Wednesday, September 7, 2016
Finally, as promised, here is the U.S. v. Reddy Annappareddy 9-1-16 Motion to Dismiss Hearing Transcript. At the conclusion of that hearing Judge George Levi Russell dismissed the Indictment with prejudice. Judge Russell's rationale for his ruling can be found at pages 49-62 of the transcript. This was a health care fraud case and a core government theory was that Mr. Annappareddy received Medicaid reimbursement for pills that were never given to patients. The government sought to prove its theory by showing that Mr. Annappareddy's pharmacies billed for more pills than they received. The most significant evidence that the prosecutors offered in support of this allegation was a calculation of the purported “loss” from the alleged fraud. The following factors were key to the Court's finding that the government committed due process violations that shocked the conscience and rendered it impossible to put Mr. Annappareddy back on an even footing with the government: 1) the government violated Brady by failing to disclose loss calculations from its initial auditing team that were significantly smaller (in total and with respect to two key pharmacies) than the calculations of a subsequent government auditor who testified at trial; 2) the government violated Brady by failing to disclose the risk of double-counting errors in the loss calculations; 3) the government presented false testimony regarding the loss calculations due to double counting errors; 4) the government presented false testimony by a government agent, based on her examination of the wrong set of phone records, that Mr. Annappareddy had NOT made any calls to a key individual in response to a material email from that individual, when in fact Annappareddy had several phone contacts with the individual within minutes of the material email; and 5) the government destroyed potentially key exculpatory evidence without a court order or the defense's permission. The Court also sent a not so subtle warning to the government: "In the event that my record is not clear or exercise of my discretion too broad, this Court will conduct an extensive time-consuming and costly hearing as to these matters and the other grounds supporting the motion to dismiss and other motions which have already been filed. To that end, the balance of all other motions in this case are denied as moot." Translation: If you appeal this ruling and I am reversed, we will delve in detail into the other grounds of error raised by the defense. And it will not be a pleasant process. Hat Tip to David Debold of Gibson Dunn for sending along the transcript.
Thursday, September 1, 2016
The case against Reddy Annappareddy is over. The Government's case has been dismissed with prejudice by U.S. District Court Judge George Russell because of a pattern of government misconduct that shocks the conscience. As soon as I obtain a copy of today's hearing transcript we will post it. Congratulations are in order for Mr. Annappareddy and his Womble Carlyle defense team of Mark Schamel and Josh Greenberg. Greenberg's relentless motions work over the past 11 months has been particularly brilliant. Anybody who does white collar work in the federal courts knows how difficult it is to obtain a result like this, post-trial. This is a magnificent victory.
As we write this post U.S. District Court Judge George Russell is holding a hearing on Defendant's Motion to Dismiss with prejudice. I have previously discussed this case here and here. The motion is bottomed on various alleged prosecutorial errors and misdeeds. In a bad omen for the Government, Judge Russell only set arguments on the Motion to Dismiss (despite the pendency of other motions) and summarily denied the Government's motion to delay the hearing. The Government wanted a delay in the wake of an onslaught of defense motions, authored by Womble Carlyle's Josh Greenberg, alleging additional Government misbehavior, including destruction of potentially exculpatory evidence at a time when the Defendant's Motion for New Trial was filed and awaiting a decision. The Government later joined in the Motion for New Trial after admitting that it presented false material testimony to the jury. Meanwhile, in a filing that can only be described as stunning, the Government yesterday attempted to defend its admitted document destruction. Here lies the Government's Response Re Document Destruction.
Wednesday, August 31, 2016
Guest Blogger: Rory K. Little (Joseph W. Cotchett Professor of Law, U.C. Hastings College of Law)
Almost all of the Court’s October arguments will be in criminal cases
In a somewhat unprecedented calendaring wrinkle, the entire first week of oral arguments at the Supreme Court this coming Term, and 7 of the 8 cases to be argued in all of October, are criminal-law-based cases. This is probably not intentional, but rather reflects hesitancy in certiorari consideration last Spring by an evenly-divided eight-Justice Court.
Although the Court normally opens with oral arguments on “the first Monday in October,” this Term, due to Rosh Hashanah, the Court will only issue Orders on that day. Then on Tuesday, October 4 the Court will open its argument Term by hearing two cases; and on Wednesday, three. Three of these five arguments are pure criminal cases; the other two are “civil” but arise directly from criminal prosecutions.
The next Monday, October 10, is the Columbus Day holiday, and Wednesday is Yom Kippur. So the only argument day that week will be Tuesday October 11, when the Court will hear three cases. Two of those are criminal (discussed below), and the third is Samsung v. Apple, October’s only completely non-criminal case (described briefly in the next paragraph).
That’s it for October -- eight cases which, given the Court’s slow pace in granting certiorari until late June, were all that could be fully briefed and ready for argument that “speedily.”
The lone civil case set for argument in October, Samsung Electronics v. Apple, is a “big” IP case, presenting an important question about the extent of damages available for patent infringement when the infringed patented design applies only to a “component” of a product. Oral arguments will be presented by two well-known Supreme Court “heavy-hitters” -- Kathleen Sullivan for Samsung, and William Lee for Apple.
Otherwise, the Court’s entire argument focus in October will be on criminal matters. Below are short (and undoubtedly simplified) summaries of the seven criminal cases set for argument in October, presented in the order they will be heard.
- Bravo-Fernandez v. United States (argument on Oct. 4): A somewhat complicated Double Jeopardy question, which invokes a favorite old chestnut of law professors, Ashe v. Swenson, and the “collateral estoppel” effects of related prosecutions. When jury convictions have been vacated on appeal, is retrial on those counts barred by (perhaps inconsistent) acquittals that were returned on other counts? Arguing: former Assistant to the U.S. Solicitor General Lisa Blatt (for Bravo) and Elizabeth Prelogar from the current U.S. Solicitor General’s office. (Specific arguing counsel have not yet been officially identified by the Court; these summaries present my best guesses as to arguing counsel.)
