Tuesday, July 31, 2007

Plea in Export Case

The U.S. Attorney's Office for the Central District of California issued a press release of a plea in an export case where according to the information, the accused failed to secure the "required expert license to export vibration amplifiers, cable assemblies, and vibration processor units."  The accused "was an international sales manager and was responsible for all exports at Endevco Corporation, an Orange County, California company that manufactures electronic sensors, vibration testing equipment, and other technology with both civilian and military applications.  The information alleges that [the defendant] illegally exported a variety of sensitive items in 1999 and 2000 from the United States to Hindustan Aeronautics Limited (HAL), Engine Division, in Bangalore, India." 

Plea Agreement -


Download india_arms_export_peng_plea_agreement.pdf

July 31, 2007 in International | Permalink | Comments (0) | TrackBack (0)

White Collar Educators

Fraud in the education arena is not something new. An article by Audrey Williams June in the Chonicle of Higher Education (subscription required) describes how college business officers may be forced to deal with fraud on campus.  The example of kickbacks/bribes of contractors is one item covered in the article, which is titled "Business Officers Get Advice on Guarding Against Fraud and 'Going Green' Frugally."


July 31, 2007 in Fraud | Permalink | Comments (1) | TrackBack (0)

Counterfeit Drugs

Professor Stephanie Aleong of Nova SouthEastern University Law School presented a talk at the SouthEast Association of Law Schools (SEALS) on counterfeit drugs.  She argued for an extension of environmental models (e.g., RCRA, CERCLA) to combat the existing problems of distributors presenting counterfeit drugs into the market place.  Professor Aleong calls for manufacturers to be held liable when the distributor engages in the sale of counterfeit drugs.  Although she limits the remedy to civil tort actions, one has to wonder if this extension will eventually reach the criminal arena.


July 31, 2007 in Fraud | Permalink | Comments (1) | TrackBack (0)

SEALS White Collar Crime Panel

The Southeast Association of Law Schools (SEALS) included a panel discussion titled, White Collar Crime in the Post-Enron Era: Substance and Scholarship, with Joan Hemingway (Tennessee) moderating the panel.

The first speaker, John Hasnas (Georgetown Business School), spoke of the existing "Commander & Control" Approach and how it is detrimental to the corporate structure in creating an adversarial relationship among the parties. Hasnas called for a "Procedural Justice" approach. He noted how punishing the innocent is not justified for retribution standards and this occurs under the existing model.

Lisa Nicholson (University of Louisville, Louis D. Brandeis School of Law), started by discussing the growing debate between those who think the existing punishment is not enough and those who think Congress has gone too far. She advocated for removing the economic incentive of the criminal conduct and proposed use of asset forfeiture to accomplish this.

Chris Slobogin (U of Florida) focused on the "law of counts," looking at the overlapping situation ("redundant charges") when prosecutors charge different crimes for the same conduct. Looking at the Martha Stewart case he noted the deficiencies of redundant charging.

Lisa Fairfax (Maryland) looked at outside director liability. She noted how these individals can be an integral role in the fraud in their failure to provide proper oversight. But that said, she did not advance making this criminal liability.


July 31, 2007 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, July 30, 2007

Feds Raid "Uncle Ted's" Home

Just days ago the press was reporting that Senator Ted Stevens (R. Alaska) was under scrutiny.  The scrutiny appears to have increased with the recent search of his residence in Alaska. (See Washington Post here; Yahoo News here)  This search required a showing of probable cause, approval by a judge, and execution of the search warrant by the feds.  There are several interesting things to point out here -

1.  In many white collar cases, the government uses its subpoena powers to secure documents. It is less common that we see searches being used in white collar cases.  In recent years, however, searches have been in seen in everything from environmental to corruption investigations.

2.  The benefit of a subpoena is that probable cause is unnecessary and there is no requirement of court approval prior to issuing the subpoena.  The feds also do not have to search the premises for certain documents when the items are produced by the subpoenaed individual.

3.  A benefit of using a search is the surprise factor.  Items cannot be destroyed when the search occurs without notice.  There is also the possibility that the government may observe other evidence in plain view while conducting the search. 

So did the government not trust the Senator, and was there a fear that he would destroy evidence in making the decision to proceed with a search as opposed to asking him to produce documents to a grand jury?  Or was this such a high profile case that the government wanted court approvals?  In either event, what is on the premises of this Senator that warrants this extreme invasion?


