresponding New York statutes.
Wednesday, April 6, 2016
The DC Circuit Court of Appeals, Hon. Srinivasan, vacated the district court order in the Fokker case finding that these "determinations are for the Executive - not the courts - to make." The case arose "from the interplay between the operation of a DPA and the running of time limitations under the Speedy Trial Act." The Court of Appeals held "that the Act confers no authority in a court to withhold exclusion of time pursuant to a DPA based on concerns that the government should bring different charges or should charge different defendants." Some key quotes from the decision -
"The Constitution allocates primacy in criminal charging decisions to the Executive Branch."
"It has long been settled that the Judiciary generally lacks authority to second-guess those Executive determinations, much less to impose its own charging preferences."
"Nothing in the statute's terms or structure suggests any intention to subvert those constitutionally rooted principles so as to enable the Judiciary to second-guess the Executive's exercise of discretion over the initiation and dismissal of criminal charges."
"The context of a DPA is markedly different. Unlike a plea agreement - and more like a dismissal under Rule 48(a) - a DPA involves no formal judicial action imposing or adopting its terms."
Friday, April 1, 2016
From the abstract:
Corporate compliance is becoming increasingly “criminalized.” What began as a means of industry self-regulation has morphed into a multi-billion dollar effort to avoid government intervention in business, specifically criminal and quasi-criminal investigations and prosecutions. In order to avoid application of the criminal law, companies have adopted compliance programs that are motivated by and mimic that law, using the precepts of criminal legislation, enforcement, and adjudication to advance their compliance goals. This approach to compliance is inherently flawed, however — it can never be fully effective in abating corporate wrongdoing. Explaining why that is forms this Article’s main contribution. Criminalized compliance regimes are inherently ineffective because they impose unintended behavioral consequences on corporate employees. Employees subject to criminalized compliance have greater opportunities to rationalize their future unethical or illegal behavior. Rationalizations are a key component in the psychological process necessary for the commission of corporate crime — they allow offenders to square their self-perception as “good people” with the illegal behavior they are contemplating, thereby allowing the behavior to go forward. Criminalized compliance regimes fuel these rationalizations, and in turn bad corporate conduct. By importing into the corporation many of the criminal law’s delegitimatizing features, criminalized compliance creates space for rationalizations, facilitating the necessary precursors to the commission of white collar and corporate crime. The result is that many compliance programs, by mimicking the criminal law in hopes of reducing employee misconduct, are actually fostering it. This insight, which offers a new way of conceptualizing corporate compliance, explains the ineffectiveness of many compliance programs and also suggests how companies might go about fixing them.
Wednesday, March 30, 2016
Sixth Amendment Right to Counsel Infringed When Untainted Assets are Frozen, Preventing Payment of Attorney Fees
In Sila Luis v. United States, the Supreme Court rules "[a] federal statute provides that a court may freeze before trial certain assets belonging to a criminal defendant accused of violations of federal health care or banking laws. See 18 U. S. C. §1345. Those assets include: (1) property 'obtained as a result of' the crime, (2) property 'traceable' to the crime, and (3) other 'property of equivalent value.' §1345(a)(2). In this case, the Government has obtained a court order that freezes assets belonging to the third category of property, namely, property that is untainted by the crime, and that belongs fully to the defendant. That order, the defendant says, prevents her from paying her lawyer. She claims that insofar as it does so, it violates her Sixth Amendment 'right . . . to have the Assistance of Counsel for [her] defence.' We agree."
Monday, March 21, 2016
I have just published a new article in the Compliance Elliance Journal entitled "Internal Investigations and the Evolving Fate of Privilege."
In 1981, the United States Supreme Court delivered a landmark ruling in Upjohn Co. v. United States. The decision made clear that the protections afforded by the attorney-client privilege apply to internal corporate investigations. This piece examines the fundamental tenets of Upjohn, discusses some recent challenges to the applicability of privilege to materials gathered during internal investigations, and considers the manner in which the international nature of modern internal investigations adds complexity and uncertainty to the field.
The article is available for free download here.
Friday, March 18, 2016
We note two recent victories in federal white collar jury trials, one by a seasoned hand and another by an up and coming star. In U.S. v. Kallini, Dr. Adel Kallini, a former anesthesiologist and now pain management physician practicing in Broward County, Florida, was indicted in the Middle District of Florida, Tampa Division. Dr. Kallini was charged with one count of conspiracy to commit health care fraud and wire fraud, as well as one count of falsification of records in a federal investigation. The Government also sought forfeiture of over $1MM.
