May 08, 2009
W.R. Grace - Not Guilty
See Grace Case, A Joint Project of the School of Law & the School of Journalism, W.R. Grace not guilty on all counts (and hats off to all the students and professors involved in the wonderful blog coverage of this trial).
Note above website seems to be down. See also WSJ Blog here
March 07, 2009
Major Criminal Tax Fraud Trial Results In Complete Defense Victory
This past week a U.S. Virgin Island (USVI) federal jury returned not guilty verdicts on all twenty-six counts in a major federal criminal tax fraud trial. The government alleged that three individuals created and promoted Kapok, a USVI limited partnership, in order to unlawfully obtain tax benefits from a USVI economic development program. The program provided a 90 percent federal income tax credit for eligible companies and individuals. Also charged were a St. Louis area auto dealer and several companies affiliated with the defendants. The government alleged a loss of more than $75 million in federal income taxes from Kapok's participating partners.
Blair G. Brown, a partner in Washington, DC's Zuckerman Spaeder, led the defense of one of the individual's accused, with assistance from associate Lani Cossette. "This case should never have been a criminal prosecution," said Mr. Brown. "The legal standards for USVI residency and qualifying income under the economic development program were vague. All of the defendants did their best in relying on the guidance of experts. The jury also correctly understood that the defendants and similar partnerships brought substantial economic benefits to the USVI."
"The defense was a real team effort that melded the strengths of all defense counsel. Sticking together and pounding our themes-vague standards, reliance, disclosure, and benefits to the USVI-were essential," added Mr. Brown. The defense presented only two witnesses, and none of the defendants testified.
Also representing the same person as Brown were Clyde Kuehn from Belleville, Ill., and USVI local counsel Lee Rohn. Other defense counsel were William Lucco of Edwardsville, Ill.; Chuck Meadows and Josh Ungerman of Dallas; Robert Webster of Dallas; Robert Smith of Dallas; and Gordon Rhea of Mt. Pleasant, S.C. The government was represented by Assistant U.S. Attorneys from the Southern District of Illinois, where the case was originally indicted before its transfer to the USVI, and the U.S. Department of Justice Tax Division.
December 23, 2008
The Holiday Pardons
President Bush issued some holiday pardons - 19 individuals were recipients, and one person had a sentence commutation. The list includes many older offenses, with a few being drug related crimes.
The ones that might be considered white collar ones included a 1985 mail fraud conviction, a 1993 aiding and abetting embezzlement of bank funds, a 1993 conspiracy to defraud the U.S., a 1962 forging the endorsement on a US Treasury check, a 1998 concealment of information affecting Social Security benefits, a 1971 embezzlement of mail matter, a 2003 false statements to the HUD and mail fraud, a 1949 conspiracy to export and exportation of a military aircraft to a foreign country in violation of the Neutrality Act of 1939, and a 1992 aiding and abetting violation of the Archaeological Resources Protection Act.
For the story behind one of the pardons, see Eric Lichtblau, Jailed for Aiding Israel, but Pardoned by Bush
Additional Addendum, Jordan Weissmann, BLT Blog, Pardon Memo Puzzles Legal Experts
December 21, 2008
The Abramoff aftermath never seems to end. In the latest happenings, one sees that David Safavian, former chief of staff at the General Services Administration, is convicted in a retrial. See Derek Kravitz, Washington Post, Ex-White House Official Convicted Again. He was initially convicted after a trial by jury and given a sentence of eighteen months. That conviction was overturned. The interesting question is whether the court will keep the sentence constant in a post Gall and Kimbrough world. For background on the case see:
- Abramoff - The Reward for Cooperation
- Commentary on Safavian Reversal
- Safavian Sentenced to 18 Months
- Safavian Guilty- What Does This Mean?
- In the Words of Abramoff
- Abramoff and Rove
- Former GSA Chief Indicted
- Ex-Official in Bush Administration Indicted
November 03, 2008
Former CEO National Century Financial Enterprises Convicted Again
A DOJ Press Release reports that "Lance K. Poulsen, former president, owner and chief executive officer of National Century Financial Enterprises (NCFE)" was convicted "of conspiracy, fraud and money laundering." Poulsen had been convicted of "conspiracy, witness tampering and obstruction on March 26, 2008, and [he] was sentenced to ten years in prison on those charges." (see here) The DOJ Press Release states that "[t]he charges stemmed from a scheme to deceive investors about the financial health of NCFE that cost investors more than $2 billion. The company, which was based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002."
October 27, 2008
Stevens - Guilty
Details can be found at - CNN here; Washington Post here; NYTimes here; WSJ here. The question of whether it was a good move to proceed to trial quickly, to beat the forthcoming election, has now also been answered.
