White Collar Crime Prof Blog

Stanford Bail Shortlived

Blogged here was the jumpsuit walk of R. Allen Stanford following the ordering of bail by a magistrate judge.  But the bond was short-lived as the federal judge overseeing the case revoked his bail. A key test for securing bail pending trial is whether the accused will flee. The court, concerned with the possibility of Stanford fleeing, decided he should stay incarcerated.  But even with this decision, I have to question the jumpsuit walk.  Our system is premised on innocence until proved guilty.  Parading an innocent person in front of cameras implicates that individual prior to any finding of guilt. See Juan Lozano, Huffington Post, Stanford's Bail Revoked By Judge; Clifford Krauss, NYTimes, Judge Revokes Bail for Billionaire Accused of Fraud.

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Stanford Gets Bail, But After Jumpsuit Walk

Who gets bail and who remains in jail has been interesting to watch. The question is not limited to one stage of the criminal process, as the issue arises 1) upon indictment and arrest, 2) after a guilty finding at trial, 3) after sentencing, and 4) after an initial appellate ruling.  

The first stage - upon indictment and arrest - is often one of the easier ones for obtaining release as there is no conviction and being charged with a white collar crime, there is little chance of the accused using violence to harm others. In this stage Madoff, Snipes, Lay, and most other white collar individuals were released pending their trial.   So it is not surprising to see that R. Allen Stanford is being given bail pending his trial. 

So knowing the likelihood of bail, is it really proper for the government to parade Stanford in a jumpsuit in front of the media. Check out the picture with this article:Mauricio Guerrero, NYTimes, Stanford Enters Plea; Bail Is Set at $500,000  It's all well and good if Stanford is found guilty.  But if he is not convicted - the picture of the escorted man in an orange jumpsuit will forever remain. The problem here is not the press.  The problem is the government's misuse of its power to taint an individual who has not been proved guilty.

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Stanford and Other Execs Indicted

Robert Standard, chair of Stanford Financial Group, along with three executives from the company and one "former chief officer of the Antiguan bank regulatory agency" were indicted.  A DOJ Press Release states:

According to the indictment, Stanford and his co-defendants engaged in a scheme to defraud investors who purchased approximately $7 billion in certificates of deposit administered by Stanford International Bank Ltd. (SIBL), an offshore bank controlled by Stanford and located on the island of Antigua.  Stanford and his co-defendants allegedly misused and misappropriated most of those investor assets, including diverting more than $1.6 billion into undisclosed personal loans to Stanford himself, while misrepresenting to investors SIBL’s financial condition, its investment strategy and the extent of its regulatory oversight by Antiguan authorities.

The Indictment does not include allegations related to section 1346, the honest services clause (is the government shy to use this statute in light of the pending case before the Supreme Court).  The indictment does, however, include fraud charges and conspiracy to commit money laundering against some of those accused.   There will be many interesting questions on the conduct of the government that may arise from this prosecution. (see Attorney Dick DeGuerin'sStatement here as posted on the WSJ site - left hand side of page under Stanford Press Statement here)

Perraud Indictment here

Stanford Indictment here

Davis Information here

See also Evan Perez, WSJ, U.S. Files Criminal Charges in Stanford Case ;Matthew Goldstein, Stanford 'Is Not Madoff'; Mary Flood, Tom Fowler, & Jennifer Dlouhy, Stanford and 4 others indicted -Feds say holders of $7 billion in CDs bilked; Stanford attorney proclaims innocence;Clifford Krauss, NYTimes, Texas Financier and Antiguan Official Charged With Fraud

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Pictures of Different Fraudsters

Melanie Linder, Forbes, has an article titled, How to Foil a Corporate Fraudster.  What is particularly unique about this piece is that it is coupled with pictures of seven different types of fraudsters.  The different types (e.g., The Wannabe, The Survivor) really capture the sociology behind different types of individuals who commit white collar crimes. This article, with its pictures, presents an interesting perspective in deciding where along the spectrum a corporate fraudster belongs when it comes to sentencing. I highly recommend this piece in thinking about a sentencing hearing.

