Friday, January 15, 2016
Tuesday, January 5, 2016
The Ethics & Compliance Initiative (ECI) released a special Blue Ribbon Panel report, Principles and Practices of High Quality Ethics & Compliance Programs. The report is a discussion draft, and they are seeking comments and suggestions from colleagues and other members of the public. The draft report can be found here - Download FinalBRPReport
The deadline for comments is January 8th, but they asked that those needing more time to contact their office.
Monday, January 4, 2016
Guest Blogger - Dmitriy Kamensky, Fulbright Faculty Development Fellow, Stetson University College of Law; Professor of Law, Berdyansk State University, Ukraine.
On Dec. 30, just as corporate and the rest of America was getting ready to celebrate the New Year, one of the top-tier Swiss banks, Julius Baer Group, announced (see here) that it had reached an agreement in principle with the U.S. Attorney’s Office for the Southern District of New York, related to a long and extensive investigation into aiding American customers to evade millions of tax dollars. The bank said it set aside $ 547 million to settle the matter with the Justice Department and expects to enter a final settlement in the first quarter of 2016.
This final development of the Julius Baer case is the latest of about a dozen Swiss financial institutions that came under DOJ scrutiny for allegedly providing American customers (and taxpayers) with numbered accounts that were protected by Swiss bank-secrecy laws, thus effectively helping U.S. taxpayers underreport their taxes.
In February of 2009, UBS AG, the largest Swiss bank worth over $ 1 trillion in assets, entered into a Deferred Prosecution Agreement (DPA) with the Department of Justice for $780 million (see here). The bank has acknowledged that between 2000 and 2007 it has participated in a cross-border scheme with the purpose of defrauding the United States and the Internal Revenue Service. The scheme was designed to aid American customers in evading federal taxes, by dodging their money to numbered UBS accounts. Under growing pressure from the U.S. authorities, the bank and later the Swiss government agreed to cooperate, by granting access to American accounts and later relaxing bank secrecy laws altogether.
Then in 2014 another larger Swiss lender, Credit Suisse Group AG, moved to settle a similar criminal probe by pleading guilty to conspiracy to aid its American clients in filing false income tax returns with the IRS. The bank agreed to pay $ 2.6 billion in criminal fine, restitution and other penalties (see here).
With the case of Julius Baer outlining the final part of multiyear aggressive probes by DOJ into the Swiss banking industry and tax dodging operations, it becomes clear that bankers across the globe are being given a serious (and quite expensive) warning: do not mess with American tax laws; federal prosecutors and tax agents have long arms.
Saturday, January 2, 2016
Each year this blog has honored individuals and organizations for their work in the white collar crime arena by bestowing "The Collar" on those who deserve praise, scorn, acknowledgment, blessing, curse, or whatever else might be appropriate. With the appropriate fanfare, and without further ado, The Collars for 2015:
The Collar for Make-Believe Julius Caesar – To Deputy AG Sally Yates who issued a “new” corporate divide and conquer memo, pitting companies against their employees in a supposed effort to “get tough” on high-level corporate wrongdoers, only to see it followed up by GM’s Deferred Prosecution Agreement. She came, she saw, she whimpered.
The Collar for Forced Government Product Recall—To Preet Bharara who was ordered by the Second Circuit to recall his spoiled brand of insider trading prosecutions.
The Collar for Bargain Shopping – To DOJ, which might consider shopping its insider trading cases out of Manhattan following the Newman decision.
The Collar for Newspeak (aka the Orwell Collar)—To DOJ's Office of Public Affairs for its press release celebrating the Don Blankenship verdict.
The Collar for Best Singing of "Silence is Golden" – To DOJ for issuing press releases when there is a conviction and nothing when the jury returns a not guilty or a court dismisses the case.
The Collar for Arm-Twisting—To Deputy AG Sally Yates, whose memo spawned a sudden outbreak of corporate throwing--under the bus.
The Collar for Wishful Thinking—To Karl Rove for speculating in his Wall Street Journal column that Hilary Clinton might be indicted.
The Collar for Delusional Thinking—To "bad boy" Martin Shkreli for complaining to the Wall Street Journal that the indictment against him, "doesn't tell my side of the story at all."