An added consideration to the prior blog post here, is that if there was any error that causes a reversal of this conviction, it is hard to remedy it prior to the election. Appeals can take a long time, and certainly more time than the few days left before the election.
Trivia - The late Rep. Charles Diggs was re-elected while awaiting sentencing (although he did eventually resign) here.
P.S. Will the defense be raising an issue on appeal regarding a response to a jury question during the deliberation process? See BLT Blog here.
August 29, 2008
Pellicano and Christensen Convicted
A press release of the U.S. Attorney's Office for the Central District of California reports that "[f]ormer private investigator Anthony Pellicano and prominent entertainment attorney Terry Christensen were found guilty today of federal conspiracy and wiretapping charges in connection with their illegal wiretapping of the ex-wife of Christensen’s longtime client, billionaire Kirk Kerkorian, during a 2002 child support dispute." The jury trial lasted 6 weeks. Pellicano had previously been convicted of other charges, including RICO, in May. The government had tapes in this case, something that can be very difficult for the defense to overcome.
Dan Slater, Wall Street Jrl Blog, Terry Christensen, Pellicano Convicted on Wiretapping Charges
Above the Law - Lawyer of the Day - Terry Christensen
June 04, 2008
The press is reporting on the conviction of Antoin Rezko:
Bob Secter & Jeff Coen, Rezko Convicted of Corruption
Peter Slevin, The Trail Blog, Washington Post - Rezko Convicted of Influence Peddling
Catrin Einhorn & Susan Sauley, NYTimes - Fund-Raiser Convicted in Illinois Bribery Scheme
Ilan Brat & T.W. Farnam, Wall St Jrl, Fund-Raiser Rezko Found Guilty in Illinois Corruption Trial
The case drew national attention when the names of Obama and Blagojevich surfaced during the trial. For background see here, here, here, here and here. The initial DOJ Press Release can be found here.
(esp)(blogging from Atlanta)
June 03, 2008
Not Guilty for 2 Former CVS Vice-Presidents
W. Zachary Malinowksi over at Projo.com reports (here) on the not guilty verdicts entered against the two former VPs from CVS. Perhaps the most amazing aspect here is that the jury issued the verdict in 90 minutes. This is particularly noteworthy as one often does not find the quick verdict in white collar cases. And although this case was not a heavy document case, it still involved allegations of fraud. The accused individuals had been charged with bribery, conspiracy, and mail fraud (see here). The case was built largely with testimony of a cooperating witness. One of the individuals in this case was represented by David B. Fein and Scott Corrigan of Wiggin and Dana.
Even though successful in court, it is never really a "win" for a criminal defendant who goes to trial. One cannot bring back the agony of facing the charges, the strain of the trial, and the personal costs one faces in maintaining innocence.
May 15, 2008
Former CEO of PurchasePro Convicted
"The principal founder and former Chief Executive Officer of PurchasePro.com, Inc. . . . , a now-defunct internet company that specialized in business-to-business commerce ('B2B')" was found guilty after a bench trial of "conspiracy to commit securities fraud, securities fraud and witness tampering." The court noted that "PurchasePro established and promoted virtual 'marketplaces' in which buyers and sellers of goods could interact with one another." The opinion describes the relationship of this company with AOL.
In a press release issued by the US Attorney for the Eastern District of Virginia it states:
"[the defendant] originally faced trial on the securities fraud and witness tampering charges in a jury trial that began in October 2006 before Judge Kelley. [The defendant’s] first trial ended after Judge Kelley granted a motion from [the defendant]’s defense attorney to withdraw from the case and a mistrial was declared. The remaining defendants were subsequently acquitted. In the retrial, which began in October 2007, an obstruction of justice charge was consolidated with the original securities fraud charges. In addition to the guilty verdict on the original charges, Judge Kelley also found [the defendant] guilty of obstructing a federal proceeding as a result of his conduct during his original trial."
The U.S. Attorney did not issue a press release when the initial defendants were acquitted and there is only one sentence of the acquittal in this press release. (see here)
The opinion - Download johnson_final_verdict_and_opinion_w_esig.pdf
Pellicano Convicted of RICO
A DOJ Press Release reports that
"Former private investigator Anthony Pellicano and two associates were found guilty today of federal racketeering charges for participating in a criminal enterprise in which Pellicano paid tens of thousands of dollars to police officers in exchange for confidential law enforcement information on numerous individuals who were being investigated by Pellicano.
"A federal jury today also found that Pellicano and others were involved in the installation of wiretaps on the phones of numerous individuals whom Pellicano had been hired to investigate."