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Nacchio Files Reply Brief and Case Is Set for Conference

Former Qwest CEO Joseph Nacchio's Petition for Cert can be found here. He argued that the Tenth Circuit decision (en banc) conflicted with other circuits. (The Tenth Circuit opinion was decided with a close vote). Nacchio has now filed his Reply Brief, responding to the government, and the matter has been set for conference at the end of the month.  Here are some interesting lines from the brief-

• "The petition and amicus briefs explained that if the internal debates and predictions underlying this prosecution count as 'material inside information' then no company or executive can buy or sell stock, ever, without risking capricious criminal prosecution."

• "The government never denies that this is the first time an executive has ever been prosecuted on the basis of undisclosed 'risks' about future quarters, or that Nacchio was convicted for failing to disclose information that other circuits would have punished him for disclosing."

There are a host of other important issues in this case.  

Reply Brief - Download Cert_Reply

See also Catherine Tsai, Houston Chronicle (AP), Nacchio: Case never should have gone to trial

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Indictment - Attorneys and Accountants

The indictment against seven individuals - "three former shareholders of the Jenkens & Gilchrist law firm (J&G), the former Chief Executive Officer and a former tax partner from the BDO Seidman accounting firm (BDO), and two former bankers from a foreign bank with headquarters in New York (Bank A)" is a top news item. The accusations are about alleged "tax fraud conspiracy and related crimes arising out of tax shelters promoted by J&G, BDO, and the bank." The DOJ Press Release is here.  The Indictment makes a point of giving some of the background of the individuals accused with crimes.  For example, that one individual previously worked for Arthur Andersen and that another had a Masters in Laws degree in Taxation.

In reading the Indictment, I kept thinking of Justice Ginsburg's words in the case of Ratzlaf v. United States - "[c]ourts have noted 'many occasions' on which persons, without violating any law, may structure transactions 'in order to avoid the impact of some regulation or tax.'" The question here will be, did the individuals cross the line, and did they commit criminal acts.

 The Indictment is here - Download Daugerdas,_Paul_et_al_Indictment

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DiMasi Indictment

The U.S. Attorneys Office in Massachusetts indicted the former Massachusetts Speaker of the House, Salvatore F. Dimasi, along with three associates on charges of conspiracy, mail and wire fraud (using the honest services statute), and money laundering.  Dimasi served as speaker of the house from October 2004 through January 2009. The Indictment makes a point of noting that he is a lawyer. The case is alleged to involve a software company that sells "business intelligence and performance management software and related services."  The press release sums it up as a "scheme to deprive the citizens of Massachusetts of his honest services by allegedly improperly using his power and influence to enable a software company to obtain multi-million dollar procurements from agencies of the Commonwealth of Massachusetts." Like so many modern cases, emails may be playing a part in the case as one finds reference to emails in the Indictment.

Indictment - Download DiMasi Indictment

Wecht Case Over

There is no press release on the website of the US Attorney for the Western District of Pennsylvania announcing the dismissal of the case against Cyril Wecht.  But one seldom finds a US Attorney's Office posting a press release on a case dismissal - it always seems to be the indictments and convictions that they are anxious to report. (shouldn't a minister of justice report all instances of justice?).  

But the press is reporting that the charges against Cyril Wecht have been dropped. See Paula Reed Ward, Pittsburgh Post-Gazette, Wecht charges dropped; Eric Heyl, TribLive, Buchanan's big case slams shut for good; Joe Mandak, Philly.com (AP),U.S. drops charges against pathologist

This, too, isn't surprising as key evidence was tossed from this case last month. (see here) This case started with many counts against Cyril H. Wecht (see Indictment). The initial trial that lasted 7 weeks with the  government presenting 44 witnesses.  It resulted in a hung jury. 

On my wish list this past year to President Barak Obama was that his administration

• Conduct an investigation on cases such as former Alabama Governor Siegelman and Cyril Wecht and if politics played any role - do the right thing

A dismissal renders this issue moot, and that's OK. Everyone needs to move on.

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UK Looking at Lawyers

The US may not be the only government entity proceeding against lawyers, as the UK Financial Services Authority seems to also be heading in this direction.  See James Lumley and Caroline Binham, Bloomberg, Lawyers at U.S. Firms Face FSA Insider-Trading Case

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Conrad Black Asks for Bail Pending a Ruling by the Supremes

Lyle Denniston over at Scotus Blog has Conrad Black's application for bail (see here), and it is noted that the government has until Friday to respond.  In the defendant's favor is the fact that a co-defendant has been granted bail pending appeal.  Further, the fact that the Supreme Court has accepted certiorari is an important consideration (see here).  Despite the summary resolution of the case by the Seventh Circuit (see here), there is a fascinating mail fraud issue that the Court will be reviewing (see here).  The disparity in having one co-defendant on bail, and the other incarcerated seems like a strong argument to grant bail when there has been no indication of a flight risk or a danger to society. But lets see what the Government responds.

