White Collar Crime Prof Blog

Thornburgh Enters Appearance in Wecht Appeal

The Third Circuit Court of Appeals entered a stay of the Cyril Wecht trial pending appeal (for background on this case see here).  The case of the 77 year old coroner charged with federal violations for alleged state conduct was set for retrial following a hung jury.

A motion to expedite the appeal was also entered.  The appellee's brief is due on or before May 15th and the appellant's reply brief has a deadline of May 20th.  On the day this order was granted, there was also an entrance of appearance by Richard L. Thornburgh, former Pennsylvania Governor and former Attorney General of the United States and now with the law firm of Kirkpatrick & Lockhart, Preston, Gates, Ellis LLP. 

Should DOJ really be spending taxpayer money on this attempt to re-prosecute this individual? 

Government's Response Arguing that a Stay is Not Necessary - Download govt. Response-Wecht.pdf

Court Order Rejecting Government's Position - Download wecht_order.pdf

(esp)

The Government is Working With Air

Two airline related cases reached agreements -

1. A plea agreement was filed in United States v. Japan Airlines International Co., Ltd. on a Sherman Antitrust Act, 15 U.S.C. § 1, matter. The criminal fine of $110 million is offered with cooperation by the company.  There are a few interesting aspects of this plea -

• It actually outlines an agreed upon payment plan -

"The United States and the defendant agree to recommend, in the interest of justice pursuant to 18 U.S.C. § 3572(d)(1) and U.S.S.G. §8C3.2(b), that the fine be paid in the following installments: within thirty (30) days of imposition of sentence -- $20 million; at the one-year anniversary of imposition of sentence ("anniversary") -- $20 million; at the two-year anniversary -- $20 million; at the three-year anniversary -- $20 million; at the four-year anniversary -- $20 million; and at the five-year anniversary -- $10 million; provided, however, that the defendant shall have the option at any time before the five-year anniversary of prepaying the remaining balance then owing on the fine."

One can't help but think if the accountants were considering tax implications here.

• It accounts for the need to secure testimony from those outside the United States -

"16. The United States agrees that when any person travels to the United States for interviews, grand jury appearances, or court appearances pursuant to this Plea Agreement, or for meetings with counsel in preparation therefor, the United States will take no action, based upon any Relevant Offense, to subject such person to arrest, detention, or service of process, or to prevent such person from departing the United States. This paragraph does not apply to an individual's commission of perjury (18 U.S.C. § 1621), making false statements (18 U.S.C. § 1001), making false statements or declarations in grand jury or court proceedings (18 U.S.C. § 1623), obstruction of justice (18 U.S.C. § 1503, et seq.), or contempt (18 U.S.C. §§ 401-402) in connection with any testimony or information provided or requested in any Federal Proceeding."

2. A DOJ/Antitrust Press Release notes that "[t]he former highest-ranking Qantas Airways Limited cargo executive employed in the United States has agreed to plead guilty, serve 8 months in jail, and pay a criminal fine for participating in a conspiracy to fix rates for international air cargo shipments."

(esp)

No Witnesses for the Defense in Rezko

Chicago Tribune, Rezko Prosecution Rests, Defense to Call No Witnesses (for prior discussion of this case and the relation of this case to Presidential Candidate Obama see here, here and here).

(esp)

Former President of Monster Indicted

A DOJ Press Release of the U.S.  Attorneys Office of the Southern District of New York announces that the former chief operating officer and president of Monster Worldwide, Inc. was charged with securities fraud and conspiracy in connection with backdating of stock options. The press release states as the alleged criminal activity that:

"TREACY conspired with other former senior executives at Monster to systematically backdate stock option grants to Monster employees between 1997 and 2003, in an effort to provide
profitable options to employees without recording the required compensation expenses, thereby falsely inflating Monster's earnings. As a result, Monster’s public filings with the United
States Securities and Exchange Commission ("SEC") between 1997 and 2005 fraudulently understated the company’s compensation expenses by a total of more than $300 million."

(esp)

Wecht & Jurors Talk - Commentary

KDKA.com has an incredible tape from jurors and also with Wecht himself talking.  He hits it on the money when he notes how powerful prosecutors can be. The very fact that citizens who served as jurors and heard the evidence in this case are speaking out, that Wecht is telling how he has been destroyed by enormous legal fees and the emotional strain placed upon him, makes one wonder where is the oversight of main justice and have there been any discussions of a deferred prosecution. (see here)

It is equally bothersome to hear the prosecution claiming they need outsider jurors for the retrial (see here).  It sounds just like the defense argument in a much higher profile case - that is, Jeffrey Skilling's claim when being tried before a Houston jury.

