Thursday, January 22, 2015
The New York Times has the story, with a link to the criminal complaint, here. U.S. Attorney Preet Bharara followed his longstanding tradition of holding a press conference in order to make inflammatory, prejudicial, and improper public comments about the case.
Wednesday, January 21, 2015
For more than a year now, the Australian Securities and Investments Commission has been investigating a number of large Australian banks regarding allegations of collusion in the setting of the Bank Bill Swap Rate (BBSR). The BBSR is an interest rate benchmark that is used when banks lend to one another. This rate also impacts business and home loan rates. As details regarding the investigation begin to trickle out, one Australian commentator in the Sydney Morning Herald has said that this “could well prove to be the largest corporate scandal of 2015.” According to the commentator’s article, one bank, ANZ, has suspended seven BBSR traders, including the suspension of the head of the bank’s balance sheet trading earlier this month (see here). The article further states that ANZ has launched an internal investigation into the matter. While the article notes that other Australian banks may have also launched internal investigations, the banks have made no public statements regarding any such inquiries.
As readers of this blog will recall, in 2012 an investigation began into allegations that several large banks had been manipulating the London Interbank Offered Rate (Libor). The scandal received significant international attention. Eventually, the US, UK, and EU fined the banks involved more than $6 billion. Further, several traders were prosecuted for their roles in the manipulation. For more on the Libor Scandal, see the Council on Foreign Relations Backgrounder available here.
Based on recent reports from Australia, it sounds like the Australian BBSR investigation might be the next big international white collar case to watch in 2015.
Monday, January 19, 2015
The case is United States v. Dibe. Claudio Dibe pled guilty, without a plea agreement, to wire fraud and received a below Guidelines sentence. He complained on appeal that his sentence would have been lower if the sentencing court had considered his counsel's ineffective assistance in failing to adequately explain the benefits of the government's initial plea offer. The Ninth Circuit held that ineffective assistance of counsel cannot be considered as a mitigating under 18 U.S.C. Section 3553(a). Distinguishing the U.S. Supreme Court's opinion in Pepper v. United States, 131 S.Ct. 1229 (2011), the Ninth Circuit noted that counsel's alleged ineffective assistance "has nothing to do with [Dibe's] own conduct."
Wednesday, January 14, 2015
Tuesday, January 13, 2015
In United States v. Coppenger, the defendant pled guilty to conspiracy to commit bank (mortgage) fraud and a Klein conspiracy. Coppenger, a developer, led and initiated the scheme, which involved two Panama City land parcels, 33 straw buyers and three corrupt mortgage company officers. The Government requested a downward departure based on Coppenger's substantial assistance, and the parties agreed that a sentence within the 78-97 month Guidelines range found at level 28, criminal history category 1, was appropriate. Instead, the sentencing court upwardly varied to a 120 month sentence, based on Coppenger's victimization of the straw buyers, many of whom pled guilty and saw their lives ruined. The judge relied heavily on sealed information contained in the straw buyers' presentence reports. Coppenger's trial attorney failed to object.
Coppenger attacked the sentence on appeal as procedurally and substantively unreasonable. He argued that it was procedurally unreasonable under Fed.R.Crim.Proc. 32(i)(1)(B), because the court relied on information excluded from the presentence report without giving the defendant a written or in camera summary of said information, thereby surprising and prejudicing Coppenger. Coppenger argued that the sentence was substantively unreasonable because the court characterized his co-conspirators as victims.
The Sixth Circuit vacated the sentence, holding that the court's procedural error was plain, both surprising and prejudicing Coppenger. The Sixth Circuit distinguished Coppenger's case from Irizarry v. United States, 553 U.S. 708 (2008), because in Irizarry the Supreme Court interpreted Fed.R.Crim.Proc. 32(h), which requires advance notice to the parties only when a sentencing court is contemplating an upward departure. Although the court in Coppenger's case upwardly varied, rather than departed, it did so after reviewing approximately 30 straw buyer presentence reports, in order for the judge to "go back and refresh my recollection about their history, their background, and how it was that they came to be involved in all this." None of this information was contained in Coppenger's presentence report and it remains under seal to this day. The Sixth Circuit held that Coppenger and his attorney should have been given a meaningful opportunity to understand and respond to this information: "Here the district court's sua sponte reliance on extraneous information both surprised and prejudiced Coppenger and denied him a meaningful opportunity to respond, in violation of Rule 32(i)(1)(B). The court’s explicit consideration of the offense conduct’s impact on the co-conspirator straw buyers was not only novel, but was neither signaled in the presentence report nor otherwise reasonably foreseeable."
