Tuesday, June 9, 2015
Three years ago, I wrote a lengthy blog piece about U.S. v. Daguerdas, a case in which a SDNY judge ordered a new trial for three of four defendants because of juror misconduct. ("Lying Juror Requires New Trial in Tax Fraud Case," July 12, 2012). The judge denied a new trial for the fourth defendant, Parse, because his lawyers, said the judge, knew or should have known of the juror's misconduct and chose not to report it to the court, and thus Parse waived the misconduct. On appeal to the Second Circuit, U.S. v. Parse (13-1388, June 8, 2015)), the Court, with Judge Amalya Kearse writing the majority opinion, reversed Parse's conviction and remanded for a new trial as to him also.
The Court spent a considerable time reviewing the record to conclude that the district court's factual findings (by Judge William Pauley) that prior to the verdict the lawyers knew about the misconduct or failed to exercise due diligence to determine whether it had occurred was "clearly erroneous" and "unsupported by the record." This ruling, with which Judge Chester Straub, while concurring in the reversal, disagreed, I am sure gave some measure of relief to the trial lawyers, from the firm of Brune and Richard, whom Judge Pauley had chastised. Those lawyers appeared to have been faced with the difficult dilemma of whether and when a lawyer is obliged to report suspected misconduct by a trial participant that is likely to be favorable to her client and to have chosen not to report something that would have diminished his (and their) chance of winning. (It is also possible that during the heat and travail of trial the lawyers never focused on the reporting issue.)
This ethical/practical dilemma arises, for instance, when an attorney suspects or believes - but lacks actual knowledge - about trial misconduct, whether minor misconduct such as a juror engaging a defendant in casual conversation outside a courtroom despite a court admonition, or major misconduct such as a witness or defendant perjuring himself. Reporting the misconduct would likely result in removing a potentially favorable juror in the first example and in striking favorable testimony and severely limiting the defense in the second, in both cases lessening the client's (and attorney's) chance of a favorable outcome.
The Court declined to adopt a general rule, as requested by the defendant and amicus New York Council of Defense Lawyers, that lawyers (including prosecutors presumably) need not bring juror misconduct to the attention of the court unless counsel actually knew that such misconduct had occurred. Nonetheless, I suspect lawyers will cite the case for that specific proposition and the broader proposition that lawyers need not report any trial misconduct unless they have actual knowledge.
Interestingly, the extensive, case-specific factual analysis about the extent of the attorneys' knowledge of the juror's misconduct was unnecessary to the Court's decision, as both the two-judge majority and concurring opinions demonstrated. Even assuming the district court was correct in its negative evaluation of the attorneys' conduct, the Court found the denial to Parse of his basic Sixth Amendment right to an impartial jury by the improper presence of the lying juror was so significant that it could not be, as the district court had found, "waived" by the lawyers' conduct, and warranted reversal.
Monday, June 8, 2015
"The highest ranking BP exec charged in the fatal 2010 Deepwater Horizon disaster," was acquitted on Friday after two hours of jury deliberations. Initially charged with false statements and Obstruction of Congress, the court dismissed the obstruction charge, leaving the jury to consider the false statements charge. Interestingly the dismissal of the obstruction charge was "after three members of Congress and six staffers subpoenaed by" the accused "sought to be kept from having to testify, citing the speech and debate clause in the U.S. Constitution." (Steptoe & Johnson LLP here). The case was handled on the defense side by Brian Hererlig and Reid Weingarten.
Saturday, June 6, 2015
The DOJ has prosecuted many companies, often resolving the cases with Deferred and Non-Prosecution Agreements. And on occasion, states have also proceeded against companies alleging corporate criminal liability. But how far does entity liability go, and can you extend corporate criminality to entities like the Archdiocese of St. Paul and Minneapolis. According to Jean Hopfensperger's article in the Star Tribune, Archdiocese Charged in Sex Abuse Coverup, the Ramsey County Attorney's Office has filed these charges against this entity and that the entity reports it will cooperate in this state investigation. Will we start seeing states adopting the federal path of proceeding criminally against entities, getting them to cooperate, followed by individual indictments premised upon the information provided? Does it make a difference here that an individual has already been indicted? And will proceeding against this particular entity, present a different model? And should corporate criminality versus civil liability be used here?
Tuesday, June 2, 2015
Yesterday I skimmed through the FIFA indictment referred to by my colleague Lucian Dervan on May 26, 2015 ("FIFA Officials Facing Corruption Charges"), primarily to determine how the government justified jurisdiction over alleged criminal activities that largely, seemingly almost entirely, occurred in other nations, a complaint made by none other than Vladimir Putin. Upon review, I believe the indictment, apparently drafted with that question in mind, facially makes a reasonably strong case for U.S. jurisdiction, based largely, although not entirely, on money transfers through U.S. financial institutions.
