Monday, January 22, 2007

Cunningham & White Collar Cases

Yesterday, the United States Supreme Court issued an opinion in the case of Cunningham v. California, a sentencing case that may "constrain judges' power in sentencing." (See Linda Greenhouse, N.Y.Times). 

But the cases that may be more crucial in the white collar area are still outstanding in the Supreme Court - the cases of Claiborne and Rita. (see here).  More briefs were filed in these cases- see here.

For in-depth analysis on Cunningham see Professor Doug Berman's Sentencing Law & Policy Blog here, here, here, here, and here.


January 22, 2007 in Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (1)

Jury Selected in Libby Case

The opening statements are set for this a.m. with the jury selected in the I. Lewis "Scooter" Libby case.  (see Washington Post here).


January 22, 2007 in Plame Investigation, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Sunday, January 21, 2007

Week Two in LibbyLand

The second week of the I. Lewis "Scooter" Libby trial starts today, and the jury has yet to be selected.  But it is anticipated that this will happen by the end of the day. For details on the jury selection process check out the Washington Post here and Firedoglake here.  It seems obvious from reading the media and blogs that this case will not be streamlined to cover just obstruction and perjury allegations.  It appears likely that the defense will be opening the door to cover matters that will relate to Iraq, or matters that may explain the surrounding circumstances at the time of the alleged criminal conduct.  As prosecutors can infer intent from the circumstances, the defense also has the right to have evidence that might shed a different light on the intent of the accused. But what that defense will be and how it will develop remains to be seen. Oftentimes the theme of the defense case can be seen when listening to the opening statement.  Jerri Merritt at TalkLeft has some pointers here.  It is always important to keep in the back of one's mind that the defense is not required to testify and is not required to prove anything.  The burden rests with the government.


January 21, 2007 in Plame Investigation, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Ohio Vote Recount Case Progresses

Over in Cleveland, a vote recount case is progressing with the prosecution presenting opening statements this past week.  This may be an odd case in that the alleged impropriety may be found to be resulting from laziness and not for political reasons. Check out the (AP) here for the details.


January 21, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

National Procurement Fraud Task Force

After an incredible record with the Katrina Task Force, Assistant AG of the Criminal Division, Alice S.Fisher, in conjunction this time with Paul McNulty, DOJ's Deputy Attorney General (a person under fire for the recent McNulty Memo), appear to be getting the National Procurement Fraud Task Force off the ground.  To date there have been several indictments forthcoming from this task force. These include:

  • A former army office defense contractor convicted of wire fraud and bribery - here
  • A former U.S. Army contractor pleading to bribery and a tax violation - here
  • A former Tammi Global Exec being sentenced in a kickback scheme -   here

This task force is one that deserves close scrutiny to see if Alice Fisher's incredible results with the Katrina Task Force can be replicated in this new fraud task force.


January 21, 2007 in Fraud | Permalink | Comments (0) | TrackBack (0)

Saturday, January 20, 2007

More on Scrushy/Siegelman

With sentencing yet to happen in the Scrushy/Siegelman case, things are heating up.  First there was the talk about emails, but the court initially rejected the new trial motion premised upon this. (see here). The question involves whether there was juror misconduct related to emails. But the court did order the government to respond to the defense motion regarding a new trial. Now a WSFA TV-12 report (here) discusses the latest developments in the case.

The government is calling the emails - "inherently discreditable." And the defense is requesting the court to reconsider its order. Interestingly, the government appears to be arguing that the emails are "too good to be true."  But the defense is clearly at a disadvantage at trying to prove their cause here in that they do not have the resources of the government and Siegelman may be feeling the pressures of the high cost of attorney fees. (see here - noting "his legal bills are nearing $1 million in connection with his 2006 corruption conviction.")

It is important to remember that the government is not an advocate, but rather serves as a "minister of justice." Whether there is merit or not to these emails remains to be seen.  But what is clear is that the government should want the truth to prevail and not want to proceed to sentencing if an injustice occurred at trial.