The Collar for Hallucinatory Thinking—To Representative Trey Gowdy for thinking that anybody, on either side of the political aisle, really cared about the substance of his special committee’s findings.
The Collar for Favorite Don Quixote Judicial Noodge (aka the Tilting Against Windmills Collar)—To Judge Alex Kozinski who bravely and repeatedly urges his fellow federal judges to deter Brady violations where they matter--in the courtroom.
The Collar for Creative Writing (aka the E.E. Cummings Collar)—To the New Orleans U.S. Attorney's Office, whose prosecutors made anonymous prejudicial comments in local online newspaper stories about the defendants they were prosecuting.
The Collar for Creative Storytelling—To the same New Orleans U.S. Attorney's Office, whose prosecutors denied in open court all knowledge of anonymous prejudicial comments. This resulted in a dismissal with prejudice upheld this year by the Fifth Circuit.
The Collar for Prejudicial Law Enforcement Statements (aka the John Ashcroft Collar)—To the F.B.I. for its spokesperson's public "anonymous" comment that the charges against Martin Shkreli represented "a trifecta of lies, deceit, and greed."
The Collar for Professional Irresponsibility—To the U.S. Attorney's Office for the Eastern District of New York for allowing the FBI to perp-walk Martin Shkreli in front of television cameras.
The Collar for the Fishiest Title on a DOJ Press Release — "Chicken of the Sea and Bumble Bee Abandon Tuna Merger After Justice Department Expresses Serious Concerns"
The Collar for Forcing the DOJ to Call Soccer “Football” – To FIFA for the ongoing corruption investigation in the United States and Europe
The Collar for Defending the Attorney-Client Privilege – To the U.S. Court of Appeals for the District of Columbia for overturning a lower court decision in the case of In re Kellogg Brown & Root, Inc. that “generated substantial uncertainty about the scope of the attorney-client privilege in the business setting."
The Collar for Attempting to Make the Guinness Book of Records for the Longest Investigation – Yet again, to Congress for its investigation of the IRS.
The Collar for Food for Thought in Sentencing – To Stewart Parnell, who received a sentence of 28 years in prison after conviction on charges related to his involvement in a deadly nationwide salmonella outbreak
The Collar for the Case Most Needing Review – Virginia Governor Bob McDonnell’s conviction.
The Collar for Rat-Catching – To Antitrust for having the highest percentage of substantial assistance motions in the 4th quarter.
The Collar for Judicial Watchdog—To EDVA District Judge Gerald Lee. When the EDVA U.S. Attorney’s Office sent an official letter to potential defense witnesses informing them that they were actually victims, Judge Lee made prosecutors prepare a corrected version setting the record straight.
The Collar for the Best Child– To Don Siegelman’s daughter, who continues to fight to Free Don.
The Collar for the Best Parent - Retired years ago and renamed the Bill Olis Best Parent Award –not awarded again this year since no one comes even close to Bill Olis, may he rest in peace.
Monday, December 28, 2015
The Stetson IEMCC, now in its 20th year, is the world’s largest moot court competition devoted exclusively to global environmental issues. This year’s problem focuses on the return of confiscated poached elephant ivory and implicates UNCAC and UNTOC. We are seeking knowledgeable volunteers to evaluate memorials (briefs) submitted by student teams.
There is one more opportunity to judge: For the International Finals, judges will receive their assignments at the end of February/beginning of March. The due date for evaluations is Monday, April 11. We expect that each judge will read six to eight memorials.
If you are interested in assisting, please contact Prof. Brooke Bowman at firstname.lastname@example.org. General information about the Stetson IEMCC is available at http://www.stetson.edu/law/international/iemcc/index.php. Many thanks for your consideration and happy new year!
Thursday, December 24, 2015
Title 18 U.S. Code, Section 1546(a) prohibits a person from using a document prescribed by statute or regulation for entry into the United States if the document was "procured by means of" a false claim and false statement. In U.S. v. Pirela Pirela, out of the Eleventh Circuit, Pirela Pirela obtained a visa to enter the United States from Venezuela and intentionally failed to mention his Venezuelan criminal conviction. Charged with a violation of 1546(a), he argued that the statute requires the government to prove that he would not have obtained the visa but for his false statement. The government argued that it need only prove the materiality of the false statement. The government won.
