Tuesday, March 5, 2013

Eleventh Circuit Finds Violation of Customs Regulation Not Criminal

by: Lawrence S. Goldman

One of the several troubling aspects of the continuing overcriminalization of federal law is the frequent elevation of a violation of civil regulation to a crime.  In United States v. Izurieta, 11th Cir., 11-13585 (February 22, 2013), the Eleventh Circuit addressed this issue.

The defendants in Izurieta were convicted after trial by jury of violating the general smuggling statute, 18 U.S.C. 545, importing goods "contrary to law," by violating a customs regulation, 19 C.F.R. 142.113(c), in failing to redeliver to Customs for exportation or destruction goods purportedly contaminated with E. coli, Staphylococcus aureus and/or Salmonella which had been conditionally released.

The defendants appealed on various grounds -- significantly not including whether the indictment sufficiently charged a crime by relying on the Customs regulation.  At oral argument, however, the Court raised this issue sua sponte and ordered supplemental briefing.

Section 545, as pertinent here, reads:

Whoever fraudulently or knowingly imports or brings into the United States, any merchandise contrary to law, or in any manner facilitates the transportation, concealment, or sale of such merchandise after importation, knowing the same to have been imported or brought into the United States contrary to law . . . shall be fined . . . or imprisoned . . . .

Emphasis added.

The regulation or "law" upon the charges here were based covered the "failure to deliver, export, and destroy with FDA supervision" certain foods found to be adulterated.  19 C.F.R. 141.113(c).

The Court in its opinion recognized a split among circuits on when a regulation constitutes the "law" upon which a Section 545 indictment may be based.  The Ninth Circuit in United States v. Alghazouli, 517 F.3d 1179, 1187 (9th Cir. 2008) took what the opinion called "a relatively narrow interpretation" of Section 545 that regulations are included in "law" only when "there is a statute (a 'law') that specifies that violation of that regulation is a crime."  The Fourth Circuit in United States v. Mitchell, 39 F.3d 465, 470 (4th Cir. 1994), to the contrary, took what the opinion called a "more expansive" view, deciding that Section 545 criminalizes violations of any regulation "having the force and effect of law" based on a three-prong test.

The Court, while claiming its binding authority, Bobb v. United States, 252 F.2d 702, 707 (5th Cir. 1958) was consistent with the Fourth Circuit's "expansive" approach in Mitchell, applied the rule of lenity and held that the regulation in question did not qualify as a "law" for purposes of Section 545 liability.  It found that the regulation in question was primarily to reflect contractual requirements between Customs and the importer and thus was "civil only."

The rule of lenity was premised, it said, on two ideas:  first, that "a fair warning should be given . . . of what the law intends to do if a certain line is passed" and, second, that "legislators and not courts should define criminal activity."

This apparent case-by-case approach, of course, does not establish a "bright line" as to when violations of an administrative regulation become a crime.  Citizens and attorneys will often have to guess whether a violation of a regulation is a crime; that is, "what the law intends to do if a certain line is passed."  The case may, however, curb the government's increasing efforts to convert violations of ostensible civil regulations into crimes.

This case should remind lawyers that the uncertainties in this area require that they pay attention at both the trial and appellate levels to the issue of whether a violation of an administrative regulation is a crime.

 (goldman)

(A hat tip to Paul Kish and the Federal Criminal Lawyer Blog)

 

March 5, 2013 in Food and Drink, Judicial Opinions, Prosecutions, Prosecutors, Statutes | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 2, 2013

DOJ Should Be Commended for Requiring a Conviction by UBS

by: Lawrence S. Goldman

It is not often that I praise the Department of Justice ("DOJ"), especially for bringing a prosecution.  However, I commend the decision to prosecute -- really prosecute, and not just indict and offer a deferred prosecution -- a UBS subsidiary for its role in manipulating the benchmark LIBOR interest rate.  See here.

To be sure, UBS was allowed to offer as the defendant in this case a Japanese subsidiary (UBS Securities Japan Co. Ltd.), for which a conviction would bring considerably less collateral damage than it would upon the parent company.  Substituting others for prosecution, whether corporations or individuals, of course, is not a common benefit offered to criminal targets.  Nonetheless, for DOJ, bringing a prosecution against a major financial institution, even a subsidiary, is a considerable and commendable step.

Generally, I believe that prosecutions should not be brought against large institutions because of a few rogue employees, unless at least one is a director or "a high managerial agent acting within the scope of his employment and in behalf of the corporation."  New York Penal Law Section 20.20(2)(b).  See also Model Penal Code Section 2.07.  UBS, however, is a serial offender with a history (not alone among Swiss and other banks) as an eager accomplice of money launderers and tax evaders throughout the world.  Although UBS' belated and commendable efforts to clean up its act and cooperate deserve credit, in this case DOJ apparently felt it did not make up for its past conduct enough to deserve non-prosecution, and appropriately broke its usual pattern of allowing major financial institutions to avoid criminal convictions.

As a practical matter, one may ask what the difference is between an indictment/deferred prosecution (as occurred in the case of the parent, UBS AG of Zurich) and indictment/conviction if both ultimate results carry huge financial penalties and other requirements, such as monitoring.  Aside from the collateral consequences -- which can, as in the obvious case of Arthur Andersen, be fatal to a major financial institution (although I agree to an extent with Gabriel Markoff (see here) that such a fear is exaggerated) -- the conviction here has importance as a symbol, and perhaps also a deterrent in both the specific and general aspects.