- Shaw v. United States (argument on Oct. 4): Does subsection (1) of the federal bank fraud statute require the government to prove that the defendant intended to obtain “bank-owned” property, as opposed to fraudulently obtaining assets of a customer that are held by the bank? The case is a follow-on from the Court’s 2014 decision in Loughrin v. United States. Arguing: Deputy Federal public Defender Koren Bell of Los Angeles (for Shaw); and Anthony Yang from the current U.S. Solicitor General’s office.
- Salman v. United States (argument on Oct. 5): An important insider trading case. Is the Second Circuit’s groundbreaking 2014 decision in United States v. Newman correct in holding that the government must prove “at least a potential gain [to the tipper] of a pecuniary or similarly valuable nature;” and if so, does the gift of a “tip” to a close friend or relative satisfy this “personal benefit” requirement (derived from Dirks v. SEC, 1983)? Arguing: Alexandra Shapiro of New York (for Salman), and Deputy U.S. Solicitor General Michael Dreeben.
- Buck v. Davis (argument on Oct. 5): The case presents a technical procedural question arising from a decidedly un-technical incident of racial bias in a death penalty case. Buck’s defense counsel actually elicited “expert” testimony at sentencing that Buck was more likely to be dangerous in the future because he is black – Texas now concedes that such generic race-based testimony is “always inappropriate.” So, did the Fifth Circuit erroneously deny a Certificate of Appealability from the district court’s denial of federal habeas corpus? Such a Certificate is a statutory prerequisite to allow review of Buck’s habeas corpus claim on the merits. This same case previously attracted the Court’s attention in 2011, when the Court denied certiorari at an earlier stage and five Justices joined two opinions: three Justices concurring in, and two dissenting from, the denial of certiorari. Arguing: Christina Swarns of the NAACP Legal Defense & Education Fund (for Buck); and someone from the Texas Attorney General’s office.
- Manuel v. City of Joliet (argument on Oct. 5): It is complicated to even briefly describe what question this case presents. In a §1983 civil rights complaint, filed after criminal charges against him were dropped, Manuel alleged that he was held in jail for 47 days based on false reports made by the police. Among other things he claimed damages for “malicious prosecution” after the institution of “legal process” -- and to avoid dismissal under a statute of limitations, Manuel argued that he could not legally file that claim until the prosecution against him had terminated in his favor. The central question presented is whether the Fourth Amendment, or the Due Process Clause, governs such a claim. Many federal Circuits have said Fourth Amendment, while the Seventh Circuit here said Due Process. This same question was debated, but not resolved by a majority, in Albright v. Oliver (1994) (a plurality said Fourth Amendment; Justice Kennedy joined by Thomas said Due Process), and oral argument will likely focus on the intricacies and subsequents Court statements about Albright. However, the briefs filed so far also suggest that the parties disagree about a number of preliminary wrinkles, which could sidetrack the Court at argument. Arguing: Stanley Eisenhammer of Arlington Heights, Illinois (or possibly Professor Jeff Fisher of Stanford, see the next case) for Manuel; Michael Scodro of Chicago’s Jenner & Block (and former Illinois Solicitor General and Justice O’Connor clerk) for the City of Joliet; and Assistant to the U.S. Solicitor General Ilana Eisenstein for the United States as Amicus..
- Pena-Rodriguez v. Colorado (argument on Oct. 11): After Pena-Rodriguez was convicted of three sexual assault misdemeanors, two jurors reported that during deliberations, another juror had made a number of racist statements against “Mexicans.” The question is whether the Sixth Amendment right to an “impartial jury” requires that such reports of “racial bias” during criminal jury deliberations be considered, despite Colorado’s (and many other jurisdictions’) “no impeachment” rule that generally bars use of evidence about things said or done inside the jury room to impeach a verdict. Something like this question was left open by the 2014 decision in Warger v. Shauers. Arguing: Jeff Fisher of Stanford Law School, for Pena-Rodriquez; Frederick Yarger, Solicitor General of Colorado; and Assistant to the U.S. Solicitor General Rachel Kovner afor the United States as Amicus.
- Manrique v. United States (argument Oct. 11): Is a notice of appeal -- filed after sentence and judgment (including a general restitution obligation) is imposed, but before restitution is precisely determined -- sufficient to challenge the details of the restitution award? Arguing: Paul Rashkind, Assistant Federal Public Defender in Miami (for Manrique); and Allon Kedem from the U.S. Solicitor General’s office.
* * * * *
So stay tuned for an almost “all criminal, all the time” month of arguments at the nation’s Highest Court! (And if you really want an earful, attend the “UC Hastings Annual Supreme Court Review & Preview” panel discussion, in San Francisco at Hastings on September 26, 2016.)
Tuesday, August 30, 2016
The Supreme Court decision in McDonnell v United States, decided June 27, has given several politicians whose corruption convictions are on appeal both a cause for optimism and freedom on bail pending appeal. Last week SDNY District Judge Valerie Caproni granted former New York Assembly Speaker Silver's request for bail pending appeal on the grounds that there was a "substantial question" whether the court's instruction defining "official act" passed muster in light of the narrow definition of that term announced in the later Supreme Court decision.
Judge Caproni made it clear that she had little doubt about Silver's guilt of the major accusations against him, stating, "There is no question that Silver took a number of official acts - most obviously passing legislation and approving state grants and tax-exempt financing - as part of a quid pro quo scheme." These acts would clearly fall within the Supreme Court definition of "official act." But the judge recognized that there were other acts committed by Silver that were presented to the jury by the government, such as holding a meeting or arranging an internship, that might not fall within the narrow Supreme Court definition of "official acts." The jury was thus presented with instructions which may have permitted it to find Silver guilty for actions that were not criminal even if bought and paid for.
18 USC 3143(b)(1) allows a convicted defendant to be granted bail pending appeal if, inter alia, there is "a substantial question of law or fact likely to result in (i) reversal [or] (ii) an order for a new trial...." Finding the existence of a "substantial question," despite the literal language of the statute, does not mean that the judge believes there is a likelihood of reversal, only that if there were a substantial question which if decided in the defendant's favor would bring such relief. United States v. Miller, 750 F2d 19 (3d Cir 1985). Appellate courts deal with a lot of "substantial questions" that have led to bail pending appeal, but rarely reverse trial convictions.
