Tuesday, July 16, 2019
The DOJ Antitrust Division issued a new guidance memo on Compliance Programs in Criminal Antitrust Investigations (see here). Providing transparency to the evaluation process of corporate compliance is a smart move as companies will now know what is expected of them from DOJ, and thus there is a greater likelihood of achieving compliance on the part of companies. This process can also reduce costs in providing a more efficient way of getting companies to readjust their compliance programs and assure that internal measures are in place to avoid company and individual criminality. Providing this 17 page compliance memo to companies should be applauded.
In issuing this new guidance, Assistant Attorney General Makan Delrahim stated that "effective immediately" the Antitrust Division would, "(1) change its approach to crediting compliance at the charging stage; (2) clarify its approach to evaluating the effectiveness of compliance programs at the sentencing stage; and (3) for the first time, make public a guidance document for the evaluation of compliance programs in criminal antitrust investigations." (see here), A major change from past policy is that credit for having a compliance program will now be given at the charging stage.
Eight considerations are provided, but it is noted that "the guidance emphasizes that these elements and questions are not a checklist or formula, and not all of them will be relevant in every case." Delrahim states that "[d]ivision prosecutors should ask three preliminary questions at the outset to help focus their analysis. First question: does the company’s compliance program address and prohibit criminal antitrust violations? Second, did the antitrust compliance program detect and facilitate prompt reporting of the violation? Third, to what extent was a company’s senior management involved in the violation?"
In house corporate counsel and outside attorneys representing companies need to be aware of this new guidance and readjust compliance programs to match the specifics provided by this document.
Saturday, July 13, 2019
- Who in DOJ made the ultimate decision to drop the proposed felony indictment of Jeffrey Epstein and to cap the Non-Prosecution Agreement ("NPA") sentence at two years--later reduced to 18 months? The 6-2-17 affidavit of AUSA Ann Marie Villafaña, the lead prosecutor on the original federal criminal case, largely supports Alex Acosta's account of certain key events in this week's press conference. Keep in mind, however, that her affidavit was filed as part of the Jane Doe 1 and Jane Doe 2 litigation in SDFL, which resulted in Judge Marra's ruling that SDFL violated the Crime Victim's Rights Act ("CVRA") by failing to notify Epstein's victims about the NPA. At the time it was filed, the affidavit was focused on the effort to convince Marra that SDFL had not violated the conferral/right to be heard provisions of CVRA. On pages 8 and 9 of her affidavit, Villafaña attests that: "Prior to the Office making its decision to direct me to engage in negotiations with Epstein's counsel, I discussed the strengths and weaknesses of the case with members of the Office's management and informed them that most of the victims had expressed significant concerns about having their identities disclosed. While I was not part of the final decision-making at the Office that arrived at the two year sentence requirement, I was part of the discussions regarding sex offender registration and the restitution provision. It is my understanding from these and other discussions that these factors, that is, the various strengths and weaknesses of the case...together with the Office's desire to obtain a guaranteed sentence of incarceration for Epstein, the equivalent of uncontested restitution for the victims, and guaranteed sexual offender registration...were among the factors that informed the Office's discretionary decision to negotiate a resolution of the matter and to ultimately enter into the NPA." Translation: Villafaña disagreed with dropping the indictment and was not part of the group that made the ultimate decision to go for an NPA with a two year state prison cap. If she was even present at the meeting where the decision was made, she disagreed with the decision and was thus not "part of the final decision-making process." It is unusual, but not unheard of, for the lead prosecutor to be overruled on a case. It is very unusual to go from a 50-plus page multi-count felony sex trafficking indictment to an NPA with no federal charges, particularly when your lead prosecutor wants to go to trial. Villafaña was and is a respected career AUSA. Apparently DOJ's Office of Professional Responsibility ("OPR") is looking into how the case was handled. OPR will want to see Villafaña's original pros memo in the case, will seek to interview all government participants in the negotiations, and will want to know every DOJ person involved in the ultimate decision to drop the indictment.
- Why was DOJ's standard language making it explicitly clear that the NPA bound only the SDFL not included in the NPA? Such language is employed every day by U.S. Attorneys' Offices throughout the United States and has been for years. It goes like this: "The defendant understands that this agreement is binding only on the U.S. Attorney's Office for the ________ District of _______." Why wasn't that done in Epstein's case? Epstein is now arguing that the SDFL NPA prevents his prosecution in SDNY. He will probably lose, given Second Circuit case law, but why even leave the possibility of challenge open? The NPA does not even include a standard integration clause. This is strange.
- Why was the entire NPA placed under seal? I understand the Government's desire to protect the identity of Epstein's victims, but this could have been done through a redacted version of the NPA, and indeed this has been done in the subsequent litigation.
- Why weren't all of Epstein's known victims notified of the NPA and its terms in a timely fashion? Acosta and Villafaña have explained that they did not want the victims to see the civil damages portion of the NPA before SDFL was certain that Epstein would be pleading to the Florida felony, because they did not want the victims to be cross-examined about having seen those provisions in the event the deal broke down and SDFL took Epstein to trial. Epstein signed the Florida plea papers only a few days before he actually pled guilty and there was not enough time to notify all the victims. I understand the explanation, and assume no bad faith on SDFL's part, but it doesn't cut the mustard. If Judge Marra is correct, CVRA required notification. And either the NPA or Florida plea deal could have been structured to prevent the fiasco of having to locate and confer with victims over a weekend. Marra ruled that SDFL affirmatively hid the NPA from the victims and essentially deceived them into thinking that the office was still investigating Epstein well after the NPA was signed. That scenario should have been avoided.
- Why were Epstein's lawyers allowed to lobby Main Justice after the NPA was signed? I understand going to Main Justice and arguing to overturn an individual office's charging decision. Not every lawyer obtains such access and these efforts to overturn are rarely successful. But they almost always occur BEFORE an indictment has been returned. Why was Epstein's team allowed to lobby for several months AFTER the NPA was signed. The original NPA was signed by attorneys on both sides in September 2007. An addendum was signed by the attorneys in October 2007. Epstein signed in December 2007. The Oosterbaan letter, explaining why federal involvement was legitimate, was not signed until May 15, 2008. This is weird.