Although the huge UBS fines will be borne by current UBS shareholders (not necessarily the same stockholders who benefited from the LIBOR bid-rigging), one would hope that UBS makes an effort to recoup the substantial financial gains through bonuses and other compensation geared to profits that those in leadership and supervisory roles made as a result of UBS' now-admitted criminality even if those leaders were uninvolved or unaware of the wrongdoing.  I suspect that there will be no such serious effort, or at least little or no success if there is one. 

(goldman) 

January 2, 2013 in Arthur Andersen, Current Affairs, Deferred Prosecution Agreements, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 4, 2012

Second Circuit Vacates Part of Tax Shelter Case

Guest Blogger - Peter D. Hardy (Post & Schell)

On November 29, a divided panel of the Second Circuit vacated two out of four convictions obtained at trial by the government in the massive Ernst & Young (E&Y) tax shelter case, due to insufficient evidence.  The opinion, United States v. Coplan et al, 10-583-cr(L), is available here.

In Coplan, four defendants were convicted after a 10-week trial on a variety of criminal tax charges arising out of their alleged involvement in the development and defense of five complicated tax shelters that were sold or implemented by E&Y to wealthy clients.  Two defendants, Nissenbaum and Shapiro, had been tax attorneys at E&Y who were each convicted of conspiracy to defraud the United States and to commit tax evasion (18 U.S.C. §371) and two substantive counts of tax evasion (26 U.S.C. §7201).  Nissenbaum also was convicted of one count of obstructing the IRS, in violation of 26 U.S.C. §7212(a), on the basis of allegedly causing false statements to be submitted to the IRS in response to an Information Document Request (IDR) submitted when the IRS was examining one of the tax shelters at issue.

The opinion is lengthy and complex, and resists easy summarization.  It is well worth reading because it discusses in detail a kaleidoscope of issues relevant to any "white collar" criminal trial, from evidentiary rulings to jury instructions to sentencing.  This commentary is limited to the sufficiency of evidence claims, and some of their implications for lawyers as potential defendants.

The panel in Coplan displayed a remarkable willingness to comb through an extremely complicated trial record and test every nuanced inference that the government urged could be drawn from the evidence in support of the verdicts.  The bottom-line holding of the panel was that, after making all inferences in favor of the government, the convictions had to be vacated because the evidence of guilt was at best in equipose.

Although this general principle can be stated easily, its practical application in Coplan involved the panel conducting a particularized review of the evidence that appellate courts often forego.  For example, one important fact for Shapiro was that a tax opinion letter provided to shelter clients stated that, for the purposes of the "economic substance" test governing tax-related transactions, the clients had a "substantial nontax business purpose" (OK, per the Coplan panel), rather than stating, as it had before Shapiro’s revisions, that the clients had a "principle" investment purpose.  Likewise, although Shapiro had reviewed letters and attended phone conferences deemed incriminating by the government, his involvement in such conduct was not "habitual" or otherwise substantial.  As for Nissenbaum’s Section 7212(a) conviction, his response to the IDR that the government characterized as obstructive – a partial explanation of the clients’ subjective business reasons for participating in the tax shelters – could not sustain the conviction because the IDR drafted by the IRS had sought all reasons held by the clients, rather than their primary reason.  If this sounds somewhat murky and convoluted, it is.  The point is that multiple convictions for very significant offenses were vacated after much effort at extremely fine line-drawing.

The implicit theme running throughout the discussion of the evidence was that it was not sufficiently clear that these lawyers had crossed the line while attempting to assist their clients, to whom they owed a duty.  The competing tensions that lawyers can face was encapsulated in a jury instruction discussed later in the opinion.  Although the trial court instructed the jury as requested by the defense that "[i]t is not illegal simply to make the IRS’s job harder[,]" it declined to instruct the jury on the larger defense point that "[t]his is particularly true for the defendants, whose professional obligations as attorneys or certified public accountants required them to represent the interests of their clients vigorously in their dealings with adversaries, such as the IRS." 

The Coplan case echoes partially the case of Lauren Stevens, the former in-house counsel for GlaxoSmithKline who was indicted and tried in 2011 by the government for allegedly obstructing a U.S. Food and Drug Administration investigation of alleged off-label practices by the company.  The district court dismissed all charges against Ms. Stevens at the end of the government’s proofs for insufficient evidence.  The ruling was a tremendous defense victory and underscored, like the Coplan case, the difficulties that the government can face when it targets a lawyer on the basis of alleged conduct undertaken on behalf of a client.  Nonetheless, these cases still stand as cautionary tales to practitioners.  Although there are important differences between Coplan and Ms. Stevens' case, both cases remind us of the pitfalls that can await advocates who stumble into the cross-hairs of the government.  Ms. Stevens – like Shapiro and Nissenbaum – was fortunate enough to have an extremely conscientious court willing to parse through the nuances of the evidence, a great defense team, and the resources for extended litigation.  It is no slight to these clients or their lawyers to recognize that, in many ways, sheer luck played a role in their ultimate outcomes.  Although acquittals can provide vindication, such finales may provide limited comfort to the client after the excruciating process of being investigated, charged and tried.  That such a process might turn eventually on the precise phrasing of a document, or how a conference call might be handled, is sobering.