July 30, 2007 in Corruption | Permalink | Comments (1) | TrackBack (0)

Cheney Stirs Up the Pot

Dan Eggen of the Washington Post has yet another article on beltway news. This time it is Vice President Cheney, and he is expressing disagreement with the Libby verdict.  Does he have information that wasn't presented to the jury?  Does he know something that the rest of us don't know?  And if he knew something, shouldn't he have disclosed it to LIbby's attorneys.

And one finds in this article that Cheney is supporting Gonzales - and saying that the Attorney General has the support of the President. But does he have the support of the civil servants in his office? And does he have the support of the people?


July 30, 2007 in News | Permalink | Comments (0) | TrackBack (0)

PLeas in FCPA case

A DOJ Press Release reports that "[t]wo former ITXC Corporation executives have pleaded guilty and one former executive has been sentenced" "in relation to their participation in a foreign bribery scheme."  This case from the District of New Jersey charged in a one count information, conspiracy to violate the foreign corrupt practices act and the travel act.


July 30, 2007 in FCPA | Permalink | Comments (0) | TrackBack (0)

Sunday, July 29, 2007

Gonzales in Boiling Water

Washington Post's Dan Eggen and Amy Goldstein present yet another lead article on Attorney General Alberto Gonzales, and like some of the others before this one, it does not bode well for him.  The article, titled Gonzales Truthfulness Long Disputed, traces his history in a position associated Bush both before and during this Presidency.  It contains criticisms from several key Republicans. 

But irrespective of whether Gonzales has been candid with Congress, it is important to consider whether the standard he applies to corporate CEOs is being applied to him.  Was there wrongdoing occurring under his watch?  Was he the responsible corporate officer?  Did he have knowledge and fail to take action?  Should he have had knowledge?  Did he fail to secure the appropriate information to make certain that those under his watch were complying with the law?  Did he have in place an appropriate compliance program?

It is also interesting to examine the Office of the Attorney General and ask whether this office has become an arm of the President, as opposed to an office that operates independently above the political system.  Are we seeing the independence of this office slowly diminishing from the days prior to and including AG Janet Reno, to AG John Ashcroft, and now AG Alberto Gonzales.


July 29, 2007 in Prosecutions | Permalink | Comments (0) | TrackBack (0)

11th Circuit Rejects Appeal of Former Georgia State Senator

The 11th Circuit issued an opinion affirming the conviction of former Georgia State Senator Charles Walker. The court rejected defense arguments that “(1) during jury selection, the district court erroneously disallowed four of Walker’s peremptory strikes after finding a Batson violation; (2) honest services mail fraud was improperly charged in the indictment and not supported by sufficient evidence; (3) prosecuting Walker for mail fraud violates basic principles of federalism; and (4) various sentencing enhancements were improperly imposed by the district court.”

Batson issues are not usually the focus of a white collar case.  But clearly the facts of this case present an interesting twist to picking a jury in white collar, as well as other criminal matters.  The trial court found that four of defense counsel's strikes should be reseated.  The trial court, however, failed to give defense counsel additional strikes, perhaps in part because potential jurors had been dismissed.  The appellate court stated:

"Replacement strikes would have required that the court start anew the next day, at considerable time and expense. Although the better practice in certain circumstances is to begin afresh with a new venire, we cannot say that the district court abused its discretion here."

The 11th Circuit notes that the lower courts are split on whether one is entitled to additional strikes following a Batson challenge that is upheld.  But whether this will be enough to get a Supreme Court glance is unknown.  The 11th Circuit was troubled by the record on the strikes, but provided deference to the trial court in its judging of the facts surrounding these peremptory challenges.

This was also a case in which prosecutors had brought a mail fraud count under section 1346, the intangible right to honest services.


July 29, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Saturday, July 28, 2007

Dismissal Sought in Case Against Attorney Charged With SOX Obstruction

Michael Regan of the Hartfield Courant reports on a bizarre case being brought by federal prosecutors in Connecticut.  The case charges obstruction against an attorney for acts related to his representation of his client.  Prosecutors brought the matter using the post-Enron SOX amendments on destruction of evidence. 

The Connecticut Criminal Defense Lawyers Association is actively opposing the government's aggressive posture of proceeding against an attorney who allegedly destroyed a computer that contained alleged child pornography. The attorney was faced with the dilemma of retaining contraband or voiding an attorney-client privilege.  He is alleged to have destroyed the contraband. One has to wonder if Congress intended this type of application when they passed the SOX amendments.  On Friday the court heard the defendant's motion to dismiss the action.