I do not believe that the Epstein deal was "dirty" in any way. I have heard from multiple sources that Acosta is a person of high integrity, who was well regarded within the office. I was impressed with Acosta's handling of the press conference. I don't think he should have resigned. I don't know how easy or hard it would have been for SDFL to achieve a victory at trial or how many victims would have been further traumatized by a trial. I do know that SDFL has a long history of aggressively prosecuting these types of cases--child sex trafficking and kiddie porn. And I do believe SDFL should have conferred with the victims before NPA was inked. Acosta had no criminal trial experience when he became U.S. Attorney. Was he was out-negotiated here, or overawed by the team of big name defense lawyers representing Epstein? His First Assistant Jeffrey Sloman, a veteran prosecutor who was deeply involved in the negotiations and signed the NPA, has denied this and has publicly defended both Acosta and the deal.
Still, the questions I and others have posed are legitimate and deserve answers. Perhaps we will get them from the OPR investigation.
Here are some additional documents. The first three were made available by Acosta in connection with his press conference in order to help support his explanation of the NPA. Next is the Jeffrey Sloman op-ed defending Acosta and the deal. The final three documents are the most recent filings in the SDNY case and all deal with the government's effort to detain Epstein pending trial.
July 13, 2019 in Celebrities, Civil Litigation, Current Affairs, Defense Counsel, Deferred Prosecution Agreements, Investigations, Judicial Opinions, News, Prosecutions, Prosecutors | Permalink | Comments (0)
Tuesday, July 9, 2019
Here are some important documents related to Jeffrey Epstein's legal issues. Hopefully they can help people make informed judgements about his federal criminal case.
Here is the Non-Prosecution Agreement ("NPA") from 2007. Epstein-NPA
Here is the current federal indictment. U-S-v-Jeffrey-Epstein-Indictment
Here is U.S. District Judge Kenneth Marra's decision holding that SDFL violated the CVRA. Judge Marra's Order and Opinion Holding that Government Violated Crime Victim's Rights Act
Here is a May 2008 letter from DOJ's Child Exploitation and Obscenity Section Chief to Epstein's attorney, explaining why federal prosecution of Epstein was warranted and why there was a legitimate federal interest. The letter is copied to Assistant Attorney General and Criminal Division Chief Alice Fisher. The letter shows both the high levels of Main Justice that Epstein's lawyers had access to and the potential problems that may have been entailed by SDFL in taking him to trial. It does not answer the question of whether Main Justice (or SDNY) knew that standard wording unequivocally limiting the NPA to SDFL was absent from the NPA. Note that this letter was written several months after the NPA was signed but before Epstein entered his state court guilty plea. Oosterbaan Letter
Here is Jane Doe 1's Emergency Petition for Enforcement of the Crime Victim's Rights Act, filed in July 2008. This was one week after Epstein's state court plea. Victim's Emergency Petition for Enforcement
Monday, July 8, 2019
Although U.S. v. Epstein is not a white collar case, the issues raised by SDNY's federal conspiracy and sex-trafficking charges will reverberate throughout the white collar world, as we deal with such issues all the time. Here is the background in a nutshell.
Epstein was investigated by the U.S. Attorney's Office for the Southern District of Florida ("SDFL") for a series of sex crimes involving minor girls. A Non-Prosecution Agreement ("NPA") was entered into between SDFL and Epstein. The NPA called for Epstein to plead guilty to related state charges. There were no federal charges, but the NPA was contingent upon Epstein entering into and abiding by the state plea deal. Additionally, Epstein's named victims were allowed to sue Epstein civilly under 18 U.S.C. 2255, which is only available to federal sex crime victims.
Under the NPA's terms, "on the authority of R. Alexander Acosta, United States Attorney for the Southern District of Florida, prosecution in this District for these offenses shall be deferred in favor of prosecution by the State of Florida, provided that Epstein abides by the following conditions and the requirements of this agreement as set forth below." (Emphasis added.) If the United States Attorney determines that Epstein has violated the NPA, the United States Attorney may notify Epstein of the violation and "shall initiate its prosecution." But, if Epstein timely fulfills all of the NPA's obligations, "no prosecution for the offenses set out on pages 1 and 2 of this Agreement, nor any other offenses that have been the subject of the joint investigation by the Federal Bureau of Investigation and the United States Attorney's Office, nor any offenses that arose from the Federal Grand Jury investigation will be instituted in this District, and the charges against Epstein, if any, will be dismissed." (Emphasis added.) It is undisputed that Epstein fulfilled all of his obligations under the NPA. The NPA does NOT include a standard provision near the signature block explicitly affirming that the agreement binds only the SDFL.
About a week after Epstein's state guilty plea, one of his victims, Jane Doe, filed a federal civil action seeking enforcement of the federal Crime Victim's Rights Act ("CVRA"). She claimed that SDFL had failed to confer with her as required by CVRA. Neither Jane Doe nor any of Epstein's other victims were aware that an NPA had been entered into that would free Epstein from having to face federal charges, at least in SDFL. In fact, it is clear from her pleading that Jane Doe thought federal plea negotiations were still under way when she filed. Jane Doe's case continues to wind its way through U.S. District Judge Kenneth Marra's court, and new plaintiffs, including Jane Doe 2, have been added. On February 21, 2019, Judge Marra held that SDFL violated the CVRA by hiding the NPA and its terms from Epstein's victims. Judge Marra also held that the CVRA authorizes the rescission of an NPA reached in violation of a prosecutor's conferral obligations. SDFL prosecutors maintained, as recently as June 24, that judge Marra had no authority to force them to reopen Epstein's case.
Fast forward to late last week, when Epstein was arrested on new federal sex crime charges emanating from the SDNY. The SDNY indictment was unsealed today. The SDNY charges are clearly covered by the NPA, if the NPA extends beyond the Southern District of Florida.
So, the battle lines are drawn for what promises to be a fascinating and important test of constitutional and statutory issues.
You can be certain that Epstein will move quickly to dismiss the new charges as a violation of the NPA and the Double Jeopardy Clause of the U.S. Constitution. What are some of the key issues likely to be litigated?
