Monday, September 7, 2015
Registration is now open for the Inaugural ABA Criminal Justice Section Global White Collar Crime Institute, which will take place November 19-20, 2015 at the Ritz-Carlton Shanghai Pudong in Shanghai, China. The event is done in collaboration with the KoGuan Law School of the Shanghai Jiao Tong University. I am honored to serve as the Institute Chair and hope to see many of our blog readers at the event.
This conference will be an incredible opportunity to interact with prosecutors, judges, defense counsel, accountants, in-house counsel, and academics from the U.S., China, and other parts of the world as they convene to discuss the complexities of international white collar crime.
More from the registration website:
The goal of the conference is to bring the energy and excitement of our previous international white collar crime conferences to Asia and create unique opportunities for our participants to network and explore the legal complexities of white collar crime in the growing Chinese legal market. Conference topics will include:
- General Counsels’ Roundtable
- Enforcers' Roundtable
- How to Conduct an International Internal Investigation
- Recent Developments in Global Antitrust Cartel Enforcement and Anticipated Implications for China and Asia
- Comparative Legal Systems & Special Enforcement Issues in China, the US & Beyond
- Year in Review: Lessons Learned from Recent White Collar Crimes Prosecutions in China & the US
- Trends Regarding Anti-Corruption Enforcement in China & the US
- Cyber Crime & Virtual Currencies
- Social Responsibility of Corporations
LUNCHEON KEYNOTE SPEAKER – November 19
Sung-Hee Suh, U.S. Deputy Assistant Attorney General
Suh was appointed in Sept. 2014 as the U.S. Department of Justice's Deputy Assistant Attorney General overseeing the Criminal Division's Fraud, Appellate and Capital Case Sections. She re-joined the Department after 15 years in private practice at Schulte Roth & Zabel LLP in New York, where she was a partner in the Litigation group and focused on representing institutions and individuals in financial fraud, securities regulatory, Foreign Corrupt Practices Act, anti-money laundering and sanctions matters.
The complete program is also now available on the ABA CJS registration website.
Thursday, September 3, 2015
Earlier this year, the Wall Street Journal ran an interesting story about several cases in which U.S. courts refused to recognize the attorney-client privilege for communications between in-house counsel and overseas companies. The article focused on two cases in particular – Wultz et al. v. Bank of China Limited and Anwar et al. v. Fairfield Greenwich Limited.
Just recently, Janet Levine, Gail Zirkelbach, Derek Hahn, and Danielle Rowan wrote an article in the Summer 2015 edition of the ABA CJS Criminal Justice magazine on the topic of The Evolving Landscape of Legal Privilege in Internal Investigations. Along with the Bank of China case, the article provides summaries of three other cases involving the privilege issue during internal investigations – In re Kellogg Brown & Root, Inc. (KBR) (previously discussed on this blog here and here), Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Trust Fund IBEW (previously discussed on this blog), and Paterno v. NCAA).
As an update to the above excellent reads, it is important to note that the U.S. Court of Appeals for the District of Columbia recently released another opinion in the KBR matter. This opinion vacated additional orders by the District Court that would have required KBR to turn over the materials at issue in the case. See In re Kellogg Brown & Root, Inc., -- F.3d –, 2015 WL 4727411 (August 11, 2015).
According to the appellate court in the new KBR opinion:
More than three decades ago, the Supreme Court held that the attorney-client privilege protects confidential employee communications made during a business’s internal investigation led by company lawyers. See Upjohn Co. v. United States, 449 U.S. 383, 101 S. Ct. 677, 66 L. Ed. 2d 584 (1981). In this case, the District Court denied the protection of the privilege to a company that had conducted just such an internal investigation. The District Court’s decision has generated substantial uncertainty about the scope of the attorney-client privilege in the business setting. We conclude that the District Court’s decision is irreconcilable with Upjohn. We therefore grant KBR's petition for a writ of mandamus and vacate the District Court's March 6 document production order.
The issue of attorney-client privilege in the internal investigation context is one that is growing in both complexity and significance. Keep an eye out for more court decisions on this issue in the future as companies, attorneys, and courts struggle to find a balance in today’s complex legal and business environment.