(esp)

The Latest in the Wecht Case

This case is beginning to sound like a movie. As I previously noted here:

First there were questions about whether this case warranted a federal prosecution, and more importantly one with this many charges.  Then there was a seven week trial with a long deliberation, but that ended with a hung jury. (see here)  The post trial conduct by the FBI in questioning jurors certainly raised some eyebrows. (see here)  There were even questions about how the jurors names were obtained. (see here) There have also been claims that the FBI fabricated a 2005 affidavit (see here).  And there are claims that an excused juror did not want to leave the deliberations (see here).  And the prosecution is arguing that they need "outsiders" to get a fair jury in the retrial (see here and here).  And the judge responding to claims of bias, says he is not stepping aside. (see here and here) And you have the house committee asking for documents related to this case (see here).  And there have been claims of this being a political prosecution (see here). And you have prominent players asking AG Mukasey to step in here. (see here)

Wouldn't this be a perfect case for a Frank Quattrone style deferred prosecution agreement (see here)?

And just when you think enough has happened here, there is more.  The latest -

• The Pittsburgh Tribune Review (AP) - Wecht appeals to 3rd Circuit to overturn judge's decision
• The Pittsburgh Tribune Review - Judge won't dismiss charges against Wecht
• Pittsburgh Post Gazette - Wecht jurors surprised prosecutors seek retrial

So who will play Wecht is this movie?

(esp)

The Latest Jack Abramoff Effect

It has been several years since the investigation of Jack Abramoff and over two years since he plead guilty and received a seventy month sentence (see here).  But the dominoes continue to fall. (see here).

This time it is someone who was with the DOJ. The LA Times in an article titled, "Ex-Justice official is charged in corruption inquiry in connection with Jack Abramoff" tells the background of this former DOJ attorney and tells of the alleged favors received. The DOJ proceeding against a DOJ person is highlighted in the headline over at the ABA Jrl Law News - DOJs Abramoff Probe Ensares One of its Own.

The press anticipates a plea here, which raises questions of who will this new defendant be a witness against. As there are clear benefits to cooperation, and the more cooperation provided the better the deal, it serves an accused well to offer testimony against others in order to receive a lower sentence.  The continual fear in these cases is that with such a strong motivation to provide testimony, one has to question the credibility of the testimony that is received. 

(esp)

Dr. Cyril H. Wecht's Case - The Latest

It is without doubt that this case has been enormously controversial. First there were questions about whether this case warranted a federal prosecution, and more importantly one with this many charges.  Then there was a seven week trial with a long deliberation, but that ended with a hung jury. (see here)  The post trial conduct by the FBI in questioning jurors certainly raised some eyebrows. (see here)  There were even questions about how the jurors names were obtained. (see here) There have also been claims that the FBI fabricated a 2005 affidavit (see here).  And there are claims that an excused juror did not want to leave the deliberations (see here).  And the prosecution is arguing that they need "outsiders" to get a fair jury in the retrial (see here and here).  And the judge responding to claims of bias, says he is not stepping aside. (see here and here) And you have the house committee asking for documents related to this case (see here).  And there have been claims of this being a political prosecution (see here). And you have prominent players asking AG Mukasey to step in here. (see here)

Wouldn't this be a perfect case for a Frank Quattrone style deferred prosecution agreement (see here)?

(esp)

Former IRS Agent Pleads

A Press Release of the US Attorneys Office for the Middle District of California reports on the charging of a former IRS Agent "in relation to a securities fraud scheme that took more than $10 million from hundreds of victims across the country." The release also notes that there was a plea to "a two-count information that accuse[d] him of conspiracy to commit securities fraud and subscribing to a false tax return."  The plea agreement provides for a guilty plea to these two felony counts.

(esp)

Post Wecht Trial Conduct by the FBI

Cyril Wecht's trial ended with a hung jury (see here), and it was a relatively long trial at that (see here).  Jonathan Silver at the Pittsburgh Post-Gazette, in an article titled Many Questions Surround Wecht Retrial, Set for May, provides an interesting description of the government's desire to proceed in a retrial against this 77 year old man, including some statements from former AG and Governor Dick Thornburgh.

But the government has not stopped at just saying they want to retry this case.  According to an article by Carl Prine and Jason Cato in the Pittsburgh Tribune-Review, (see here) the FBI is calling the jurors in the prior trial. Check out a prior article titled Majority Thought Wecht Was Innocent, Juror Says.

Perhaps the irony here is that Wecht's charges relate to his alleged use/misuse of public funds.  But the government's use, and perhaps continued use, of public funds to continue this prosecution might be questioned by some as beyond what is necessary. 

(esp)

Addendum - Steve Benen - Salon.com

Wecht Trial Over - Mistrial

In some ways there is relief for the defense when a mistrial occurs - at least it isn't a conviction. In another respect, it is an added weight - they have to go through it again.  The court has reset 77 year old Wecht's re-trial for May 27th, although the defense will likely present motions to dismiss in the interim.  Some of the problems that a defendant faces after a mistrial are -

• The prosecution has heard the cross-examinations and the theme of the defense case.
• The defendant will not only be paying for one trial, but now for a second one. (Prosecutor's work on the public payroll and don't have to worry about this aspect - although maybe they should have to answer to whether the expenditure of money is a worthwhile one)

One question prosecutors should be asking now is whether this case is really worth a re-trial.  This is where DOJ Criminal Division oversight should be used, as often an individual USAttorney's office is so invested in a case that they can't properly compare this case with those across the country.  It is interesting that USAs want uniformity in sentencing, but when it comes to selection of charges they seem to want the individual office making a decision, except in the unusual cases that require DOJ approval like RICO cases.  Maybe it would be good to require DOJ Criminal Division oversight in all cases that resulted in a mistrial, to ascertain as to whether valuable resources should be spent on a re-trial. After all the defendant has suffered by payment of attorney fees, by publicity, and most of all by the strain and pressure that comes in being a defendant facing many years in prison. 