January 20, 2007 in Corruption, HealthSouth, Sentencing | Permalink | Comments (1) | TrackBack (0)

H-P CEO Denies "Bullet-Dodging" in Options Exercise

Hewlett-Packard CEO Mark Hurd responded to a letter from House Energy and Commerce Committee Chairman John Dingell questioning his exercise of H-P stock options in August 2006, right before the "pretexting" used in the company's internal investigations of leaks became public.  Chairman Dingell raised the issue of whether Hurd's sale of shares from the options exercise was "bullet-dodging" to avoid the hit to his stock and options holdings from the negative publicity generated by the pretexting, particularly in light of the fact that Hurd sold the shares the same day that he was interviewed as part of the company's internal investigation of the leak inquiry.  While the timing appeared suspicious, an earlier post (here) noted that the company's stock increased after Hurd's sale, so that if he was dodging a bullet he may have actually taken one instead.  The Committee released Hurd's response (here), which was dated December 21, 2006, as an attachment to a letter to SEC Chairman Cox from Chairman Dingell, dated January 19, 2007, asking for an update on any SEC case or investigation once it is concluded. 

In his letter, Hurd states that he did not pick the actual sale date of August 25, that it was simply when the process of exercising the options and selling the shares took place after he received clearance to sell them during a window when company executives are permitted to engage in such transactions.  He asserts, "My August trade was not a case of 'bullet-dodging.'  That trade represented less than 5% of my vested and unvested HP stock options and involved less than one-third of the options I could have exercised and sold at the time."  In other words, he's saying that "if I was going to dodge a bullet, I would have gotten everything out of the way that I could."  Hurd did not trade ahead of a drop in the stock price, and it is unlikely he could have anticipated the firestorm that the pretexting triggered, even if he should have.  Once again, there may not be much smoke here, much less any fire. (ph)

January 20, 2007 in Investigations, Securities | Permalink | Comments (0) | TrackBack (0)

Former Representative Ney Receives 30-Month Sentence

Former Ohio Representative Bob Ney, once chair of the House Administration Committee, received a 30-month prison term from U.S. District Court Judge Ellen Segal Huvelle for his convictions on filing false statements and conspiracy.  Prosecutors had recommended a 27-month sentence, but the judge increased it by three months because Ney's crimes involved an abuse of the public's trust in an elected official.  Ney's attorney argued that his client's growing dependence on alcohol was a basis for a reduced sentence, but Judge Huvelle stated, "It wasn't an isolated aberration. It had a consistency to it: It involved significant and serious abuses of the public's trust." (see AP story here on the sentencing)  The court recommended that Ney serve his term at the minimum security Morgantown FCI in West Virginia. If sent to that facility, Ney will be the second former Congressman serving time there, along with former Iowa Representative Edward Mezvinsky, sentenced on a bank fraud charge unrelated to his Congressional service in the 1970s.

Ney is the second Representative elected to the 109th Congress to be sentenced to prison on corruption charges.  Former California Representative Randy "Duke" Cunningham received an 8-year term for accepting over $1 million in bribes.  While Ney's corruption did not involve nearly the same amounts as Cunningham's, the difference is more one of slight degree than any real distinction in kind because each chose to abuse his elected position to enrich himself.

In case you think this puts an end to corruption investigations on Capitol Hill, there is no shortage of current and former officials under scrutiny.  Two recently reelected Representatives have been linked to bribery investigations.  Louisiana Representative William Jefferson's office was searched in May 2006 by the FBI related to alleged kickbacks from business interests, and California Representative Jerry Lewis is identified as a possible target of a federal investigation arising from one of the men who made payments to Cunningham (see Wall Street Journal story here). And the AP story on the Ney sentencing notes that former superlobbyist Jack Abramoff, who provided the benefits, was also involved in giving gifts to former Senator Conrad Burns and Representative Tom DeLay, among others.  Abramoff is cooperating in the federal investigation, so there could be more prosecutions in the near future. (ph)