Wednesday, December 23, 2015
Here is the Ninth Circuit's opinion in U.S. v. Douglas DeCinces. Absolutely no surprise that the district court's exclusion of 404(b) evidence was overturned. Like, duh. Here is the real lesson. There is no such thing as a tentative ruling. You exclude the evidence or you don't. All evidentiary calls are tentative in nature until the parties close. If you sense a favorable ruling but don't want the government to get an interlocutory appeal, ask the judge to carry the motion with the trial. Ask the judge to allow you to approach the bench and argue admissibility. Ask for anything but an actual pre-trial ruling, because, nine times out of ten, you are going to frigging lose on interlocutory appeal. I wouldn't even call this inside baseball. More like Pee-Wee Leagues.
Tuesday, December 22, 2015
Today in U.S. v. Gregory Bell, aka Boy-Boy, the D.C. Circuit denied appellants' consolidated petitions for rehearing en banc, which challenged the sentencing court's use of acquitted conduct to dramatically enhance appellants' sentences. Two separate and outstanding concurrences are worth a view. Judge Patricia Millett incisively critiques current sentencing jurisprudence which condones such horrific results. Judge Brett Kavanaugh agrees with Judge Millett and provides guidance for district courts who find by a preponderance of the evidence that acquitted conduct occurred, but do not want to enhance the sentence. What is the guidance? In a nutshell, utilize Booker to downwardly vary the sentence. Hopefully the Supreme Court will grant certiorari and end this appalling vestige of sentencing law.
Monday, December 21, 2015
Paragraph two of 18 U.S.C. Section 1542 criminalizes the willful and knowing use of a passport secured by reason of a false statement. Long ago, in a galaxy far away, the Supreme Court held that "willfully and knowingly" in the context of paragraph two means "deliberately and with knowledge" and not a damn thing more. The case, as every schoolboy knows, is Browder v. United States. (I was discussing one of Browder's more subtle points just yesterday with my haberdasher.) In U.S. v. Aifang Ye, the Ninth Circuit dealt with the appeal of Ms. Ye, who was convicted under Section 1542, paragraph one, of willfully and knowingly making a false statement in a passport application. The Ninth Circuit held that what's good for paragraph two is good for paragraph one. And what about those pesky intervening Supreme Court decisions seeming to indicate that willfulness requires "bad purpose" and a "knowledge that the conduct was unlawful"? You know, cases like Bryan v. United States and Safeco Insurance Company of America v. Burr? Not to worry. All disposed of in footnote two of the Ninth Circuit's opinion. Since Browder "directly applies" (although it dealt with a different paragraph of a predecessor statute), its ruling controls, even if its reasoning has been rejected in subsequent Supreme Court decisions.
Sunday, December 20, 2015
Last week in U.S. v. James Wendell Brown the United States Court of Appeals for the D.C. Circuit reversed a Booker upward variance in a child pornography case. The majority found Judge Richard Leon's sentence procedurally unreasonable, even under the plain error standard. The problem? Judge Leon was too general, and generic, in explaining how the four (out of seven) 3553(a) factors that he referenced applied to the defendant and justified an upward variance. As a white collar practitioner I always get nervous when a variance of any kind is sent back. Case law supporting upward and downward variances is substantial, and generally very favorable to the defense, and any chink in the armor of broad district court sentencing discretion is worrisome. Here there should be no great cause for concern. While talismanic recitation of all Booker factors is not required in any federal circuit to justify an upward or downward variance, there has to be some specific effort to link the factors relied upon to the individual conduct or character of the defendant standing before the sentencing court. Making sure that the court performs this linkage is the practitioner's job. Here, Judge Leon was simply too vague in reciting the 3553(a) factors and explaining why they justified a significant upward variance, and no practitioner chose to fill in the details, because the variance was opposed by both the prosecution and defense. In the mine run case, where defense counsel is arguing for a downward variance, it is his or her job to convince the trier of fact and, if necessary, help the court articulate, on the record, the reasons for the variance, such that the sentence will stand up on appeal. To fail is to screw your own case up and create a bad precedent for your peers.