- Was the CVRA really violated? Does it even apply to non-prosecution agreements, or does it require a federal court filing by the prosecutors?
- If the CVRA was violated, does the violation affect the NPA provisions that benefitted Epstein?
- Is the NPA really unambiguous as to where it applies? If the NPA is ambiguous, have Epstein's due process rights been violated by the SDNY prosecution?
- Does the Double Jeopardy Clause even come into play here? Epstein only pled to state charges and the doctrine of Dual Sovereignty would appear to control. Does the joint federal-state nature of the NPA bring the Double Jeopardy Clause back into play? In other words, is the federal action here brigaded with state action for purposes of Double Jeopardy Clause analysis? Could an exception to Gamble be carved out? If jeopardy only attaches after a court accepts a guilty plea, how would that work here where there was no federal plea? Would jeopardy attach when the state court accepted the plea or when Epstein fulfilled the terms of the plea, thereby fulfilling the NPA's terms?
- Regarding potential remedies to a CVRA violation, is it fair to punish Epstein for the government's transgression? Is it relevant that Epstein's attorneys were keenly aware of the CVRA's provisions and vigorously tried to minimize the government's disclosures of the NPA to the victims? Isn't it the defense attorney's duty to aggressively defend his/her client to the full extent allowed by law and ethical rules?
On the political front, I have been asked whether it is possible that SDNY acted on its own in charging Epstein. I find such a scenario to be highly unlikely. If not, how high within DOJ did the approval request reach?
Stay tuned. It's going to be a rocky ride. Case materials will be posted later tonight or tomorrow morning.
Monday, June 17, 2019
As previously written here, the Supreme Court issued the Gamble decision upholding the continued use of the dual sovereignty doctrine. So states and the federal government - separate sovereigns - can continue to both prosecute defendants for the same conduct, without facing a double jeopardy problem. As the sovereigns are different, there is no constitutional violation.
Some thoughts on the decision:
- The Court does an exhaustive review of the history of double jeopardy before reaching its conclusion.
- The "foreign issue" raises a concern. ("If, as Gamble suggests, only one sovereign may prosecute for a single act, no American court—state or federal—could prosecute conduct already tried in a foreign court.")
- Stare decisis is an important concept that needs to be adhered to. ("Stare decisis 'promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.' Payne v. Tennessee, 501 U. S. 808, 827 (1991)"); ("Gamble’s historical arguments must overcome numerous 'major decisions of this Court' spanning 170 years.")
- If you want to change longstanding precedent, you need to have strong support to succeed. ("we have the following (1) not a single reported case in which a foreign acquittal or conviction barred a later prosecution for the same act in either Britain or America; (2) not a single reported decision in which a foreign judgment was held to be binding in a civil case in a court of law; (3) fragmentary and not entirely consistent evidence about a 17th-century case in which a defendant named Hutchinson, having been tried and acquitted for murder someplace in the Iberian Peninsula, is said to have been spared a second trial for this crime on some ground, perhaps out of “merc[y],” not as a matter of right; (4) two cases (one criminal, one in admiralty) in which a party invoked a prior foreign judgment, but the court did not endorse or rest anything on the party’s reliance on that judgment; and (5) two Court of Chancery cases actually holding that foreign judgments were not (or not generally) treated as barring trial at common law. This is the flimsy foundation in case law for Gamble’s argument that when the Fifth Amendment was ratified, it was well understood that a foreign criminal judgment would bar retrial for the same act.”)
- Beware of relying on secondary sources. ("Gamble’s argument is based on treatises, but they are not nearly as helpful as he claims. Alone they do not come close to settling the historical question with enough force to meet Gamble’s particular burden under stare decisis.").
Justice Thomas wrote a concurring opinion in which he states - "I write separately to address the proper role of the doctrine of stare decisis. In my view, the Court’s typical formulation of the stare decisis standard does not comport with our judicial duty under Article III because it elevates demonstrably erroneous decisions—meaning decisions outside the realm of permissible interpretation—over the text of the Constitution and other duly enacted federal law." But he then finds no showing that the dual sovereignty rule is "incorrect, much less demonstrably erroneous," and thus concurs with the majority.
There are two dissents - Justices Ginsburg and Gorsuch. Justice Gorsuch says, "[t]he separate sovereigns exception was wrong when it was invented, and it remains wrong today."
The Court sends a strong message in this decision that the Court is not going to be political in deciding this case. Some may focus on the stare decisis analysis, the italics used in the decision "numerous" and "170 years" as to whether other cases may remain in place, but that all remains to be seen. It also remains to be seen whether state legislatures will put in place restrictions on prosecuting cases already handled by the federal government. Likewise, one has to wonder if Congress will be engaged to step in to formalize the petite policy currently existing in DOJ. But for now, dual sovereignty remains.
Wednesday, May 29, 2019
Special Counsel Muller has remained silent and conducted the Investigation appropriately without leaks. He spoke with a detailed Report, and that Report has been shared in part with the public. Today he spoke in a press conference letting everyone know he has nothing more to say than what is in the Report. So it seems imperative that everyone needs to read this Report. His parting words in leaving his role as Special Counsel are important - "there were multiple, systematic efforts to interfere in our election. That allegation deserves the attention of every American."
His full statement today is below (see here):
Two years ago, the Acting Attorney General asked me to serve as Special Counsel, and he created the Special Counsel’s Office.
The appointment order directed the office to investigate Russian interference in the 2016 presidential election. This included investigating any links or coordination between the Russian government and individuals associated with the Trump campaign.
I have not spoken publicly during our investigation. I am speaking today because our investigation is complete. The Attorney General has made the report on our investigation largely public. And we are formally closing the Special Counsel’s Office. As well, I am resigning from the Department of Justice and returning to private life.
I’ll make a few remarks about the results of our work. But beyond these few remarks, it is important that the office’s written work speak for itself.
Let me begin where the appointment order begins: and that is interference in the 2016 presidential election.
As alleged by the grand jury in an indictment, Russian intelligence officers who were part of the Russian military launched a concerted attack on our political system.
The indictment alleges that they used sophisticated cyber techniques to hack into computers and networks used by the Clinton campaign.
They stole private information, and then released that information through fake online identities and through the organization WikiLeaks. The releases were designed and timed to interfere with our election and to damage a presidential candidate.