Here, it appears that under the instructions it was given, the jury could have convicted Silver based on acts not within the statute as limited by the Supreme Court.. But that is not the end of the analysis. The appellate court will also consider, and the decision is likely to turn on, whether the evidence is considered so strong that the jury would have undoubtedly convicted Silver under a proper charge - in other words, whether the erroneous instruction constituted "harmless error."
I hesitate to predict the outcome of the appeal. Cases of political figures, as demonstrated by McDonnell, are scrutinized by appellate courts more carefully than, for instance, cases of drug dealers. I believe it is likely, and will appear likely to the appellate court, that Silver would have been convicted upon a proper instruction. How likely is the issue. Is it so likely that the court will find the error "harmless?" What is "harmless error' is in many ways just a visceral judgment by the judges putting themselves in the role of jurors. Harmless error analysis, thus, arguably deprives an accused of his basic constitutional right to a determination by a properly-instructed jury of peers and I believe should be applied rarely.
Other factors the appellate court will probably consider include whether the defense proposed an instruction in accord with the standard set forth in McDonnell, and whether the defense specifically objected to the definition given by the trial court as too broad. Another factor that may conceivably affect the decision, although unlikely to be mentioned, is whether the judges believe the 12-year prison sentence imposed on the 72-year old Silver is excessive. And, of course, there may be other, unrelated issues raised. In any case, based on the "official act" issue issue alone, a reversal will likely not give Silver a dismissal, but only a new trial, presumably with proper jury instructions.
One lesson that lawyers - both prosecutors and defense lawyers - might learn from this situation is to be aware and up-to-date on cases for which the Supreme Court has granted cert and, if any concern issues that might arise in a pending case, to craft requests to charge in anticipation of the possible result of the Supreme Court case. Another lesson - for judges and prosecutors more than defense lawyers - is to adjourn a pending case that might be affected by a pending Supreme Court case until after that decision. A third lesson - for prosecutors - is to analyze all aspects of their prospective case and discard legally or factually questionable ones when there are strong aspects.
Monday, August 29, 2016
Things are getting personal in U.S. v. Annappareddy. I posted here last week about this District of Maryland case in which the Government ultimately admitted to having presented false evidence to the trial jury, and grudgingly joined Defendant's new trial motion--granted the next day by Judge George Russell. Now the Government has admitted to "disposal" of certain documents while defendant's New Trial Motion was pending in March 2015. Annappareddy's current trial team was not notified of the disposal until August 19, 2016, and claims, in Defendant's Motion for Extension of Time to File Motions In Limine, that some of the destroyed documents were exculpatory in nature. No court order authorized the destruction at the time it was accomplished.
The DOD/OIG Evidence Review Disposal Sheet from March 11, 2015 states that AUSA Sandy Wilkinson determined that the items in question "were not used as exhibits in trial and would not be used in future proceedings against Annaparreddy." In other words, Wilkinson acted unilaterally, apparently consulting no one on the defense team before making her decision. The Government's response to the allegation is a footnote stating in part that "in early March 2015, after the trial, the government began to clean up papers and documents not used from the Washington Blvd collection and store the trial exhibits post- trial. The government began purging the contents of several unused boxes. These were items Defendant and his own attorneys had reviewed at length and were never marked as exhibits or used in any way by them at trial. Yet they couch their complaint again in the most accusatory of tones. "
Well, yes. Destruction of potential evidence prior to final judgment on appeal is quite rare, if not unheard of, in federal criminal practice. That an AUSA would do it on her own is remarkable. The Government's Response to Annappareddy's Motions to Limit Government Evidence complains further that Annappareddy's new lawyers don't play nice in the sandbox, unlike the original trial lawyers--you know, the ones who lost after the Government presented false testimony. That's right, Ms. Wilkinson. Lawyers tend to get angry when false testimony is put in front of the jury and potentially exculpatory evidence is destroyed.
The case is far more involved, and the issues more complex, than I can do justice to here. Annappareddy has moved to dismiss with prejudice and a hearing on that motion is set for September 1. Failing that, the defense wants to limit the Government's evidence at a new trial to the evidence presented at the first trial. One thing absent from the Government's papers that I have had an opportunity to review is any recognition of the emotional, financial, and strategic harm suffered by defendants when the Government screws up, forcing a new trial. It's as if Ms. Wilkinson wants a cookie and a pat on the back for deigning to agree that Reddy Annappareddy gets to go through the whole damn thing again.
Wednesday, August 24, 2016
Criminal defense lawyers in federal courts in this nation on an average plead 35 defendants guilty for every one they take to trial. Accordingly, many criminal defense lawyers are not much more "trial lawyers" than the many big firm "litigators" who have never selected a jury or cross-examined a trial witness. However, one area in which federal defense lawyers have plenty of experience is crafting the expressions of remorse made at sentencing by virtually every criminal defendant (save those who were convicted after trial and intend to appeal and do not wish to make any sort of admission because it might later be used against them). The expression of remorse, a near uniform ritual in every federal sentencing proceeding, is made in order to ensure that the court grant a reduction in the Sentencing Guidelines level of two or three levels for "acceptance of responsibility" (USSG Sec. 3E1.1) and to demonstrate that the defendant is truly sorry and contrite for having committed criminal acts, a factor many judges consider in the sentencing determination.
To be sure, the incantation of remorse is often less than fully sincere, and the defendant is actually only sorry that he was caught and is now facing punishment. An astute defense lawyer will counsel her client that the expression of remorse should reflect his realization of and sorrow for the wrong he has done and harm he has caused to his victims and to society in general, and not only to his family and friends, and not to excuse or justify his acts, or minimize the damage. She will counsel her client not to use weak words like "regret" or stiff ones like "remorseful." Thus, it is difficult for a judge to distinguish the absolutely genuine shame and sorrow some defendants feel from the false impression of remorse others present.
Some judges do suspect or realize that the expression of remorse is not genuinely sincere, but feel that the mere expression of remorse is itself a step forward. Others, while perhaps doubtful of the defendant's sincerity, accept the expression of remorse without comment or much consideration. Some judges accept the apology at face value and credit it. Some few listen carefully and skeptically, and, if they detect a false note, sometimes comment on the defendant's lack of genuine remorse to justify, in part, a severe sentence (which they had probably decided beforehand to impose in any case). I have not heard of a judge who denied an acceptance of responsibility reduction solely because of the defendant's presumed insincerity. (I wonder whether such a determination would be upheld on appeal; I suspect, depending on the facts, that it might.)