Judge Edwards, writing for the majority, distinguished U.S v. Ransom. In writing about Ransom here last year, I noted that the DC Circuit "rejected appellants' argument that the sentencing court improperly relied on factors in varying upward that the Guidelines had already accounted for. Joining some sister circuits the Court held (internal quotes and citations omitted) that:
It is not error for a district court to enter sentencing variances based on factors already taken into account by the Advisory Guidelines, in a case in which the Guidelines do not fully account for those factors or when a district court applies broader [Section] 3553(a) considerations in granting the variance.
Notice that there are two alternative prongs to this portion of Ransom. The Brown court seems to indicate that the failure of the Guidelines to fully account for certain factors will only occur when the sentencing court sees and identifies special additional factors that exist in a specific defendant's particular circumstance. Thus, in Ransom, although the Guidelines already assessed two points for committing the offense while on probation, the sentencing court stated on the record that the offense of conviction (embezzlement) and the identity of the co-defendant were identical to the violated probationary offense and that this (and other things) justified an upward variance. Contrat this with Brown, where Judge Leon failed to articulate anything about Brown's particular offense/conduct/background that was not fully accounted for in the applicable Guidelines provisions.
The other prong of Ransom is completely undisturbed. A sentencing court can apply broader Section 3553(a) considerations, that is, broader considerations than those contained in the Guidelines, in granting an upward or downward variance. Again, there must be an explanation by the sentencing court. The sentencing court is always free to articulate its disagreement with the Guidelines' approach, and as long as that disagreement is rational and reasonable, the sentence cannot be disturbed. Two classic examples of this are family circumstances and aberrant conduct, both of which are nearly impossible to achieve as grounds for downward departure, but which regularly enter in to downward variance judgments in the post-Booker-Gall-Kimbrough world.
Judge Sentelle, who wrote the majority opinion in Ransom, dissented in Brown, because he did not see plain error.
Tuesday, December 8, 2015
Not surprisingly, New York County District Attorney Cyrus Vance's office has announced it will after a hung jury retry, albeit in slimmed-down form with fewer defendants and counts, the criminal case involving the defunct firm of Dewey & LeBoeuf's alleged misrepresentations in seeking financing during its desperate dying days. Prosecutors rarely admit defeat in big cases after a single hung jury. Double jeopardy does not apply.
The major defendant, against whom (as often happens with the highest-ranking officer) there is the least evidence, Steven H. Davis, its former chair, has been pared from the case and apparently will receive a deferred prosecution. "Deferred prosecutions" are rarely, if ever previously, given to individuals by New York state prosecutors, at least by that name. Although the terms have not been announced, this disposition, I suspect will essentially be just a dismissal dressed up so that the prosecutor can save some face and not admit a total loss.
The prosecutor, as is a custom in New York County, announced publicly on the record his plea offers to the three defendants remaining. I find this custom repugnant and sometimes in return I announce the defendant's terms for a final disposition - such as, a dismissal, an apology by the prosecutor and a testimonial dinner in the defendant's honor.
The plea offers here were a felony plea with a one-to-three year jail term to Joel Sanders, a felony plea with 500 hours of community service to Stephen DiCarmine, both of whom spent six months at the trial that ended in a hung jury, and a misdemeanor plea with 200 hours of community service, to Zachary Warren, who was severed and has not yet gone to trial. I would not be surprised if these cases were settled before trial, not necessarily at the offered price.
Saturday, December 5, 2015
Congratulations to the defense team members and their client in U.S. v. Bajoghli. After a 16 day trial, the dermatologist defendant was acquitted on all counts--over 40. Dr. Bajoghli was represented by Peter White and Nicholas Dingeldein of Schulte Roth & Zabel and Kirk Ogrosky and Murad Hussain from Arnold & Porter. The jury was out a day and a half.
There was some interesting motion work during the pre-trial phase, for those of us interested in government efforts to affect witness testimony. Six weeks before the original trial date, the government sent "victim impact notification" letters to several of Dr. Bajoghli's patients. Dr. Bajoghli complained that the patients, many of whom were scheduled to be defense witnesses, were not victims and that the letter was intended to prejudice the patients against him. Judge Gerald Lee granted the motion and issued a corrective letter. Here are the relevant papers: Bajoghli Motion in Limine Seeking Corrective Witness Instructions, Exhibit A Ogrosky Letter to DOJ, Exhibit B to Bajoghli Motion, Order Granting Motion for Corrective Witness Instruction, Court's Corrective Witness Letter.