And at the same time, as the grand jury alleged in a separate indictment, a private Russian entity engaged in a social media operation where Russian citizens posed as Americans in order to interfere in the election.
These indictments contain allegations. And we are not commenting on the guilt or innocence of any specific defendant. Every defendant is presumed innocent unless and until proven guilty in court.
The indictments allege, and the other activities in our report describe, efforts to interfere in our political system. They needed to be investigated and understood. That is among the reasons why the Department of Justice established our office.
That is also a reason we investigated efforts to obstruct the investigation. The matters we investigated were of paramount importance. It was critical for us to obtain full and accurate information from every person we questioned. When a subject of an investigation obstructs that investigation or lies to investigators, it strikes at the core of the government’s effort to find the truth and hold wrongdoers accountable.
Let me say a word about the report. The report has two parts addressing the two main issues we were asked to investigate.
The first volume of the report details numerous efforts emanating from Russia to influence the election. This volume includes a discussion of the Trump campaign’s response to this activity, as well as our conclusion that there was insufficient evidence to charge a broader conspiracy.
And in the second volume, the report describes the results and analysis of our obstruction of justice investigation involving the President.
The order appointing me Special Counsel authorized us to investigate actions that could obstruct the investigation. We conducted that investigation and we kept the office of the Acting Attorney General apprised of the progress of our work.
As set forth in our report, after that investigation, if we had confidence that the President clearly did not commit a crime, we would have said that.
We did not, however, make a determination as to whether the President did commit a crime. The introduction to volume two of our report explains that decision.
It explains that under long-standing Department policy, a President cannot be charged with a federal crime while he is in office. That is unconstitutional. Even if the charge is kept under seal and hidden from public view—that too is prohibited.
The Special Counsel’s Office is part of the Department of Justice and, by regulation, it was bound by that Department policy. Charging the President with a crime was therefore not an option we could consider.
The Department’s written opinion explaining the policy against charging a President makes several important points that further informed our handling of the obstruction investigation. Those points are summarized in our report. And I will describe two of them:
First, the opinion explicitly permits the investigation of a sitting President because it is important to preserve evidence while memories are fresh and documents are available. Among other things, that evidence could be used if there were co-conspirators who could now be charged.
And second, the opinion says that the Constitution requires a process other than the criminal justice system to formally accuse a sitting President of wrongdoing.
And beyond Department policy, we were guided by principles of fairness. It would be unfair to potentially accuse somebody of a crime when there can be no court resolution of an actual charge.
So that was the Justice Department policy and those were the principles under which we operated. From them we concluded that we would not reach a determination – one way or the other – about whether the President committed a crime. That is the office’s final position and we will not comment on any other conclusions or hypotheticals about the President.
We conducted an independent criminal investigation and reported the results to the Attorney General—as required by Department regulations.
The Attorney General then concluded that it was appropriate to provide our report to Congress and the American people.
At one point in time I requested that certain portions of the report be released. The Attorney General preferred to make the entire report public all at once. We appreciate that the Attorney General made the report largely public. I do not question the Attorney General’s good faith in that decision.
I hope and expect this to be the only time that I will speak about this matter. I am making that decision myself—no one has told me whether I can or should testify or speak further about this matter.
There has been discussion about an appearance before Congress. Any testimony from this office would not go beyond our report. It contains our findings and analysis, and the reasons for the decisions we made. We chose those words carefully, and the work speaks for itself.
The report is my testimony. I would not provide information beyond that which is already public in any appearance before Congress.
In addition, access to our underlying work product is being decided in a process that does not involve our office.
So beyond what I have said here today and what is contained in our written work, I do not believe it is appropriate for me to speak further about the investigation or to comment on the actions of the Justice Department or Congress.
It is for that reason that I will not take questions here today.
Before I step away, I want to thank the attorneys, the FBI agents, the analysts, and the professional staff who helped us conduct this investigation in a fair and independent manner. These individuals, who spent nearly two years with the Special Counsel’s Office, were of the highest integrity.
I will close by reiterating the central allegation of our indictments—that there were multiple, systematic efforts to interfere in our election.
That allegation deserves the attention of every American.
Saturday, May 25, 2019
Readers of the blog might be interested in the upcoming Third Global White Collar Crime Institute, which will occur in Prague, Czech Republic on June 27-28, 2019. The Global Institute is a unique ABA Criminal Justice Section conference opportunity structured to bring together experts in the field of international white collar crime to meet and discuss cutting edge issues in a new corner of globe. The experience, therefore, offers not only insights into the latest developments in the field, but the chance to interact and network with colleagues and expand your presence in new regions of the world.
The Third Global Institute will begin with a “Meet the Enforcers” panel featuring Matthew Miner (Deputy Assistant Attorney General of the United States, U.S. Department of Justice), Matthew Wagstaff (Head of the Bribery and Corruption Division, Serious Fraud Office), and Pavel Zeman (Prosecutor General of the Czech Republic). On the second day of the Global Institute, we will also welcome Dr. Adrian Jung, who serves as Special Counsel on “Internal Investigations” to the German Federal Ministry of Justice. Dr. Jung is drafting legislation for Germany regarding corporate criminal liability and internal investigations that has the potential of changing the corporate criminal enforcement landscape in Europe. Other panels during the conference will include Lessons Learned from the VW Internal Investigation, Data Privacy and GDPR, Extradition and Red Notices, Global Anti-Corruption Trends, and Changes in Enforcement After Brexit.
For those interested in attending, there is more information about the Global Institute on the conference webpage, including a full agenda of the program and the registration form. I hope to see many of you in Prague next month.
Wednesday, May 1, 2019
AG Barr's statement (here) accompanying his testimony this morning before the Senate Judiciary Committee states in part with regard to obstruction of justice:
"In Volume II of the report, the Special Counsel considered whether certain actions of the President could amount to obstruction of justice. The Special Counsel decided not to reach a conclusion, however, about whether the President committed an obstruction offense. Instead, the report recounts ten episodes and discusses potential legal theories for connecting the President’s actions to the elements of an obstruction offense. After carefully reviewing the facts and legal theories outlined in the report, and in consultation with the Office of Legal Counsel and other Department lawyers, the Deputy Attorney General and I concluded that, under the principles of federal prosecution, the evidence developed by the Special Counsel would not be sufficient to charge the President with an obstruction-of-justice offense."