There remains, however, the question whether the U.S. Department of Justice should assume the role of prosecutor of the world and prosecute wrongs, however egregious, that were almost wholly committed by foreigners in foreign nations and affected residents of those foreign nations much more than residents of the United States. Our government's refusal to submit to the jurisdiction of the International Criminal Court is arguably inconsistent with our demand here that citizens of other nations submit to our courts.
On another subject, what struck me as just wrong was a minor part of the indictment, the obstruction of justice charge against Aaron Davidson, one of the two United States citizens indicted (the other, a dual citizen, is charged with procuring U.S. citizenship fraudulently). While the obstruction of justice count itself (count 47) is a bare bones parsing of the statute, the lengthy 112-page preamble to the actual recitation of counts (to me in clear violation of Fed. R. Crim. P. 7(c), which says the indictment "must be a plain, concise and definite written statement")(emphasis added) describes Davidson's allegedly criminal conduct as follows: "Davidson alerted co-conspirators to the possibility that they would be recorded making admissions of their crimes."
Such advice is provided as a matter of course - absolutely properly and professionally, in my opinion - by virtually every white-collar or other criminal lawyer representing a target of a criminal investigation. Since lawyers are given no special treatment different from others, if these facts justify a criminal conviction, a lot of white-collar lawyers will be counting the days until the five-year statute of limitations has passed since their last pre-indictment stage client meeting.
The obstruction of justice statute is so vague that it gives the government the opportunity to charge virtually any effort by lawyers or others to advise persons under investigation to exert caution in talking with others. The applicable statute, the one used against Davidson, prescribes a 20-year felony for "whoever corruptly...obstructs, influences, or impedes any official proceeding, or attempts to do so..." 18 U.S.C. 1512(c)(2). That catch-all statute, which follows one proscribing physical destruction of tangible evidence, to me is unconstitutionally vague, but courts have generally upheld it and left the determination of guilt to juries on the ground the word "corruptly," which itself is subject to many interpretations, narrows and particularizes it sufficiently. I hope that the presiding judge in this case, the experienced and respected Raymond Dearie, does not allow that count to get to the jury.
Friday, May 29, 2015
Former Speaker of the House Dennis Hastert has been indicted for structuring and lying to the FBI, two crimes that many reasonable people, including me, are not certain should be crimes. Structuring involves, as alleged here, limiting deposits and other financial arrangements so as not to trigger a bank report to the IRS. Lying to the FBI includes a denial of wrongful activity, a natural human response by those confronted (although a mere "exculpatory no" without more is no longer generally prosecuted).
The indictment states that Hastert had paid off a fellow Yorkville, Illinois resident he had known most of that person's life $1.7 million, and promised a total of 3.5 million, "in order to compensate for and conceal...misconduct" committed "years earlier" against that person. The indictment mentions that Hastert was a teacher and wrestling coach at a local high school from 1965-1981.
Reading between the lines of this deliberately vague and unspecific indictment, my guess is that the alleged underlying misdeeds are sexual in nature. I also wonder whether the considerable payment mentioned in the indictment "to compensate for and conceal misconduct " resulted from extortion and, if so, whether as a matter of prosecutorial discretion and perhaps even as a matter of law Hastert should be prosecuted for such relatively minor crimes, and whether Hastert is really being punished for wrongs done decades ago (and probably beyond a statute of limitations). These thoughts, let me be clear, are based on speculation and surmise, with only preliminary knowledge of the facts.
Tuesday, May 26, 2015
According to CNN, the U.S. Department of Justice is preparing to bring corruption charges against up to 14 senior officials at FIFA, the world's soccer governing body. The reports from CNN come from "law enforcement officials." According to the New York Times, several FIFA officials have already been arrested in Switzerland in a "extraordinary early-morning operation."
FIFA has been under investigation for some time, including with regards to the bidding process for the 2018 and 2022 World Cups, which will occur in Russia and Qatar. FIFA conducted an internal investigation of the selection process for each event. The investigation was led by Michael Garcia of Kirkland & Ellis. Garcia submitted his report to FIFA in September 2014. FIFA then released a "summary" of the report's findings, which summary Garcia alleged was "erroneous." Garcia resigned as independent chair of the FIFA Ethics Committee's Investigatory Chamber in December 2014.
One issue that will be interesting to watch in this case is the manner by which the U.S. alleges jurisdiction over the senior FIFA officials despite the fact that alleged corruption occurred overseas and FIFA is an association governed by Swiss law. According to CNN, the U.S. will allege jurisdiction exists because of the breadth of U.S. tax and banking regulations. Further, the government will reportedly rely in part on the fact that significant revenue is generated by the U.S. television market. This is certainly a case we will be hearing a lot about in the coming months.
