White Collar Crime Prof Blog

2008 White Collar Crime Awards

2008 White Collar Crime Awards

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. I welcome comments from readers who would like to suggest additional categories or winners (or losers?).

With the appropriate fanfare, and without further ado,

The Collars for 2008:

The Collar for Best Supporting Actor - to the attorneys who represented actor Wesley Snipes, who was found not guilty of fraud and conspiracy and guilty of three misdemeanors

The Collar for Worst Stretching Exercise - to the prosecutors who charged Ben Kuehne with money laundering based upon his writing an opinion letter, a charge that was dismissed by the court

The Collar for Keeping the Biggest House of Cards Standing for the Longest Period of Time - Bernie Madoff is the leading contender

The Collar for Knowing When to Quit - to former plaintiffs tobacco litigation lawyer Dickie Scruggs who plead guilty to a single count

The Collar for the Best Autopsy on a Case - to former county coroner Cyril Wecht for his extensive post-trial arguments calling for no re-trial

The Collar for the Best Flip-Flop by a Former Prosecutor - to former Enron Task Force prosecutor Andrew Weissman, who argued for limits to corporate criminal liability in an amicus in the Second Circuit Ionia case

The Collar for the Most Efficient Decision - to Judge Posner, who wrote the opinion affirming Conrad Black's decision twenty days following oral argument

The Collar for the Most Bang for the Buck - Jack Abramoff, who in 2006, won The Collar for the Best Cooperating Witness, and in 2007 The Collar for the Best Skating Not on an Ice Rink (along with Andy Fastow)

The Collar for the Most Often Indicted Political Position - there is a recount on this one with Ted Stevens arguing that he can't be counted in the Senate category until after sentencing, Rod Blagojevich claiming that he should be able to be included in both the Senate and Governor category, and a text message received from former Detroit Mayor Kwane Kilpatrick asked whether we were including Puerto Rico's Governor in the count

The Collar for the Best Timing - a tie between DOJ for issuing new guidelines pertaining to principles of business prosecutions on the same day it lost the Stein case and Siemens for entering into a FCPA agreement prior to a change in administration

The Collar for the Best Parent - retired last year and renamed the Bill Olis Best Parent Award - unawarded this year since no one comes even close to Bill Olis

The Collar for Needing to Be Told "No" Twice - to the prosecutors who appealed Judge Lewis Kaplan's decision in the Stein case

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Eric Holder - The Forthcoming Confirmation

President-Elect Obama has expressed his desire to have Eric Holder as his Attorney General.  (see here).  The initial comments focused on his role in the Marc Rich pardon (see here) and the questions he would likely face in light of his role in this case.  And then we saw President Bush suddenly facing issues on one of his pardons.  Bush now appears to think that he can rescind that pardon.  Whether he can, remains to be seen.  But what is important for Holder is that others realized what happens when you leave pardons to the last minute and don't vet them properly through all channels.

And although Holder is still likely to have questions on the pardon he participated in, there are likely to be new issues that will need to be discussed.  For one, Edmund Mahony of the Hartford Courant has an article in Clinton-Era Sentence Reductions Could Trip Holder's Confirmation that raises questions about "sentence reductions he recommended in 1999."

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Addendum - Doug Berman's Sentencing Law & Policy here

In the News & Around the Blogosphere

Vesna Jaksic, National L Jrl (law.com), Lawyer for Kuehne discusses recent victory in money-laundering case (includes an interview with Attorney John Nields - one of Kuehne's attorney)

Scott Helman, Boston Globe, Holder's hearing might be rocky -GOP could grill Cabinet nominee

Gregory B. Hladky, Boston Globe, Political 'bad old days' recalled in Connecticut -Corruption elsewhere eclipses state scandals

Sam E Antar, White Collar Fraud Blog, A New Year’s Message from a Convicted Felon: While you hope, criminals prey 

Scott Burns, Houston Chronicle (UPS), Counting the costs of the Madoff case

Josh Hafenbrack, Sun-Sentinel, Legislator Franklin Sands of Weston says he lost savings in Madoff fund

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Fifth Circuit Affirms All But Forfeiture in Fen Phen Related Case

The fifth circuit affirmed the conviction of a lawyer in a Fen Phen related case. (Opinion) The "jury convicted Arledge of conspiracy and fraud for his involvement in filing fraudulent claims to recover from the Diet Drug Qualified Settlement Funds I and II (collectively the "Settlement Fund"), funds set up to compensate victims of the diet drug Fen Phen." The defendant was convicted of a "count of conspiracy in violation of 18 U.S.C. § 371 (count 1), four counts of mail fraud in violation of 18 U.S.C. § 1341 (counts 2–5), and two counts of wire fraud in violation of 18 U.S.C. § 1343 (counts 6–7). Arledge was found not guilty of one count of wire fraud and sixteen counts of money laundering." The court stated that the accused:

"was sentenced to sixty months’ imprisonment for each of counts 1 through 3, to run concurrently, and eighteen months’ imprisonment for each of counts 4 through 7, to run concurrently with each other and consecutively with his sentence for counts 1 through 3. This resulted in a total sentence of seventy-eight months’ imprisonment. In addition, he was sentenced to three years of supervised release on each of the counts of conviction, to run concurrently, and ordered to pay a $700.00 special assessment. In an Amended Judgment, he was ordered to pay restitution in the amount of $5,829,344.90 and a forfeiture of $375,000.00."