(Peter Hardy)

December 4, 2012 in Prosecutions, Prosecutors, Tax, Verdict | Permalink | Comments (0) | TrackBack (0)

Friday, November 16, 2012

A Victory for Discretion

Guest Blogger - Steven H. Levin (Levin & Curlett LLC)

In 2004, the then-US Attorney for the District of Maryland famously wrote in a leaked email that he wanted three front-page indictments by November of that year. Though open to interpretation, the impression left by the poorly-drafted missive is that prosecutors should seek headlines rather than justice. Let’s give credit to the prosecutors involved in the Petraeus/ Broadwell affair, er, matter for their
exercise of sound discretion.

Assuming the accuracy of the news reports, it is possible that overzealous prosecutors might have tried to apply one of several cybercrime statutes in a prosecution against Broadwell just to make headlines.

In his paper entitled Computer and Internet Crime, G. Patrick Black, a federal defender in Texas, analyzes a number of cyberstalking statutes. As Black writes: “Under 18 U.S.C. 875(c), it is a federal crime to transmit any communication in interstate or foreign commerce containing a threat to injure the person of another. Section 875(c) applies to any communication actually transmitted in interstate or foreign commerce – thus it includes threats transmitted in interstate or foreign commerce via the telephone, e-mail, beepers, or the Internet.”    This is seemingly inapplicable to the alleged Broadwell conduct because there appears to be no evidence of actual threats.

Likewise, there is 47 U.S.C. 223, a misdemeanor that might have been considered for this alleged conduct. Black writes that “47 U.S.C. 223,” makes it unlawful to “use a telephone or telecommunications device to annoy, abuse, harass, or threaten any person at the called number. The statute also requires that the perpetrator not reveal his or her name.”  

Finally, there is 18 U.S.C. 2261A, also known as the Interstate Stalking Act.  The ISA makes it unlawful for any person to travel across state lines with the intent to injure or harass another person and, in the course thereof, places that person or a member of that person’s family in reasonable fear of death or serious bodily injury causes substantial emotional distress to that person or a member of their family.

Prosecutorial discretion depends on decisions made by individual prosecutors. And there are marked differences in individual prosecutors. A busy federal prosecutor in a major city may be less inclined to take a marginal case than a federal prosecutor in a slower jurisdiction. A new federal prosecutor trying to make a name for him/herself might be more inclined to investigate a high-profile target aggressively than a seasoned veteran who has already seen his or her share of big cases.

Admittedly, white collar laws have to be drawn broadly in order to permit federal prosecutors to combat the increasingly creative, technologically complex efforts of enterprising criminals. At least one downside of such broadness is that a large number of people may find themselves under federal investigation for conduct that can better be addressed in a different forum, or no forum at all. Most prosecutors, do, in fact, make rational decisions based upon the best possible expenditure of resources, the assessment of the jury appeal of a particular case, and the desire to maintain a good reputation with the bench and the bar. However, prosecutors and investigators too often fail to recognize that they may view a case against a high-profile target differently than a case against an average citizen and should consider, in making charging decisions, whether the identity of the target is a valid consideration or not. The decision not to pursue criminal charges against Broadwell for any alleged possible conduct is perhaps a signal that discretion might be working after all. 

(Steven H. Levin)

November 16, 2012 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Thursday, November 15, 2012

BP Settlement & Individuals Charged

According to a DOJ press release - BP agreed "to pay a record $4 billion in criminal fines and penalties."  BP had an Information filed against it for "seaman's manslaughter," and violations of the "clean water act, migratory bird treaty act, and obstruction of congress."

The guilty plea entered by BP provides that the "Department agrees that, if requested to do so, it will advise any appropriate suspension or debarment authority that, in the Department's view, the defendant has accepted criminal responsibility for its conduct relating to the Deepwater Horizon blowout, explosion, oil spill and response by virture of this guilty plea and that BP is obligated pursuant to this agreement to cooperate in any ongoing criminal investigation by the Department relating to the Deepwater Horizon blowout, explosion, oil spill and response."  But it does state that "[n]othing in this agreement limits the rights and authority of the United States of America to take further civil or administrative action against the defendant including but not limited to any listing and debarment proceedings to restrict rights and opportunities of the defendant to contract with or receive assistance, loans and benefits from United States government agencies." 

The agreement includes an attachment for monitors. It also provides that the North American Wetlands Conservation Fund will receive $100 million. As a part of the probation, special conditions are included in an Order which includes $350 million to the National Academy of Sciences and $2.394 billion to the National Fish and Wildlife Foundation.

While at the same time that we see the company pleading guilty, we see that individuals are indicted - two "BP supervisors onboard the Deepwater Horizon on April 20, 2010 – are alleged to have engaged in negligent and grossly negligent conduct in a 23-count indictment charging violations of the federal involuntary manslaughter and seaman’s manslaughter statutes and the Clean Water Act."  Another is "charged with obstruction of Congress and making false statement to law enforcement officials."

(esp)

November 15, 2012 in Environment, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Friday, November 9, 2012

United Water Case: Not Guilty. All Defendants. All Counts.

by: Solomon L. Wisenberg

In a major environmental prosecution out of the Northern District of Indiana, a great white collar team proves once again that you CAN go to trial and beat the government. The indictment alleged a conspiracy to violate the Clean Water Act and 26 substantive violations by United Water Services and two of its employees. Some counts were dropped along the way by the government. All three defendants were acquitted of all remaining charges by the jury.