Pittsburgh Post Gazette - Mistrial declared in Wecht case; new trial set for May 27

Pittsburgh Post Tribune - Wecht trial over; feds to try again

(esp)

Wecht Jury - Up to 11 days

The  Pittsburgh Tribune Review here and the Pittsburgh Post Gazette here report that there is still no verdict in the Wecht trial (see here for background).   So the question is - how long do you wait for a jury to decide?

Lets look at former Governor of Illinois Ryan's case, a case in which the jury eventually convicted.  The court seated the alternates in that case - here in Wecht's case they went with 11 jurors. But juror errors played a prominent role on Ryan's appeal.  Unfortunately for the defense, the 7th circuit affirmed (here) - although there was a strong dissent and that case has a petition for cert. pending (here) in the Supreme Court. 

In the Wecht case the jury is having a leisurely deliberation.  Interestingly this is a sharp contrast to some other juries -

(esp)

Former Alabama Governor Siegelman Released Pending Appeal

Gov. Don Siegelman was ordered released from prison on bail pending appeal. This is in sharp contrast to his being taken immediately to prison as opposed to other white collar and not-likely-to-flee offenders.  The court did not give the same relief to Richard Scrushy. Birmingham News here.

There was no question - Siegelman was not a flight risk - so the first prong of the test for bail pending appeal was easy.  The second prong was also met as the court held that he "specifically met his burden of showing that his appeal raises substantial questions of law or fact."   The court did not provide explicit language as to what the substantial questions were.

Interestingly, this all happened around the same time as the judiciary committee wanted Siegelman released to testify before Congress. See here. There is no doubt that this will be a hearing to watch.  Key issues likely to be discussed will be whether politics ruled this prosecution, why was the former governor prosecuted while others were not, and was this prosecution in some way related to the "attorney firings."

(esp)

Governor of Puerto Rico Indicted

Aníbal Acevedo Vilá, Governor of Puerto Rico, along with 12 other individuals, were indicted.  The charges pertain to campaign financing. (see here)  Carrie Johnson and Matthew Mosk at the Washington Post report on the corruption charges brought against the governor and it appears to be "conspiracy, fraud, false-statements and tax charges." (see here).  But many (commenter's on Huffington Post here) seemed to be more concerned about his endorsement of Senator Obama as a super-delegate.

(esp)

DOJ Press Release states in part:

"According to the indictment, the defendants conspired to defraud the United States and violate various Federal Election Campaign Act provisions by having Puerto Rico businessmen make illegal and unreported contributions to pay off large and unreported debts stemming from Acevedo Vilá’s 1999-2000 and 2001-2002 campaigns for Resident Commissioner of the Commonwealth of Puerto Rico. Payments were made principally to the public relations and media company for the campaigns. The illegal actions continued into 2003, due to the significant debt accumulated by the campaigns, some of which was also concealed from the FEC and the public."

Addendum - Indictment - Download vilaindictment.pdf

(w/ a Stetson hat tip to Whitney Curtis)

In the News - Wecht, Kilpatrick, Prosecutor, University President

Pittsburgh Post Tribune - Wecht Jury at Impasse?

Freep.com - Will Beaty Make a Plea Deal (she is the former chief of staff to Detroit Mayor Kilpatrick).

Martha Neill, ABALaw JrlNewsNow - 20-Year Texas Prosecutor Convicted of Stealing Office Funds

Houston Chronicle - Plea Deal for former Texas Southern University President Priscilla Slade - she will pay the fine and do no time ($127,672.18 fine) here (represented by Mike DeGeurin)

(esp) (w/ a Stetson Hat Tip to Frank Klim on the last)

Detroit Mayor and Former Chief of Staff Charged

Perjury, obstruction, conspiracy, and misconduct, are the charges brought by the Wayne County prosecutor against the Mayor of Detroit and his former chief of staff. Dan Webb is representing the mayor and is calling this a "selective prosecution."  The prosecutor in this case chose to respond to what was said by defense counsel.   

The press reports that the basis for the "selective prosecution" claim is that the prosecutor has never charged anyone with the crime of perjury for statements made during a civil matter.

Selective prosecution claims are difficult to win in the pre-trial stage. Prosecutors have broad discretion in their charging powers and as long as there is probable cause of the commission of the crime charged, the decision "generally rests entirely within the prosecutor's discretion." See Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978).  That said, if the prosecutor uses an impermissible factor, such as race or religion, it's a different story. Although selective prosecution claims may be difficult to prove in a pre-trial stage, if allowed into evidence it can make for an interesting jury consideration.  Couple that with perjury, a difficult charge for prosecutors in that it requires clear questions with clear answers, and the case will be one to follow.