On appeal the defendant:

"challenges his conviction for lack of sufficient evidence, alleges that the district court’s failure to admit key pieces of evidence deprived him of the ability to present a defense, disputes the admission of evidence related to charges of which he was later acquitted, and maintains that the use of the 2006 Sentencing Guidelines violated the Ex Post Facto Clause of the Constitution. He also challenges the district court’s restitution order by asserting that the record did not support the district court’s calculation of the amount of "loss," argues that the restitution order violated the Eighth Amendment, maintains that the district court did not take into account requisite statutory factors, and asserts that the restitution order sets forth an unclear payment schedule."

The court affirmed the conviction and sentence, but vacated the restitution order and remanded the case for further proceedings consistent with its opinion. The court found that three of the claims lacked evidence of the claims being fraudulent. In response to a government argument that these three claims should be included, the court held that restitution is not subject to harmless error. The court stated, "[w]ithout evidence that the claims were fraudulent, it is unclear that the Settlement Fund suffered any loss by paying these claims. The district court’s decision to include these three claims, totaling $54,000, without any evidence of fraud was an abuse of discretion."

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In the News & Around the Blogosphere

Eduardo Porter, NYTimes, Ponzi Schemes: The Haul Gets Bigger, but the Fraud Never Changes

Media Center, Office of the Attorney General - State of N.Y., Attorney General Cuomo Prosecuting NYS Parole Board Chairman for Stealing State-Owned Laptop 

DOJ Press Release, Second Arrest in  Dreier Investment Fraud Case

Pamela A. MacLean, National LJ, law.com, Hedge fund sued over Madoff investments

Pamela A. MacLean, National LJ, law.com, A white-collar defender's take on what can be learned from the KPMG verdicts

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In the News & Around the Blogosphere

Glenn Reynolds, InstaPundit, as to a LATimes story on the fed probe of Governor Richardson - here

Daniel Wise, NYLaw Jrl - law.com, Top Counts Dropped Against Former Executive in Medicaid Fraud Case (w/ a hat tip to Bill Olis)

Eric Lightblau, NYTimes, Federal Cases of Stock Fraud Drop Sharply

Karen Hawkins, TBO.com (AP), Gov's Lawyer asks panel to subpoena Obama staff 

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Rescinded Pardon

Ken Belson & Eric Lichtblau over at the NYTimes have an article, A Father, a Son, and a Short-Lived Presidential Pardon that tells of President Bush's rescinding a pardon when he learned that the father of the pardoned individual had donated money to Republicans.  This blog discussed these pardons here. Several items of interest here:

• The president seems to believe that he has the power to rescind a pardon. The NYTimes article states that "the Justice Department said it believed that the original pardon announcement was not binding and could be revoked because Mr. Toussie had not received formal notification of the president’s action."  How formal does the notification have to be?  Isn't a DOJ Press Release sufficient? Yes - a DOJ Press release that explicitly begins -  "WASHINGTON – On Dec. 23, 2008, President George W. Bush granted pardons to 19 individuals and commutation of sentence to one individual"  and then includes:

  • Issac Robert Toussie - Brooklyn, N.Y.
  Offense: False statements to the U.S. Department of Housing and Urban Development, 18 U.S.C. § 1001; mail fraud, 18 U.S.C. § 1341.
  Sentence: Sept. 22, 2003; Eastern District of New York; five months in prison, three years of supervised release conditioned on five months of home detention, $10,000 fine."