This was a complete victory for the defense. The jury deliberated about 8 hours over two days. Congratulations go to the following members of the respective white collar/environmental defense teams:

Representing United Water Services were my colleagues at Barnes & Thornburg: Larry Mackey, George Horn, Pat Cotter, Harold Bickham, Meredith Rieger, and Tim Haley.

Representing Dwain Bowie were Jackie Bennett and Bob Clark of Taft Stettinius & Hollister.

Representing Gregory Ciaccio were J.P. Hanlon and Kevin Kimmerling of Faegre Baker Daniels.

The case was tried in Hammond, Indiana.

Here is the Post-Tribune story.

(wisenberg)

November 9, 2012 in Defense Counsel, Environment, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Monday, November 5, 2012

Alleged Theft of Trade Secrets

An area that has long fascinated me is intellectual property and prosecutions premised on theft of trade secrets. It is particularly intriguing when the actors are outside the United States. The U.S. Attorney in the Eastern District of Virginia issued an indictment of a company and several executives "for allegedly engaging in a multi-year campaign to steal trade secrets related to DuPont’s Kevlar para-aramid fiber and Teijin Limited’s Twaron para-aramid fiber.  The indictment seeks forfeiture of at least $225 million in proceeds from the alleged theft of trade secrets from Kolon’s competitors."  What will make this case particularly interesting is that the company - Kolon- is "[h]eadquartered in Seoul, South Korea, yet the indictment came from a grand jury in Richmond, Virginia. (see here).

(esp)

November 5, 2012 in International, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 24, 2012

Rajat Gupta's Sentencing: Practice Notes

by: Solomon L. Wisenberg

The sentencing is today at 2:00 PM Southern District of New York Time. (And is there really any other time in the Universe?)

As I noted on Monday, Gupta's Guidelines Range, according to the Government and the Probation Office, is 97-121 months.That's a Level 30. Gupta's attorneys put Gupta's Guidelines Range at 41-51 months. That's a Level 22. The different calculations are based on different views of the gain and/or loss realized and/or caused by Gupta. Gupta's attorneys are seeking a downward variance and asking for probation, with rigorous community service in Rwanda. Serving a sentence in Rwanda is not as strange as it may sound on first hearing. After all, criminal defendants in Louisiana regularly do time in Angola.

But seriously, lawyers and germs, there is a practice pointer in here somewhere. Practitioners naturally strive to obtain the lowest possible Guidelines Range as a jumping off point for the downward variance. It is psychologically easier for a judge to impose a probationary sentence when the Guidelines Range is low to begin with. It is legally easier as well, because the greater the variance from the Guidelines, the greater the judicially articulated justification must be.

But too many lawyers push the envelope in their Guidelines arguments, thereby risking appellate reversal on procedural grounds. This is a particular danger when the judge is already favorably disposed toward the defendant and looking for ways to help him. Failure to correctly calculate the Guidelines is a clear procedural error. (Some of the federal circuits try to get around Booker, Gall, and Kimbrough by setting up rigorous procedural tests. The Fourth Circuit is the most notorious outlier in this regard.) Lawyers must be on guard against the possibly pyrrhic and costly victory of an incorrectly calculated Guideline range, followed by probation. One solution is to have the court rule on alternative theories. "This is the Guidelines Range. These are my reasons for downward variance. Even if the Guidelines Range was really at X, as the Government argues, I would still depart to Y for the same and/or these additional reasons." If the judge already likes your client, getting him or her to do this is often an easy task.

Of course, Judge Rakoff needs no instructions in this regard. One of our ablest and sharpest jurists, and a leading Guidelines critic, he will attempt to correctly calculate the Guidelines Range in an intellectually honest manner and will downwardly (or upwardly) vary as he damn well sees fit, with ample articulation.

(wisenberg)

October 24, 2012 in Fraud, Insider Trading, Prosecutions, SEC, Securities, Sentencing | Permalink | Comments (1) | TrackBack (0)

Monday, October 22, 2012

Some Thoughts on the Impending Gupta Sentence

by: Lawrence S. Goldman

As my colleague Solomon Wisenberg wrote, see here, former Goldman Sachs director Rajat K. Gupta is scheduled to be sentenced this Wednesday, October 24, by Judge Jed S. Rakoff of the Southern District of New York upon his conviction of insider trading and conspiracy.

The sentencing decision in this case is a particularly difficult one.  On the one hand, Gupta is (or was) a man of exceedingly high repute who has done extraordinary good works, as attested to in sentencing letters by Bill Gates and Kofi Annan, and, if sentencing were based on an evaluation of the defendant's entire life, even considering the serious blemish of this case, Gupta might well deserve commendation and not punishment.

On the other hand, the crime for which Gupta was convicted, albeit arguably aberrational, was a brazen and egregious breach of the faith which was placed in him precisely because of his outstanding reputation.  Indeed, while Gupta's motivation appears not to have been greed or personal gain, a factor that ordinarily would suggest leniency, one may conclude that his crimes resulted from an arrogance of power and privilege and the belief that as a "master of the universe" he was above the law.

Gupta, having gone to trial and expected to appeal (challenging the same wiretap that is a subject of the appeal by Raj Rajaratnam discussed by my other colleague, Ellen S. Podgor, see here), is at somewhat of a disadvantage.  Since any statements he may make discussing his motivation or showing remorse could probably be used as admissions in a potential new trial, he did not admit wrongdoing or demonstrate remorse, factors viewed favorably by most sentencing judges.  Although I strongly doubt that Judge Rakoff will "punish" Gupta for going to trial, as some judges do, the judge will be unable to consider any understandable and perhaps sympathetic motivation or any remorse, if either exists, as a mitigating circumstance.