My friend Kimberly Brown used to invite me once a year to address her Administrative Law class at University of Baltimore Law School. The topic was always the pros and cons of an Independent Counsel, operating under the auspices of the Independent Counsel Act, and a Special Counsel, appointed by the Attorney General. This was in the early years of the Obama Administration when Independent Counsel Ken Starr's Whitewater/Madison Guaranty/Lewinsky Investigation, Special Counsel Jack Danforth's Waco Obstruction Investigation, and Special Counsel Patrick Fitzgerald's Plame Leak Investigation were matters of recent history.
I knew something about each of these investigations, having worked for Starr, served as an AUSA in the Western District of Texas during the Branch Davidian siege and prosecution, and closely followed the Plame story. At the close of class I wound up comparing the Independent Counsel and Special Counsel regimes and concluding that a Special Counsel was better suited to lead a thorough investigation of what are inevitably highly charged, politicaly tinged allegations. Why?
A Special Counsel, appointed by the party running the Executive Branch, is far less subject to political attack by the ruling government's fellow travelers in the media and Congress. They look foolish attacking a person put in place by the very government being investigated. This is especially true if the Special Counsel is a person of acknowledged prestige, such as Danforth, a retired Senator, and Fitzgerald, a sitting U.S. Attorney with an impeccable reputation at the time.
And for the same reason, firing such a person is likely to bring down scorn on the Attorney General and President. Can you imagine the firestorm that would have ensued had President Bush fired Patrick Fitzgerald? Witnesses and lawyers who interacted with Danforth's Waco Investigation considered his staff to be over-the-top aggressive. But they had nobody to complain to, and Danforth and his people were insulated and protected from effective criticism.
So, the Special Counsel enjoys far less theoretical and statutory independence than did the Independent Counsel under both prior statutes, but in practice can be quite independent.
But if what if a President and Attorney General come along who never appoint a Special Counsel, even when one is called for, and what if the mainstream media outlets give them a free pass? That is essentially what happened in the first six years of President Obama's reign, with Eric Holder as Attorney General.
To my knowledge not one DOJ Special Counsel has been appointed during President Obama's tenure. And yet there are/were at least three scandals justifying an independent, professional Executive Branch criminal investigation, free from political interference. These three are: Fast and Furious and alleged cover-up; Benghazi and alleged cover-up; and alleged IRS political targeting and cover-up.
It is hard to believe that a Republican President and Attorney General would be able to get away with such inaction, without an incessant drumbeat of opposition and media invective. The failure to appoint a Special Counsel to probe IRS' alleged targeting of conservative groups is particularly troubling, given the confirmed interaction between IRS officials such as Lois Lerner and DOJ Public Integrity attorneys regarding potential prosecution of targeted groups. I cannot imagine a more glaring conflict of interest on DOJ's part.
This is a lesson not likely to be lost on future Republican Administrations.
Thursday, April 30, 2015
False Accusation of Rolling Stone Article Suggests prior Notification of Targets in White-collar Cases
In November Rolling Stone published a blockbuster article about a student's account of being gang-raped at a University of Virginia frat house. Within days others, primarily the Washington Post, sharply questioned the truthfulness of the student's claim. Rolling Stone then commissioned an independent investigation by Steve Coll, the respected Dean of Columbia Journalism School, to review the magazine's reporting, editing and fact-checking. That report, written by Coll and two colleagues, came out a few weeks ago. See here. Rolling Stone also "withdrew" the article.
The report (Sheila Coronel, Steve Coll, Derek Kravitz, "An Anatomy of a Journalistic Failure") is "intended as a work of journalism about a failure of journalism." It is thorough and comprehensive and, as expected, clear and thoughtful. Although the purpose of the report was to investigate the conduct of Rolling Stone and not the conduct of the student, it treats the student who made the false accusation and continued it over months of questioning by the reporter much too gently and itself is affected by the implicit bias that it suggests motivated the writer. For instance, it takes pains to state that the student who made the indisputably false accusation may well have in fact been a victim of some predatory sexual act(s), and does not even speculate that she might have made up the incident out of whole cloth. It expresses its regret that the the widely-disseminated revelation of the false accusation might cast doubt on other campus sex accusations (accepting the questionable estimates that false charges make up less than 8% of rape allegations) and fails even to consider the possibility that the false claim here might not be such an aberration , and perhaps will serve a salutary purpose by increasing public (and governmental and institutional) awareness that false accusations are not so infrequent.
To be sure, campus sexual abuse by male students against women is a serious problem and deserves vigorous, but measured and fair, action by universities and, when appropriate, law enforcement, and aggressive reporting on that subject is important to increase public knowledge. School officials, and magazine and newspaper writers (and also law enforcement officers) should be mindful, however, that this is an area where accusations are often inaccurate, exaggerated, and sometimes downright false, and that there are sometimes unjust findings and convictions, by courts and schools, that wrongly destroy the lives of those accused. Indeed, in my opinion, rape is the area of criminal law in which there are the most intentionally false (as opposed to mistaken) accusations by civilian complainants.