January 20, 2007 in Corruption, Sentencing | Permalink | Comments (0) | TrackBack (0)

Friday, January 19, 2007

Two CVS Executives Indicted in R.I. Corruption Case

Two executives with drugstore chain CVS were indicted on conspiracy and corruption charges related to alleged secret payments to a Rhode Island state senator to secretly help protect the company's position in connection with legislation.  Charged in a 23-count indictment (here) are John R. Kramer and Carlos Ortiz, who worked in the company's Woonsocket, R.I. headquarters in the government affairs department and allegedly arranged for payments to former State Senator John Celona, who earlier entered a guilty plea.  According to a press release issued by the U.S. Attorney's Office (here):

The indictment alleges that Kramer and Ortiz engineered a consulting agreement in which CVS paid Celona $1,000 a month, ostensibly to improve CVS’s image among consumers.  However, the indictment alleges, Celona’s actual job was to thwart legislation deemed harmful to CVS, and to advance matters deemed favorable. The indictment alleges that Kramer and Ortiz concealed the true nature of Celona’s relationship with CVS from other CVS executives and lobbyists, and from the public.

While being paid by CVS, the indictment alleges, Celona used his position as a member of the Senate Corporations Committee, and later as its chairman, to block passage of legislation known as Pharmacy Freedom of Choice. The legislation was designed to allow any willing pharmacy to participate in a health care insurance reimbursement network. CVS was a member of what was then a restricted network with a particular health care insurer, and defeating the Freedom of Choice legislation was a primary company objective.

Celona's cooperation has already netted two former executives at Roger Williams Medical Center in Providence on similar corruption charges. (ph)

January 19, 2007 in Corruption | Permalink | Comments (0) | TrackBack (0)

Former Monster GC the Focus of Options-Timing Investigation

It's not much fun being a general counsel when your company gets caught up in one of the myriad options-timing investigations.  Media reports (see CNNMoney here) are that former Monster Worldwide GC Myron Olesnyckyj is squarely in the sights of federal prosecutors.  Olesnyckyj was put on leave by the company and then terminated in November 2005 (see earlier post here).  The company's former CEO also stepped down, and then resigned from the board when he would not meet again with the law firm conducting an internal investigation of Monster's options issuance practices.  Among the items being reviewed by prosecutors are e-mails that may indicate Olesnyckyj's knowledge of the accounting issues involved in backdating options, a key to showing intent for any securities fraud charges.  Whether Olesnyckyj might cooperate in an investigation and become the second GC -- after Comverse's William Sorin -- to plead guilty in an options case remains to be seen. The heat is certainly on for lawyers involved in any practices related to falsifying corporate records.  (ph)

January 19, 2007 in Investigations, Securities | Permalink | Comments (0) | TrackBack (0)

Thursday, January 18, 2007

Will Wittig Get Out of Jail Soon?

When the Tenth Circuit recently reversed the convictions of former Westar CEO David Wittig for securities fraud and false statements, it appeared that he would have clear sailing out of the FCI in which he has spent the past year.  Wittig was first sent to jail for a bank fraud conviction not directly related to Westar in early 2006, for which he received a five-year prison sentence. On a second appeal of that sentence, the Tenth Circuit held that the district court improperly calculated the amount of loss, finding that the proper sentencing range was 0-6 months; the court rejected the government's argument that the sentence would have been the same, stating that a "dramatic variance" ten times greater than the Guidelines sentence required a remand for resentencing (see opinion here).  Wittig has served more than the presumptive Guidelines sentence, and requested immediate release.  With the reversal of the Westar fraud convictions, Wittig appears to have a good argument that he should be released, but U.S. District Judge Julie Robinson has ordered resentencing on the bank fraud charge in early February, so Wittig gets to wait in prison longer before learning when he will be released.  A report (here) states that federal prosecutors have asked Judge Robinson to resentence Wittig to a five-year term, despite the Tenth Circuit's Guidelines analysis.  Prosecutors have not announced whether they will retry Wittig on the Westar charges that were only reversed but not barred by double jeopardy.