As often happens, both sides have made extreme sentencing requests.  The government asks for a sentence of 97 to 121 months, what it claims is the appropriate sentencing guidelines range.  The defense is seeking probation with community service in Rwanda, supported by a request from a Rwandan governmental official, or alternatively New York.  At first blush, the request for community service in Rwanda struck me as either a "Hail Mary" hope, an accommodation to a client or family who are unwilling to accept reality, or a deliberately lowball request in the expectation of a middle ground sentence.  On further consideration, however, I believe that a sentence of, say, two years performing "community service" in Rwanda while living in spartan conditions (a modest one-room apartment, cooking his own meals, not having servants, etc.), might not be inappropriate.  Rather than wasting Gupta's enormous talents and intellect in prison, such a sentence would enable him to provide considerable benefit to society.  Indeed, such a sentence would probably be much more onerous for Gupta than confinement in a federal minimum security camp.  To be sure, there is a serious question whether such community service could be suitably monitored.

Of course, Judge Rakoff, however independent, fearless and innovative as he is, will not sentence Gupta in a vacuum.  He will no doubt consider sentences that he and other judges have meted out to lesser-known defendants in other insider trading cases and how his sentence will appear to the public in terms of deterrence and equal justice.  Gupta should not buy his plane ticket yet.

 (goldman)

October 22, 2012 in Insider Trading, Prosecutions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Rajat Gupta Sentencing Materials

by: Solomon L. Wisenberg

Rajat Gupta is scheduled to be sentenced by Judge Jed Rakoff on Wednesday. The  Rajat Gupta Sentencing Memo filed last week by his attorneys is an outstanding work of its kind, and the Government's Sentencing Memo in U.S. v. Gupta is also quite good.

Gupta's Guidelines Range, according to the Government and the Probation Office, is 97-121 months. Gupta's attorneys, led by Gary Naftalis, put Gupta's Guidelines Range at 41-51 months. The different calculations appear to be based entirely on different views of the gain and/or loss realized and/or caused by Gupta. Key issues are whether Judge Rakoff should include the acquitted conduct in the loss calculations (which he is allowed but not required to do)  and whether the gain should be confined to Gupta and his co-conspirators, as opposed to other investors. Gupta's attorneys are arguing for probation, with a condition of rigorous community service in New York or Rwanda.

My guess is that, however he gets there, Judge Rakoff will impose a prison sentence of 3 to 6 years. The judge is a well-known critic of the Guidelines and Gupta has apparently led a life of extraordinary kindness and good works. On the other hand, Gupta is an enormously wealthy member of the financial elite to whom much has been given. He stands convicted of insider trading, which everybody on Wall Street knows is illegal. This was not a case in which ambiguous admitted conduct did or did not violate the outer edges of the insider trading laws. This was a case in which Gupta either tipped clearly confidential, proprietary inside information or he didn't. The jury has ruled that he did, at least with respect to four of the six charged counts. Judge Rakoff must and will accept that verdict. I believe that Judge Rakoff will see it as his judicial duty to send, through Gupta's sentence, a message of general deterrence.

(wisenberg)

October 22, 2012 in Fraud, Prosecutions, Prosecutors, Securities, Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 9, 2012

Guts and the DC Bar Counsel: The Case of Andrew J. Kline

by: Solomon L. Wisenberg

We all make mistakes. We are all flawed. It is a relatively rare prosecutor who has not committed, overseen, or sufferred on his watch some kind of Brady error somewhere along the way. Usually it is unintentional. Prosecutors are not naturally inclined or oriented to sniff out Brady materials. (They are paid to win.) And case law is clear. Brady error occurs irrespective of prosecutorial knowledge or intent. Indeed, defense attorneys are trained to make Brady arguments that do not impugn the integrity of prosecutors. This is because most judges, particularly federal judges, do not like to see personal attacks on prosecutors.

But then there are the egregious cases-- blatantly obvious examples of Brady/Giglio materials that should have been, but were not, disclosed to the defense. What is the bar to do when confronted with such cases? One thing is clear. Congress to date has not had the guts to deal with this problem. The Department of Justice lacks both the guts and inclination to do anything about it. Do you doubt me for one moment? You only have to look at the pathetic administrative punishment meted out to the Ted Stevens line prosecutors, and the complete whitewash of their superiors. You only have to search the DOJ website for DOJ-OPR's Report on the Stevens debacle. Hint--you won't find it there.

What is the solution to the persistent blight of jaw-droppingly obvious Brady/Giglio violations? One solution is to bring ethical complaints against purportedly miscreant prosecutors in appropriate instances. Which brings us to the case of former DC AUSA Andrew J. Kline, currently making its way through the bar disciplinary process.The BLT has posted on the Kline case here and here. DC Bar Counsel wants Kline censured for an alleged Brady/Giglio violation that also runs afoul, according to Bar Counsel, of the arguably broader Rule 3.8(e) of the DC Rules of Professional Conduct. Rule 3.8(e) states in pertinent part that: "The prosecutor in a criminal case shall not . . . intentionally fail to disclose to the defense, upon request and at a time when use by the defense is reasonably feasible, any evidence or information that the prosecutor knows or reasonably should know tends to negate the guilt of the accused . . . ."