For full coverage -Detroit Free Press here (videos and all); Detroit News here.

(esp)

Presidential Commutation & Disbarment

With the recent disbarment of I. "Scooter" Libby, there have been questions regarding the effect of the president commuting his sentence on his later disciplinary matter.  The bottom line is - probably none. This issue was examined in the context of Eliot Abrams, the former Assistant Secretary of State for Inter-American Affairs. In the case In re Abrams, 689 A.2d 6 (1997), the court held that a presidential pardon does not negate the ability of a disciplinary committee from imposing professional discipline. The Abrams case resulted after President Bush gave Abrams a "full and unconditional pardon" on Christmas Eve in 1992. Although there are four judges that offer a dissent in the Abrams case, the precedent remains for saying that a presidential commutation of sentence does not change the disciplinary board's decision. 

(esp)(w/ a hat tip to Professor Greg Miller)

Former CEO of InterMune Inc. Indicted

According to the Indictment, the accused, a medical doctor in California is accused of marketing the drug Actimmune beyond what it had been approved for with the FDA. The former CEO of InterMune Inc. was indicted in Count One with "Wire Fraud, Aiding and Abetting," and Count Two with "Doing Acts, With Intent to Defraud and Mislead, Resulting in Drugs Being Misbranded While Held for Sale Following Shipment in Interstate Commerce." The website of InterMune states that the company "is a biopharmaceutical company focused on developing and commercializing innovative therapies in pulmonology and hepatology."  The company entered into a deferred prosecution agreement in 2006. (see here)(although the link to the press release on the government's deferred prosecution agreement no longer works). The company now issued a press release letting people know that the former CEO hasn't been with the company for over four years.   The company press release also states:

"In 2006, InterMune settled all government claims related to that conduct, without criminal sanctions against the company. At the time, the government acknowledged that InterMune fully cooperated with its investigation and had instituted numerous and comprehensive compliance changes before the investigation even began. Today's government action does not affect the Company's settlement in any way.

'In today's action, the government is bringing charges against a former employee, not against InterMune, its current employees or its Directors."

Dan Levine (The Recorder) initially wrote about this matter here (subscription required) and now writes here in an article on Law.com titled Biotech Executive Indicted for Off-Label Claims.  In reading the latter article, it looks like there are some facts in dispute between the prosecution and defense.

Indictment - Download harkonen_indictment.pdf

(esp) (w/ a Stetson hat tip for assistance from librarian Whitney Curtis).

Obama & Rezko

Battling for the Democratic Nomination, Barak Obama is facing questions about his affiliation with political fundraiser Rezko, who remains on trial in Chicago (see here). Gavel to gavel coverage of the trial can be seen at the Chicago Tribune here. The SunTimes talks about an amount of $250,000 (see here) with respect to fundraising for Obama, an amount that is a far cry from amounts initially mentioned (see here). For background on Rezko's trial, see here. Instapundit (here) has a link to a fascinating ABC clip by Obama speaking about his "former pastor" and Rezko. It is interesting to see what happens when the political scene and the judicial system meet.

(esp)

Scruggs Pleads Guilty

See Wall Street Jrl. here; New York Times (AP) here.  More to follow. 

(esp)

Greenberg Traurig & the Guam Attorney General

The law firm of Greenberg Traurig seems to be recipient of charges filed by the Attorney General's Office in Guam. The case clearly emanates from the days of Jack Abramoff, as he too is included as a defendant and the times of the alleged activity dates back a good number of years. There are 10 charges, some of which are felonies and some are misdemeanors.  They include: unlawful influence, official misconduct, and theft.  See ABA Jrl Law News Now here; WSJ here; Miami Herald here. 

Indictment can be found here.

(esp)

Extradition Denied in Antitrust Case

The House of Lords denied a request by the United States to extradite a defendant from England to face an antitrust charge related to price fixing in carbon products.  The basis was the lack of dual criminality, that price fixing was not made a criminal offense in the United Kingdom until the adoption of the Enterprise Act of 2002.  The Lords' decision (available below) rejected the argument that a conspiracy in restraint of trade was an offense at common law:

The common law recognised that an agreement in restraint of trade might be unreasonable in the public interest, and in such cases the agreement would be held to be void and unenforceable. But unless there were aggravating features such as fraud, misrepresentation, violence, intimidation or inducement of a breach of contract, such agreements were not actionable or indictable.

While the defendant cannot be extradited on the antitrust charge, he was also indicted in the United States on obstruction of justice charges related to destroying documents.  For those counts, he argued that because price fixing was not a crime in England at the time of his conduct, then he could not obstruct an investigation of such a charge because there could not be an analogous criminal investigation in the U.K.  On that issue, the Lords took a different approach:

Destroying documents to prevent them falling into the hands of the investigators may well affect the outcome of that investigation and is, indeed, intended to do so. So the mere fact that the result of the investigation in Mr Norris’ case was a charge of simple price fixing, which does not constitute an offence under English law, is no reason to hold that it would not have been an offence under English law to obstruct the progress of an equivalent investigation by the appropriate body in this country.