In answering questions he said that usually you need an "underlying crime" and an "inherently malignant act" for obstruction of justice. Two questions:
- Were the ten items in the Mueller Report insufficient to meet the Barr standard?
- Will the DOJ be using this "new" standard in all obstruction of justice cases?
- Can defense counsel argue in obstruction of justice cases, insufficient evidence if it fails to meet the Barr standard?
DOJ issued a new Guidance Document on Evaluation of Corporate Compliance Programs (here).
Some thoughts -
- Prosecutorial discretion remains as the document states - "Because a corporate compliance program must be evaluated in the specific context of a criminal investigation, the Criminal Division does not use any rigid formula to assess the effectiveness of corporate compliance programs."
- The three "fundamental questions" that a prosecutor should ask are: "1. 'Is the corporation’s compliance program well designed?' 2. 'Is the program being applied earnestly and in good faith?' In other words, is the program being implemented effectively? 3. 'Does the corporation’s compliance program work' in practice?
- But the document is also quick to note that there is no checklist in answering these questions as it states "In answering each of these three 'fundamental questions,' prosecutors may evaluate the company’s performance on various topics that the Criminal Division has frequently found relevant in evaluating a corporate compliance program. The sample topics and questions below form neither a checklist nor a formula. In any particular case, the topics and questions set forth below may not all be relevant, and others may be more salient given the particular facts at issue."
- The document then goes on to provide some clues as to what DOJ will look at in its evaluation process.
Bottom line - The document provides a helpful structure for someone making a presentation to the government on why they should not be prosecuted or at the most get an NPA or DPA. Methodically going through this document and demonstrating a company's case for getting corporate compliance program credit will likely make for a longer presentation to the government.
Billy Witz, NY Times, April 30, 2019, Judge Overturns Conviction of Ex-Penn State President in Sandusky Case
Thursday, April 25, 2019
Our federal criminal code defines crimes, but declines to sort its fraud offenses according to degrees of harm or culpability. Although state prosecutors routinely charge crimes such as homicide or robbery in varying degrees, the federal code’s core fraud statutes are noticeably flat. There is no such thing as first- or second-degree fraud in the federal code.
Amidst a roiling debate as to whether the federal government overcriminalizes or underenforces white-collar crime, scholars have lost sight of the federal code’s lack of gradation. This Article seeks to remedy this neglect, particularly in regard to fraud crimes. Drawing examples from federal and state criminal codes, the Article analyzes the ways in which ungraded statutory regimes generate problematic and self-destructive expressive gaps. By lumping so much conduct under a single statutory umbrella, the federal code deprives the public of the ability to gauge the seriousness of a specific offense and of the will to discern those factors that separate the worst frauds from the merely bad ones.
If criminal law’s function is to distinguish wrongdoing and not solely to prohibit it, then our federal fraud statutes leave much to be desired. Reasonable people can debate the proper methodology for distinguishing bad from worse offenses, but it is quite another matter to abandon statutory sorting altogether. Accordingly, the Article closes by advocating the use of misdemeanor and low-level felony statutes to improve—and sort—the federal code’s fraud crimes.
Wednesday, April 10, 2019
Prosecutors have enormous discretion. They decide who to charge, who will receive a plea, who gets cooperation credit, and now we see even more of that discretion being used - tacking on additional charges (money laundering) and adding defendants to existing indictments.
In Operation Varsity Blues, prosecutors initially had some Indictments, some Informations (individuals typically cooperating or at least pleading) and some Complaints brought against parents who were alleged to have conspired to be "involved [in] 1) bribing SAT and ACT exam administrators to allow a test taker, typically XXX, to secretly take college entrance exams in place of students or to correct the students’ answers after they had taken the exam; 2) bribing university athletic coaches and administrators—[at a variety of schools]—to facilitate the admission of students to elite universities under the guise of being recruited as athletes; and (3) using the façade of XXX’s charitable organization to conceal the nature and source of the bribes." (XXX's inserted here)(See DOJ Press Release here). Some of the parents came forward quickly and pleaded guilty (see Bloomberg here). This included a former partner in a law firm and an actress.
Others, however, did not accept the government invitation for a quick plea (not that one is ever directly offered). And now they find themselves indicted, but with an additional charge tacked onto the fraud charges - money laundering. Is this unusual? Not really for some government prosecutors. Some prosecutors use their discretion to add charges such as money laundering when an initial plea is not quickly reached. The addition of charges when a plea is not taken has been found not to carry a presumption of prosecutorial vindictiveness (U.S. v. Goodwin). But wait there's more....
We also see all the cases coming from the US Attorneys Office in Massachusetts, although many are not from this area and their acts did not occur in this district. Conspiracy is another way that prosecutorial discretion is used to allow the government to choose the place they want to proceed. Conspiracy allows them to choose the forum where there was either an agreement or where one of the acts took place. Coupling everyone together gives the government a wider breadth of possible jurisdictions. Is this unusual? Not really, the government has been using conspiracy to choose their forum for many years. And there may be challenges here on whether this is a conspiracy case that warrants severance. But wait there's more...
The government has also brought recent Indictments via a Second Superceding Indictment of an existing case (see here). And yes, this new revised Indictment includes the charge of Conspiracy to Commit Money Laundering. And it allows the government to go with a judge who may already have been assigned one of the cases. (see Jack Newsham, NLJ, College Scandal Defense Teams Accuse Feds of Judge-Shopping). Is this unusual? Not really, superceding Indictments happen all the time.
But putting all three of the above prosecutorial decisions together and looking at them cumulatively, one has to ask whether these prosecutorial practices are really beginning to seem too aggressive. Keep in mind that we are only at the preliminary pre-trial stage. If the individuals decide not to enter a plea, one can anticipate some important legal challenges.