The Sixth Circuit rejected Coppenger's substantive unreasonableness argument, holding that the court on remand could consider the impact of Coppenger's offense conduct on his co-conspirators.
Congratulations to Evan Smith of the Appalachian Citizens' Law Center, who argued and briefed the case on appeal.
Monday, January 12, 2015
A former Peru president is convicted "of funneling more than $40 million in public funds to tabloid newspapers that smeared his opponents during his 2000 re-election campaign." See AP, Former Peru President Convicted of Corruption
In United States v. Norman, the defendant was convicted of wire fraud conspiracy after a jury trial in which he testified in his own behalf. The sentencing court assessed two points against Norman for obstruction, based on the defendant's allegedly perjurious trial testimony. But the judge also determined amount of loss and number of victims based on Norman's testimonial admissions. On appeal, Norman objected to this as inconsistent and procedurally unreasonable. The Second Circuit unsurprisingly disagreed, noting that the trial judge was free to accept some and reject some of Norman's testimony. Moreover, even though the trial judge found that appellant's admissions regarding amount of loss and number of victims were corroborated by other evidence, the Second Circuit said that this was not necessary. There is no need for a sentencing court to corroborate the defendant's in-court admissions before using them to determine sentencing factors.
Saturday, January 10, 2015
2B1.1, the fraud sentencing guideline, has been controversial. The controversay has centered on several points including its complexity, its focus on fraud loss, its failure to sufficiently focus on offender culpability, and the problems that accrue in determining fraud loss. The U.S. Sentencing Commission recognized some of these problems and held a conference at John Jay College to consider the issues and possible solutions.
The Commission now seeks comment on a proposed amendment to revise this guideline "by clarifying the definition of 'intended loss,' which contributes to the degree of punishment, and the enhancement for the use of sophisticated means in a fraud offense." The Commission also states that "[t]he proposed amendment also revises the guideline to better consider the degree of harm to victims, rather than just the number of victims, and includes a modified, simpler approach to 'fraud on the market' offenses which involve manipulation of the value of stocks." (see here) The Commission stated that they "have not seen a basis for finding the guideline to be broken for most forms of fraud, like identity theft, mortgage fraud, or healthcare fraud." You can find the proposal here (last 17 pages).
Wednesday, January 7, 2015
As we start off the year, I thought I would mention an issue that will likely be widely discussed in 2015 – collateral consequences.
As I mentioned in this 2014 post, I moderated a panel discussion regarding collateral consequences at the 2014 ABA CJS White Collar Crime Institute in London last October. That discussion raised a number of interesting issues and made clear that this is a topic that is growing in prominence internationally. As we move into 2015, the ABA continues to work on the ABA National Inventory of Collateral Consequences of Conviction, a database with which every attorney should be familiar. Later this year, the ABA will also convene a National Summit on Collateral Consequences, which will bring together a host of experts from around the country to discuss important issues related to this topic.
The NACDL has also been working hard on the issue of collateral consequences. According to the organization, over 70 million Americans have some form of criminal record and there are over 50,000 known collateral consequences of conviction. In May of last year, the NACDL launched a major new report entitled Collateral Damage: America’s Failure to Forgive or Forget in the War on Crime – A Roadmap to Restore Rights and Status After Arrest and Conviction. According to the NACDL website, “The report is a comprehensive exploration of the stigma and policies relegating tens of millions of people in America to second-class status because of an arrest or conviction. In addition, the report lays out ten recommendations to ensure that the values of life, liberty and the pursuit of happiness are within reach of all, regardless of past mistakes.” It is certainly worth a read.