Last week, two notable men, presidential candidate Donald Trump and Olympic swimmer Ryan Lochte (neither of course criminal defendants) made widely-publicized "apologies" of sorts. Both "apologies" would trouble a judge considering whether to credit the speakers for "acceptance of responsibility" or genuine remorse.
Mr. Trump. who in the course of his campaign has insulted the parents of a heroic soldier who died in action, a woman Fox television commentator, a federal judge of Mexican ancestry, a U.S. Senator who was a prisoner of war for five years, a disabled reporter, and, generically, Mexicans and Muslims, chose to use the word "regret" rather than "sorry" or "apologize." And his "regret" was for an inadvertent slip of the tongue, rather than a deliberate slur, and without any specificity of what statements he regretted or whom he may have harmed and no direct admission that they did harm anyone. He said, "Sometimes in the heat of debate, and speaking on a multitude of issues, you don't choose the right words or say the right thing. I have done that, and, believe it or not, I regret it, I do regret it, particularly where it may have caused personal pain."
Mr. Lochte, in a television interview and at least one social media post, presented a fictitious account of robbers in police uniforms pulling over a taxi he and fellow swimmers were in and robbing them at gunpoint. This account received widespread publicity (perhaps to Mr. Lochte's surprise)and was a great international embarrassment for Brazil, a country which with its many troubles appeared to have demonstrated competence and provided adequate safety for the Olympics. In fact, as Mr. Lochte's swim team colleagues later admitted, they were drunk, urinated on a wall, and vandalized the gas station, and that the guns were drawn by security guards who demanded they pay compensation for the damage before they left. Faced with the contradictory statements by his colleagues, Mr. Lochte then said, "I want to apologize for my behavior last weekend - for not being more careful and candid in how I described the events of that early morning." He went on to excuse himself even for that minor transgression by seemingly claiming he was victimized: "It's traumatic to be out late with your friends in a foreign country - with a language barrier - and have a stranger point a gun at you and demand money to let you leave." While Mr. Lochte did use the word "apologize," his apology minimized his misbehavior by describing it as lack of carefulness and candor rather than lying, and omitted any mention of the intoxication, urination and vandalism.
Similar "apologies" by criminal defendants would both cause scrutiny and little impress federal sentencing judges. Mr. Trump's was limited by the use of the wishy-washy word "regret." Both Mr. Trump's and Mr. Lochte's played down their own seeming misbehavior. And, both contained defenses or excuses to justify or mitigate the limited degree of impropriety they admitted. Defense lawyers should keep copies of these "apologies" to show their clients how not to do it.
Were Mr. Trump or Mr. Lochte criminal defendants who had offered "apologies," a federal judge might have some difficulty finding, even if they had pleaded guilty, that they had "clearly demonstrate[d] acceptance of responsibility for the offense." USSG Sec. 3E1.1(a).
Tuesday, August 23, 2016
In June 2016, the U.S. District Court for the District of Maryland (Judge George Levi Russell III, presiding) granted Reddy Annappareddy a new trial on the grounds that the prosecutors presented false evidence to the jury at his first trial and that the outcome might have been different without the false evidence. This ruling is part of a remarkable turnaround for Mr. Annappareddy, whose case appeared to be over after the first trial ended in December 2014.
The case is captioned as United States v. Annappareddy, No.1:13-cr-00374 (D. Md.). The prosecutors’ main allegation during the first trial was that Mr. Annappareddy’s chain of pharmacies, known as Pharmacare, committed health care fraud by billing government insurance programs for prescriptions that were never picked up or delivered. The most significant evidence that the prosecutors offered in support of this allegation was a calculation of the purported “loss” from the alleged fraud. Mr. Annappareddy’s current counsel, Mark Schamel and Josh Greenberg of Womble Carlyle, began working on the case in the spring of 2015. In September 2015, they filed a Supplement to the one-and-a-half-page Motion for New Trial filed by Annappareddy's original trial counsel. The Supplement and a Reply in support of it argued, among other things, that the prosecutors presented materially false evidence to the jury on a number of important subjects in violation of the Due Process Clause.
After many months, during which the parties took depositions of trial counsel and Greenberg and Schamel filed extensive additional briefs raising troubling issues, the Court scheduled a hearing for June 3 on Annappareddy's Motion for New Trial. On the afternoon of June 2, the prosecutors filed a letter with the Court conceding that the "inventory analysis" it presented to the jury, in an effort to prove purportedly enormous losses caused by Annappareddy, was in "substantial error", rendering its own evidence "wrong", and violative of Due Process. The Government effectively joined Annappareddy's Motion for New Trial, which was granted the next day by Judge Russell during a status conference.
Judge Russell scheduled a second trial – to last eight weeks, three weeks longer than the first trial – to begin on September 19. Last month, the Court entered an Order denying the Government's motion to delay the second trial. The Order emphasizes that the Court granted a new trial because the prosecutors presented “significant material and false testimony” at the first trial and that the delay they sought “would be fundamentally unfair” to Mr. Annappareddy.
While government admissions of error are always welcome, one of the striking things about this case has been the prosecution's reluctance to admit that the evidence it presented to the jury was not just wrong or in error--it was false.
The defense recently filed a motion calling for dismissal with prejudice. Check this space for further details. The multiple briefs filed by Greenberg and Schamel since they entered their appearances represent outstanding work.
Here are some relevant documents pertaining to the case: a partial transcript from the U.S. v. Annappareddy 6-3-16 Status Conference; Judge Russell's 7-6-16 Order Denying Gov't's Motion for Modification of Trial Schedule; and the Government's Letter to Court Conceding that New Trial is Warranted.