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Enron Broadband's CFO Pleads

A DOJ Press Release reports on Former Enron Broadband Chief Financial Officer Pleads Guilty to Falsifying Books and Records.  "According to the terms of the plea agreement, Howard faces a maximum sentence of up to 12 months of home confinement at his sentencing."  The press release states that "[i]n an attempt to generate earnings sufficient to meet the earnings target, Howard admitted that he and others at EBS structured a transaction known as 'Project Braveheart' designed to 'monetize' or book a portion of the anticipated hundreds of millions of dollars of future earnings from EBS’s agreement with Blockbuster in the fourth quarter of 2000."  But the reality is that Howard had a hung jury the first time around and a conviction vacated the next time.  Most likely the cost of trial, including the psychological cost, made this plea extremely attractive.  

See also Tom Kirdendall, Houston ClearThinkers. Chalk up Another Trial Penalty Deal;Amir Efrati, WSJ Blog, Former Enron Exec Could Get Home Confinement After Plea

Lawyer Memos as a Basis for Criminal Charges

The media is certainly focusing on the "Torture Memos,"  as they should. See here, here, and here.  But one aspect hasn't really been discussed and that is whether there should be reconsideration of another case that involved a lawyer's opinion letter.  If the torture memos are not a basis for a criminal prosecution, then can one really proceed against Ben Kuehne for his opinion letters? See here

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Blagojevich Indicted

Rod Blagojevich and 5 others were indicted in a 75 page document that included a myriad of different federal statutes, such a mail and wire fraud, false statements and RICO. The Indictment with its 19 counts (16 against Blagojevich) claim that he "allegedly used his office in numerous matters involving state appointments, business, legislation and pension fund investments to seek or obtain such financial benefits as money, campaign contributions, and employment for himself and others, in exchange for official actions, including trying to leverage his authority to appoint a United States Senator."  One interesting aspect of the Indictment is how prosecutors framed the Enterprise for the RICO charge. They call it the "Blagojevich Enterprise."  The enterprise is an association in fact comprised of "defendant Rod Blagojevich, the Office of the Governor of Illinois, and Friends of Blogojevich."  Will Blagojevich have any friends left by the time this case progresses to trial, if in fact it does?

DOJ Press Release here.

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Holder's Statement on the Stevens Case, Commentary, & More

AG Eric Holder sets the tone for this new DOJ (see here) in his DOJ Press Release which states, "After careful review, I have concluded that certain information should have been provided to the defense for use at trial. In light of this conclusion, and in consideration of the totality of the circumstances of this particular case, I have determined that it is in the interest of justice to dismiss the indictment and not proceed with a new trial."

This dismissal is monumental in terms of sending a message that this justice department will be very different.  Many years ago a group of AG's signed an amicus brief in the case of Gideon v. Wainwright advocating for the defendant. They wanted a fair fight in court, and recognized the importance of the right to counsel to achieving justice.What happened today is on par with what happened back then. It is a recognition that prosecutors are not merely advocates, but rather "ministers of justice."  Today an Attorney General took the side of justice.

What Others Are Saying:

Ashby Jones, Breaking News: Gov. to Drop All Charges Against Ted Stevens, WSJ Blog here

Doug Berman, Sentencing Law & Policy here

Neil A. Lewis, N.Y. Times,U.S. to Drop Case Against Ex-Senator From Alaska

Erika Bolstad & Richard Mauer, Anchorage Daily News, Attorney general drops Stevens prosecution

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Experts in White Collar Cases - The Goyal Case

In the Nacchio case (see here), the defense was precluded from having an expert witness testify.  In the Goyal case (see here), the issue is that the prosecution failed to provide an expert witness to show that there was a GAAP violation. It is interesting to see the importance of expert testimony in white collar cases -- cases that tend to be more complicated and require educating the jury on the technicalities of transactions.