As is so often the case in these kinds of white collar prosecutions, there is a raft of civil litigation between the former executive and the company.  A Wall Street Journal story (here) states that Westar has already paid $8.4 million of Wittig's attorney's fees, and he is claiming another $12 million.  Most companies have generous reimbursement policies, and the reversal of the conviction may well entitle Wittig to payment of a significant portion of the claimed fees.  In addition, Wittig has a $52 million claim under a severance agreement with the company, and the Tenth Circuit's decision on the Westar fraud charges likely strengthens his case.  With that much money at stake, look for the fight to continue. (ph)

January 18, 2007 in Fraud, Prosecutions | Permalink | Comments (2) | TrackBack (0)

Commit a Crime, Lose a Congressional Pension

The continuing investigation of corruption on Capitol Hill has triggered a move to strip any legislators convicted of certain offenses from receiving their pensions.  A bill introduced in the House and Senate, the Congressional Pension Accountability Act, would forfeit any pension earned by a Representative or Senator convicted of violating the federal bribery/gratuity law, 18 U.S.C. Sec. 201, a conspiracy to violate the law, and perjury or subornation of perjury.  Representative Bob Ney, the most recent Congressman to enter a guilty plea, would not fall under this provision (if it were in effect when he was in Congress) because he pleaded guilty to a false statement charge, so it would not affect his $29,000 pension.  Another bill introduced in the House, the Congressional Pension Forfeiture Act, would cover a broader array of criminal statutes, including perjury and

An offense within the purview of section 201 (bribery of public officials and witnesses), 203 (compensation to Members of Congress, officers, and others in matters affecting the Government), 204 (practice in United States Court of Federal Claims or the United States Court of Appeals for the Federal Circuit by Members of Congress), 219 (officers and employees acting as agents of foreign principals), 286 (conspiracy to defraud the Government with respect to claims), 287 (false, fictitious or fraudulent claims), 371 (conspiracy to commit offense or to defraud the United States), 597 (expenditures to influence voting), 599 (promise of appointment by candidate), 602 (solicitation of political contributions), 606 (intimidation to secure political contributions), 607 (place of solicitation), 641 (public money, property or records), 1001 (statements or entries generally), 1341 (frauds and swindles), 1343 (fraud by wire, radio, or television), 1503 (influencing or injuring officer or juror), 1951 (interference with commerce by threats or violence), 1952 (interstate and foreign travel or transportation in aid of racketeering enterprises), or 1962 (prohibited activities) of title 18 or section 7201 (attempt to evade or defeat tax) of the Internal Revenue Code of 1986.

A letter from the National Taxpayers Union (here) sent in November 2006 highlighted the pensions received by former Representatives James Traficant, in prison on a RICO conviction receiving a $40,000 annual pension, and Dan Rostenkowski, who pleaded guilty to mail fraud and still receives a $125,000 annual pension.  Not to worry, however, even the more stringent House bill would only take effect for violations in the 111th Congress and later, which doesn't begin until January 2009.  Any current legislators under investigation are not in danger of losing their pensions. (ph)

January 18, 2007 in Corruption, Statutes | Permalink | Comments (0) | TrackBack (0)

Former GC Sentenced to Two Years

The former general counsel for Computer Associates, Steven Woghin, received a two-year prison term for his role in the accounting fraud at the company.  Woghin pleaded guilty to conspiracy to commit securities fraud and obstruction of justice related to revenue inflation practices at the company that included the so-called "35-day month" when the last month of the quarter was extended to include contracts as revenue even though the had not been completed in time.  Former CEO Sanjay Kumar received the stiffest sentence -- twelve years -- from the case.  An AP story (here) discusses the sentencing. (ph)