Wednesday, August 26, 2015
Once again, the ABA Criminal Justice Section Academics Committee will host work-in-progress roundtables at the annual Criminal Justice Section Fall Institute in Washington, DC. The roundtables will be held on Thursday, October 22, 2015 from 12:30-3:00pm at the Loews Madison Hotel, and the ABA will provide sandwiches and drinks for lunch. The rest of the CJS Fall Institute programs will take place later in the day on Thursday, October 22 and on Friday, October 23 at the same hotel.
We hope you will consider workshopping your criminal justice works-in-progress at these roundtables. Participants will present their work in a roundtable format, and abstracts or drafts will be shared among presenters and discussants in advance of the workshop. If you’re interested in participating, please email an abstract of your paper of no more than 500 words to Lucian Dervan at firstname.lastname@example.org by Sept. 15, 2015. Space is limited, and presenters will be chosen by members of the organizing committee.
This is an excellent opportunity for academics at any stage of their careers, and for those who would like to transition to academia, to workshop pieces at an early stage of development or obtain feedback on more developed pieces. Workshop presenters will be responsible for their own travel and hotel costs, but there is no registration fee for participating in the roundtables. If you decide to participate in the remainder of the ABA CJS Fall Institute, you will need to register for that event separately.
We are also excited to note that this year’s workshop will begin with a brief opening address by Professor Stephen A. Saltzburg of the George Washington University Law School. Professor Saltzburg will discuss how to create and execute a productive and impactful research agenda. Professor Saltzburg is one of the nation’s leading scholars and has authored over twenty books and over 100 articles. Professor Saltzburg’s talk is not to be missed.
The Criminal Justice Section has secured a special room rate of $269 single/double per night at the Lowes Madison Hotel. This rate can be reserved by calling 855-255-6397 and referring to the “ABA Criminal Justice Section Fall Institute.” You can also book online. Reservations must be made by Thursday, October 1, 2015 at 5:00pm EST to secure this rate.
Please spread the word to those who might be interested, including those not yet in academia. We have included below some information regarding last year’s workshop. We hope to see everyone in D.C. at the end of October.
All the best,
Lucian E. Dervan (SIU Law) and Meghan J. Ryan (SMU Law)
Co-Chairs, ABA CJS Academics Committee
Information Regarding Last Year’s Roundtable
On October 23, 2014, the ABA Criminal Justice Section Academics Committee hosted academic roundtables at the ABA Criminal Justice Section Seventh Annual Fall Institute. At these roundtables, scholars from across the country discussed papers on topics ranging from big data’s effect on jury selection to whether second-look sentencing is consistent with the asserted purposes of the Model Penal Code. Participants in the academic roundtables included Joanmarie Davoli (Florida Coastal, now Fed. Soc.), Cara Drinan (Catholic), Andrew Ferguson (Univ. of D.C.), Lea Johnston (Florida), Kevin Lapp (Loyola LA), Ion Meyn (Wisconsin), Steve Morrison (North Dakota), Anthony O’Rourke (Buffalo), and Meghan Ryan (SMU).
Here is a sampling of the great work they presented:
The Miller Revolution, by Cara Drinan (forthcoming in the Iowa L. Rev.)
In a series of cases culminating in Miller v. Alabama, the United States Supreme Court has limited the extent to which juveniles may be exposed to the harshest criminal sentences. In this Article, I argue that the Miller trilogy has revolutionized juvenile justice. While we have begun to see only the most inchoate signs of this revolution in practice, this Article endeavors to describe what this revolution may look like both in the immediate term and in years to come. Part I demonstrates how the United States went from being the leader in progressive juvenile justice to being an international outlier in the severity of its juvenile sentencing. Part II examines the Miller decision, as well as its immediate predecessor cases, and explains why Miller demands a capacious reading. Part III explores the post-Miller revolution in juvenile justice that is afoot. Specifically, Part III makes the case for two immediate corollaries that flow from Miller, each of which is groundbreaking in its own right: 1) the creation of procedural safeguards for juveniles facing life without parole (“LWOP”) comparable to those recommended for adults facing the death penalty; and 2) the elimination of mandatory minimums for juveniles altogether. Finally, Part III identifies ways in which juvenile justice advocates can leverage the moral leadership of the Miller Court to seek future reform in three key areas: juvenile transfer laws; presumptive sentencing guidelines as they apply to children; and juvenile conditions of confinement.