(esp) (w/ a hat tip to Ross Garber)

July 28, 2007 in Obstruction | Permalink | Comments (0) | TrackBack (0)

Amicus Brief Filed in Gall

An incredible amicus brief has been prepared by the Federal Public Defenders in the Gall case.  The question presented is "whether, when determining the 'reasonableness' of a district court sentence under United States v. Booker, 543 U.S. 220 (2005), it is appropriate to require district courts to justify a sentence outside the range recommended by the United States Sentencing Guidelines with a finding of extraordinary circumstances."  The Brief covers four basic arguments:

"I. The Original Intent Was That Sentencing Policy and Practice Would Evolve in Response to the Actions and Views of Sentencing Courts.

II. Before Booker, The Intent That Decisions of Sentencing Judges Would Contribute to a Sentencing Common Law and Evolution of the Sentencing Guidelines Was Not Fulfilled.

III. After Booker, Aggressive Appellate Review of Sentences Outside the Guideline Range Again Forecloses the Possibility of District Court Feedback to the Commission, Discourages Development of a Sentencing Common Law, and Is Now Unlawful and Unconstitutional.

IV. Requiring Deference to District Courts’ Application of § 3553(a) to Individual Cases Will At Last Permit the Development of a Sentencing Common Law and a Dialogue with the Commission."

Credit for writing goes to Amy Baron-Evans with the assistance given her by Sara Noonan and Jennifer Coffin of the Federal Defender Sentencing Resource Counsel and Dan Kaplan, AFPD in the Arizona office. Editing and polishing done by Paul Rashkind,Henry Bemporad, David Lewis, Kristen Rogers, and Tim Crooks .

Brief - Download gall_defender_amicus.pdf

(esp) (w/ a hat tip to David Beneman)

July 28, 2007 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Greed is Not Good

U.S. District Judge Edward Nottingham described the insider trading convictions of former Qwest CEO Joseph Nacchio as "crimes of overarching greed" in sentencing him to six years in prison.  The judge also rejected the defense request for bail pending the appeal, ordering that Nachio report within fifteen days of receiving his assignment from the Bureau of Prisons.  While it is always hard to predict whether a defendant will be allowed to remain free while pursuing an appeal, the trend in recent high-profile white collar cases, such as the prosecutions of Jeffrey Skilling and I. Lewis Libby, is for judges to reject the request and order the defendant to report shortly after sentencing.  Judge Nottingham did agree to recommend that Nacchio be directed to report to the Schuylkill FCI in Pennsylvania, which is relatively close to his home in New Jersey.  But, the Bureau of Prisons makes its own decision on prisoner placement, so Nacchio could end up anywhere in the Northeast, and perhaps even further than that.  A Bloomberg article (here) discusses the sentencing. (ph)

July 28, 2007 in Insider Trading, Sentencing | Permalink | Comments (0) | TrackBack (0)

Continuing Attorney's Fee Fight in Westar Case

An earlier post (here) discussed the opinion issued by the U.S. District Court for the District of Kansas ordering utility company Westar Energy to pay a portion of the claimed attorney's fees of one of its former officers, Douglas Lake, who is facing a third trial on charges related to allegedly false reports filed with the SEC concerning benefits received by former CEO David Wittig.  The Court determined that the indemnification provision in Westar's by-laws required it to advance Lake's fees, which the company had withheld while he underwent two trials, an appeal that resulted in a reversal of the convictions rendered in the second proceeding, and the prospect of a third trial on the remaining charges.  In directing Westar to pay $3.2 million, the district court found that the indemnification provision did not permit the company to withhold the funds. 

Rather than pay the money, however, Westar has taken a novel tactic of filing a motion (available below) asking the court to require Lake to post a bond of $4.2 million "as appropriate security for the payment of such costs and damages as may be incurred or suffered by Westar if it is determined that the preliminary injunctive relief awarded against Westar in the Court’s Order of June 28, 2007 was wrongfully granted and that the Court make additional findings to support requiring security in connection with the Order."  The company reaches that conclusion by claiming that the district court's order is a "preliminary injunction" and therefore under Federal Rule of Civil Procedure 65(c) a bond must be posted.  Unfortunately for Westar, the court's order is not styled as a preliminary injunction but only a resolution of what is, in effect, a contract claim.  Westar has refused to pay the $3.2 million, and Lake has filed a motion to hold the company in contempt (available below).  The company's refusal to pay any of the fees has put Lake in a rather precarious position because his attorneys had filed a motion to withdraw prior to the decision ordering the payment, and could well renew the motion if they don't receive any money in advance of the next trial.  (ph)