• If they hadn't asked about political contributions previously, and had no knowledge of the political contribution at the time of granting this one, then why rescind this pardon? Do you rescind something just because it looks bad?
• It sounds like the father made the contributions and not the son.  Do you rescind a pardon because of acts of a parent?  And should all people and their families who might be interested in obtaining a pardon need to beware of their contributions and not make any political contributions because it may result in a rescinded pardon if someone finds out about the contributions after the fact?
• If the pardons are going to the white house and not DOJ, then are pardons limited to those individuals who have access to the white house?  What does this say about the process and individuals who can't hire a lawyer who can petition a pardon from the white house? One certainly can't count on a public defender for this. If the DOJ is not going to be used, then perhaps the President needs an internal pardon officer to review all the petitions.
• And should this case have been considered for a pardon?  See Peter Wallsten, LATimes, Bush withdraws fast-track pardon It doesn't seem like the victims believe this merits a pardon. See Sumathi Reddy, Michael Amon, Patrick Whittle & James Bernstein, Newsday, Bush defends Suffolk real-estate swindler pardon
• And has President Bush just assured the confirmation of Eric Holder as AG - after all Holder did not have the opportunity to rescind the pardon given by the President - so can you really hold it against him? Or maybe people will start looking at the rest of Holder's record and see where he stands on items like the Holder Memo (see here).

Sometimes you make mistakes, and you have to live with them.  But it is also important to learn from your mistakes.  President Bush needs a better system for reviewing and granting pardons.  But the pardons are an important part of the presidential powers and hopefully his mistake will not cause him to stop reviewing the many meritorious pardons that need consideration.

See also Dan Slater, WSJ Blog,  Pardon Goes Awry, Thanks to White House Counsel’s Advice; Doug Berman's Sentencing Law & Policy here and here.

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Addendum, Brian Kalt, Concurring Opinions here and here

Statement by the Press Secretary, White House here

Instapundit (also citing the Pardon Power Blog) here

Pardon Power here and here

Happy Holiday

Wishing everyone a happy, healthy, and peaceful holiday.

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The Holiday Pardons

President Bush issued some holiday pardons - 19 individuals were recipients, and one person had a sentence commutation. The list includes many older offenses, with a few being drug related crimes. 

The ones that might be considered white collar ones included a 1985 mail fraud conviction, a 1993 aiding and abetting embezzlement of bank funds, a 1993 conspiracy to defraud the U.S., a 1962 forging the endorsement on a US Treasury check, a 1998 concealment of information affecting Social Security benefits, a 1971 embezzlement of mail matter, a 2003 false statements to the HUD and mail fraud, a 1949 conspiracy to export and exportation of a military aircraft to a foreign country in violation of the Neutrality Act of 1939, and a 1992 aiding and abetting violation of the Archaeological Resources Protection Act.   

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For the story behind one of the pardons, see Eric Lichtblau, Jailed for Aiding Israel, but Pardoned by Bush

Additional Addendum, Jordan Weissmann, BLT Blog, Pardon Memo Puzzles Legal Experts

In the News & Around the Blogosphere

DOJ Press Release, A U.S. Army Reserve Major Pleads Guilty for Role in Bribery Schemes Involving Department of Defense Contracts in Iraq

David Ingram, BLT Blog, Prosecutor in Marc Rich Case Endorses Holder

Mike Scarcella, BLT Blog, Whistleblower Alleges Government Misconduct in Stevens Trial

DOJ Press Release, ExxonMobil Charged in Boston Harbor Oil Spill -Corporation to Pay $6 Million for Criminal Violation of the Clean Water Act

DOJ Press Release, Spartan Motors and Subsidiary Agree to Settle Military Kickback Allegations for $1.7 Million

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More on Kuehne

As noted here, the judge in Ben Kuehne's case dismissed Count One of the Indictment against him. It's a simple question and an obvious ruling.  The statute (18 USC § 1957) has an exemption as part of a definition clause that provides that the term monetary transaction "does not include any transaction necessary to preserve a person's right to representation as guaranteed by the sixth amendment to the Constitution."  The government attempted to use the Caplin & Drysdale decision, a forfeiture case, to support their argument.  But as noted by Judge Cooke, "[u]nlike § 1957, the civil forfeiture statute, 18 U.S.C. § 981, does not include an exemption for attorney's fees." The court made it clear that this ruling does "not find the statute exempts everyone who handles tainted funds, to and from defense counsel to provide legitimate criminal defense services." 

The more important question is why did the government include this charge that clearly was not permitted under the express terms of the statute, and what does this say about the rest of their case. For background see here.

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Fiat FCPA Deferred Prosecution Agreement

Noted here was the recent Fiat deferred prosecution agreement.  The FCPA Blog has the agreement, as well as comments here.  Yes, this is an end-of-the-year (or as some might say, a pre-new administration) agreement in the U.N. Oil for Food investigation. The DOJ Press Release states that "Fiat S.p.A (Fiat), an Italian corporation based in Turin, Italy, has agreed to a $ 7 million penalty for illegal kickbacks paid to officials of the former Iraqi government by three of its subsidiaries."  There is also a $3.6 million in civil penalties and an additional amount in disgorgement of profits. 

By having a deferred prosecution agreement, the government is able to keep check of any future violations of the company.  If the company complies with the agreement than the government dismisses the information against the entities charged.