January 18, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 17, 2007

Cendant CEO Sentenced to 151-Month Prison Term

Former Cendant CEO Walter Forbes, convicted on conspiracy to commit securities fraud and false filing counts after two mistrials, received a twelve year, seven month prison term.  Forbes was CEO of CUC before it merged with HFS in 1998 to form Cendant, and the revelation of significant accounting fraud at the company caused it to suffer substantial losses.  According to an AP story (here), the Federal Sentencing Guidelines called for a sentence of twelve to fifteen years, and the court rejected Forbes' request for a downward departure based on his age (he's 64) and charitable contributions.  The court also ordered Forbes to pay over $3 billion in restitution, although the money is not likely to be forthcoming any time soon.

The sentence is similar to those seen recently in other white collar prosecutions involving accounting fraud, including twelve years for former Computer Associates CEO Sanjay Kumar and fifteen years for former Homestore.Com CEO Stuart Wolff.  E. Kirk Shelton, a former vice chairman of Cendant convicted at the first trial, received a ten-year sentence.  Under the Bureau of Prisons rules, Forbes will serve a bit less than eleven years.  He is currently free on $1.2 million bail, and the next issue will be whether the court permits him to remain free pending completion of his appeal.  (ph)

January 17, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 16, 2007

But Is It "Material" Information?

The Wall Street Journal reports (here) that the New York Attorney General and the SEC are looking at whether consulting firms that use reports from corporate employees may have been passing inside information about the companies to hedge funds and other traders.  The firms, Gerson Lehrman Group and Vista Research, retain large numbers of consultants, including employees of publicly-traded companies, to report on trends in their industries.  According to the Journal, the New York AG's office issued subpoenas to the firms and some hedge funds, and the SEC also has requested information from hedge funds that received reports from the consultants.

An interesting question will be whether the information supplied by a corporate employee acting as a consultant will meet the standard of "materiality" for an insider trading case.  While the consultants may breach a fiduciary obligation to their employers by sharing private information, especially if they're paid and don't receive permission to do so, it is not entirely clear that the tidbits of information passed on is material to a particular company.  A report on industry trends may not pertain to one company any more than another, and aggregating a number of reports from different parts of a company is unlikely to be material until the analyst (or hedge fund) puts it all together.  Absent unauthorized disclosure of significant corporate information, the consulting arrangements might be little more than a source of information on a par with government and media reports of consumer trends.  The Supreme Court expressed considerable skepticism in Dirks v. SEC, 463 U.S. 646 (1983), about the application of the insider trading prohibition to analysts who gather and interpret information, even when that information comes from a private source. 

The presence of the New York AG's office shows that it has not slowed down since Eliot Spitzer moved up to the Governor's office, and the competition with the SEC may be continuing. (ph)

January 16, 2007 in Insider Trading, Investigations | Permalink | Comments (1) | TrackBack (0)

Day One in LibbyLand

The trial of I. Lewis "Scooter" Libby opened today with voir dire, the questioning of the potential jurors.  The Washington Post reports on the political questions asked of these potential jurors (here) and also tells about some of the "other" questions. 

Good defense attorneys start their defense in the voir dire.  The questions the attorney asks (or request a court to ask when the court is doing the voir dire), sets the stage of the theme of the case.  It is clear from seeing some of these questions that one theme will be - "faulty memory"  or "we all make mistakes as to exatly what we recall."  Often the defense attorney will develop the theme with different witnesses presented. 

In this case we are likely to see a main theme and several subsidiary themes.


January 16, 2007 in Plame Investigation | Permalink | Comments (1) | TrackBack (0)

Refco Inc.'s Former Pres Indicted

Wall Street Journal reports that "Refco Inc.'s former president has been indicted on securities fraud and other charges." 