The Lords remanded the case to the trial court, however, to consider the defendant's argument that to extradite him now for conduct that took place years earlier would violate his rights under the European Convention on Human Rights.  So there will be no extradition quite yet, and the lower court's decision would be subject to appeal, so it may be years before there is a final decision on extradition. (ph)

Download norris_v_united_states_house_of_lords_decision_march_12_2008.pdf

Spitzer Quits -- Will Charges Follow?

Eliot Spitzer resigned as Governor of New York, issuing a statement (here) declaring that "I have begun to atone for my private failings with my wife, Silda, my children, and my entire family. The remorse I feel will always be with me."  The resignation came only two days after the public revelation of his philandering, and whether he will face any federal charges for his conduct remains to be seen.  As discussed in earlier posts (here and here), the U.S. Attorney's Office for the Southern District of New York could conceivably pursue potential violations of the Mann Act or the anti-structuring statute.  An interesting question is whether prosecutors might have sought Spitzer's resignation as a condition for not filing charges, or as part of an as-yet undisclosed plea agreement. 

Federal prosecutors seeking the resignation of an elected state official, or conditioning charges on such a decision, could raise significant federalism concerns.  Moreover, the political overtones of a Republican-selected U.S. Attorney seeking (or demanding) the resignation of a Democrat from elected office in an election year would only add to the concerns.  The U.S. Attorney's Manual in Sec. 9-16.110 addresses the issue of seeking the voluntary resignation of a non-federal elected official (here):

GENERAL RULE: Resignation from office, withdrawal from candidacy for elective office, and forbearance from seeking or holding future public offices, remain appropriate and desirable objectives in plea negotiations with public officials who are charged with federal offenses that focus on abuse of the office(s) involved. Where the office involved is not one within the Legislative or Judicial Branches of the federal government, such negotiated terms may be also be enforced involuntarily against the will of the defendant by a sentencing judge pursuant to the Federal Probation Act.

While not stated explicitly in the USAM, resignation does not seem to be an "appropriate or desirable objective" when the charges are unrelated to the official's exercise of authority.  To this point, Spitzer's tryst with the prostitute "Kristen" seems to be an entirely personal act, and the funds involved apparently came from personal accounts.  Thus, it would seem that the resignation should not connected to any charging decision, at least if the U.S. Attorney's Office acts in accordance with Department policy.  Should the use of government funds for the assignations have occurred, then Spitzer's resignation could be tied to a charging decision.  Of course, a decision to abjure filing charges is not subject to any outside scrutiny, so we would never know -- at least not officially -- whether his decision was in response to a request from the federal prosecutors.  (ph)

                                                                                                   

UPDATE: The U.S. Attorney's Office for the Southern District of New York issued a press release after Spitzer's resignation that states in its entirety: "In response to press speculation, MICHAEL J. GARCIA,the United States Attorney for the Southern District of New York,said: 'There is no agreement between this Office and GovernorEliot Spitzer, relating to his resignation or any other matter.' "  (ph)

Spitzer and the Southern District of New York

The fact that federal prosecutors from the U.S. Attorney's Office for the Southern District of New York pursued the investigation of New York Governor Eliot Spitzer's use of large amounts of cash for transactions that turned out to involve the services of one or more prostitutes means he could be looking at federal charges for his conduct.  Blog co-editor Ellen Podgor has already discussed (here) the possible application of the Mann Act to Spitzer's involvement in the interstate transportation of a person for prostitution, which in fact is among the charges against the leaders of the Emperors Club service Spitzer used (criminal complaint and affidavit below -- the juicy "Client 9" material begins in paragraph 73 for those with their minds in the gutter).  The investigation began because of Suspicious Activity Reports filed by banks because Spitzer purportedly made large cash withdrawals, and while the initial focus was for possible public corruption, the case turned out to involve a more mundane, albeit considerably salacious, prostitution ring.

While Mann Act charges against Spitzer certainly would be quaint, a criminal structuring charge may be more likely.  The applicable statute is 31 U.S.C. Sec. 5324(a), which provides:

No person shall, for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—

cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by an order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508 . . . .

If Spitzer split deposits or withdrawals in his accounts to stay below the $10,000 threshold for filing a Currency Transaction Report by the bank, then he could be guilty of structuring.  The predecessor to this provision was the subject of the Supreme Court's decision in Ratzlaf v. United States, 510 U.S. 135 (1994), in which the court interpreted the "willfully" element to require proof that the defendant knew there was a legal duty to report the transactions and sought to have the bank violate the law by structuring his transactions.  As the Court explained, "Undoubtedly there are bad men who attempt to elude official reporting requirements in order to hide from Government inspectors such criminal activity as laundering drug money or tax evasion.  But currency structuring is not inevitably nefarious." (Italics added)  In response, Congress sought to overturn Ratzlaf by removing "willfully" as an element of the crime.  Thus, all the government must prove is that the person intended to structure the transactions, not that the person intended to commit a crime by violating the provision.  So while structuring is not always nefarious, it is a crime regardless of the desire to violate the law.