Our sole defense at trial was good faith reliance upon the advice of counsel. In June, 2013, Dr. Kallini’s tax attorney presented him with a business “deal”, proposed to the attorney by two people who claimed to be legitimately involved in the health care field. (Unbeknownst to Dr. Kallini and his lawyer, the two were involved in health care fraud for the past three years which included, but was not limited to, paying kickbacks to patients and doctors in South Florida). The “deal” presented to Dr. Kallini, through his lawyer, essentially required Dr. Kallini to “rent” out his Medicare provider number for (what he was told) the billing of legitimate services provided to patients by other physicians who, for one reason or another, could not bill Medicare for the services provided. From the payments, Dr. Kallini was to receive 25%, his lawyer 10%, and the two others 65%. Dr. Kallini’s lawyer prepared a written agreement/contract reflecting the above.
Dr. Kallini has been practicing medicine since 1971 and had a Medicare provider number since 1973. Having never previously done anything of this nature, he asked his lawyer point blank: “Is this legal?” His lawyer told him it was. Dr. Kallini signed the agreement/contract.
On cross examination, the Government’s expert witness was forced to concede the critical differences between intentional fraud and unintentional "abuse" of the Medicare payment system. The expert also acknowledged that if the defense's factual theory of the case was correct, Dr. Kallini's conduct could fall into the non-criminal category. Bieber's cross examination of the expert on this point was greatly aided by Strassman's discovery on the internet of a six year old Power Point presentation prepared by the expert in which he taught a group of Government investigators the differences between the intentional defrauding of Medicare and the “unintentional abuse” of the payment system. Dr. Kallini was the sole defense witness.
In U.S. v. Upchurch, et al., in the EDVA (Alexandria Division), Eugene Gorokhov of Washington DC's Burnham & Gorokhov, assisted by Ziran Zhang, represented defendant Matthew Jones. According to Gorokhov:
A group of young adults, to include my client, went to a Six Flags amusement park on a Saturday in the Summer of 2015. On the day they were there, numerous people at Six Flags had their belongings stolen, to include bags containing wallets and credit cards. Later surveillance videos showed that several individuals in my client’s group used the stolen credit cards at nearby stores on the same days. My client, however, was not in any of the videos.
Despite the apparent lack of evidence against my client, the Government still charged him, along with the others, with conspiracy to commit wire fraud and access device fraud. As to my client, the only evidence of his involvement was: (1) the appearance of his home address on a fraudulent credit card application, made in the name of a victim who had her belongings stolen from the park; (2) the use of the fraudulently obtained card to pay a phone bill under his name. Multiple people lived at my client’s home address. After indictment, phone records showed that his phone account had two phone numbers, and other evidence the investigator had showed that one of these numbers was used by another resident of his house, giving that person incentive to pay the phone.
The Government investigator, during the course of his investigation: (1) did not interview any of the other residents living at my client’s home address, despite knowing that more than one person lived at my client’s address; (2) overlooked the fact that the fraudulent credit card application listed an email address associated with one of the other residents at my client’s address (and admitted that he overlooked it at trial); (3) did not subpoena any of ATM surveillance videos associated with several fraudulent ATM transactions on the credit card, and those videos were ultimately erased in accordance with the bank's retention policy; and (4) did not obtain recorded phone calls between the credit card company and the individual who made the fraudulent card application, even though there were about a dozen such calls. Those calls surfaced 24 hours before trial and were, for unknown reasons, not previously produced by the bank. Those calls showed that it was someone else, and not my client, attempting to activate the fraudulent card.
During deliberations, the jurors came back with a question that asked, in essence, whether they could find a defendant guilty based only on his knowledge of a crime, and his presence at the scene. The defense asked Judge Brinkema for a "mere presence" instruction, which she gave. Thirty minutes later, the jury came back with a verdict of not guilty with respect to Eugene's client.
Congratulations to Bieber and Gorokhov and their respective teams. And if you have a federal white collar jury trial victory to report do not hesitate to let me know. We'll do our best to publish it and discuss its significance here.