As 2015 gets underway, this is one topic to keep an eye on, and the above resources from the ABA and NACDL are a great way to get up to speed.
Tuesday, January 6, 2015
Monday, January 5, 2015
Many are focused on what sentence former Virginia Gov. Bob McDonnell will receive from the judge today. After all, he was convicted, and now is the time for him to be punished. But there is a second question, and an important one in this particular case, that also warrants consideration: Whether the former governor should be allowed to remain on bond pending his appeal. It should be an easy answer - he needs to remain free.
McDonnell’s case screams, ‘let’s wait before we put him behind bars.’ That’s because this is really a case about whether prosecutors stretched the law too far.
Creative federal prosecutions are not new and higher courts have been quick to strike prosecutions that exceed the boundaries of the law. Sometimes our courts have to remind prosecutors of John Adams words that we are “a government of laws, and not of men.”
We recently saw the Supreme Court strike down a prosecution that used the Chemical Weapons Convention Implementation Act to prosecute a woman for an attempted simple assault. And the Supreme Court is currently reviewing the government’s use of the Sarbanes Oxley Act to prosecute a fisherman for throwing fish overboard that a state official had asked him to bring to shore.
McDonnell prosecutors used a novel approach in bringing this case. They attempted to prosecute conduct that folks may find offensive. But merely being offensive is not enough for making something a crime. It has to be criminal under existing laws, as opposed to a new interpretation created by the government in order to bring their case to court.
This case wasn’t the typical bribery case of someone handing a person money and that individual doing a specific official act in return. When an appellate court finally gets its hands on this case, it may all come down to whether McDonnell corruptly performed or promised to perform an “official act.” But what constitutes an “official act” is not so easy to explain. Will it include any act that happens to be done by a government official? Will it make a difference in a federal prosecution that the government official happens to be elected to a state position? Will it make a difference that state ethics rules exist to oversee what may or may not be considered corrupt conduct?
So now an appellate court will need to decide whether McDonnell’s conduct fits within the language of the statute. And that is a substantial question of law, the test the court looks at in determining whether to grant bond pending appeal. Pending that decision, it seems that he should remain free.
Many convicted defendants before McDonnell have been allowed to stay out on bond pending their appeal. There’s Martha Stewart, who eventually decided to go ahead and serve her sentence; Bernie Ebbers who received a 25 year sentence; John and Timothy Rigas, who received 15 and 20 years, respectively, and actor Wesley Snipes, who was convicted in a tax case. All went to trial and were convicted. And all were offered the chance to remain free pending their appeal. One even finds former governors and congressman on the list of those who have been given an appellate bond – former Illinois Gov. George Ryan was the recipient of one and so was former representative William Jefferson.
In many instances, the trial judge is the one who grants the bond pending appeal. But in some cases, it has required a higher, appellate court to step in to order the release of the accused pending his or her appeal. That happened to former Alabama Gov. Donald Siegelman, who was initially granted bail.
The bottom line in most white collar cases comes down to whether the accused has a significant issue being raised on appeal that it is better to have resolved prior to the start of the sentence. After all, once the individual is incarcerated, you can’t take back the time they have served.
Creative federal prosecutions have cost prosecutors much time and money, with few rewards. And in some cases it takes appellate courts to step in and act – and until they do, McDonnell should remain free.
Thursday, January 1, 2015
Wednesday, December 31, 2014
Each year this blog has honored individuals and organizations for their work in the white collar crime arena by bestowing "The Collar" on those who deserve praise, scorn, acknowledgment, blessing, curse, or whatever else might be appropriate.
With the appropriate fanfare, and without further ado, The Collars for 2014:
The Collar for Attempting to Make the Guinness Book of Records for the Longest Investigation - To Congress for its continued investigation of the IRS.