Strictissimi Juris, by Steve Morrison (67 Ala. L. Rev. __ (forthcoming 2015)
Guilt by association is universally rejected, but its criticisms are always based on the substantive due process right to individual, not imputed, liability. The rule of strictissimi juris promises to be the procedural counterpart to the substantive right. Its promise, however, has gone unfulfilled because it is little understood or developed. This article provides a descriptive, prescriptive, and contextual dissertation on strictissimi juris. Descriptively, it provides the jurisprudential foundation and definition of strictissimi juris. Prescriptively, it sets forth the purposes for which lawyers and courts have invoked strictissimi juris, thus providing a guide for how future lawyers might invoke strictissimi juris, and courts apply it. Contextually, it analogizes strictissimi juris to substantive canons that play important roles in the separation of powers.
Thursday, August 13, 2015
On Wednesday, Judge Berman of the Southern District of New York issued an order preliminarily enjoining the SEC from pursuing an administrative proceeding – an in-house trial before an SEC administrative law judge (“ALJ”) rather than an Article III judge – against Barbara Duka, a former Standard & Poor’s executive whom the SEC has accused of securities fraud. The order finds that the SEC’s process for appointing its ALJs is “likely unconstitutional in violation of the Appointments Clause,” marking the third preliminary injunction issued by a federal district court that has come to the same conclusion in recent months – and the first such injunction issued from the SDNY, the putative center of the universe of securities enforcement. The constitutionality of SEC ALJs’ appointments is apparently in grave doubt. This issue has the potential to bring the SEC’s use of administrative proceedings (“APs”) to a halt; indeed, it could impact administrative proceedings in any number of agencies beyond the SEC as well.
The SEC publicly has trumpeted its increased reliance on its ALJ system as part of the agency’s overall goal of pumping up enforcement because of its perceived efficiency – at least from the perspective of the government. For the past several years, the SEC has brought the vast majority of its enforcement actions before its ALJs. The SEC’s success rate in cases before ALJs has been a startling 90% over the past 4.5 years, compared with 69% in federal court over the same period. This is perhaps unsurprising, given the procedural advantages the SEC enjoys in its APs: unlike in federal court, SEC APs involve no jury; discovery for respondents is seriously limited – contrasting sharply with the SEC’s ability to collect evidence, sometimes over the course of years, via subpoena; respondents are generally afforded no more than four months to review the case and prepare for trial; the Federal Rules of Evidence do not apply; and traditionally-inadmissible evidence routinely is considered: “[A]ll evidence that can conceivably throw any light upon the controversy at hand should normally be admitted.” In the Matter of Jay Alan Ochanpaugh, Exchange Act Rel. No. 54363, 2006 SEC LEXIS 1926, *23 n.29 (Aug. 25, 2006) (citing In the Matter of Jesse Rosenblum, 47 S.E.C. 1065, 1072 (1984)). The SEC has turned to its ALJ system to pursue complex cases, including insider trading cases, that historically had been reserved for resolution in federal district court. Anecdotal reports also strongly suggest that the SEC has invoked its perceived advantages before ALJs during settlement negotiations with potential respondents. Thus, the current ALJ system not only provides the SEC with concrete procedural advantages during actual litigation, but the mere threat of the current ALJ system bestows upon the SEC a less concrete but potentially extremely potent weapon to use, behind the scenes, to convince its targets to never litigate in the first place.