(esp)(w/ thanks to Bill Olis)
March 16, 2008
Guilty Verdict in Securities Case
A DOJ Press Release notes how "[a] federal jury has found five former executives of National Century Financial Enterprises (NCFE) guilty of conspiracy, fraud and money laundering, following a six-week trial and less than two days of deliberation." The press release noted that "[t]he Columbus, Ohio, jury returned the guilty verdict on all charges contained in a 27-count superseding indictment stemming from a scheme to deceive investors about the financial health of NCFE. The company, which was based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002. " "This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America," said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division. The press release states that "[a]t trial, the government presented evidence that the defendants engaged in a scheme to deceive investors and rating agencies about the financial health of NCFE and how investor monies would be used."
March 02, 2008
Defense Wins Bankruptcy Fraud Case
A lawyer who was charged with 11 counts of bankruptcy fraud had the last two remaining counts dismissed this past week by a District Court Judge in D.C. Initially 5 counts were dismissed pre-trial. The jury heard the remaining 6 counts against the attorney who is licensed to practice in DC and California, and acquitted the lawyer on 4 counts. This left 2 counts, counts that were hung when the jury failed to reach a verdict. The court, in a 15 page opinion, dismissed these remaining two counts finding that the only evidence presented at trial "can hardly be the basis for a criminal conviction."
The remaining two counts had charged a violation under 18 U.S.C. s 152 for allegedly making false material statements. The statements related to whether a contingency fee needed to be reported on a bankruptcy schedule.
February 25, 2008
Insurance Executives Convicted
Five former insurance company executives, four from General Re and one from American International Group, were convicted of conspiracy, securities fraud, false statements to the SEC, and mail fraud in connection with a "finite insurance" contract used to make AIG's reserves look stronger than they were. The defendants include the former CEO of General Re, Robert Ferguson, the company's former CFO, senior vice president, and long-time assistant general counsel in addition to a vice president from AIG. The case revolved around reinsurance transactions in 2000 and 2001 that helped AIG report an increase in its insurance loss reserves, something that analysts had been critical about, negatively affecting the stock price. According to prosecutors, the contracts were a sham transaction because no real risk passed to General Re, so AIG's accounting for it as a reinsurance agreement was improper.
An interesting twist in the case was the government's identification of former AIG CEO Maurice Greenberg as an unindicted co-conspirator, although he has never been charged with any crime. Naming such a well-known executive as a member of the conspiracy may have been a means to undermine the defendants' "empty chair" defense that sought to blame the problems with the transactioin on Greenberg. He was forced out of his position as CEO by then-New York Attorney General (and now Governor) Eliot Spitzer, who demanded Greenberg's termination on the threat of criminal prosecution of the company, an almost sure death sentence for an insurer. General Re is a wholly-owned subsidiary of Berkshire Hathaway, whose CEO is Warren Buffett, once named as a potential witness in the case but never called by either side.
While the case is primarily an accounting fraud prosecution, it is different from more typical cases of this type because the main defendants were not from the company whose accounting was improper. Indeed, there was no claim that General Re's recording of the transaction was improper, only AIG's. In that sense, General Re was an enabler of AIG, the type of enterprise liability rejected by the Supreme Court in the Stoneridge case for private securities fraud actions. One rationale for rejecting that theory of liability in Stoneridge was the presence of the SEC and federal prosecutors to crack down on companies that aid others in violating the securities laws. An AP story (here) discusses the verdict, which the defendants have vowed to appeal. (ph)
February 23, 2008
Jury Tells Government to Stick to Tax Charges
The government was again sent the message to stick to tax charges. The brother of the former mayor of Philadelphia was acquitted of mail and wire fraud charges (See Phil. Inquirer here). After a three day deliberation, the jury found T. Milton Street Sr. (also a former state senator) guilty of three counts of failure to file income tax returns. Other tax counts resulted in a hung jury.
As previously discussed here, this case has similarities with the prosecution against Wesley Snipes in that both were charged and acquitted of substantive charges beyond the failure to file taxes. In both cases, the individuals accused of crimes was only found guilty of misdemeanor tax offenses for some of the years in question. And in both cases the jury did not immediately reach a verdict. This last factor was also exhibited in the case of U.S. v. Cheek, where the accused represented himself pro se and kept the jury out for some time.
(esp)(w/ a hat tip to Peter Goldberger)
February 04, 2008
Venue in Snipes Case
Several posts have focused on the Wesley Snipes case, the trial and the verdict (see here, here, and here). Actor Snipes was convicted on 3 misdemeanor tax counts, but acquitted on all other charged conduct including a count charging conspiracy. As previously discussed, the conspiracy count may have had a venue basis when charged, as venue can be found in either the place of the agreement or where any of the acts occurred. But the tax counts have been argued as improper from the initial days.