Download westar_energy_v_lake_bond_motion.pdf

Download westar_energy_v_lake_contempt_motion.pdf

July 28, 2007 in Defense Counsel | Permalink | Comments (0) | TrackBack (0)

You Can't Tell the Congressmen Under Investigation Without a Scorecard

A New York Times article (here) provides a run-down of the various current and former members of Congress under investigation for corruption by federal prosecutors.  Many of the investigations -- but by no means all -- are traceable to the activities of former superlobbyist Jack Abramoff, currently serving a six-year prison term who has provided information that led to the guilty plea and thirty-month sentence for former Ohio Representative Bob Ney.  There is currently one Congressman, William Jefferson, under indictment, and the FBI recently searched the residence of a California Representative whose wife worked for Abramoff.  Quite a roster of questionable dealings, to be sure. (ph)

July 28, 2007 in Corruption, Investigations | Permalink | Comments (0) | TrackBack (0)

Friday, July 27, 2007

Nacchio Sentenced to Six Years in Prison

U.S. District Judge Edward Nottingham sentenced former Qwest CEO Joseph Nacchio to a six-year prison term, at the lower end of the Federal Sentencing Guidelines range.  In addition, he imposed a $19 million fine, the maximum permitted based on the 19 counts of conviction, and ordered a forfeiture of $52 million based on his total gain.  The Denver Post blog on the Nacchio trial (here) has the details. (ph)

July 27, 2007 in Insider Trading, Sentencing | Permalink | Comments (0) | TrackBack (0)

Is There a Special Prosecutor in Gonzales' Future?

Four Democrat senators sent a letter (here) calling for the appointment of a special prosecutor to investigate Attorney General Alberto Gonzales for possible perjury in his testimony before the Senate Judiciary Committee about dissent in the Administration over the secret surveillance program and his role in the firing of nine U.S. Attorneys.  The issue came to the forefront when former Deputy Attorney General James Comey testified about a meeting in 2004 in the hospital room of then-Attorney General John Ashcroft to pressure him to renew the authorization for the surveillance program over Comey's objection.  Gonzales was there as Counsel to the President, and Ashcroft refused to override Comey's decision.  In testimony on July 26 before the Committee, FBI Director Robert Mueller appeared to call into question Gonzales' early statements denying any dissension over the program, according to an AP story (here).  The Senators' letter states that "the Attorney General has provided -- at a minimum -- half-truths and misleading statements about the removal and replacement of U.S. Attorneys, about his role in trying to circumvent Acting Attorney General Comey, and about the Administration's position on the NSA wiretapping program."

The White House has maintained its support of Gonzales, asserting that his testimony has not been inconsistent.  Press Secretary Tony Snow stated (here):

Q: On Gonzales, this Negroponte memo shows an apparent contradiction in what he told the committee two days ago about that briefing at the White House. But yet Gonzales' spokesman says that what he said on Tuesday was true. How can that be? Can you explain that?

MR. SNOW: Unfortunately we get into areas that you cannot discuss openly. It's a very complex issue. But the Attorney General was speaking consistently. The President supports him. I think at some point this is going to be something where members are going to have to go behind closed doors and have a fuller discussion of the issues. But I can't go any further than that.

Q Everyone else says the meeting was about the TSP. Negroponte says it, people who were there said it, Comey said it. How could that not be right?

MR. SNOW: It's simply more complex than that, and I can't go into any more detail.

Q Is there another program that existed besides the TSP program?

MR. SNOW: I will repeat myself -- it's more complex, and I cannot go any further than that. [Italics added]

For those who remember the days of Watergate, the answers seem perilously close to a non-denial denial ("It's a very complex issue"). 

As co-blogger Ellen Podgor pointed out in an earlier post (here), Gonzales has recused himself from the investigation of the firing of the nine U.S. Attorneys, and his involvement in the meeting with Ashcroft and Comey in 2004 likely knocks him out of any participation in an investigation of that issue.  The letter from the Senators is addressed to Solicitor General Paul Clement, the highest ranking DOJ official not recused from the matters.  While it is unlikely at this point that a special prosecutor will be named, questions about Gonzales' testimony will persist.  If a special prosecutor is appointed, I doubt Patrick Fitzgerald's telephone will ring, despite his experience in the area.  A logical candidate would have been Craig Morford, a career prosecutor with experience in a variety of districts who has no strong political ties, but he's now the Acting Deputy Attorney General due to the pending resignation of Paul McNulty.  We shall see. (ph)