The report demonstrates convincingly that there were a series of errors in the investigation, review, fact-checking and editing of the story before it appeared. Among those errors was the failure to give the person accused an opportunity to refute the accusations. "Journalistic practice - and basic fairness - require that if a reporter intends to publish derogatory information about anyone, he or she should seek that person's side of the story."
I could not help but thinking that the defective oversight of the Rolling Stone journalists and their seemingly limited concern for the reputations of the institutions accused were nonetheless far greater and far more likely to uncover false accusations than the minimal or nonexistent review by law enforcement that typically occurs in a criminal case prior to an arrest (and sometimes even after). Once law enforcement officers decide to make an arrest, why should the accused not be allowed to present beforehand his "side of the story?" Obviously, in many cases, such as where there is a need for immediate apprehension by a police officer, no pre-arrest review or notification is possible. Further, in many other cases, for instance where the identity of the alleged perpetrator is unknown, or where there is a reasonable fear that if not arrested he will flee and not be available to face charges, an immediate unannounced arrest is called for.
However, in many, probably most, white-collar cases, there is no such need. In those cases, as a general rule a prosecutor should notify a target that he is under investigation and seek his "side of the story." Nonetheless, many prosecutors proceed the "old-fashioned" way by ordering an arrest first without giving the defendant an opportunity to hire a lawyer and present, should he choose to, his side of the story.
Notifying a prospective defendant that he is likely to be arrested and may choose to present his case beforehand has advantages for prosecutors in many situations. The defendant and his lawyer might provide evidence or legal arguments that will persuade the prosecutor to seek lesser charges or not to go forward at all. Sometimes a plea agreement might be reached with the defendant which will eliminate the need for a time-consuming grand jury presentation. And, should the defendant decide to cooperate, he may be able to do so proactively and generally more effectively since an indictment often tips off others to steer clear of him.
There are, arguably, certain benefits to law enforcement in making surprise arrests. There is a possibility that an upset, unprepared and uncounseled defendant will make incriminating statements. And, a defendant may have on his person or in proximity evidentiary items which will be found by a search. Those advantages, however, are less likely to occur in white-collar case, where defendants are less likely to make statements without lawyers or carry contraband or evidence. Another potential benefit to prosecutors is that at bail hearings a defendant's attorney may not be able to argue that the defendant did not flee after becoming aware of the charges. Such an argument, I have found, does not carry as much weight as it should. In any case, prosecutors are unlikely to provide prior notification of their intent to arrest to any who are conceivable flight risks.
For these reasons, the most successful and sophisticated prosecutors in white collar cases, such as the United States Attorney for the Southern District of New York, generally notify white-collar targets of their investigations and give them or their attorneys an opportunity to dissuade, minimize or deal. Less sophisticated prosecutors of white-collar crimes, often state prosecutors, are more likely to make summary arrests. These cases, generally not well vetted since there was no input from the accused or his counsel, more often lead to dismissals, acquittals or cheap pleas.
Not only is pre-arrest notification to a prospective defendant more fair to him in that it gives him an opportunity to defend, explain, negotiate or prepare psychologically, it will benefit judicial and prosecutorial economy of resources by allowing for some matters to be settled with less or no litigation and court involvement. And, as discussed above, it helps law enforcement. It should be the default position in white-collar (and many other) cases, and deviated from only when there are genuine countervailing reasons.
Friday, April 24, 2015
The Deferred Prosecution Agreement (DPA) is available online on the DOJ website here. Like so many DPAs, this one has terms that place the sole discretion on certain matters with the DOJ. For example,
"Deutsche Bank agrees that in the event that the Department determines, in its sole discretion, that Deutsche Bank has knowingly violated any provision of this Agreement, an extension or extensions of the term of the Agreement may be imposed by the Department, in its sole discretion, for up to a total additional time period of one year, without prejudice to the Department's right to proceed as provided in Paragraphs 13-16 below."
As with many DPAs, it calls for continued compliance, a monitor, and disclosure of information (not covered by the attorney-client privilege, etc.). The agreement allows Deutsche Bank to propose three names of monitors to the government - although the government gets to choose. Bottom line is that if the company complies with the DPA (which is within the sole discretion of the government to decide) the criminal Information gets dismissed. Another problematic provision within the DPA is that:
"Deutsche Bank expressly agrees that it shall not, through present or future attorneys, officers, directors, employees, agents or any other person authorized to speak for Deutsche Bank or its subsidiaries or affiliates, make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by Deutsche Bank set forth above or the facts described in the attached Statement of Facts."
Is it really necessary to place so much discretion with the government in the DPA? Shouldn't a court get to decide if there is a violation of a DPA? Should First Amendment rights be allowed to be discarded in a DPA? We will probably never know the answer to these questions because companies in a post-Arthur Andersen world can't take a risk of fighting the government. Most just sign the DPA, try their best to comply, and hope they can move on. For a discussion of terms within DPAs, see my co-authored article here.