Sunday, March 24, 2019
One needs to give credit to AG Barr for his quick release of a preliminary statement (see here - Download AG March 24 2019 Letter to House and Senate Judiciary Committees) concerning the Report of Special Counsel Mueller, which is titled, Report on the Investigation into Russian Interference in the 2016 Presidential Election. But one also needs to read this four-page statement carefully, because the public needs to grasp all of what is being said and what is not being said here.
- AG Barr's Summary notes the extensiveness of this investigation ("employed 19 lawyers who were assisted by a team of approximately 40 FBI agents, intelligence analysts, forensic accountants, and other profession staff. The Special Counsel issued more than 2,800 subpoenas, executed nearly 500 search warrants, obtained more than 230 orders for communication records, issued almost 50 orders authorizing use of pen registers, made 13 requests to foreign governments for evidence, and interviewed approximately 500 witnesses.")
- AG Barr's Summary does not provide the same specificity in telling the public the number of indictments and convictions of individual and entities in connection with his investigation, instead saying "all of which have been publicly disclosed." Well that number does seem pretty important, as this investigation had so far 7 guilty pleas, 27 people indicted, and 37 indictments with some of the cases still ongoing.
- AG Barr's Summary says that "The Report does not recommend any further indictments, nor did the Special Counsel obtain any sealed indictments that have yet to be made public."
- AG Barr's Summary does not say how many matters were turned over to other federal or state offices, perhaps because there was criminality that did not pertain to Russian Interference in the 2016 Presidential Election. Although it does say that "During the course of his investigation, the Special Counsel also referred several matters to other offices for further action."
- We now know for certain that the Investigation had two parts, or at least the Report does: Russian Interference in the 2016 US Presidential Election and Obstruction of Justice.
- AG Barr's Summary confirms that there were Russian efforts to influence our 2016 US election. AG Barr's Summary states that - "The report outlines the Russian effort to influence the election and documents crimes committed by persons associated with the Russian government in connection with these efforts." This is an important statement that needs both executive and legislative follow-up. How will we be assuring that future efforts by another country do not undermine our election? And even if they "did not establish that members of the Trump Campaign conspired or coordinated with the Russian government in its election interference activities," do we know if the results of the election were accurate?
- AG Barr's Summary confirms "that Russian government actors successfully hacked into computers and obtained emails from persons affiliated with the Clinton campaign and Democratic Party organizations, and publicly disseminated those materials through various intermediaries, including WikiLeaks." Again, did we have a fair election? What is the appropriate remedy? What will happen in future elections to preclude such activity?
- On Part II - Obstruction of Justice - AG Barr's Summary states that "the Special Counsel considered whether to evaluate the conduct under Department standards governing prosecution and declination decisions but ultimately determined not to make a traditional prosecutorial judgment." Barr's Summary says that "[i]nstead, for each of the relevant actions investigated, the report sets out evidence on both sides of the question and leaves unresolved what the Special Counsel views as 'difficult issues' of law and fact concerning whether the President's actions and intent could be viewed as obstruction." So it does sound like the President was a "subject" as opposed to "witness" of this investigation.
- AG Barr's Summary does not say that evaluating the evidence is typically the job of the jury, after a determination has been made that there is probable cause to indict. Instead AG Barr restates Mueller's Report that "while this report does not conclude that the President committed a crime, it also does not exonerate him." AG Barr goes on to say that he and Rod Rosenstein have made the decision "that the evidence developed during the Special Counsel's investigation is not sufficient to establish that the President committed an obstruction-of-justice offense."
- In many ways it is good to see that a "short-cut offense" of obstruction of justice will not be used (see my article here), but one has to wonder about the defendants who have been charged with obstruction of justice. It will be important for everyone to know what has been declined here so that everyone can understand the DOJ's standard for evaluating obstruction. Isn't it always stated that "intent can be inferred from the circumstances" in letting juries make those decisions? But it is also good to see DOJ taking a hard line in not prosecuting uncertain cases - it is hopeful that all US Attorneys will follow this lead with the obstruction cases they are currently handling. Having the full Report will provide this important transparency.
- I leave for another day a discussion of AG Barr's decision to extract 6(e) grand jury material from the report prior to its release.
Sunday, March 17, 2019
I wasn't there, but was just reading Assistant AG Benczkowski's written remarks from the 33rd Annual ABA National Institute on White Collar Crime (see here). Here are some thoughts that caught my eye -
- It is good to see his approach on recognizing that companies are more likely to comply if they know the rules of the game in reporting and cooperating. Transparency is key to enforcing corporate compliance and it is wonderful to see this recognized.
- He claims that there have been "6,500 defendants in white-collar prosecutions, a modest increase over the prior year." But he doesn't tell us how he defines white collar crime. Trac (see here) claims the number is down. And as I noted, there is no consistent methodology for reporting white collar crime -especially as to what crimes are included. So we really can't assess who is accurate. When he gets to specific internal numbers, like what the Fraud Section's Securities and Financial Fraud Unit charged, that makes sense. But claiming that white collar prosecutions as a whole have increased needs a lot more explaining.
- It is good to see that DOJ will be using an "'anti-piling on' policy to reduce or apportion financial fines, forfeitures, and restitution between authorities to ensure that the overall outcome is equitable and just." There needs to be a coordinated effort so it is good to see this new practice continuing.
- It is likewise good to see that the internal DOJ/SEC Resource Guide for FCPA matters will now be "reflected in the Corporate Enforcement Policy itself." Or does this mean that an internal policy, unenforceable at law, is just being moved from one place on the web to another?
- It is likewise good to see a training program for assuring consistency in prosecutorial discretion on evaluating effectiveness of corporate compliance programs. But wouldn't it be best to have this done outside the DOJ since if the program is held to be ineffective, it will be the DOJ moving ahead against the company.
- But my real concern with the comments lie here - "In 2018, our Fraud Section prosecutors charged 406 individuals, won 268 convictions, and brought 10 corporate enforcement actions." It is the use of the term "won" that raises flags. Prosecutors do not win convictions and do not lose cases - prosecutors do justice and that happens irrespective of whether there is a "win," "conviction," "not guilty," or "declination."
Overall, it's sounds good to see that "corporate transparency" will be something of the future, as this can enhance compliance efforts.