Friday, December 4, 2015
This morning's Wall Street Journal contains an opinion piece I wrote on the subject of the "trial penalty." Entitled "The Injustice of the Plea-Bargaining System," the commentary examines the manner in which the trial penalty induces too many defendants to give up their constitutional right to trial. In examining the issue, the piece includes a discussion of the tragic case of Orville (Lee) Wollard. Wollard, who was charged with a crime after firing a warning shot in his home into the wall next to his daughter's allegedly abusive boyfriend, turned down a plea offer of five years probation and ended up receiving a sentence of twenty-years in prison after conviction at trial. I hope you will have an opportunity to read the entire piece.
Thursday, December 3, 2015
Not Guilty on Two Counts and Conviction on a Misdemeanor Count in CEO's Case Following Deadly Mining Accident
It is interesting to see the headlines from the NYTimes - Former Massey Energy C.E.O. Guilty in Deadly Coal Mine Blast and Politico - Coal baron convicted for mine safety breaches. Both headlines focus on the conviction of the CEO. The Wall Street Journal headline says - Jury Convicts Former Massey CEO Don Blankenship of Conspiracy - but does say in smaller print below this headline "Former executive found not guilty of securities-related charges after deadly West Virginia mining accident."
Yes, it is important to note that a CEO was convicted here of workplace related safety violations and this was after a deadly accident. But what is also important is that CEO Blankenship was found not guilty of the serious charges that he initially faced. What started as a 43 page indictment by the government (see here), ended as a misdemeanor conviction on one count. William W. Taylor, III of Zuckerman Spaeder LLP was the lead on this defense team.
The New York Times reported today (Goldstein, "Witness in Insider Trading Inquiry Sentenced to 21 Days, see here) what it called a "surprising" 21-day prison sentence imposed by Judge P. Kevin Castel upon a felony conviction broke "what has been the standard practice" in insider trading cases in the Southern District of New York. Anyone not familiar with the customs of that court's prosecutors and judges might think that such a sentence was out-of-the-ordinary lenient. However, as the article makes clear, that sentence, for a major cooperator, was apparently considered out-of-the-ordinary harsh.
The defendant, Richard Choo-Beng Lee, was a California hedge-fund owner who, after being approached by FBI agents with evidence that he (and his partner, Ali Far, who was later sentenced to probation by a different judge) had broken securities laws, cooperated with the government by recording 171 phone calls with 28 people, including Steven A. Cohen, DOJ's no. 1 target, who has not been indicted (although his firm, SAC Capital Advisers, was and pleaded guilty and paid a multi-billion dollar fine).
New York City is the cooperation capital of the world. As the Times article indicates, cooperators in white-collar (and other) cases in the Southern District of New York are given considerable benefits for cooperating (far greater than in most jurisdictions) and the default and almost uniform sentence for them is probation and not jail. To be sure, cooperators make cases, and many of those cases and the individuals charged would go undetected without cooperators looking to provide assistance to the government to lessen their own potential sentences.
However, the cooperation culture in New York has many deleterious consequences. To the extent that deterrence is achieved by jail sentences (and I believe it is in white-collar cases, but not in many other areas), its effect has been minimized. The clever white-collar criminal (and most but not all are intelligent) knows that he has in his pocket a "get-out-of-jail card," the ability to cooperate against others and get a non-jail sentence. The mid-level financial criminal can commit crimes, enjoy an outrageously lucrative, high-end life style, and, when and if caught, cooperate, stay out of jail and pay back what assets, if any, remain from his wrongdoing.
Knowledgeable white-collar defense attorneys are well aware of the benefits of cooperation. It is often good lawyering to urge cooperation, at times even in marginal cases, to avoid jail sentences. Indeed, more than a a trifling number of those who plead guilty in white-collar cases are actually innocent, often because they lack the requisite mens rea (a difficult, even when accurate, defense). And sometimes, at the urging of their lawyers, they admit guilt and tailor their stories and testimony to what the prosecutors and agents (who usually see only the dark side of equivocal facts and circumstances) believe actually occurred so that others actually innocent are convicted (or also choose to plead guilty and perhaps cooperate against others). The bar for indictment and conviction has been lowered. The adversary system has been turned sideways, if not upside-down.