Wednesday, July 20, 2016
Earlier this month, the UK Serious Fraud Office announced the approval by Lord Justice Leveson of the country's second deferred prosecution agreement. Readers may recall that the implementation of a DPA process is relatively new in the UK (see prior post here). According to the SFO press release in the matter, the company, which remains nameless due to ongoing, related legal proceedings, was subject to an indictment charging "conspiracy to corrupt, contrary to section 1 of the Criminal Law Act 1977, conspiracy to bribe, contrary to section 1 of the same Act, and failure to prevent bribery, contrary to section 7 of the Bribery Act 2010, all in connection with contracts to supply its products to customers in a number of foreign jurisdictions."
Pursuant to the terms of the DPA, the indictment was suspended and the company agreed to pay a total of 6,553,085 British Pounds. The company also agreed to continue to cooperate with the ongoing SFO investigation and conduct a review of all third party transactions and its existing compliance measures.
The SFO press release went on to state:
In passing the judgment, Lord Justice Leveson said:
“[This conclusion] provides an example of the value of self-report and co-operation along with the introduction of appropriate compliance mechanisms, all of which can only improve corporate attitudes to bribery and corruption.”
SFO Director David Green CB QC said:
“This case raised the issue about how the interests of justice are served in circumstances where the company accused of criminality has limited financial means with which to fulfill the terms of a DPA but demonstrates exemplary co-operation.
“The decision as to whether to force a company into insolvency must be balanced with the level and nature of co-operation and this case provides a clear example to corporates. The judgment sets out the considerations in detail and endorses the approach we took. As with the first DPA with Standard Bank, the judgment provides clear and helpful guidance.”
The suspended charges relate to the period of June 2004 to June 2012, in which a number of the company’s employees and agents was involved in the systematic offer and/or payment of bribes to secure contracts in foreign jurisdictions. The SFO undertook an independent investigation over a period of two years, concluding that of the 74 contracts examined 28 were found to have been procured as a result of bribes.
The SME’s parent company implemented a global compliance programme in late 2011. In August 2012, this compliance programme resulted in concerns being raised within the SME about the way in which a number of contracts had been secured. The SME took immediate action, retaining a law firm that undertook an independent internal investigation. The law firm delivered a report to the SFO on 31 January 2013, after which the SFO conducted its own investigation.
The SFO would like to thank HM Treasury, HM Revenue & Customs and the Department for Business, Innovation & Skills for their assistance in this investigation.
The final redacted judgement in the matter is available here.
This week, WilmerHale released a piece entitled "The UK's second DPA: a hopeful judgment." In the piece, author Lloyd Firth argues that several revelations from the DPA are encouraging as we consider the role the new DPA system will have in the UK. For those interested in the evolving DPA process in the UK, I recommend you give both the final redacted judgment and the WilmerHale piece a read.
Friday, July 15, 2016
In 2014, prosecutors proceeded with a case against fed ex. Unlike many companies in a post-Arthur Andersen world, they would not be bullied into folding and taking a non-prosecution or deferred prosecution agreement. Instead, they took the risk - and it is always a risk - of going to trial. What makes this case particularly puzzling is that the company had cooperated with the government. They hired a top-notch white collar attorney Cristina Arguedas and the government folded shortly after the trial began. Now, according to Dan Levine and David Ingram in their Reuter's story, U.S. Prosecutors Launch Review of Failed Fed Ex Drug Case, the DOJ is reviewing this matter. Some thoughts -
1. It is good to see DOJ re-examining this case. What happened here should not have happened, and learning from this case is important.
2. The review should not be limited to the fed ex case. There needs to be an examination, especially for the smaller companies that cannot afford to go to trial, of the government cooperation tactics.
3. If cooperation is going to work, then credit needs to rightfully be given.
4. The government's pitting employees (the corporate constituents) against the employers (company) needs to also be examined. This practice defeats the ability of corporations and individuals working together to root out corporate misconduct.
5. Criminal defense attorneys need to recognize that one can successfully take a corporation to trial against the government. The risk is enormous, but innocence needs to matter.
Thursday, July 7, 2016
I agree with guest bloggers Ziran Zhang and Eugene Gorokhov in their thoughtful blog post (here) that "[i]f Director Comey is right that individuals in similar circumstances in the past were only subjected to administrative sanctions, then its decision to recommend no prosecution in this case may be the right one."
I would, however, go a step further - a declination of prosecution was the right decision here even without the long precedent of not bringing these cases. After listening to FBI Director Comey's testimony in an over four hour hearing of the House Oversight and Government Reform Committee on the "Hillary Clinton Email Investigation" (see here) we find out that the 3 emails that were alleged to be classified were not in fact properly marked. And they looked at "tens of thousands of emails." Here there was no header on the documents or in the text. And FBI Director Comey stated that it would be a reasonable inference to think it was not classified when there was no header on the document.
Attorneys Zhang and Gorokhov reference the US Attorneys Manual, specifically the Principles of Prosecution in 9-27.000 and 9-27.220(A). But let me add to their discussion part of the Comment from that portion of the Manual -
Comment. USAM 9-27.220 expresses the principle that, ordinarily, the attorney for the government should initiate or recommend Federal prosecution if he/she believes that the person's conduct constitutes a Federal offense and that the admissible evidence probably will be sufficient to obtain and sustain a conviction. Evidence sufficient to sustain a conviction is required under Rule 29(a), Fed. R. Crim. P., to avoid a judgment of acquittal. Moreover, both as a matter of fundamental fairness and in the interest of the efficient administration of justice, no prosecution should be initiated against any person unless the government believes that the person probably will be found guilty by an unbiased trier of fact. (emphasis added)
Put the format of the emails together as testified to by Director Comey, with no intent, no evasiveness, and no false statements - Director Comey would be justified in believing that such a case would not return a conviction. Using the guidance of the US Attorney's Manual FBI Director Comey's recommendation to DOJ was justified.
But there is another fascinating aspect to this hearing. One of the key aspects of the Overcriminalization Movement (a bi-partisan coalition) is the need to include a mens rea in statutes. (see here). Yet in this hearing we see some members of Congress, albeit different ones from the committee looking at Overcriminalization, arguing that in this case a strong mens rea should not be needed for this criminal statute.