Friday, March 15, 2019
Trac Reports titles the recent report, White Collar Prosecutions Hit All-Time Low in January 2019. They note that "[t]his is an historic low since monthly tracking began in October 1998." They note that "this number is down 20.3 percent over the previous month, and continues a five-month downward slide." Additionally, they say that "[c]ompared to five years ago, January filings were down 35.7 percent." President Trump's term they say has a number "lower than in previous administrations."
I don't doubt that the white collar prosecutions are down. I also don't doubt that comparing the prosecutions from the current administration to the last administration using the same metrics support it being down.
But there is a separate issue here that raises concerns - how does DOJ measure white collar crime. Trac includes thirty (30) categories of crimes, including ones related to fraud, antitrust, intellectual property violations, identity theft, and arson for profit. The list of different types of fraud is impressive, including tax fraud, federal procurement fraud, insurance fraud, securities fraud, computer fraud, health care fraud, and many other classes of fraudulent conduct.
But what I don't see are the "short-cut" offenses that are often used in white collar prosecutions. Unreported here are obstruction of justice, false statements, and perjury. And yet we all know that these are common offenses used in white collar cases. And is RICO included in the statistics? Cases under the Racketeer Influenced Corrupt Organization Act can have many different predicate offenses, some of which are street crimes like homicide, and others are mail and wire fraud.
So there is no doubt that white collar prosecutions are down. But we should also be asking -- isn't it about time that DOJ started looking at a better methodology for reporting white collar prosecutions. See Lucian Dervan & Ellen Podgor, White Collar Crime: Still Hazy After All These Years.
(esp)(w/ disclosure that she has a B.S. degree from Syracuse U.- home of the Trac Reports).
Wednesday, March 13, 2019
Paul Manafort has now been sentenced by two different judges in two different courts on two different cases. It remains to be seen if we will have a third sentencing as Manhattan District Attorney Cyrus Vance Jr. just announced additional charges against Manafort. (see here & here). A week ago Manafort received a sentence of 47 months from a Virginia federal district court judge. (see Doug Berman's Sentencing Law & Policy Blog here) Today he received a sentence of 73 months from a D.C. federal district court judge. Although the latter sentence was 73 months, some of the sentence is consecutive and some of it concurrent. In total it comes to a sentence of 7 1/2 years. Some claimed the first sentence, a below guidelines sentence, was too light. And many wondered if this could be appealed. Others felt it was best to wait for this next sentence as the next judge would likely be closer to the guideline range. Some thoughts:
- When the sentencing guidelines were created they initially were mandatory, not permitting judicial discretion to sentence the individual as an individual and not a mere numerical calculation. I certainly criticized this.
- When discretion with sentencing happened as a result of a litany of Supreme Court decisions - Blakely, Booker, Gall, Rita, etc. - judges could look at the 3553(a) sentencing factors and sentence the individual as opposed to a mere numerical calculation. I was pleased to see this happen.
- But many of us also wondered what would happen once judges were given discretion to deviate from the guidelines. Would this remove the original intent of the guidelines, an intent to have "predictability and consistency" in sentencing. Would it send sentencing back to the "wild west" of a no guidelines era?
- In my opinion guidelines needed to happen because appellate court judges were not willing to really review district court sentencing. Clearly, because they are not the finders of fact, appellate judges need to give the trial court discretion. But appellate courts also need to monitor sentences that are appealed, in order to ascertain whether there has been an abuse of discretion.
- White collar sentences are different from sentences in street crimes cases. This should not be because of privilege, and certainly not because of race. But rather because the very nature of these crimes are different. (see The Challenge of White Collar Sentencing). And clearly when they differ because of race or privilege that needs to be corrected.
- Back in 2007 I wrote a short piece in the Yale Law Journal Forum (see here), with Andrew Weissmann (w/ Joshua Block) writing a piece presenting another side (see here) of this picture. The opening statement of the Weissmann/Block Essay is "At the margins, the current Federal Sentencing Guidelines for fraud and other white-collar offenses are too severe." He then goes on to criticize my arguments. My piece, Throwing Away the Key" argued that "[t]he problem [then was] not only the draconian sentences that white-collar offenders are receiving, but the fact that because of the elimination of parole they [would] actually have to serve them." It bothered me that Chalana McFarland, a first-time offender, received a thirty-year prison term for her role in a mortgage fraud scheme that skimmed twenty million dollars from the sale of over one hundred homes from 1999 to 2002. Thirty years was too high for this first-time offender who had a sentence determined by a numerical calculation.
- So the outliers are questioned here, whether it be the unusually low sentence in Manafort's first case, or the usually high sentence that individuals like Chalana McFarland initially received. And perhaps with Manafort's sentence of today, and potential sentence from new charges, it will find the medium place that alleviates my questioning. But we do need to ask appellate court judges to review sentences to assure that sentences are not extreme - whether it high or low.
- I don't expect an answer from Andrew Weissmann on this now and respect the quiet approach of the Special Counsel's investigation. But perhaps when it is over we should be writing the joint article that looks at how best to achieve predictability and consistency in sentencing without outliers and without taking away judicial discretion.
Tuesday, March 12, 2019
The allegations coming from "Operation Varsity Blues" are incredibly sad -- from all perspectives. The DOJ Press Release (here) tells of the arrest of "dozens of individuals" alleged to be "involved in a nationwide conspiracy" of cheating on college entrance exams and the admissions of students into top universities. The DOJ Press Release states: "The conspiracy involved 1) bribing SAT and ACT exam administrators to allow a test taker, typically XXX, to secretly take college entrance exams in place of students or to correct the students’ answers after they had taken the exam; 2) bribing university athletic coaches and administrators—including coaches at Yale, Stanford, Georgetown, the University of Southern California, and the University of Texas—to facilitate the admission of students to elite universities under the guise of being recruited as athletes; and (3) using the façade of XXX’s charitable organization to conceal the nature and source of the bribes." (XXX's inserted here)
So it looks like there are several aspects to the allegations in Operation Varsity Blues 1) a college entrance exam cheating scheme; 2) a college recruitment scheme; and 3) a tax fraud conspiracy.