The defense bar often talks about using various state versions of Rule 3.8(e) in tandem with Brady/Giglio, in part to get around the Brady/Giglio materiality problem. Here is a Bar Counsel actually doing something about it. Kline vigorously denies that the withheld information was material or that he intentionally engaged in any wrongdoing.

What information did Kline actually withhold? He was prosecuting Arnell Shelton for the shooting of Christopher Boyd. Shelton had filed an alibi notice and "the reliability of the government's identification witnesses" was the principal issue at the 2002 trial, according to the Report and Recommendation of Hearing Committee Number Nine ("Report and Recommendation"). Kline spoke with Metropolitan Police Department Officer Edward Woodward in preparation for trial. Kline took contemporaneous notes. Woodward was the first officer at the scene of the crime and spoke to victim Boyd at the hospital shortly after the shooting.

According to the Report and Recommendation, Kline's notes of his conversation with Woodward were, in pertinent part, as follows: "Boyd told officer at hospital that he did not know who shot him–appeared maybe to not want to cooperate at the time. He was in pain and this officer had arrested him for possession of a machine gun …"

At trial Boyd identified Shelton as the shooter. According to Bar Counsel, Kline never disclosed Boyd's hospital statement to the defense despite a specific Brady/Giglio request for impeachment material. The other identification witnesses were weak and/or impeachable.

The case ended in a hung jury mistrial and the alleged Brady material (that is, Boyd's hospital statement to Woodward) was not revealed to the defense until literally the eve of the second trial, even though DC-OUSA prosecutors and supervisors had known about it for some time. When the trial court found out about the hospital statement and that it had not been disclosed before the first trial because Kline did not consider it exculpatory, the court was thunderstruck: "I don’t see how any prosecutor could take that position. . . I don’t see how any prosecutor anywhere in any state in the country, could say I don’t have to turn that over because I think I know why he said that." See DC Bar Counsel's corrected Brief at 8.

The court offered defense counsel a continuance, but she elected to go to trial as her client was then in jail. The second trial ended in Shelton's conviction.

Kline's position now is that the hospital statement was not material, hence not Brady, because Boyd was in pain and being treated for a gunshot wound at the time and because Shelton was ultimately convicted upon retrial.

Bar Counsel's position is that the withheld hospital statement was material and exculpatory and therefore Brady material, but that even if it was not Brady material, the failure to turn it over violated Rule 3.8(e). Bar Counsel seeks a public censure of Mr. Kline.

DOJ argues, via the DC U.S. Attorney's Office amicus brief, that DC Rule 3.8(e) is no broader than Brady. This is not a surprising or frivolous argument. What is surprising is DOJ's position that Boyd's withheld hospital statement was not material under Brady. DOJ is taking this position at the same time it is trying to convince Congress and the Courts that it can be trusted to discipline and police prosecutors for discovery violations. Is anybody watching?

A further subject for investigation is the decision of DC-OUSA supervisors to withhold the Boyd hospital statement until the evening before the retrial. Let's see if DOJ takes the lead on that.

DC Bar Counsel and Hearing Committee Nine should be commended for addressing this issue. Oral Argument is scheduled to take place before the District of Columbia Court of Appeals Board on Professional Responsibility on October 11, 2012, at 2:00 PM in Courtroom II of the Historic Courthouse of the District of Columbia Court of Appeals, located at 430 E Street NW.

(wisenberg) 

October 9, 2012 in Prosecutions, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Sunday, October 7, 2012

Defense Witness Immunity & Global Tech - Important Issues on Cert

An interesting issue is presented to the Supreme Court on cert - defense witness immunity.  The case of Walton v. the United States presents an issue that has plagued many a defense counsel - what do you do when you have a critical defense witness who will not testify without immunity. The government has the ability to give a witness immunity and often they do so in criminal cases to secure cooperation for the prosecution.  But shouldn't the defense also be allowed this immunity when the evidence that would be offered is exculpatory to the defendant? This cert petition presents strong arguments showing the differing views among the circuits on defense witness immunity.

The Walton Petition also has a post-Global Tech issue. (for background on Global Tech, see here and here).  The obvious is argued - Global Tech applies to criminal cases. The Court used criminal law doctrine in deciding the case, so of course it should apply to criminal law decisions.  I am covering Global Tech in both criminal law and white collar crime classes because it summarizes the law on willful blindness. If the Court was using this criminal standard for a civil case and remarking that this is how it gets handled criminally, therefore, of course, it must be the appropriate standard for a criminal case.  Even in his dissent, Justice Kennedy notes that "[t]he Court appears to endorse the willful blindness doctrine here for all federal criminal cases involving knowledge."  He didn't like that they were doing this, but it was pretty clear that this is what they did. This cert petition, if granted, will send this message loudly and clearly to the Fifth Circuit. 

Filing a separate cert petition is James Brooks.  Argued here by attorneys Gerald H. Goldstein and Cynthia Eve Hujar Orr are that "[t]he jury instructions here not only failed to require that Brooks take deliberate steps to blind himself to the illegal purpose of his conduct, but additionally instructed the jury that he did not need to 'know' or even suspect that his conduct was unlawful."Global Tech clearly requires both.    