The Second Circuit rejected a fall-back argument that the statute requires that the money that is the subject of the structuring must be tainted and not just funds properly controlled by the defendant.  In United States v. MacPherson, 424 F.3d 183 (2d Cir. 2005), the court stated, "The anti-structuring law may well have been intended to prevent criminals from concealing their illicit profits, but that is not the limit of its reach. Section 5324 makes no reference to the source of the monies at issue or to the reason why a person seeks to avoid CTR filing. Its singular focus is on the method employed to evade that filing requirement, i.e., structuring."  (Italics in original) Spitzer could not avoid a structuring charge by arguing that the money was his, or at least he had lawful access to it, so he could do with it as he wanted.  Moreover, an ignorance defense would be difficult to offer for a former state Attorney General who fancied himself the Sheriff of Wall Street.  The structuring provision is different from the money laundering statute, which reaches the proceeds of "specified unlawful activity," even though it reaches similar activity and often involves conduct by people who are trying to hide criminal activity.

An interesting question is whether any other federal criminal charges could come out of the cash transactions.  The old adage is to "follow the money," and here it may be to trace the dollars backward to find out where they came from and how they traveled, and not so much where they ended up.  Spitzer is a fairly wealthy man, so he probably has access to a sizable pool of money.  Yet, according to the criminal complaint, he did not want to make a wire transfer, even though Emperor's Club employed a shell corporation that could be used to hide the true nature of the payments.  If Spitzer was trying to hide what he was doing from his family, then large cash withdrawals might have raised just as many questions as wire transfers.  It would not surprise me that federal investigators were looking into whether any campaign money was involved in the transactions, or at least campaign bank accounts, that could be used so that it was not as apparent when slugs of cash were used for personal purposes.  Whether that violates any federal laws is an open question, but I suspect the U.S. Attorney's Office is going to take a very close look at the flow of the money to see what roads it traversed. (ph)

Download us_v_brener_criminal_complaint_spitzer_march_2008.pdf

Sex or Crime, Spitzer Has Been Punished?

Four individuals had a criminal complaint filed against them.  Two were charged with a conspiracy to violate federal laws related to prostitution.  The other two face charges of prostitution and money laundering. (See NYTImes here) Enter client 9 - an individual unnamed in the charges. The details of the D.C. meeting involving client 9, and how the woman meeting him was to arrive are outlined in the NYTimes here.  Some of the questions that are likely to be explored in the upcoming days are:

• Did Spitzer violate the Mann Act?  The Mann Act, 18 U.S.C. Sec. 2421, provides: "[w]hoever knowingly transports any individual in interstate or foreign commerce, or in any Territory or Possession of the United States, with intent that such individual engage in prostitution, or in any sexual activity for which any person can be charged with a criminal offense, or attempts to do so, shall be fined under this title or imprisoned..." Even if this did amount to a technical violation, one has to seriously question whether consensual acts warrant prosecution.
• Will Spitzer need to be a witness in the case against the four individuals charged with conspiracy, prostitution, and money laundering?  Will he be given immunity?  In the federal system this would be "use" immunity as opposed to "transactional immunity,"  which means that anything he said or derived from what he said could not be used against him. 
• Was it really necessary to include all of these acts in the charging instrument? Prosecutors, obviously, knew who they were dealing with in this case.  But, on the other hand, did fairness require this to happen - should any one person be protected here more than others?

From a purely punishment perspective, and irrespective of Spitzer having any criminal culpability, it seems obvious that a "shaming" has occurred here.  Even if there was some criminal culpability, should taxpayer's dollars be spent on investigating and prosecuting this man. The higher the office holder, the longer the fall from power, and in this case it is pretty hard ground that Spitzer is landing upon.

(esp)

Addendum - Check out Brian Baxter's piece at The American Lawyer here. Some thoughtful quotes from Associate Dean Patricia Salkin are in this article. 

Blagojevich & Obama: Two Names Mentioned During Rezko Trial

Chicago SunTimes - Rezko Lawyer: Don't Trust Key Witness

Chicago Tribune - Blagojevich's Name Surfaces Early in Case

It's kind of like being named the "enterprise" in a RICO case.  You can be perfectly legitimate, have committed no wrongdoing, and suddenly you find that someone has named you in the same sentence with someone allegedly committing criminality. RICO enterprises are often legitimate businesses.  But does the public really understand that the "enterprise" is not part of the criminality when this "enterprise" gets named in a RICO indictment?  One has to wonder if Blagojevich and Obama are feeling this same sting right now. 