To many, probably most, lawyers, cooperation is personally easier than going to trial. Cooperation avoids the stress of battle and the distress of (statistically probable) defeat at trial. No longer do lawyers walk around with "no-snitch" buttons. The white-collar bar has become generally a non-combative bar. To the extent it ever had one, it (with notable and not-so-notable exceptions) has lost its mojo. The first (and often only) motion many lawyers make upon being retained is to hail a taxi to the prosecutor's office.
I write about the role of the bar as a lament more than a criticism. I too represent cooperators when I think cooperation is to their benefit. There is a great penalty (or, to put it gently, "loss of benefit") for not cooperating. Those accused who choose not to cooperate, or those whose own scope of criminality and knowledge of wrongdoing of others is so limited that they cannot, receive (in my opinion sometimes, but far from usually, appropriate) severe jail sentences. Those who cooperate, except for the unfortunate Mr. Lee, almost always avoid jail.
Lawyers and professors talk about the "trial penalty," the extra, often draconian, prison time one receives for exercising his right to trial. The principal "penalty" in white-collar cases is not the trial penalty, but the "non-cooperation penalty." Even those who choose not to go to trial and plead guilty are punished much more severely than those who cooperate.
Remaining in this case is a single misdemeanor charge following the court's dismissal of homicide charges against a BP engineer on the Deepwater Horizon oil rig. (see here) Eleven charges were dismissed by the government in 2014 premised on the statute not applying to the operator of a drilling ship and eleven other charges were now dismissed by the court as the "government agreed" to this dismissal of charges of "'involuntary homicide' based on lack of evidence and other arguments. Initially, this individual faced 22 felony homicide charges, plus one misdemeanor charge of water pollution. The remaining misdemeanor charge is scheduled for a February trial. David Gerger from Quinn Emanuel represented the accused. See also Smyser, Kaplan & Veselka, LLP lawyers David Isaak, Shaun Clarke, and Dane Ball's role in this case (see here).
Monday, November 30, 2015
Longtime New York State Assembly Speaker Sheldon Silver, a Democrat, was found guilty today by a Southern District of New York federal jury on corruption charges, including honest services theft and extortion under color of law. As Speaker and majority leader, Silver was one of the "three men in a room" who controlled the New York Legislature (the others being the Governor and Senate majority leader, almost always a Republican, one of whom, Dean Skelos, is now on trial on corruption charges in the same courthouse as Silver was - an apparent show of federal prosecutorial bipartisanship).
Silver had requested and received case referrals to the tort specialty law firm where he was counsel from a doctor to whose university-affiliated clinic he later directed a half-million dollar state grant. He also requested from two major real estate firms that they send business to a different law firm from which he received large referral fees. Although the doctor and the real estate firm officers testified that they made the referrals to curry favor and influence Silver, no witness testified that there was an explicit quid pro quo or specific agreement that Silver would perform a specific (or even unspecific) act, although the government maintained that Silver did perform official actions that benefited the doctor and the real estate firms.
The defense argued that there was no quid pro quo, that the referrals were made out of friendship and respect, and that the official acts performed by Silver were legitimate and not performed because of the referrals.
The verdict was no surprise. Although the defense portrayed the incidents as "politics as usual," the "politics" just stunk. Silver had clearly received benefits, referrals to law firms from which he received millions of dollars only because those who had provided these benefits thought that Silver as a powerful official would do things - unspoken, unspecific and perhaps then unknown - that would benefit them. The cases, on which Silver did no actual legal work, were not referred to him because of his reputation as a lawyer.
On the one hand, as one who loathes corruption, I am somewhat gratified that it now appears (subject to judicial reversal of the jury verdict) that a public official may not request a substantial valuable benefit, direct or indirect, if he or she knows or believes, that the donor is conferring the benefit because the donor believes that the official will exercise his or her official power to the donor's advantage, even in the absence of an agreement that the official do anything in his official capacity.