The Collar for Trying to Be Best Actor in the “Mirror Has Two Faces”– To corporate counsel who think they can represent individuals in a corporation or academic institution while continuing to represent the entity
The Collar for Continually Hitting the Snooze Button on the Wakeup Alarm – To the Sentencing Commission for putting off for years the recognition that something needs to be done about Sentencing Guideline 2B1.1
The Collar for Trying to Build the Economy – To DOJ for reaching huge dollar settlements with companies and banks.
The Collar for the Largest Fireworks End of Year Show – To Alstom and DOJ for reaching a $772 Million Settlement
The Collar for Getting Out When the Going is Good – To AG Holder who tendered his upcoming resignation after announcing important clemency initiatives
The Collar for the Case Most Needing Review - Virginia Governor Bob McDonnell’s conviction
The Collar for Forgetting What Happened to Humpty Dumpty – To US Attorney Preet Bharara for going too far with insider trading prosecutions
The Collar for the Most Indecipherable Code – To whoever is trying to determine the meaning of how to define insider trading
The Collar for Least Likely to be Teaching Professional Responsibility at a Law School -- The former attorneys at Dewey & LeBoeuf who plead guilty
The Collar for Breaking the Rubber Band When It Was Stretched Too Far – To the DOJ for trying to use the Sarbanes Oxley Act to prosecute a fisherman who threw fish overboard.
The Collar for Role Reversal -To Sidney Powell, who is a female, for her scintillating book Licensed to Lie that exposed prosecutorial shenanigans, but also critiqued the physical characteristics and attire of her DOJ litigation opponents
The Collar for the Most Likely to Fall in a Dominos Game – Anyone who was associated with Bernie Madoff.
The Collar for Justice Finally Served-To the Texas Court of Criminal Appeals that overturned the one remaining Tom DeLay conviction in an 8-1 decision.
The Collar for Most Political District Attorney’s Office -To the Travis Country District Attorney’s Public Corruption Unit. Not satisfied with its humiliating appellate defeats in the Tom DeLay case, the office is now investigating University of Texas System Regent Wallace Hall in a politically inspired witch-hunt.
The Collar for White Collar Integrity-To U.T. System’s outside counsel Phil Hilder whose written report exposed the legal absurdity of the Texas Legislature’s Wallace Hall witch-hunt referral.
The Collar for the Least Likely to Put Up a Fight – To companies charged with Antitrust violations -- that had no trials and 100% of its convictions through plea agreements.
The Collar for Best Non-Fiction -To Rob Cary’s Not Guilty: The Unlawful Prosecution of U.S. Senator Ted Stevens, which builds a devastating critique of the DOJ’s trial team.
The Collar for the Best Child– To Don Siegelman’s daughter, who continues to fight to Free Don
The Collar for the Best Parent - Retired years ago and renamed the Bill Olis Best Parent Award –not awarded again this year since no one comes even close to Bill Olis, may he rest in peace.
Thursday, December 11, 2014
Here are two (ahem) differing views on yesterday's Second Circuit insider trading decision in United States v. Newman. The Wall Street Journal editorial writers are understandably happy at the ruling and contemptuous of Preet Bharara, dubbing him an Outside the Law Prosecutor. The Journal exaggerates the extent to which the case was an outlier under Second Circuit precedent and incorrectly states that "the prosecution is unlikely to be able to retry the case." The prosecution cannot retry the case, unless the full Second Circuit reverses the panel or the U.S. Supreme Court takes the case and overturns the Second Circuit.
Over at New Economic Perspectives, Professor Bill Black insists that the Second Circuit Makes Insider Trading the Perfect Crime. Black thinks Wall Street financial firms will enact sophisticated cut-out schemes in the wake of the opinion to give inside traders plausible deniability. He compares the fate of Newman and his co-defendant to that of Eric Garner and calls for a broken windows policing policy for Wall Street. Black's piece is outstanding, but in my view he underestimates the extent to which the Newman court was influenced by Supreme Court precedent and ignores the opinion's signals that the government needed to do a much better job of proving that the defendants knew about the tipper's fiduciary breach. As a matter of fact, in the typical insider trading case it is relatively easy to show such knowledge. That's what expert testimony and willful blindness instructions are for.
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.