Recently, Professor Podgor wrote two informative posts covering FBI Director James Comey’s public statement about the FBI’s year-long investigation into Hillary Clinton’s use of private e-mail servers, its recommendation that no criminal charges be filed (here), and AG Loretta Lynch’s acceptance of the FBI’s recommendation (here). Professor Podgor noted many unusual aspects about Director Comey’s statement, including the fact that the FBI does not usually publicize its recommendations. The short version of Director Comey’s speech is that the FBI did find “evidence of potential violations of the statutes regarding the handling of classified information,” but is recommending against criminal prosecution for a variety of reasons. This post examines two questions: (1) Is Director Comey right when he says that the evidence indicated potential violations of federal laws? (2) if so, why is the FBI recommending against prosecution?
What laws did Hillary Clinton’s conduct potentially violate?
While the FBI’s investigation undoubtedly looked at many federal statutes, the one that Director Comey referenced in his statement appears to be 18 U.S.C. 793(f), which makes it a federal crime for anyone “through gross negligence" to permit classified information "to be removed from its proper place of custody or delivered to anyone in violation of his trust, or to be lost, stolen, abstracted, or destroyed[.]”
In this case, classified information was undoubtedly removed from its proper place of custody. According to Director Comey, of the approximately 30,000 emails provided by Hillary Clinton, 110 contained classified information at the time they were sent or received. (Another 2,000 emails were later determined to contain classified information, although those were not formally classified at the time they were sent or received). A small number of emails also contained documents with markings that indicated the presence of classified information. Comey noted that “none of these e-mails [containing classified information] should have been on any kind of unclassified system,” let alone “unclassified personal servers not even supported by full-time security staff[.]”
Whether the act of communicating classified information through personal servers constitutes “gross negligence” is a more difficult question to answer. The Supreme Court has called “gross negligence” a “nebulous” term “lying somewhere between the poles of negligence at one end and purpose or knowledge at the other[.]” Farmer v. Brennan, 511 U.S. 825, 836 n.4 (1994).
Reported decisions of prosecutions under 18 U.S.C. § 793(f) are rare. In one case, a Marine Corps intelligence officer pled guilty to a violation of § 793(f) where he inadvertently packed classified documents into his gym bag along with his personal papers and took the classified documents home. United States v. Roller, 42 M.J. 264 (CAAF 1995). Former FBI Agent James J. Smith, who had an affair with suspected Chinese spy Katrina Leung, was also charged under this provision for taking classified documents to Leung’s home, resulting in Leung covertly copying the documents without Smith’s knowledge. Smith later pled guilty to a charge of false statements.
Director Comey opined that the use of a private server was “extremely careless” and that any “reasonable person” in Hillary Clinton’s position would know better than to use an unclassified system to discuss classified information. A jury looking at the full evidence, including the actual content of the emails and the context in which these events occurred, may have agreed with Comey, or may have decided that although negligent, Clinton’s conduct did not rise to gross negligence.
Why did the FBI recommend that no criminal charges be filed?
Director Comey’s primary reason for not recommending criminal charges in this case appears to be the lack of precedent for criminal charges in similar cases in the past. According to Director Comey, “[a]ll the cases prosecuted involved some combination of: clearly intentional and willful mishandling of classified information; or vast quantities of materials exposed…; or indications of disloyalty to the United States; or efforts to obstruct justice.” Whereas “in similar circumstances,” “individuals are often subject to security or administrative sanctions”
While the decision to prosecute is ultimately up to the prosecutor, what some may not realize is that in federal cases, the prosecutor’s decision to bring criminal charges is governed by the United States Attorney’s Manual. USAM 9-27.000, titled “Principles of Federal Prosecution” contains the DOJ’s written guidance to prosecutors about decisions to initiate or decline prosecution. Specifically, 9-27.220(A) instructs prosecutors to file criminal charges in all cases where there is a violation of federal law and the evidence is sufficient to obtain a conviction, unless one of three grounds exist:
- Lack of a substantial federal interest;
- The defendant is subject to prosecution in another jurisdiction; or
- The existence of adequate non-criminal alternatives to prosecution.
In this case, both the first and third grounds are potential reasons that a federal prosecutor can rely on to justify not bringing any charges.
The first ground, “substantial federal interest,” is a composite factor that weighs a number of considerations including federal law enforcement priorities, the nature and seriousness of the offense, the deterrent effect of prosecution, the personal characteristics of the individual, and the probable sentence upon conviction. Nationally, the DOJ’s number one law enforcement priority is protecting U.S. citizens from national security threats. See Memorandum re: Federal Prosecution Priorities. However, a prosecutor can potentially justify declining prosecution based on Hillary Clinton’s personal characteristics and the nature and seriousness of the offense.
The third ground, the existence of adequate non-criminal alternatives, appears to have been the one that Director Comey relied upon. In this case, for example, Hillary Clinton could potentially face security and administrative sanctions such as revocation of her security clearance, and such a sanction may be “adequate” in light of past practice. (How such a sanction would work if Clinton is elected President, however, is a question we can’t answer).
The FBI’s investigation uncovered sufficient evidence for a reasonable jury to find that Hillary Clinton did violate the law. However, the federal government does not (and should not) bring criminal charges in every case. If Director Comey is right that individuals in similar circumstances in the past were only subjected to administrative sanctions, then its decision to recommend no prosecution in this case may be the right one.
(ZZ & EG)
The declination to prosecute Hilary Clinton and the public announcement of that decision by FBI Director Comey, were, in my opinion, wholly proper. When an investigation of a public figure receives widespread notice, it should be incumbent on the prosecuting agency to make public a decision not to prosecute.
However, the severe criticism of Ms. Clinton by Director Comey was inappropriate. I do not know enough to assess the accuracy or fairness of his report and do not challenge it. However, the FBI (either acting, as here, as the surrogate prosecutor, or otherwise) should not, in the absence of sufficient evidence to recommend charges, issue a public declaration of fault in any case, let alone one that affects a presidential election. By his pronouncement, Comey, obviously knowingly, did so. That he had no business doing.