On the other hand, I am concerned about what in effect is legislation by prosecution, even if it is good legislation. However unwholesome Silver's conduct was, he might have been convicted for what had been generally perceived as acceptable conduct in his world that he believed was not criminal. For better or worse, U.S. Attorney Preet Bharara has essentially changed the rules. A corruption conviction does not require as a quid pro quo that there be an agreement by a public servant to do a specific act or at least generally to act favorably in the future when circumstances arise, as many prosecutors had believed for years (and some still do). While the "new" rule is certainly better for society as a deterrent to corruption, I have some concern whether it is just to convict, and likely imprison for a considerable time, someone who acted within what he believed the rules were.
Perhaps this case will embolden prosecutors to go further in charging public officials. Here, Silver clearly solicited benefits, received benefits, and, at least in the case of the doctor, in return provided a benefit, even if not pursuant to an agreement. Will cases now be brought where public official receive monetary or equivalent benefits from those intending to influence them even where there is no evidence of solicitation by the officials and/or no evidence that the officials did anything in return for the benefits received? And what about cases involving campaign contributions made by donors and accepted by a candidates in the expectation that the candidates will act favorably toward their causes, and the candidates (if elected) do so act? (Or should there be an exemption for cases involving campaign funding?)
(Note - Silver, whom I have never met or spoken with, reappointed me three times as his designee to serve on the New York State Commission on Judicial Conduct, but did not reappoint me a fourth time.)
According to Reuters, a judge approved Britain's first Deferred Prosecution Agreement today. The below is from the Serious Fraud Office's (SFO) press release.
The Serious Fraud Office's first application for a Deferred Prosecution Agreement was today approved by Lord Justice Leveson at Southwark Crown Court, sitting at the Royal Courts of Justice.
The counterparty to the DPA, Standard Bank Plc (now known as ICBC Standard Bank Plc) ("Standard Bank"), was the subject of an indictment alleging failure to prevent bribery contrary to section 7 of the Bribery Act 2010. This indictment, pursuant to DPA proceedings, was immediately suspended. This was also the first use of section 7 of the Bribery Act 2010 by any prosecutor.
As a result of the DPA, Standard Bank will pay financial orders of US$25.2 million and will be required to pay the Government of Tanzania a further US$7 million in compensation. The bank has also agreed to pay the SFO's reasonable costs of £330,000 in relation to the investigation and subsequent resolution of the DPA.
In addition to the financial penalty that has been imposed, Standard Bank has agreed to continue to cooperate fully with the SFO and to be subject to an independent review of its existing anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws. It is required to implement recommendations of the independent reviewer (Price Waterhouse Coopers LLP).
DPAs are a new settlement vehicle in the U.K., as discussed in my article International White Collar Crime and Deferred Prosecution Agreements. One should expect that now the first DPA has been approved, U.K. enforcement bodies will begin aggressively using DPAs in the coming years. As the Director of the SFO, David Green, said of the Standard Bank DPA, "This landmark DPA will serve as a template for future agreements."
The press release and links to the Standard Bank DPA are available on the SFO website.
Friday, November 27, 2015
If you want to know why companies settle with the government, even when they aren't guilty of anything, look no further than Ally Financial LLC's $98 million "no admit or deny" settlement with the Consumer Financial Protection Bureau (CFPB) over alleged racial bias in auto lending. As Wednesday's Wall Street Journal reports here, the CFPB chose questionable statistical methods, had questionable legal authority, and used the threat of unfavorable action by the Federal Reserve and the FDIC in a wholly separate matter, to coerce a settlement. Ally was eager to receive approval from the Fed and FDIC to convert to holding company status, in order to avoid having to shed some of its business units. The Fed was only too happy to oblige CFPB in its bullying tactics. As an internal CFPB memo makes clear, a Fed finding of improper discrimination would "most likely result in the denial of holding company status," but the Fed "also indicated that if Ally takes prompt and corrective action, it would consider such a factor in its determination." The House Financial Services Committee Report, Unsafe at any Bureaucracy, carefully documents CFPB's sordid tactics . Incredibly, CFPB referred the matter to DOJ. This kind of stuff happens, and dictates business litigation strategy with the government, quite often. So, when people complain that the failure to prosecute corporate insiders is inevitably suspicious in light of large civil settlements, I always want to know the industry, the company and other important details.