DOJ Press Release here today -
"DB Group Services (UK) Limited, a wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank), has agreed to plead guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions around the world. In addition, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges in connection with its role in both manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR. Together, Deutsche Bank and its subsidiary will pay $775 million in criminal penalties to the Justice Department."
"The agreement requires the bank to continue cooperating with the Justice Department in its ongoing investigation, to pay a $625 million penalty beyond the fine imposed upon DB Group Services (UK) Limited and to retain a corporate monitor for the three-year term of the agreement."
"Together with approximately $1.744 billion in regulatory penalties and disgorgement—$800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action, and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action—the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion."
Thursday, April 23, 2015
Jennifer Steinhauer, NYTimes, Senate Confirms Loretta Lynch as Attorney General After Long Delay
Michael S. Schmidt & Matt Apuzzo, NYTimes, David Petraeus Is Sentenced to Probation in Leak Investigation
Wednesday, April 22, 2015
An en banc decision of the Ninth Circuit, United States v. Bonds, reverses the obstruction of justice conviction against then professional baseball player Barry Bonds finding insufficient evidence of materiality under the statute, 18 U.S.C. s 1503. The decision is per curiam, with several concurring opinions, and one dissent.
Hon. Kozinski, joined by Judges O'Scannlain, Graber, Callahan, and Nguyen commence with a single question - "Can a single non-responsive answer by a grand jury witness support a conviction for obstruction of justice under 18 U.S.C. s 1503? In answering this question, they speak about how "[s]tretched to its limits, section 1503 poses a significant hazard for everyone involved in our system of justice, because so much of what the adversary process calls for could be construed as obstruction." They continue to state that "[b]ecause the statute sweeps so broadly, due process calls for prudential limitations on the government's power to prosecute under it." The limitation they place is a requirement of materiality. They find materiality lacking here.
The next concurring opinion also speaks to a requirement of materiality, finding that "a single truthful but evasive or misleading statement can never be material." Hon. Reinhardt's concurring opinion simply says that a single non-responsive answer by a grand jury witness cannot support a 1503 conviction.
And although Hon. Fletcher disagrees with the rationale, focusing on the word corruptly in the statute finds it insufficient here.
Only Hon. Rawlinson does not want to second guess the jury decision and doesn't want to rely on perjury law as some of the concurrences did. The jury was instructed on materiality and that should be sufficient.
What fascinates me about this case is whether everyone is in the same ballpark. For all the reasons provided by everyone other than the dissent, one should not have an obstruction conviction based on this limited statement. But most imply that materiality is an element of obstruction. I have argued in a past Article that it should be - here. And it is wonderful to see so many on this court adhering to that position and taking this point as a given. But the statute may not be as clear and the law as consistent as it should be. This case is important for taking this important step and demonstrating the absurdity of a conviction that fails to have materiality as a key component.
Tuesday, April 14, 2015
Earlier this month, the Second Circuit, as expected (at least by me), denied Southern District of New York U.S. Attorney Preet Bharara's request for reargument and reconsideration of its December 2014 ruling in United States v Newman which narrowed, at least in the Second Circuit, the scope of insider trading prosecutions. I would not be surprised if the government seeks certiorari, and, I would not be all that surprised it cert were granted.
In Newman, the defendants, Newman and Chiasson, were two hedge fund portfolio managers who were at the end of a chain of recipients of inside information originally provided by employees of publicly-traded technology funds. The defendants traded on the information and realized profits of $4 million and $68 million respectively. There was, however, scant, if any, evidence that the defendants were aware whether the original tippors had received any personal benefit for their disclosures.
The Second Circuit reversed the trial convictions based on an improper charge to the jury and the insufficiency of the evidence. Specifically, the court ruled that:
1) the trial judge erred in failing to instruct the jury that in order to convict it had to find that the defendants knew that the corporate employee tippors had received a personal benefit for divulging the information; and
2) the government had indeed failed to prove that the tippors had in fact received a personal benefit.
Thus, at least in the Second Circuit, it appears that the casual passing on of inside information without receiving compensation by a friend or relative or golf partner does not violate the security laws. "For purposes of insider trading liability, the insider's disclosure of confidential information, standing alone, is not a breach," said the court. Nor, therefore, does trading on such information incur insider trading liability because the liability of a recipient, if any, must derive from the liability of the tippor. To analogize to non-white collar law, one cannot be convicted of possessing stolen property unless the property had been stolen (and the possessor knew it). Those cases of casual passing on of information, which sometimes ensnared ordinary citizens with big mouths and a bit of greed, are thus apparently off-limits to Second Circuit prosecutors. To be sure, the vast majority of the recent spate of Southern District prosecutions of insider trading cases have involved individuals who have sold and bought information and their knowing accomplices. Although Southern District prosecutors will sometimes now face higher hurdles to prove an ultimate tippee/trader's knowledge, I doubt that the ruling will affect a huge number of prosecutions.