Petition for Cert for Walton - filed by the law firm of Gerger & Clarke - Download Petition for Writ of Certiorari

Petition for Cert for Brookes - Download Brooks Petition for Writ of Certiorari 

NACDL Amicus Brief for Brooks and Walton - authored by Attorney John D. Cline - Download NACDL--Brooks-Walton amicus 

(esp)

October 7, 2012 in Judicial Opinions, Privileges, Prosecutions, Prosecutors | Permalink | Comments (4) | TrackBack (0)

Friday, October 5, 2012

Health Care Fraud - DOJ Carries Through on Promise

The Medicare Fraud Strike Force activities of yesterday were impressive (see here), but not new for the present AG's office. AG Holder promised  that health care fraud would be a priority, and he has carried through with this promise. In this recent instance we are seeing 91 individuals being indicted across the country in a massive "Medicare Fraud Takedown." Assistant AG Lanny Breuer stated that "[t]his represents one of the largest Medicare fraud takedowns in Department history, as measured by the amount of alleged fraudulent billings." AG Holder noted that "[s]ince the first Strike Force was launched in 2007, these teams have charged nearly 1,500 defendants for falsely billing the Medicare program more than $4.8 billion." 

Although I have not counted them, I can note that the DOJ press releases coming through my emails definitely support their claim that health care fraud has been a top priority for this DOJ.

Some may argue that those being indicted here are not the real offenders in the system - after all, how many lower level individuals get caught in instances of trying to do what they think is required of them in their job. But two things come from any large scale prosecution such as this one: 1) with convictions will come general deterrence - in that they will be sending a message to others in the system that fraudulent conduct will not be tolerated; and 2) through these indictments, are likely to come more prosecutions as individuals plead guilty and offer to cooperate with the government.

(esp)

October 5, 2012 in Prosecutions, Prosecutors | Permalink | Comments (3) | TrackBack (0)

Monday, September 24, 2012

Deferred Prosecution Agreements - Definitely A Plus

On September 13th Assistant Attorney General Lanny A. Breuer spoke to the New York City Bar extolling the virtues of DOJ's strategy for corporate prosecutions (see here). Former co-blogger Peter Henning here, also authored an article which focuses on the use of deferred prosecution agreements by the government.

One clearly has to credit the government with raising the bar in the corporate world to comply with legal mandates. Corporations throughout the world now have strong compliance programs and conduct internal investigations when questionable activities are reported to them.  Likewise, post-Arthur Andersen, LLP, corporations are shy to go to trial - although there are some who have done so successfully (e.g. Lindsey Manufacturing- see here).

When the government first started using deferred and non-prosecution agreements, in a prior administration, there were government practices that were questionable.  For example, allowing for huge sums to money to go to a former attorney general as a monitor, giving a chair to a law school that happened to be the same school the US Attorney graduated from, and negotiating for continuing work with the government as part of the agreement. (see Zierdt & Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing-here)  Without doubt there were terms within the agreements that needed revision. Some terms that give complete control to prosecutors in deciding who can determine breaches of agreements present problems. But many of the questionable practices are not seen in recent deferred prosecution agreements, and this is good. 

Agreements that still provide an imbalance between corporate misbehavior and individual miscoduct is creates an imbalance, but much of this is created by the fact that corporations have greater resources and can control the discussion with DOJ, to the detriment of the individual. Clearly there needs to be a better recognition of corporate constituents during the internal investigations, the subject of a forthcoming article that I author with Professor Bruce Green (Fordham) titled, Unregulated Internal Investigations: Achieving Fairness for Corporate Constituents.  But this issue may not be one strictly for DOJ to resolve.

What is particularly impressive about the DOJ use of deferred prosecution agreements today is that it uses an educative model to reform corporate misconduct. One can't put a corporation in prison, so with fines as the best alternative it is important to focus on motivating good conduct.  Corporate deferred and non-prosecution agreements are an important step in achieving this positive result.  So, it is important to credit today's DOJ with how it is tackling the problem of corporate misbehavior.

(esp)  

September 24, 2012 in Deferred Prosecution Agreements, Investigations, News, Prosecutions, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Wednesday, September 19, 2012

Prosecutors As Collection Agents: A Disingenuous Artifice?

by: Solomon L. Wisenberg

This front page story from Sunday's New York Times details the sleazy nationwide scam cooked up by debt collection agencies and local prosecutors to pry funds from American citizens through misleading, threatening letters. People who write bad checks are sent threatening letters signed by local district attorneys. In reality the district attorneys are just renting out their letterhead to the debt collectors. The typical letter warns the recipient that he has been "accused" of a crime, but can avoid "the possibility of future action" by the District Attorney's Office if he pays off the bounced check and attends a financial accountability class. The class can cost as much as $180.00 and a small portion of that fee is kicked back from the debt collectors to the District Attorney. In almost all instances, no prosecutor has ever looked at a case file, much less examined whether the individual had criminal intent. The letters may be literally truthful, in the Clintonian sense, but they are undoubtedly misleading. They are a scheme. They are sent through the mail. Perhaps AG Holder can launch an investigation to determine whether this conduct constitutes federal mail fraud. It seems right up his alley, since most debt collection agencies are, relatively speaking, small-scale operations. In many jurisdictions it is a crime to threaten criminal action in order to gain advantage in a civil matter. But I guess it's okay if you team up with the local prosecutor. More than ever our state and federal prosecutorial authorities seem to be acting as collection agencies for big businesses. Kind of sad considering we are still mired in recession.