July 27, 2007 in Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)

Former SafeNet CFO Indicted for Options Backdating

The former CFO of computer security company SafeNet, Inc., who also served as its president for two years, was charged in the Southern District of New York with one count of conspiracy and one count of securities fraud for her role in backdating options (indictment below).  The case is one of a growing roster of prosecutions of senior corporate officers charged with crimes related to the issuance of backdated options, and in most instances they allegedly profited personally from the awards in which the dates were picked to increase the value of the securities by lowering the strike price of the options.  According to a press release issued by the U.S. Attorney's Office (here):

ARGO and her co-conspirators routinely backdated options grants by papering them as if they had been issued on select historical "grant dates" when SafeNet's stock price had closed at or near a periodic low point. With the benefit of hindsight, ARGO created an opportunity for herself and others at SafeNet to reap substantial benefits by awarding herself and others backdated options grants with particularly advantageous exercise prices. As a result, a substantial number of SafeNet’s options grants during this time period were in-the-money on the day they were granted and therefore had an immediate compensatory and expense component and value to the recipient.

The indictment does not name any other individual conspirators, and further charges may be filed in the case, particularly if there are cooperating witnesses who have agreed to plead guilty and testify for the prosecution in the case.  SafeNet was taken private in April 2007.  (ph)

Download us_v_argo_indictment_july_25_2007.pdf

July 27, 2007 in Prosecutions, Securities | Permalink | Comments (0) | TrackBack (0)

Rove and Jennings Receive Subpoenas

On what appears to be an "in for a penny, in for a pound" approach, the Senate Judiciary Committee sent subpoenas (here) to White House aides Karl Rove and J. Scott Jennings, the deputy political director, to testify and provide documents related to the firing of nine U.S. Attorneys in 2006.  Rove's name appears in e-mails from Kyle Sampson, Attorney General Gonzales' then-chief of staff, approving the firings, and Jennings corresponded with, among others, Monica Goodling, Gonzales' White House liaison.  The subpoenas require their appearance on August 2, although the odds of either appearing are nil.  The White House asserted the position that current and former Presidential aides have a complete immunity from appearing before Congress on the ground of Executive Privilege to resist subpoenas to Harriet Miers and Josh Bolten.  Given that both Rove and Jennings currently work in the White House, I believe there is no realistic chance they will appear before the Committee, even if only to assert Executive Privilege.  So you can probably add their names to the list of those who will be the subject of a debate over possible contempt of Congress charges, much like Miers and Bolten before them.  (ph)

July 27, 2007 in Investigations | Permalink | Comments (0) | TrackBack (0)

Will Nacchio Receive Bail Pending Appeal?

Former Qwest CEO Joseph Nacchio faces sentencing before U.S. District Judge Edward Nottingham, and an important question beyond the prison term -- the Sentencing Guidelines range is 70 to 87 months based on the government's calculations -- is whether he will be allowed to remain free on bail pending appeal.  Nacchio filed a brief (available below) outlining four likely issues that raise a substantial question regarding his convictions to allow the court to permit him to remain free while he pursues the appeal.  Two of the issues relate to the materiality of any information he had at the time of the trading, and the others relate to the sufficiency of the evidence and the trial court's exclusion of classified information related to contracts Qwest might have obtained that would have bolstered its stock price.  Trying to gauge whether an issue will be successful on appeal is always difficult, and in the bail-after-conviction context it is even more difficult because the standard essentially asks Judge Nottingham to second-guess himself.  As co-blogger Ellen Podgor points out (see here), recent white collar cases are all over the place on the issue, with some defendants granted bail (e.g. Bernie Ebbers) while others (Jeffrey Skilling) are not.  Former HealthSouth CEO Richard Scrushy and former Alabama Governor Don Siegelman were even taken into custody at the end of the sentencing hearing, an uncommon but not impossible scenario.  The bail statute presumes the defendant will not be granted bail pending appeal, so the odds are against Nacchio. (ph)

Download nacchio_motion_for_bail_pending_appeal.pdf

July 27, 2007 in Insider Trading, Sentencing | Permalink | Comments (0) | TrackBack (0)

Paul Caron Turns 50!!!!

Blog Emperor Paul Caron turns 50 today.  Happy birthday, Paul.

(esp) & (ph)

July 27, 2007 in News | Permalink | Comments (0) | TrackBack (0)