(esp)

Hollywood Private Eye Trial Begins

The trial of the private investigator to the stars got under way in Los Angeles, and the witness list includes more than a few Hollywood names who will be witnesses or at least referenced during the testimony.  Pellicano and four co-defendants, including a former LAPD officer and a telephone company official, will be tried for their roles in secretly taping litigants in divorce and other cases.  Among the likely witnesses are actors Sylvester Stallone and Keith Carradine along with superagent Michael Ovitz.  Among those who have entered guilty pleas related to Pellicano's actions are a director of one of the Die Hard movies and Carradine's ex-wife.  This is not the end of Pellicano's troubles as he's slated to go on trial for additional charges that also include a well-known Los Angeles entertainment attorney. A Los Angeles Times story (here) gives a preview of the case. (ph)

Can Information From Hacking Be The Basis Of A Securities Violation?

The second circuit has a fascinating securities case that has old laws meeting new technology. And the question will be whether the text of the statute ought to be stretched beyond its language to reach new forms of criminality -although in this particular case the criminality is merely alleged. (See Floyd Norris NYTimes story here)  Or is the legislature the more appropriate place to reform the law?

Basically, a Ukrainian trader allegedly hacked into a financial database and finding a forthcoming negative report, it is argued that he traded on the inside information.  The problem is that no fiduciary relationship exists to find that this conduct constitutes a section 10(b) violation. The district court judge in the Southern District of New York found no violation and the case proceeded to the Second Circuit with the government arguing otherwise.  Hon. Naomi Reice Buchwald, writing the thoughtful district court opinion, states in part:

"...the barrier to issuing a preliminary injunction at this stage in the proceedings is that the alleged 'hacking and trading' -- while illegal under any number of federal and/or state criminal statutes -- does not amount to a violation of section 10(b) of the Exchange Act under existing case law.   For as the SEC even acknowledges, in the 74 years since Congress passed the Exchange Act, no federal court has ever held that that the theft of material non-public information by a corporate outsider and subsequent trading on that information violates section 10(b)."

In the meantime, the SEC is trying to have the Second Circuit continue to freeze the trading account proceeds while the appeal is pending.  Representing the accused here is Charles A. Ross. The decision and arguments can be found accompanying the NYTimes story here.

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Plea in Writer's Guild Conspiracy Case

A press release of the U.S. Attorneys' Office of the Central District of California tells that "[a] former assistant administrator of a Writers Guild fund and another woman were charged" "with conspiring to embezzle $17,228.61 by creating a bogus beneficiary of a union fund that paid union members for their works that were sold, distributed and aired abroad."  The charges were by a one count information and were followed with a plea agreement.

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Scruggs Finally Gets a "W"

To say things have been going downhill for famed torts lawyer Dickie Scruggs over the past few months is quite an understatement.  His legal entanglements began with a criminal contempt charge in the Northern District of Alabama for his handling of documents subject to a judicial order, and then got a whole lot worse with his indictment in the Northern District of Mississippi, along with his son, for an alleged attempted bribe of a state court judge.  Two co-defendants have pleaded guilty and agreed to cooperate, and tapes of various conversations have been released that do not put Scruggs in a very flattering light.  Virtually all of his pre-trial motions have been denied, and the government will introduce evidence of a second alleged influencing of a state court judge.  Finally, though, a ray of sunshine, if you will: Senior U.S. District Judge Roger Vinson dismissed the criminal contempt charge (see opinion below).

The criminal contempt charge arose out of litigation involving State Farm, the object of Scruggs' Hurricane Katrina law suits, that was before U.S. District Judge William Acker, who has been after Scruggs for giving documents sealed in that litigation to Mississippi Attorney General Jim Hood to conduct a criminal investigation of State Farm.  Judge Vinson certainly didn't give Scruggs a free pass in dismissing the charge, noting that "there is a cloud of impropriety surrounding what Scruggs did and the nature of his eleventh hour agreement with Hood. It is certainly understandable that Judge Acker would attempt to hold him accountable. Perhaps there are ethical issues that should be examined. But, the question is not whether Scruggs acted ethically; the question is whether he can be held criminally responsible in a contempt proceeding."  Getting mad is one thing, but getting even through a criminal contempt doesn't cut it when the person is not a party to the underlying lawsuit nor counsel in the litigation.  Judge Vinson determined that "[f]or jurisdictional purposes, the undisputed facts are that Scruggs was not a party, nor was he an attorney-of-record or at any time make an appearance in the Renfroe case , , , it is axiomatic that courts only have power and jurisdiction to enjoin parties before the court."  Federal judges may well view their power as reaching the blue sky or the ends of the earth, but it doesn't always work that way.

While this is certainly good news for Scruggs, it probably only eliminates a case that was not much more than a distraction compared to the attempted bribery trial.  The criminal contempt statute, 18 U.S.C. Sec 402, limits the prison term for out-of-court violations to no more than six months, along with a $1,000 fine, which does not compare to the longer sentence Scruggs could receive in the Mississippi case.  Al Davis is famed for intoning "Just win, baby!" but this one is only the JV game -- or the undercard for fans of the sweet science.  The WSJ Law Blog has the background here. (ph)

Download us_v_scruggs_contempt_dismissal_feb_29_2008.pdf

Analyzing Rep. Renzi's Indictment

The indictment of Rep. Richard G. Renzi is 26 pages in length and has 35 counts.  There are two co-defendants also charged, although these two do not face all the charges levied against Renzi.