Against this backdrop, parties threatened with or subject to SEC administrative proceedings recently have argued, inter alia, that the SEC’s ALJ appointment process violates the Constitution’s Appointments Clause of Article II, which requires that “inferior officers” of the United States be appointed by the President, a Court of Law, or the Head of a Department. This argument should prevail if both (1) SEC ALJs are indeed “inferior officers,” and (2) they are not appointed by the President, a Court, or the Head of a Department. As to the second question, the SEC already has conceded that its ALJs are appointed via a selective service process, which “would be inconsistent with the terms of the Appointments Clause” if the ALJs are inferior officers. And as to the first question – whether the SEC ALJs are inferior officers – the Northern District of Georgia, and now the Southern District of New York, have confirmed in separate cases that closely-analogous Supreme Court precedent “mandates a finding that the SEC ALJs . . . [are] inferior officers.” Hill v. SEC, No. 15-cv-1801-LMM, 2015 U.S. Dist. LEXIS 74822, at *52 (N.D. Ga. June 8, 2015); Gray Financial Group v. SEC, No. 15-cv-492-LMM (N.D. Ga. Aug. 4, 2015); Duka v. SEC, No. 1:15-cv-357 (S.D.N.Y. Aug. 12, 2015). The Supreme Court precedent at issue is Freytag v. Comm’r, 501 U.S. 868, 881 (1991), in which the Court held that special tax trial judges, due to their ability to “exercise significant discretion,” are inferior officers under Article II. The legal conclusion by Judge Berman that SEC ALJs are inferior officers draws particular strength from Second Circuit precedent: in Samuels, Kramer & Co. v. Commissioner of Internal Revenue, 930 F.2d 975 (2d Cir. 1991), the Second Circuit anticipated the Supreme Court’s decision in Freytag, issued only three months later, when it addressed the same issue and reached an identical holding, through similar reasoning.
This legal conclusion is also entirely consistent with the actual powers enjoyed by ALJs, which are parallel to those of a trial court judge presiding over a bench trial: he or she has the power and discretion to rule on any motions, including pre-trial motions for summary disposition; conduct trials and take testimony; order production of evidence and rule on admissibility questions; issue subpoenas and rule on applications to quash; sanction parties if they are in contempt; enter orders of default; take notice, where appropriate, of facts not appearing in the record; and grant extensions of time and dismiss for failure to meet deadlines. The SEC ALJ decides whether the respondent has violated the law. That decision is appealable to the Commission itself, although in many cases the Commission can simply deny a petition for review. If the decision is not appealed, or if the Commission declines to review the ALJ’s decision, the SEC enters an order that the ALJ’s decision has become final. The respondent then may appeal to the federal Court of Appeals, albeit on a standard of review that is generally very favorable to the SEC, which so far has entirely handled the proceeding.
The issue is still working its way through the courts – no Court of Appeals has yet weighed in – but it is gaining traction. What is the potential practical effect if the courts ultimately conclude that the SEC’s ALJs are unconstitutionally appointed? This is a complex question, on which we already have written at length. In short, it appears that parties who have lost on appeal, or whose time to appeal has expired, likely will be unaffected. However, parties whose adjudications are not yet final may be able to void their adjudications. As to parties against whom the SEC may in the future bring APs, the SEC theoretically has available the easy fix of simply re-appointing its ALJs under a constitutionally-adequate process and proceeding as normal. But this issue has been percolating for months, and the SEC – represented by the DOJ –has declined to exercise this option. Indeed, in its response to an order in the Duka case which “allow[ed] the SEC the opportunity to notify the Court of its intention to cure any violation of the Appointments Clause,” the SEC was conspicuously silent as to any plan to address the issue. Thus, it appears that the SEC will continue, at least for the foreseeable future, to employ an enforcement process that runs a significant risk of being declared entirely unconstitutional.
One potential explanation for the SEC’s reticence to cure its growing problem is that any such move could be perceived as a concession that past practices were improper. Moreover, the government at large, including the DOJ, which often serves as the litigation arm for many different agencies and departments, may face a more global quandary because this issue is not necessarily limited to just SEC ALJs; rather, it may imperil the legitimacy of many ALJs across the government. Until the SEC – and possibly other agencies and departments – resolve this problem, bringing enforcement actions in federal court may be the only way to ensure that resources are used effectively, rather than pursuing judgments that ultimately may be voided.
(ph, ar, & ck)
Wednesday, July 22, 2015
John Quincy Adams and Henry Clay can rest quietly in their graves. Their "corrupt bargain" would not be considered a federal crime today. The same goes for Ike and Earl Warren. In United States v. Blagojevich, decided yesterday by the Seventh Circuit and discussed here by contributing editor Lucian Dervan, the panel vacated five counts of conviction based on partially faulty jury instructions. Under those instructions, the jury could have convicted the former Illinois Governor based on his attempt to obtain a Cabinet seat in the incoming Obama Administration in exchange for appointing Valerie Jarrett to President Obama's soon-to-be-empty Senate seat. This was just logrolling and Judge Easterbrook and his colleagues were having none of it. "It would be more than a little surprising to Members of Congress if the judiciary found in the Hobbs Act, or the mail fraud statute, a rule making everyday politics criminal." The same was true of the Government's efforts to shoehorn the Cabinet seat/Jarrett offer into 18 U.S.C. 666--the notorious mark of the beast. Altogether a sound public policy decision, although the statutory analysis is not as clear cut.