The Department of Justice is also at fault. Attorney General Lynch should never have agreed to meet with Bill Clinton, the husband of the target of a criminal investigation under her supervision, even if he were a past President and even just to exchange pleasantries. I do understand how Attorney Lynch, a classy and courteous person, would have been reluctant to refuse to meet a past President, but propriety should have trumped gentility. Worse, she never should have abdicated the responsibility of the Department of Justice to determine whether to prosecute. If she felt she were or appeared to be personally tainted by the meeting, she should at most have recused herself and left the decision to her deputies, not have turned it over to an investigating agency.
The American system of justice essentially places the responsibility of investigation on the investigators and the decision to prosecute based on the results of that investigation to the prosecutors. Effective prosecution often involves an integration of and input from both agents and prosecutors, but the prosecutors still should be the sole and final deciders of whether to prosecute. There is an inherent bias on the part of investigators, wanting a positive and public result of their work, in favor of arrest and prosecution. The prosecutors, more knowledgeable about the law and the workings of the court system than the investigators, should act as a buffer and, giving regard to the investigators, make the determination whether to prosecute. That is an important check in the criminal justice system's checks and balances. I hope this unusual situation does not serve as a precedent.
Wednesday, July 6, 2016
Attorney General Loretta Lynch issued a statement today regarding the DOJ's decision to close the investigation without charges. (see here). It's 3 1/2 lines shows the proper way to handle a declination of prosecution. It simply tells the individual and public that the investigation is over and that there will be no charges.
Unlike FBI Director Comey's comments it does not state opinions and hypotheticals. Further, it does not carelessly accuse a person of conduct that they did not and will not have an opportunity to refute in a legal forum. One also has to give AG Lynch credit for removing herself from the decision-making function and leaving this matter to career prosecutors.
From the perspective of process - Attorney General Loretta E. Lynch gets an "A" in my book.
Tuesday, July 5, 2016
FBI Director James B. Comey spoke this morning regarding the FBI's investigation of Hillary Clinton's Use of a Personal E-Mail System. See his remarks (here), which are unique in many ways:
1. Most investigations do not receive a formal statement saying that no charges will be recommended. ("we don’t normally make public our recommendations to the prosecutors"). Most individuals are left hanging without receiving a statement such as this or a statement from DOJ. Often folks may go through a lengthy investigation and but for the statute of limitations, they may never know it was over.
2. By not recommending that she be charged, but by stating negative comments about her actions (calling her "careless") she is left without the opportunity to demonstrate the truth or falsity of these statements. That said, having a statement that their recommendation to DOJ is that she not be indicted, is probably appreciated.
3. It is important to remember that an investigation such as this is one-sided - that is, the government is running the show. The FBI has no obligation to review or consider exculpatory evidence and one has to wonder if they shared what they found with defense counsel and gave them the opportunity to respond after they had reviewed the specific documents in question. Government investigations typically are not a give and take with defense counsel - they are the government accumulating as much evidence as they can to indict an individual and one only hears from the defense if and when there is a trial.
4. Is it the FBI's role to speak about hypotheticals when they have no hard facts? For example, FBI Director Comey stated - "It could also be that some of the additional work-related e-mails we recovered were among those deleted as 'personal' by Secretary Clinton’s lawyers when they reviewed and sorted her e-mails for production in 2014."
5. The accusations about what her lawyers did were unnecessary statements that had no place in this FBI statement. The statement that the "lawyers cleaned their devices in such a way as to preclude complete forensic recovery," seems like a proper action on the part of counsel - especially since they are dealing with the alleged classified documents.
6. Their statement about deficiencies in the security culture of the State Department ("While not the focus of our investigation, we also developed evidence that the security culture of the State Department in general, and with respect to use of unclassified e-mail systems in particular, was generally lacking in the kind of care for classified information found elsewhere in the government.") - To rectify this problem clearly takes money - will Congress authorize money for better technology and security within the State Department?
My Conclusions - It sounds like FBI Director James Comey's office did an extensive investigation and concluded that criminal charges are not in order - as it should be when a mens rea is lacking. It would be nice if this special instance of telling the individual that they are recommending against indictment were used in all cases when they have a recommendation for no indictment. When they do provide an announced recommendation of non-indictment, the FBI should limit their statement to just that. There is no need to tarnish a person's reputation in the process - especially when there is no concrete evidence to support the hypotheticals. Finally, becoming technologically savvy is difficult as the technology is constantly changing. Perhaps we need to re-examine our technological infrastructure across the board with the government -something we should have learned post-Snowden. Perhaps this can be put on the agenda of the next President.
An interesting case is pending in the 11th Circuit that considers whether a breach of a real estate contract can be the basis for a wire fraud conviction. The case involves a failure to disclosure a sinkhole when selling a residence. There is a huge federalism question here that is magnified by the fact that Alabama "employ[s] the cannon of caveat emptor in real estate transactions." But the most interesting aspect of the case is the government's taking a civil action and using the wire fraud statute to prosecute the conduct. I'll withhold further comment until after I have seen the government's brief - but I have to wonder if this is the case that the late-Justice Scalia was waiting for to limit the reach of the mail/wire fraud statutes.
Appellant's Brief - Download Defendant-Appellant's Initial Brief
Friday, July 1, 2016
Some folks have expressed critical views of the Supreme Court's opinion in the McDonnell case. But they are forgetting several important points:
- This was a unanimous decision by the Court. There were no dissents. There were no concurring opinions. It was clearcut!
- This decision does not put a stop to prosecutions for bribery and extortion. Cases in which there is a receipt of money for official acts can still be prosecuted. (Evans v. United States).
- This decision does not create any new limit to the bribery/extortion statute. It has always existed. (see United States v. Birdsall - a 1914 decision).
So what happened here? The government tried to push the envelope further than permitted and they were caught. This is no different than back in the 1980s when they tried to bring mail fraud cases based on intangible rights as opposed to property, a requirement of the statute. The Supreme Court in 1987 issued the McNally decision to place the government on notice that developing a new theory that exceeded the language of the statute would not be permitted.
Bottom line - Congress writes the laws and government prosecutors need to stay within the language provided to them.
Wednesday, June 29, 2016
I received the McDonnell decision with mixed feelings. Initially, I was happy for my colleague Hank Asbill, one of the nation's top criminal defense attorneys, for a great victory. Asbill and his co-counsel litigated this case the "old-fashioned way" - they fought it, and fought it, and then fought it. Their tenacity, dedication and skill make me proud to be a defense lawyer.