The opening passages of the Indictment are descriptive and include items such as the location of his law degree, something his law school may not be too happy about. This is interesting in itself as it shows that he graduated in 2001 and was elected to the house in November 2002, although he has an extensive background in Renzi Investments, since 1995, something that is also discussed in this charging document.

Count One charges conspiracy, with the substantive acts of Hobbs and mail and wire fraud being the essence of the illegal agreement. The government, despite recent losses in the honest services realm, uses section 1346 as an unlawful act which formed the conspiracy. There are 28 overt acts specifically outlined in the indictment.  Although the overt acts appear to be many, they could easily be collapsed into relatively few items as they include separate counts for when a check is written and when it is deposited.

Counts Two - Ten charge honest services wire fraud. They are the substantive acts and are very much repetitive of what was described in the conspiracy count.  Thus, the fax of July 6th appears in both places. This is not unusual as the federal system allows the government to charge both the conspiracy and substantive act for the same conduct.

Count Eleven charges conspiracy to commit money laundering with count twelve being the concealment of money laundering, and counts thirteen to twenty-five being transactions in criminally derived funds.

Counts Twenty-Six and Twenty-Seven present Hobbs Act charges.

Counts Twenty-Eight, yet another conspiracy count, presents a conspiracy to commit insurance fraud.

Counts Twenty-Nine through Thirty-Two are the substantive charges of insurance fraud.

Count Thirty-Three through Thirty-Five pertain to false statements to influence insurance regulatory investigations.

The Indictment then presents a claim for forfeiture.

This indictment, like so many, is a classic example of the discretion afforded the government in charging in that many different statutes will often fit the conduct alleged to have been committed. As one finds in many cases, the government uses a good number of the tools in its box when presenting the charges. This is contrasted against cases where there has been an agreement already reached and the government may use an Information to charge one or just a few counts.

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Arizona Congressman Indicted

Add Arizona Representative Rick Renzi to the list of Congressmen indicted over the past couple years.  A grand jury in Tuscon, Arizona indicted the three-term Representative -- who announced in August 2007 that he would not stand for re-election -- on thirty-five counts of mail and wire fraud (including right of honest services), insurance fraud, money laundering, Hobbs Act, and conspiracy for his role in a purported land swap that netted a business partner $4.5 million (indictment available below).  According to a press release issued by the U.S. Attorney's Office for the District of Arizona (here), Representative Renzi allegedly demanded that two companies purchase his partner's interest in land on which Renzi held a note in exchange for the Congressman's support for land exchange legislation.  The partner and a third participant were also indicted.

Representative Renzi is the second member of the current Congress to be indicted, joining Louisiana Representative William Jefferson, who was charged with soliciting bribes and violating the Foreign Corrupt Practices Act.  As a side note, Representative Jefferson filed a notice of appeal of the district court's decision (available below) rejecting his motion to dismiss the indictment because of violations of the Speech or Debate Clause immunity.  This is one of only two constitutional protections that can be the basis for an interlocutory appeal, the other being a claimed violation of the Double Jeopardy Clause.  That will delay Representative Jefferson's trial at least six months, and possibly a year depending on how quickly the Fourth Circuit acts.  Because the charges against Representative Renzi involve what may constitute legislative acts, i.e. his support for legislation, a Speech or Debate Clause claim will come at some point, no doubt.  Two other Representatives who entered guilty pleas while in Congress in its last term are Randy (Duke) Cunningham, serving a 100-month sentence for bribery, and Bob Ney, sentenced to thirty months for not reporting gifts (and recently transferred to a half-way house in Cincinnati).  Other members of the House of Representatives remain under investigation for transactions with former superlobbyist Jack Abramoff, who has been cooperating with prosecutors.  Another black eye for the House of Representatives. (ph) 

Download us_v_renzi_indictment_feb_21_2008.pdf

Download us_v_jefferson_memorandum_opinion_feb_13_2008.pdf

A Barrage From the Scruggs Defendants

Any federal criminal prosecution will trigger motions from the defendant, and the hotly-contested prosecution of Dickie Scruggs and two other lawyers from his firm, his son Zach and Sidney Backstrom, has resulted in a veritable barrage of filings from the defense.  Federal Rule of Criminal Procedure 12(b)(3) requires that most substantive motions that go to the charges or the institution of the prosecution be made before trial or they are waived (absent a claim of plain error, an almost sure loser).  So the defendants fired at the prosecution in a series of motions (available below) that, while unlikely to be granted, at least protect their positions for an appeal if there is a conviction.  So here they come:

1. Get Me the Heck Away From Dickie:  Not that a son should spend too much time with his dad, so Zach filed a motion to sever his trial from his father's, as did co-defendant Backstrom.  Among the reasons cited by both is the potential spill-over from other alleged wrongdoing by Dickie for supposedly bribing another state court judge in a different fee dispute.  The government gave notice under Federal Rule of Evidence 404(b) that it intended to introduce