(wisenberg)

September 19, 2012 in Fraud, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Thursday, September 13, 2012

Strong Language to Court Clerk Leads to Jail

by: Lawrence S. Goldman

Cursing has become a common part of the speech of many Americans, and the f-word is frequently used in its non-sexual meaning as a stronger substitute for "hell" to emphasize the speaker's extreme displeasure or anger, as in "get the f--- off."  However uncivil, even if used in inappropriate settings, the mere utterance of the word is unlikely to lead to arrest or imprisonment, in large part because of First Amendment protection.

Apparently, however, using such a word in complaining to a federal court clerk about the judge, even outside the presence of the judge, may be treated more seriously.   As reported in the National Law Journal (see here), Robert Peoples, a disgruntled and seemingly difficult pro se plaintiff, after learning that a South Carolina district judge had summarily dismissed one of his cases because of his lateness to court, outside the presence of the judge told a clerk that the judge should "get the f--- off all my cases."  The next day the judge initiated a criminal proceeding for contempt. 

At a bench trial before a judge from a different district, the defense contended that Peoples' statements did not obstruct the administration of justice.  The trial court rejected that argument, finding that Peoples' behavior had affected the administration of justice because "courtroom personnel . . . were temporarily delayed in conducting their routine business" in order to deal with him.  Peoples has appealed to the Fourth Circuit, where the matter is sub judice.

It is doubtful that Peoples would have been prosecuted but for his use of a four-letter word.  If merely complaining about a judge to a clerk, even vociferously, so that a clerk temporarily abandons her work constitutes contempt, many pro se litigants, and some lawyers, might be doing jail time.

The contempt power is a privilege special to judges, a vestige of the extraordinary ceremonial stature afforded them, as exemplified by the bailiff's order that all rise to honor the judge's entrance into a courtroom, the enthronement of the judge in a seat higher than all others, and the clerical black robe.  The contempt power is sometimes used, and not infrequently abused, especially in the lower state courts, to jail summarily a difficult litigant.  In my view, it should rarely, if ever, be employed to punish an unruly litigant not engaging in physical violence and if so only after due warning.  Indeed, many judges I know proudly claim that they have never held a litigant (or attorney) in contempt.

The limited issues raised by the defendant in his brief to the Fourth Circuit do not concern whether judges deserve this special treatment.  Nor does the appeal concern any matter of special or constitutional importance, including any that might free up use of the f-word, or limit punishment for doing so.  Lawyers and litigants should still be careful to control their language in complaints about judges to court personnel.

(goldman)

September 13, 2012 in Contempt, Obstruction, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 11, 2012

IRS Whistleblower Birkenfeld Hits The Jackpot

Reuters reports here on the astounding award. Yours truly and other luminaries are quoted.

(wisenberg)

September 11, 2012 in Investigations, Prosecutions, Qui Tam, Tax | Permalink | Comments (0) | TrackBack (0)

Saturday, August 11, 2012

The DOJ: In Action or Inaction?

Here is an interesting piece from the Washington Examiner's Mark Tapscott, commenting on the Government Accountability Institute's new report, Justice Inaction: The Department of Justice's Unprecedented Failure to Prosecute Big Finance. According to Tapscott, the GAI "has concluded that conflicts of interest among President Obama's top Department of Justice appointees may explain why nobody on Wall Street has been prosecuted by the government following the economic meltdown of 2008." Notice those weasel words--may explain. I haven't read the report yet, but I'm not buying GAI's theory. DOJ's stunning failure to prosecute elite financial control fraud is coming from a pay grade much higher than Holder's.

(wisenberg)

August 11, 2012 in Fraud, Prosecutions, Prosecutors | Permalink | Comments (2) | TrackBack (0)

Friday, August 10, 2012

50 Former Prosecutors (And Judges) Can't Be Wrong

The BLT reports here on the amicus brief filed by former federal prosecutors and judges in Ali Shaygan v. United States. At issue is whether the government can be fined and sanctioned under the Hyde Act, which covers vexatious, frivolous, or bad faith prosecutions, when the charges brought have an objectively reasonable basis in fact. In other words, can federal prosecutors act out of improper motives of bad faith and malice if they have a pretextual fig leaf to cover their actions? The WSJ Law Blog reports here on the brief, which was signed by yours truly, and greater lights.

(wisenberg)

August 10, 2012 in Judicial Opinions, Prosecutions, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Wednesday, August 8, 2012

DOJ's Fraud Protection Racket

Here is an excellent story by Michael S. Schmidt and Edward Wyatt in today's New York Times about DOJ's pathetic track record in prosecuting and convicting individual high profile fraudsters in connection with the financial crisis. Instead, companies pay whatever it takes by way of civil and (sometimes) criminal penalties in order to move on. For most of these companies it is a cost of doing business and a drop in the bucket. Make no mistake about it, the failure of this Administration's Justice Department to go after individual criminal fraud at the highest levels of the private sector is a decision that has been made at the highest levels of the public sector. The article quotes Acting Associate Attorney General Tony West as follows: “There is a lot of behavior that makes us angry but which is not necessarily illegal. If the evidence is there, we won’t hesitate to bring those cases.” Sorry Mr. West, but the most charitable interpretation of your remarks is that you don't know what the hell you're talking about.

(wisenberg)

August 8, 2012 in Fraud, Prosecutions | Permalink | Comments (1) | TrackBack (0)