Not having read the briefs of the parties, or of the amici, or heard the oral arguments, I am hesitant to criticize the opinion, especially an opinion by a brilliant chief justice for a unanimous court (I suspect due to a compromise by potential dissenters, possibly to avoid an outright dismissal). Indeed, the opinion makes a strong case that the decision was required by precedent. However, I do question several aspects of the opinion. First, I find questionable Justice Roberts' Talmudic crucial narrowing of the definition of "official act" by virtually eliminating the broad catch-all words "action" and "matter," largely by resort to the Latin word jurisprudence that is often an indication that the interpretation is on shaky ground.
Second, while I am less troubled than the Court about the federal assumption of power to monitor the conduct of state officials for purportedly violating their offices, there is something bothersome about federal officials by criminal prosecutions in effect setting ethical standards for state officials. However, as a practical matter it appears that with rare exceptions local prosecutors lack the will and/or the resources to prosecute high state officials. In New York City, for instance, U. S. Attorney Preet Bharara has in recent years prosecuted about ten state legislators on corruption charges, while New York's five district attorneys combined have not prosecuted any.
Third and most importantly, I am concerned by the decision's enablement of business-as-usual pay-to-play practices. By narrowing the definition of "official act, the Court has legalized (at least federally) the practice of paying a government executive to set up a meeting with a responsible official. By doing so, the Court has given such "soft" corruption a green light. Under the opinion, a businessperson does not violate federal bribery law by paying a governor, mayor - or even the President - tens of thousands of dollars to make a phone call to a purchasing official asking or directing her to meet with the businessperson. And that call, however innocuous that actual conversation may sound, will have real consequences - otherwise, why would the businessperson pay for it? Even absent a verbal suggestion that the executive wants the official to do business with the caller, the official cannot but think that the executive would like that she do business with that person. I imagine a New Yorker cartoon with a governor sitting at a phone booth with a sign saying, "Phone calls, official meetings. $10,000 each."
To be sure, the law concerning bribery - not alone among federal statutes - vests too much power in the government. At argument government counsel conceded (candidly but harmfully) that a campaign contribution or lunch to an official could constitute the quid in a quid pro quo. That is frightening, but the problem is in the quid, not in the quo - about which this case is concerned. (I applaud Chief Justice Roberts statement in response to the standard "Trust me, I'm the government" argument that "We cannot condone a criminal statute on the assumption the government will use it responsibly.") And, certainly, if this case were to apply to campaign contributions - and not, as in this case personal receipt of money and goods-in the words of the amicus brief of former White House counsel - it would be "a breathtaking expansion of public corruption law." Indeed, a distinction should be made between personal and campaign contributions. But this case applied to the quo - what the governor did in exchange for $175,000 worth of goods and money. And, in my view he took "action" as the governor on a "matter" by "official acts" - hosting an event at the official mansion, making calls and arranging meetings.
Tuesday, June 28, 2016
McDonnell v. United States and Arthur Andersen v. United States are remarkably similar Supreme Court reversals. In both cases, aggressive federal prosecutors pushed obviously dubious jury instructions on all-too-willing federal district judges. In Arthur Andersen, Enron Task Force prosecutors convinced Judge Melinda Harmon to alter her initial jury charge, defining the term "corruptly." Judge Harmon's charge was right out of the form book, based on the approved Fifth Circuit Pattern Criminal Jury Instruction. The Government's definition allowed conviction if the jury found that Andersen knowingly impeded governmental fact-finding in advising Enron's employees to follow Enron's document retention policy. The 5th Circuit Pattern's requirement that the defendant must have acted "dishonestly" was deleted by Judge Harmon and the jury was allowed to convict based on impeding alone. Thus, at the government's insistence, knowingly impeding the fact-finding function replaced knowingly and dishonestly subverting or undermining the fact-finding function. This effectively gutted the scienter element in contravention of the standard Pattern definition. Local observers were not surprised by Judge Harman's ruling. Her responses to government requests are typically described as Pavlovian. Judge James Spencer, the trial judge in McDonnell, is also an old pro-government hand. Generally well regarded, he was a military judge and career federal prosecutor prior to ascending the judicial throne. In McDonnell, the government's proposed jury instructions regarding "official act" flew in the face of the Supreme Court's Sun Diamond dicta. They were ridiculously expansive, with the potential to criminalize vast swaths of American political behavior. In both cases, Andersen and McDonnell, the Supreme Court unanimously reversed. In both cases, careful attention to the law, even-handedness, and a willingness to stand up to the government would have saved taxpayer dollars and prevented human suffering. Careful attention to the law, even-handedness, and a backbone. That's what we expect from an independent federal judiciary.
Monday, June 27, 2016
The Supreme Court vacated and remanded the convictions from former Governor Robert McDonnell's case this morning in a unanimous decision, finding that "hosting an event, meeting with other officials, or speaking with interested parties is not, standing alone, a 'decision or action' within the meaning of section 201(a)(3), even if the event, meeting, or speech is related to a pending question or matter." (see here) In vacating the conviction and remanding it back to the district court, the Supreme Court gives the lower court an option:
- It can find insufficient evidence under the Court's standard - then the charges get dismissed.
- If the lower court finds sufficient evidence under the Court's standard - then the case gets reset for trial for a new jury to properly evaluate this case.
But there really is a third option here. If the lower court decides that there is sufficient evidence for a trial (which there doesn't seem to be), then the government can step in and say - enough is enough and dismiss this case. In the Supreme Court's opinion, it states - "[W]e cannot construe a criminal statute on the assumption that the Government will 'use it responsibly.'"
This is an opportunity for the government to step in and accept the Court's decision and be responsible. And the responsible thing to do here is dismiss!
There are many criminal acts occurring in society that warrant prosecution. Companies are in need of computer laws being enforced. Corruption is without doubt a problem and when someone takes money for doing a specific official act, then prosecution is needed.
But being a nice guy and listening to constituents, trying to promote their businesses, and sticking to one's campaign slogan - "Bob's for Jobs" - should not be crime.