The National Association of Criminal Defense Lawyers (NACDL) has filed an amicus brief in the Goyal case arguing that the government was required to "offer expert testimony that a GAAP violation in fact occurred."  As stated in the brief, "a jury should not be treated as a team of accountants and asked to interpret and apply GAAP without expert guidance." (note- a similar issue, although not the same circumstances, was discussed in the  Rigases and Ebber's case - see here).  This is a particularly interesting issue as the need for an expert has been noted in civil accounting cases. The amicus brief notes that "the need is even more pressing in criminal cases, where the burden of proof of each element is higher- beyond a reasonable doubt, rather than merely by a preponderance of the evidence." The brief also examines the mens rea requirement for corporate officers.

NACDL Amicus Brief in U.S. v. Goyal - Download U.S._v._Goyal_Amicus_Brief

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Supremes to Hear White Collar Case from Enron Broadband

The U.S. Supreme Court is set to hear oral argument tomorrow on the case of Yeager v. United States, (see here) a case that reexamines the collateral estoppel rule in a white collar context.  The question before the Court is:

"Whether, when a jury acquits a defendant on multiple counts but fails to reach a verdict on other counts that share a common element, and, after a complete review of the record, the court of appeals determines that the only rational basis for the acquittals is that an essential element of the hung counts was determined in the defendant's favor, collateral estoppel bars a retrial on the hung counts."

The defendants in the case "were tried on various counts for their actions while employed at Enron Broadband Services ("EBS"). The jury acquitted Defendants on some of these counts but hung on others, after which the United States ("Government") again indicted Defendants on some of the mistried counts." The issue is now whether collateral estoppel can apply to hung counts.

There is no question that the circuits are split on this issue and that Supreme Court guidance is needed. But a lot is at stake here in that the collateral estoppel rule, an important component of the constitutional protection against double-jeopardy,  is being tested.  Some of the questions here are: Should prosecutors be rewarded for "overcharging their cases and then failing to prove the superfluous charges?" Should courts provide legal oversight when it is clear that the law can only be interpreted one way? If the acquitted counts estop the hung counts, can a court chalk this up to jury irrationality and just permit the jury a second bite at the apple?

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Addendum - Briefs can be found on this ABA site here. (w/ a hat tip to Jack Townsend)

Prosecutorial Misconduct?

Curt Anderson, Florida AP, US prosecutors accused of misconduct in case - Did prosecutors authorize two witnesses to record their conversations with defense counsel? And did the prosecutor fail to reveal evidence to the defense?  The more important question is - what would defense counsel have faced if the tables were turned. 

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United States v. W.R. Grace

Hats off to the School of Law and School of Journalism at University of Montana for the blog they created to follow the Grace case. The case is in the U.S. District Court in Montana.  Check it out here.

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Madoff- Raising the Bail Issue

The trial court sent Bernie Madoff to jail upon his entering of a guilty plea (see here).  He has now appealed to a higher court for his release pending his sentencing.  See Chad Bray, WSJ, Madoff Appeals Jailing; Thomas Zambito & Corky Siemaszko, Daily News, Bernard Madoff's lawyer Ira Sorkin appeals to spring Bernie from jail

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Nacchio: A New Direction

The Tenth Circuit recently reinstated the convictions of former CEO of Qwest Communications International, Inc, Nacchio. (see here) But the decision was a close one at 5-4.  Nacchio is now presenting new evidence and asking the court to consider this new evidence and also to provide bail pending the resolution of this matter.

What is particularly fascinating here, is that normally the government is the one who obtains favorable evidence in a parallel civil proceeding and the defense may be contesting the use of this evidence in a criminal case.  This case finds a reverse scenario, in that the evidence the defense wants the court to consider was evidence obtained in a SEC deposition.  As the court typically allows the prosecution to use parallel proceeding evidence, then shouldn't it also be permitted for use by the defense?  Now there are other considerations that the court will need to consider here, such as the timing of obtaining this evidence and whether it is inconsequential or harmless evidence.  But from a fairness perspective, it would seem that if the government can use evidence from a parallel proceeding, then the defense should have the same benefit.  It may be particularly important here with the close vote on the case and new evidence that goes to an issue before the court.

Motion for a New Trial Pursuant to Federal Rule of Crim Proc 33 - Download Motion

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