Tuesday, July 21, 2015
The Seventh Circuit has overturned five of 18 counts against former Illinois Governor Rod Blagojevich. While the government could pursue a third trial on the overturned counts, it is more likely that the former Governor will simply be re-sentenced on the remaining convictions. It is unclear whether the ruling will result in a different sentence for Blagojevich, who was sentenced to 168 months in prison after his conviction in 2011. Judge Frank Easterbrook, writing for a unanimous three judge panel, wrote, "It is not possible to call the 168 months unlawfully high for Blagojevich's crimes, but the district judge should consider on remand whether it is the most appropriate sentence." Blogojevich will not be released awaiting his re-sentencing on the counts. The Appellate Court stated, "Because we have affirmed the convictions on most counts and concluded that the advisory sentencing range lies above 168 months, Blagojevich is not entitled to be released pending these further proceedings."
Tuesday, July 14, 2015
Ellen Podgor and I have just released a new article discussing the complexities of defining the term “white collar crime.” The ability to define and identify white collar offenses is vital, as it allows one to track, among other things, the number of these cases prosecuted each year, the frequency with which particular types of charges are brought in these matters, and the sentences imposed on those convicted. This new article begins with a brief historical overview of the term “white collar crime.” The piece then empirically examines several specific crimes to demonstrate that statutory approaches to defining and tracking white collar offenses are often ineffective and inaccurate. The article then concludes by recommending that the U.S. Sentencing Commission adopt a new multivariate definitional approach that recognizes the hybrid nature of many white collar offenses. The final version of the article will appear next year in Volume 50 of the Georgia Law Review.
Ellen S. Podgor and Lucian E. Dervan, “White Collar Crime”: Still Hazy After All These Years, 50 Georgia Law Review -- (forthcoming 2016).
With a seventy-five year history of sociological and later legal roots, the term “white collar crime” remains an ambiguous concept that academics, policy makers, law enforcement personnel and defense counsel are unable to adequately define. Yet the use of the term “white collar crime” skews statistical reporting and sentencing for this conduct. This Article provides a historical overview of its linear progression and then a methodology for a new architecture in examining this conduct. It separates statutes into clear-cut white collar offenses and hybrid statutory offenses, and then applies this approach with an empirical study that dissects cases prosecuted under hybrid white collar statutes of perjury, false statements, obstruction of justice, and RICO. The empirical analysis suggests the need for an individualized multivariate approach to categorizing white collar crime to guard against broad federal statutes providing either under-inclusive or over-inclusive examination of this form of criminality.
Friday, July 10, 2015
Though it may come as no surprise given his long history with the firm, Covington & Burling has announced that former United States Attorney General Eric Holder will return to the firm. Holder previously worked at the firm from 2001 to 2009. According to the release, Holder will be in the "firm’s Washington office and focus on complex investigations and litigation matters, including matters that are international in scope and raise significant regulatory enforcement issues and substantial reputational concerns."
Holder also recently gave an interview to The American Lawyer, in which he discusses his return to private practice and his plans to work on a mix of projects at the firm, including pro bono and access-to-justice issues. In addition, The American Lawyer published an article on the subject of Holder's return.
Tuesday, June 30, 2015
Walt Pavlo (500 Pearl Street) and Jack Donson (former BOP Case Manager) developed a unique interactive website to educate lawyers on what a client needs to know about the prison experience. Check it out here. They state, "[p]risonology's intuitive website provides an easy to read narrative, a video interview with an expert on the topic, links to BOP and US Probation policies, tips, and written experiences from those who have gone through the process. It has everything a client needs to be informed and prepared." It is wonderful to see technology being used to educate lawyers so that they can be in a better position to advise and inform their clients.
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."