Wednesday, March 16, 2016
By now, every reader knows that President Obama has appointed D.C. Circuit Chief Judge Merrick Garland to the Supreme Court. On the merits, Garland appears to be a sterling appointment with impressive credentials and moderately liberal views on most issues and moderately pro-government views on criminal issues, positions that approximate those of the President. As a political matter, he, of the named contenders for the Supreme Court, is the one most likely to overcome the Republicans' stated refusal to approve any nominee until the next President is in office. I predict that Garland will be confirmed, but not until 2017, in the first term of President Hilary Clinton.
Garland, I also predict, will be a middle-of-the-road justice on criminal justice issues and generally pro-government on white-collar crime issues, somewhat like Justice Elena Kagan. He will, at least on white-collar issues, be far less pro-defense than his predecessor, Justice Antonin Scalia. Scalia, although painted by liberals as an arch-conservative (as indeed he was on some social issues, like abortion and same-sex marriages) had pro-defense views on many issues, such as the right to confront witnesses, the right to trial by jury, and overcriminalization. Not only did he often vote in favor of the defendant, he sometimes authored opinions with innovative interpretations that became established law.
At a bar affair at which I was introduced to Justice Scalia as the president of the National Association of Criminal Defense Lawyers, he said, absolutely deadpan, "Why don't you guys give me an award? I'm the best justice you have." The NACDL never did, nor was it to my knowledge ever seriously considered, no doubt because of his overall conservative reputation and record. It may to some seem far-fetched, but I would not be surprised if a few years ago from now, white-collar defense lawyers will be lamenting the loss of Justice Scalia.
Monday, March 14, 2016
In November 2014, the American Bar Association Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes published its final report. The report recommended major changes to the structure of the Federal Sentencing Guidelines for economic crimes. In particular, the report sought to reduce the current Guideline's dominant focus on loss in favor of a more balanced approach that weighed loss, culpability, and victim impact. I discussed these proposed amendments more fully here. Though the ABA CJS Task Force recommendations were not adopted by the Federal Sentencing Commission (see here and here), some courts have begun to use the ABA "Shadow Guidelines" when varying in economic crimes cases.
Last week, a federal judge in New York used the ABA "Shadow Guidelines" in sentencing Mair Faibish, former CEO of Synergy Brands, Inc. Faibish was accused of kiting checks worth in excess of $1 billion. According to the DOJ press release in the case:
Synergy was a publicly-held food products company that traded on the NASDAQ and Over-the-Counter exchanges and manufactured and distributed various food products. As proven at trial, Faibish and his co-conspirators, on behalf of Synergy, funneled approximately $1.3 billion in checks that were not backed by sufficient funds through Signature Bank, Capital One Bank, and various Canadian bank accounts of associated food manufacturers and distributors in Canada. The Canadian companies then sent checks in corresponding amounts, which were also not backed by sufficient funds, back to Faibish-controlled shell companies. Because the banks made deposited funds immediately available for withdrawal, the scheme artificially inflated the companies’ account balances. Faibish and his co-conspirators used Synergy’s inflated bank account balances to book millions of dollars in fictitious accounts receivable and revenue.
As a result of this fraud, FDIC-insured Signature Bank lost approximately $26 million that Faibish and his co-conspirators had withdrawn before the bank uncovered the scheme. Following the scheme’s collapse, Synergy was taken into bankruptcy, and its publicly traded stock became essentially worthless, causing millions of dollars in investor losses. On November 4, 2014, the Court ordered Faibish to pay $51,166,000 in forfeiture.
The trial evidence also established that Faibish falsely inflated the values of Synergy’s sales, cost of goods sold, and pre-paid expenses in filings with the SEC for the quarter ending June 30, 2008. These material misrepresentations were breaches of the defendant’s fiduciary duties to investors.
The Federal Sentencing Guideline range in the case was life in prison, though the maximum available sentence was actually less due to applicable statutory maximums. Despite the Federal Sentencing Guideline range and the government's request for decades in prison for Faibish, the Court rejected these arguments and sentenced him to 63 months in prison (see here and here). According to LAW360, the judge stated at sentencing that the Federal Sentencing Guidelines for economic crimes are "almost useless" because of their reliance and focus on loss in calculating the applicable sentencing range. Instead, the judge used the ABA "Shadow Guidelines" to determine what he considered to be a more appropriate sentence.
This seems to be yet another indication of the growing dissatisfaction among judges with the Federal Sentencing Guidelines for economic offenses (see here and here) and should serve as yet another call for the Federal Sentencing Commission to consider more significant reforms in the future.