Some of the individuals (4) are charged by Information - a clear indication that they have reached an agreement with the government. We see two cooperating witnesses mentioned in the documents. The crimes alleged in the Information include charges of racketeering conspiracy, money laundering conspiracy, conspiracy to defraud the US, mail and wire fraud and obstruction of justice. Twelve others face indictment on a charge of racketeering conspiracy. The remaining individuals have criminal complaints against them of either conspiracy to commit mail fraud and honest services mail fraud or conspiracy to commit mail and wire fraud. The affidavit for one of the criminal complaints is over 200 pages long (see here). There are also forfeiture allegations for some of the accused individuals. It will be interesting to see how many of the criminal complaints turn into Informations (requires waivers by the defense) as opposed to Indictments in the next for weeks.
Some thoughts -
- The prosecutorial power of using conspiracy and picking one's venue is emphasized here as the cases are being brought in the District of Massachusetts, although the majority of those accused of criminal activity are not from that jurisdiction. The ACT is headquartered in Iowa City and the Educational Testing Service for the SAT is in New York and New Jersey.
- Likewise the prosecutorial power of granting cooperation status appears likely as some of the cases have references to CW-1 and CW-2. Prosecutors get to decide who gets the cooperation status and who gets the cooperator's testimony against them.
- The alleged fraud appears to be massive, and one has to wonder how this could have occurred- but compromised college related entrance exams are not something new. Just today the Central District of California filed a 26-count Indictment with charges of conspiracy of false passport, and aggravated identity theft, against defendants for allegedly "using false passports" to take TOEFL (English proficiency) exams for others. (see here). It may be tougher to detect some issues of fraud outside the United States, but internally this should not be happening. Will the verification processes used with college entrance exams be re-evaluated? Or were they the ones who detected fraud?
- As an educator, I am wondering how the students fared in college. Were the alleged improper scores an accurate prediction of their college abilities? Could the value of these tests become an issue should someone go to trial?
- How many students were improperly admitted to a college, taking a seat of a student who might have had this opportunity? And if the admitted students were not aware of what their parents had done, one can only imagine the hurt they are feeling right now. So you have issues related to both the admitted students and those who may have been borderline but denied at these institutions.
- Likewise, the parents who are accused of this activity were attempting to assist their children, and it is likely that the damage caused is even greater right now. As is so often the case, especially in white collar cases, the collateral consequences can be significant.
- And should the collateral consequences to the families who may have committed these acts be considered if determining the plea offers and later sentences that might occur here.
- Many of those accused are probably trying to decide how best to handle these charges - plead not guilty and go to trial, or reach a quick agreement with the government. With tapes and other supporting evidence the decisions will likely be examined against possible cross-examination against cooperating witnesses who were involved in multiple cases. How much sympathy will a parent trying to assist their children receive, and will it surpass criticism against privilege. And there are also legal questions to examine here - is this the intended use of mail and wire fraud, is conspiracy too broad a crime here, and was this a "wheel-and-spoke' conspiracy? But what is the risk of making such challenges?
- The colleges and universities also need to reflect on the allegations here. What kind of compliance programs did they have in place to root out such conduct from individuals involved in sports activities on campus, and what now needs to be done to make certain that this doesn't occur in the future. Perhaps there is nothing they can do, but if the allegations prove true, it should be examined.
There will be much to learn from what happened today. It was a sad day for many people.
Wednesday, February 20, 2019
Monday, December 31, 2018
Each year this blog has honored individuals and organizations for their work in the white collar crime arena by bestowing "The Collar" on those who deserve praise, scorn, acknowledgment, blessing, curse, or whatever else might be appropriate. With the appropriate fanfare, and without further ado, The Collars for 2018:
The Collar for Plumber Unemployment – The Mueller Investigation, which has sprung no leaks.
The Collar for the Most Likely to Inadvertently Pull the Execution Switch on His Client – Rudy Giuliani.
The Collar for the Most Likely to Cause President Trump to have a Heart Attack – Tied between Michael Cohen and Paul Manafort.
The Collar for the Most Likely Agency to be Shut Down – No not the EPA or Department of Education, rather the IRS so that President Trump’s tax returns can’t be revealed.
The Collar for the Most Likely to Get a Second Tattoo on his back – Roger Stone (underneath his Nixon tattoo?).
The Collar for Most Likely to Try Not to Follow in his Father’s Footsteps – Jared Kushner.
The Collar for the Best Insurance Protection if in Prison – To Donald Trump, Jared Kushner, and others for passing a criminal justice reform act that will assist some serving time.
The Collar for Taking a Gamble – To all those pushing ahead with cases with dual sovereignty issues, prior to the Supreme Court’s ruling.
The Collar for the Longest Special Counsel Investigation – Clinton/Whitewater (see https://www.businessinsider.com/how-long-special-prosecutor-mueller-trump-2017-6)
The Collar for the Least Likely to Look Someone in the Eye and Say “You’re Fired” – Donald Trump.
The Collar for Most Likely to Win the Tom Petty “I Won’t Back Down Award” – Jeff Sessions for not firing Mueller.
The Collar for Least Likely to Teach Professional Responsibility at a Law School – Acting US Attorney Matthew Whitaker.
The Collar for the Joe Friday Award for Catching the Most Fish in his Net – Special Counsel Robert Mueller.
The Collar for the Least Likely to Discuss Politics in Bed – Kellyann Conway and George Conway.
The Collar for the Timex Watch “Takes a Licking and Keeps on Ticking” – Jeff Sessions.
The Collar for the Next James Patterson Mystery – The undisclosed company with a subpoena problem.
The Collar for the Least Likely to Play Poker with Mueller – William Barr and Matt Whitaker.
The Collar for Best “Stand Your Ground Defense” – Second Year in a Row, to Rod Rosenstein who continues to stand firmly on Mueller’s appointment.
The Collar for Clotheslines –Second Year in a Row, to Donald Trump for hanging so many of his subordinates out to dry.
The Collar for Directional Impairment – Second Year in a Row, to Donald Trump for demonstrating that loyalty is a one-way street.
The Collar for Best Game of Hide and Seek – To Donald Trump for continuing to refuse to disclose his tax returns (third year in a row).
The Collar for the Best Parent – Retired years ago and renamed the Bill Olis Best Parent Award – not awarded again this year since no one comes even close to Bill Olis, may he rest in peace.