The clearly-written opinion, by Judge Barrington Parker, did leave open, or at least indefinite, the critical question of what constitutes a "personal benefit" to a provider of inside information (an issue that also might impact corruption cases). The court stated that the "personal benefit" had to be something "of consequence." In some instances, the government had argued that a tippee's benefit was an intangible like the good graces of the tippor, and jurors had generally accepted such a claim, likely believing the tippor would expect some personal benefit, present or future, for disclosing confidential information. In Newman, the government similarly argued that the defendants had to have known the tippors had to have received some benefit.
Insider trading is an amorphous crime developed by prosecutors and courts - not Congress - from a general fraud statute (like mail and wire fraud) whose breadth is determined by the aggressiveness and imagination of prosecutors and how much deference courts give their determinations. In this area, the highly competent and intelligent prosecutors of the Southern District have pushed the envelope, perhaps enabled to some extent by noncombative defense lawyers who had their clients cooperate and plead guilty despite what, at least with hindsight, seems to have been a serious question of legal sufficiency. See Dirks v. S.E.C., 463 U.S. 646, 103 S.Ct. 3255 (1983)(test for determining insider liability is whether "insider personally will benefit, directly or indirectly"). As the Newman court refreshingly said, in language that should be heeded by prosecutors, judges, and defense lawyers, "[N]ot every instance of financial unfairness constitutes fraudulent activity under [SEC Rule] 10(b)."
As I said, I would not be shocked (although I would be surprised) if Congress were to enact a law that goes beyond effectively overruling Newman and imposes insider trading liability on any person trading based on what she knew was non-public confidential information whether or not the person who had disclosed the information had received a personal benefit. Such a law, while it would to my regret cover the casual offenders I have discussed, would on balance be a positive one in that it would limit the unequal information accessible to certain traders and provide a more level playing field.
Friday, April 10, 2015
District of Columbia Court of Appeals Makes It Official: Prosecutor's Duty To Disclose Exculpatory Evidence Is Broader Than Brady
Kline was prosecuting Arnell Shelton for the shooting of Christopher Boyd. Shelton had filed an alibi notice and "the reliability of the government's identification witnesses" was the principal issue at the 2002 trial, according to the Report and Recommendation of Hearing Committee Number Nine ("Report and Recommendation").
Kline spoke with Metropolitan Police Department Officer Edward Woodward in preparation for trial. Kline took contemporaneous notes. Woodward was the first officer at the scene of the crime and spoke to victim Boyd at the hospital shortly after the shooting. According to the Report and Recommendation, Kline's notes of his conversation with Woodward were, in pertinent part, as follows: "Boyd told officer at hospital that he did not know who shot him–appeared maybe to not want to cooperate at the time. He was in pain and this officer had arrested him for possession of a machine gun."
At trial Boyd identified Shelton as the shooter. According to Bar Counsel, Kline never disclosed Boyd's hospital statement to the defense despite a specific Brady/Giglio request for impeachment material. The other identification witnesses were weak and/or impeachable. The case ended in a hung jury mistrial and the alleged Brady material (that is, Boyd's hospital statement to Woodward) was not revealed to the defense until literally the eve of the second trial, even though DC-OUSA prosecutors and supervisors had known about it for some time.
The court offered defense counsel a continuance, but she elected to go to trial as her client was then in jail. The second trial ended in Shelton's conviction. You can consult my earlier posts for a more detailed factual and case history background.
Rule 3.8(e) of the DC Rules of Professional Conduct states in pertinent part that: "The prosecutor in a criminal case shall not . . . intentionally fail to disclose to the defense, upon request and at a time when use by the defense is reasonably feasible, any evidence or information that the prosecutor knows or reasonably should know tends to negate the guilt of the accused...except when the prosecutor is relieved of this responsibility by protective order of the tribunal."
The District of Columbia Court of Appeals upheld the position of D.C. Bar Counsel and the Board that Rule 3.8(e) is not synonymous with Brady v. Maryland. The Court declined to import Brady's materiality test into Rule 3.8(e), making it clear that at the pre-trial and trial stages of a case, no prosecutor is fit to make a speculative materiality analysis. The rule is now clear. Any evidence that tends to negate the guilt of the defendant must be disclosed under the D.C. Rules of Professional Responsibility.
The Court overturned the Board's 30-day sanction imposed against Kline, given the confusion engendered by the Commentary to Rule 3.8(e). The Commentary states in part that: "The rule...is not intended either to restrict or to expand the obligations of prosecutors derived from the United States Constitution, federal or District of Columbia statutes, and court rules of procedure." Courts in other jurisdictions, as well as the ABA, have construed the D.C. Rule as including the Brady materiality standard, based on this Commentary. Additionally, at the time of Kline's actions, DC-USAO's training taught that Rule 3.8(e) was synonymous with Brady. The Court held that even if the Commentary was inconsistent with the Rule, the plain language of the Rule, and its legislative history, prevailed.