Can the two be separated? One case, United States v. Ebersole, 411 F.3d 517 (4th Cir. 2005) does a good job of noting an important policy argument in this area of law -
"The Supreme Court has cautioned that the question of venue in a criminal case is more than a matter 'of formal legal procedure'; rather, it raises 'deep issues of public policy in the light of which legislation must be construed.' United States v. Johnson, 323 U.S. 273, 276 (1944). The Court also has observed that the venue provisions of the Constitution are meant to act as safeguards, protecting the defendant from bias, disadvantage, and inconvenience in the adjudication of the charges against him. Travis v. United States, 364 U.S. 631, 634 (1961) (citing U.S. Const. Art. III, § 2 (pertaining to venue)); U.S. Const. amend. VI (pertaining to jury trials)."
Was Snipes biased and disadvantaged here? Does the fact that the jury venire that he as selecting jurors was all-white make a difference?
For comments from Paul Caron's Tax Prof Blog, see here.
February 03, 2008
Will the Wesley Snipes Convictions Hold Up on Appeal?
Previously blogged was the acquittal of Wesley Snipes on the conspiracy and fraud counts, and also on three of the six tax filings counts. (see here). Peter Goldberger sent in an important comment on the Wesley Snipes three misdemeanor convictions. He stated:
"Also worth noting is that Snipes was convicted only on counts where venue was much contested, both legally and factually. Was he really a legal resident, for tax-filing purposes, of the Florida town where he went to high school, while living for years in NYC and LA as a movie star? If not, the counts of conviction are precisely those most vulnerable on appeal."
This is an important point because conspiracy cases allow the prosecutor to bring charges in a host of different venues. It can be the place of agreement or the place of any of the overt acts. With the acquittal of the conspiracy charge, is venue is lacking? Also lacking perhaps is the venue that might have been present if Snipes had been convicted on the fraud count (a count that included an aiding and abetting aspect). So how does one get this case to Florida? Couple these questions with a strong objection raised by defense counsel pre-trial to the venue, and the fact that the venire failed to include the race of the accused. But does the fact that the issue gains viability after trial, because of the acquittal of several counts, make a difference?
February 01, 2008
Snipes Not Guilty of Fraud & Conspiracy Charges; Guilty of 3 Misdemeanors
The press (here, here, here, and here) is reporting that Wesley Snipes has been found guilty of three misdemeanors and not guilty of the charges that carried more severe penalties. Unlike his co-defendants, Snipes was acquitted of the conspiracy charge that he faced.
The indictment against Snipes had charged him with conspiracy under section 371, and if convicted this charge could have produced a hefty sentence for the actor. In addition to being found not guilty on this charge, Snipes was also acquitted of count two which charged him with a fraud related offense under 18 U.S.C. 287. Finally, the government was only successful on half of the tax charges brought against Snipes, in that he was acquitted of three of the years charged under 26 U.S.C. 7203.
The minor convictions for Snipes and major ones for his co-defendants sends the message that one cannot claim ignorance if they follow a promoter of a tax scheme. But more importantly, those who promote such conduct can be charged and convicted of crimes such as conspiracy.
The numerous acquittals in the Snipes case should be making the government wonder whether it was worth the time, cost, and effort to proceed criminally against him, and whether civil penalties may have been more appropriate.
December 13, 2007
Iowa State Senator Found Not Guilty
An Iowa state Senator charged with one count of attempted extortion under the Hobbs Act was found not guilty of by a jury. As discussed in an earlier post (here), the defense had filed a motion to dismiss for prosecutorial misconduct. The case involved recordings by a prosecuting witness with the state Senator, and he was rather substantially impeached by the defense. A Des Moines Register story (here) discusses the jury verdict. (ph)
December 05, 2007
Former Brocade HR Manager Found Guilty
The second defendant from Brocade Communications was found guilty by a jury in San Francisco on charges related to options backdating at the company. Stephanie Jensen, the former human resources manager for the company, was convicted on one count of conspiracy and one count of filing false records with the SEC. Jensen was charged with former Brocade CEO Gregory Reyes in 2006, and initially there were eight charges against her. After the district court granted a severance motion, the government dismissed six counts, presenting a simpler case that focused on her work with Reyes to backdate options grants to a number of new hires at Brocade and the resulting false statements to the SEC because the backdated options were not properly accounted for in the financial statements. According to an AP story (here), Jensen's primary defense was her lack of knowledge about the accounting for stock options.
Similar to the Reyes conviction, the government's case did not include evidence that Jensen benefited personally from the backdating, which is often a key component in such prosecutions. The government relied in large part on the testimony of co-workers who raised questions about the backdating practices and Jensen's reassurances about who would be held responsible.
For a white collar crime case, this one was over almost before it began, with the trial lasting just a bit over one week. The district court postponed the sentencing of Reyes until after Jensen's trial, so that should take place in the near future. (ph)