January 16, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

Monday, January 15, 2007

Libby Library

The following provide background on the Libby Prosecution.  To access the achives by date, see here:

Ground Rules Set for Libby's Trial 1/12/07

Libby Argues No Underlying Crime 11/15/06

Court Denies Use of Expert in Libby Case 11/5/06

Pre-Trial Sparring in the Libby Prosecution 11/1/06

What the Memory Expert Did Not Remember 10/28/06

Even Libby Can't Get All the Discovery He Wants 8/21/06

Plame Files Civil Action 7/17/06 Will Libby's Trial Be Delayed Further? 7/1/06

Libby: The Cost of Building A Case 6/12/06

Judge Denies Most of Libby's Document Requests 6/2/06

Witness for the Prosecution 5/25/06

Libby Challenge to Fitzgerald Appointment as Special Counsel Rejected 4/28/06

Will President Bush Be a Witness at Libby's Trial? 4/13/06

Proving Libby's Intent 4/7/06

Libby's "I Was Too Busy Blaming Others" Defense 3/19/06

Indicting at the Top 3/12/06

Fitzgerald to Libby: "REDACTED" 3/4/06

The Libby Website -- New Motion to Dismiss the Indictment 2/24/06

The Strange Assertion of Fitzgerald Regarding Libby's Grand Jury Testimony 2/11/06

Grand Jury Secrecy - Libby Case 2/5/06

The Libby Trial: Ready, Set . . . Wait 2/4/06

Special Counsel Fitzgerald's Response to Libby's Discovery Requests 2/3/06

The Outlines of Libby's Defense 2/2/06 Libby's Defense 1/22/06

The Latest on Patrick Fitzgerald's Investigation 1/11/06

What to Expect in 2006 1/1/06

Another Reporter to Testify in the Plame Investigation 11/28/05

Bob Woodward: Would You Buy the Book? 11/22/05

Will Woodward's Revelation Help Libby's Defense? 11/17/05

New Evidence in the Leak Case 11/16/05

Libby Documents 11/15/05

Who Will Pay the Lawyers? Libby? 11/9/05

Libby Prosecution Will Enter CIPA Hell 11/5/05

Libby Pleads Not Guilty 11/3/05

Do the President and Vice-President Have An Appropriate Compliance Program? 11/1/05

Libby Indicted 10/28/05

How High Could This Leak Investigation Go? 10/25/05

The Story of "Scooter" Libby 10/24/05

Will This Be Patrick Fitzgerald's Big Week? 10/23/05

Rove + Libby = ? 10/20/05

Could VP Cheney's Office Be Involved? 10/18/05

"Don't Go There" 10/17/05

More on the Judith Miller Case 10/16/05

What Does Patrick Fitzgerald Do Now? 10/16/05

Is Libby Wearing the Bullseye? 10/13/05

How Fitzgerald Got Miller to Testify -- And How Much Should We Know 10/6/05

What Now, Mr. Fitzgerald? 10/3/05

Can the "S" Show Intent? 7/22/05


January 15, 2007 in Plame Investigation | Permalink | Comments (0) | TrackBack (0)

Sunday, January 14, 2007

Ney Set For Sentencing This Week

Rep. Bob Ney is set to be sentenced this coming Friday and according to MSNNBC(AP) he may be arguing for a placement in rehabilitation facility to assist an alchohol problem. Ney plead guilty "to one count of conspiracy to commit honest services fraud, violating the one-year lobbying ban on congressional officials and making material false statements, and to one count of making false statements." (see DOJ Press Release). For background on this case and the Abramoff connection, see here.


January 14, 2007 in Fraud, Prosecutions, Sentencing | Permalink | Comments (0) | TrackBack (0)

No One is Above the Law

A DOJ Press Release reports that a "Special Agent of the Treasury Inspector General for Tax Administration (TIGTA)" was indicted for bank fraud, conspiracy, and false statements to a federally insured bank.  He is alleged to have obtained loans for a computer company that was allegedly "created for the purpose of obtaining the three loans and that it had no revenue, no experience in the computer field and no employees."


January 14, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)