"However, while clear and convincing evidence has been presented that Kline violated Rule 3.8 when he failed to turn over the Boyd Hospital Statement to the defense prior to trial, we are mindful of the fact that our comment to Rule 3.8 (e) has created a great deal of confusion when it comes to a prosecutor’s disclosure obligations under Rule 3.8. Thus, Kline's understanding of his ethical obligations, while erroneous, does not warrant an ethical sanction."
The Board originally found that the suppressed exculpatory statement was material, even though a subsequent jury in possession of the material convicted the defendant. I don't know if that finding was ever revisited. I mention it because the Court's opinion nowhere discusses this point and seems to assume that the withheld statement was immaterial.
The opinion by Chief Judge Washington is extremely well-crafted and enormously significant.
Hat Tip to Charles Burnham of Burnham & Gorokhov for informing me of this ruling and sending a copy.
Friday, April 3, 2015
I am deeply saddened to report the death of Samuel J. Buffone, a giant in the D.C. and national white collar bars. Sam was not only one of the greatest appellate craftsmen of all time. He was also a consummate professional, gentleman, scholar and mentor. Sam was most recently a partner at BuckleySandler. Before that he was at Ropes & Gray, as chair of the Government Enforcement Practice Group, and Tigar and Buffone. I first met Sam during the Victoria Savings & Loan sentencings and appeals in the early nineties. He was a quiet man of dignity and grace, and a selfless friend to me when I crossed over to the defense bar and moved to Washington. Sam Buffone will truly be missed by the many friends and colleagues he leaves behind and whose lives he has enriched. Here is a tribute to Sam, posted today on the BuckleySandler website by Andrew Sandler.
Thursday, April 2, 2015
Wednesday, April 1, 2015
Tuesday, March 31, 2015
Practice Notes: First Circuit Cases Yield White Collar Rulings on Materiality and Upward Variance/Departure
Two white collar decisions emerged last week from the First Circuit, both related to the Rwandan genocide.
United States v. Kantengwa reinforces an old truth for white collar practitioners. If you don't win on materiality at trial, you are totally screwed on appeal. According to the First Circuit, the appellant was "a member of a prominent political family allegedly involved in the Rwandan genocide." Katengwa was indicted for perjury under 18 U.S. Code 1621 (1) for false statements she told under oath in an asylum application and subsequent removal proceedings. Katengwa argued, among other things, that the government was precluded from bringing perjury charges against her because an immigration judge had already ruled that her false statements did not "go to the heart" of her asylum claim. Assuming, without deciding, that an administrative finding of fact can preclude later criminal charges, the First Circuit rejected Katengwa's collateral estoppel claim, because "materiality" under 1621 (1) and the "heart of the matter rule" in immigration law involve two distinct standards. "The heart of the matter rule from immigration law prohibits basing an adverse credibility determination on inconsistencies in an applicant's testimony that do not go to the heart of [her] claim." (Internal quotes and citations omitted.) But, "a statement is material in a criminal prosecution for perjury under § 1621(1) if it is 'material to any proper matter of the [decisionmaker's] inquiry.' United States v. Scivola, 766 F.2d 37, 44 (1st Cir. 1985) (emphasis added)." The First Circuit made clear, through a litany of examples, that this test can cover a multitude of subsidiary matters to the decisionmaker's overall inquiry. Translation: In all but the rarest cases, materiality is an argument you make to the jury. It can serve as a nice hook for jury nullification. Don't expect it to lead to victory on appeal.
In United States v. Munyenyezi, Katengwa's sister was indicted on "two counts of procuring citizenship illegally by making false statements to the government. See 18 U.S.C. §§ 1425(a) and (b)." The jury hung in her first trial, but the second trial produced convictions. She raised several issues on appeal, but the one that concerns me here is the sentence of 120 months, the statutory maximum. Munyenyezi's Guidelines Range was 0-6 months, and she attacked the sentence on appeal as substantively unreasonable. The First Circuit called this, "a tough sell," reiterating its abuse of discretion standard of review and precedent that "as long as we see 'a plausible sentencing rationale' that reaches 'a defensible result,' the sentence stands. United States v. Martin, 520 F.3d 87, 96 (1st Cir. 2008)." The trial judge imposed the 120 month sentence under alternative theories. He granted an upward departure under Guidelines Section 5K2.0 for an aggravating circumstance of a kind or degree not adequately taken into accoount by the Guidelines. He also upwardly departed under 18 U.S.C. Section 3553 (a). As every schoolboy knows, and as the First Circuit reminds us, "Section 3553(a) lets a judge vary upward based on factors listed there, like the defendant's background (including her criminal history), the circumstances of the offense, the seriousness of the offense, the need to protect and deter others, the need to promote respect for the law and to provide a just punishment, and the need to eliminate unjustified sentencing disparities." And the First Circuit also reminds us, albeit in a footnote, that "[u]nder certain circumstances a judge can also vary downward using section 3553(a)." You don't say!