Wednesday, November 25, 2015
Last week, the American Bar Association Criminal Justice Section held the inaugural Global White Collar Crime Institute in Shanghai, China. The event was a tremendous success with participants from around the globe coming together to hear from prosecutors and judges, defense counsel and accountants, in-house counsel and academics. On the first day, we were honored to be joined by Deputy Assistant Attorney General Sung-Hee Suh. DAAG Suh delivered the keynote luncheon address and touched on many important and timely issues related to white collar crime. Below, I'll specifically mention just two of the areas discussed.
First, DAAG Suh discussed the Yates memo and provided additional information about the government's current perspective on corporate cooperation. DAAG Suh said:
In her memo, Deputy Attorney General Yates announced a policy change designed to further enhance the likelihood that individuals who are responsible for corporate crime will be held accountable. The existing policy stated that, in deciding whether to give a company credit for cooperation, a criminal prosecutor “may” consider a number of factors – including the company’s willingness to give information about individuals. The new policy means that the “may” has now become a “must.” In other words, in deciding whether to give a company credit for cooperation, a prosecutor now “must” consider the company’s willingness to give information about individuals. And a company that does not provide this information will not be eligible for any cooperation credit. Previously, companies could receive varying degrees of credit for varying degrees of cooperation. Now, a company will receive no credit for cooperation unless, at minimum, it does what it can to identify individuals involved in the conduct, whatever their level of seniority or importance within the company.
(emphasis in original).
Second, DAAG Suh discussed the Department of Justice's recent hiring of a new compliance counsel to assist them in analyzing and evaluating corporate compliance programs. DAAG Suh said:
Self-disclosure, cooperation and remediation are all steps that a company can take after the fact, but the Justice Department is just as committed to preventing corporate wrongdoing from occurring in the first place. To that end, the Department has long placed great emphasis on the importance of an effective corporate compliance program. In the U.S., there is no affirmative defense based on the company’s corporate compliance program, but the Filip Factors have long provided that in conducting an investigation of a corporation, determining whether to bring charges, or in negotiating plea or other agreements, prosecutors should consider, among other factors, “the existence and effectiveness of the corporation’s preexisting compliance program.”
Fundamentally we ask, is the corporation’s compliance program well designed? Is the program being applied earnestly and in good faith? And does the corporation’s compliance program generally work? This is common sense in broad strokes. But prosecutors are no experts in the nuances of corporate compliance programs. Indeed, over the past twenty years in particular, the role of compliance has been evolving, becoming more sophisticated, more industry-specific and more metrics-oriented. Many companies have rightly tailored compliance programs to make sense for their business lines, their risk factors, their geographic regions and the nature of their work force, to name a few. But many have not.
The Fraud Section has therefore retained an experienced compliance counsel. She started only two weeks ago, so it’s still too early to talk about specifics. But I can tell you generally that we wanted to get the benefit of someone with proven compliance expertise, so as to probe compliance programs in terms of both industry best practices and real-world efficacy. This compliance counsel will help us assess a company’s claims about its program, in particular, whether the compliance program is thoughtfully designed and sufficiently resourced to address the company’s compliance risks, or is – at bottom – largely window dressing.
No compliance program is foolproof. We understand that. We also appreciate that the challenges of implementing an effective compliance program are compounded by the everincreasing cross-border nature of business and of criminal activity. Many companies’ businesses are all over the world. They are creating products and delivering services not only here in China but overseas and are operating across many different legal regimes and cultures. We also recognize that a smaller company doesn’t have the same compliance resources as a Fortune-50 company. Finally, we know that a compliance program can seem like “state of the art” at a company’s U.S. headquarters, but may not be all that effective in the field, especially in far-flung reaches of the globe.
The Fraud Section’s compliance counsel – who, notably, has worked as a compliance officer here in China, as well as in the U.S. and the U.K. – has the concrete experience and expertise to examine a compliance program on both a more global and a more granular level. More so than ever, it is critical that companies have vigorous compliance programs to deter and detect misconduct. Our compliance counsel will give our prosecutors more tools to intelligently assess them.
DAAG Suh's entire comments at the inaugural Global White Collar Crime Institute are available here.
I was also pleased to announce in my closing remarks to the Institute in Shanghai that the second Global White Collar Crime Institute will take place in South America in the spring of 2017. I hope to see you there.