Interestingly, the trial judge did not upwardly depart/vary because of Munyenyezi's alleged "participation in genocidal conduct." He sentenced her to the statutory maximum because, "'lying about participation in genocide when specifically asked,' the judge explained, knowing full well 'that such conduct is automatically disqualifying with respect to immigration and citizenship seriously undermines the integrity of this country's immigration standards in the most offensive way' imaginable." The judge later noted that if he had sentenced Munyenyezi for her alleged genocidal conduct, he would not have imposed concurrent sentences.
There are often silver linings in decisional clouds. An appellate court that uphold a 3553 (a) upward variance of ten years can also uphold a 10 year downward variance. The precedent cuts both ways.
Saturday, March 28, 2015
Christine Wright-Darrisaw was found guilty of threatening the President under 18 U.S. Code Section 871(a). Ms. Wright-Darrisaw experienced a negative result in her local Family Court. She called the White House switchboard and, after two and one-half minutes of incoherent barnyard gibbersih, threatened to fornicate and kill President Obama. She was entitled to a four point reduction in her offense level under Guidelines Section 2A6.1(b)(6) if the sentencing court found that "the offense involved a single instance evidencing little or no deliberation." The trial judge refused to grant the reduction, noting that the very act of contacting the White House involved deliberation. According to the Second Circuit, "the explanation provided by the district court suggests that the court may have been too sweeping in its consideration of what constitutes deliberation cognizable under U.S.S.G. § 2A6.1(b)(6)." The "deliberation" to be considered under 2A6.1(b)6) "is deliberation related to the communication of the threat itself. Only if a defendant's course of conduct leading up to and following the time the threat was made is closely tied to the communication of the threat, or if the defendant makes any effort to carry out the threat, may the conduct then provide a basis for inferring deliberation sufficient to reject the four-level reduction." Although the call here was deliberate, the threat may not have been. Since it appears that the district court conflated the two concepts, the Second Circuit remanded for re-analysis of the deliberation issue. Examining holdings in sister circuits, the Second Circuit focused on two critical factors in determining whether deliberation is present: "(1) whether, and under what circumstances, the threat itself has been repeated and (2) whether there is evidence of planning or some effort to carry out the threat." In Wright-Darrisaw's case, it is undisputed that the threat against President Obama was not repeated. (However, there were abundant past threats against neighbors, strangers, President Bush, and other officials.) Thus, the only question on remand is whether "there is sufficient evidence of planning or some effort to carry out the threat." The case is United States v. Wright-Darrisaw.
Wright-Darrisaw's challenge to the sufficiency of the evidence against her was deferred pending the U.S. Supreme Court's decision in United States v. Elonis, 730 F.3d 321 (3d. Cir. 2013), cert. granted, 134 S.Ct. 2819 (2014).
Tuesday, March 17, 2015
The NACDL White Collar Crime College at Stetson completed an exhausting and exhilarating program with top white collar defenders teaching white collar advocacy skills to practitioners. This year, the instructors teaching in the program were:
A. Brian Albritton, Henry "Hank" W. Asbill, Brian H. Bieber, Barry Boss, Ellen C. Brotman, Preston Burton, Jean-Jacques Cabou, Robert M. Cary, Lee A. Coppock, David Debold, Lucian E. Dervan, James E. Felman, Drew Findling, Roberta Flowers, Ian N. Friedman, Lee Fugate, Helen Gredd, Lawrence S. Goldman, John Wesley Hall, Jr., John F. Lauro, Bruce Lyons, Terrance MacCarthy, Edward A. Mallett, Bruce Maloy, Eric R. Matheney, Michael D. Monico, Jane W. Moscowitz, Marc L. Mukasey, Kevin J. Napper, Julie Nielsen, Cynthia Eva Orr, J. Edward Page, Marjorie J. Peerce, Patricia A. Pileggi, Ellen S. Podgor, Gregory Poe, Mark P. Rankin, Shana-Tara Regon, Kerri L. Ruttenberg, Brian Sanvidge, Melinda Sarafa, Fritz Scheller, Adam P. Schwartz, George Ellis Summers, Brian L. Tannebaum, Kevin Tate, Larry Thompson, Gary R.Trombley, Morris (Sandy) Weinberg, Jr., Solomon L. Wisenberg
The opening keynote was given by Cynthia Orr, with Larry Thompson speaking about things not to do in a white collar case. The 2015 White Collar Award went to Hank Asbill of Jones Day (see here).