This all sounds good and clearly it is a win-win situation for all parties - the government, the companies, and the general public that wishes to know that kickbacks will not occur in the future.

But there are several aspects of the agreement that raise questions here:

• The deferred prosecution agreement is yet another instance of the company selling out individuals within the company.  Now clearly if these individuals are going against company policy, and acting illegally - it is deserved.  But having the larger entity being able to negotiate these agreements while individuals take the fall, raises issues as to whether power is being used against the less powerful.
• The agreement states that the department "in its sole discretion" gets to determine a breach.  From a contract standpoint is it proper to have a breach of the contract determined solely by one of the parties to the contract? See Zierdt & Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing, 96 Kentucky L.J., available here. 
• And again (see here) we are seeing a provision that only allows the company to issue a "press release if they first determine that the text of the release is acceptable to the Department."

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In the News & Around the Blogosphere - Including Update on Ben Kuehne Case

David Markus, Southern District of Florida Blog, Judge Cooke grants Ben Kuehne's motion to dismiss Count 1; Dan Slater, WSJ Blog, Judge Dismisses Count I of Ben Kuehne’s Money Laundering Indictment

DOJ Press Release, Fiat Agrees to $7 Million Fine in Connection with Payment of $4.4 Million in Kickbacks by Three Subsidiaries Under the U.N. Oil for Food Program

Karen Sloan, law.com - National Law Jrl, The Madoff litigation: no billion dollar jackpots; more like 'medium-sized litigation' (includes comments from John C. Coffee - Columbia)

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In the News and Around the Blogosphere

DOJ Press Release, Former State Department Employee Sentenced for Illegally Accessing Confidential Passport Files

Matthew Goldstein, Business Week, Madoff Losses Will Change Hedge Funds

Jenn Abelson (w/ Beth Healy & Casey Ross), Boston Globe, Bernie Madoff's man to see -Debonair middleman Robert M. Jaffe finds himself in a most uncomfortable place

Patricia Hurtado, Bloomberg.com, FBI Agents Shifted From Terror Work to Madoff, Subprime Probes

Breaking News, Chicago Tribune, Ryan's wife sends plea to Bush

Siri Schubert & T. Christian Miller, NYTimes, At Siemens, Bribery Was Just a Line Item

Findlaw - Bail Conditions in Madoff Case - here (w/ a hat tip to Whitney Curtis)

DOJ Press Release, Alaska State Senator Pleads Guilty to Public Corruption Charges

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In the News and Around the Blogosphere

Pete Yost & Marcy Gordon, TBO (AP), Attorney General Leaves Madoff Case

Lynne Marek, NYLaw Jrl, Citing conflict of interest, Blagojevich asks Ill. AG to appoint special attorney

DOJ Press Release, Miami Physician Sentenced to 30 Years in Prison for $11 Million Medicare Fraud Scheme -Prison Sentence One of the Longest Ever Received by a Physician in a Medicare Fraud Case

Andrea Estes and Matt Viser, Boston Globe, DiMasi ally indicted in lobbying case  (this is a state case and Martin Weinberg is representing the accused)

Jeffrey Krasner and Tracy Jan, Major foundation falls to Madoff fraud -Prominent MIT, Harvard benefactor to close; May be largest charity claimed by scandal

Dan Levine, The Recorder, Law.com, Ex-Bechtel Lawyer Acquitted in Tax-Credit Prosecution

Washington Post, Reuters, Ex-Willbros executive in U.S. bribery charge

Lynn Cook, Houston Chronicle, Former Willbros workers accused in bribery scheme

Susan Saulny & Monica Davey, NYTimes, ‘I Will Fight,’ Blagojevich Unapologetically Vows

Pittsburgh Post-Gazette, Wecht lawyers oppose change of trial venue

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Safavian Convicted

The Abramoff aftermath never seems to end.  In the latest happenings, one sees that David Safavian, former chief of staff at the General Services Administration, is convicted in a retrial.  See Derek Kravitz, Washington Post, Ex-White House Official Convicted Again.  He was initially convicted after a trial by jury and given a sentence of eighteen months.  That conviction was overturned.  The interesting question is whether the court will keep the sentence constant in a post Gall and Kimbrough world. For background on the case see:

• Abramoff - The Reward for Cooperation
• Commentary on Safavian Reversal
• Safavian Sentenced to 18 Months
• Safavian Guilty- What Does This Mean?
• In the Words of Abramoff
• Abramoff and Rove
• Former GSA Chief Indicted
• Ex-Official in Bush Administration Indicted

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Mary Schapiro Named to Lead the SEC

Will investors now feel more comfortable and will there be increased oversight and regulation over at the SEC? That, of course, remains to be seen.  But the person at the top with the power to influence this happening will be Mary Schapiro.  For background on her see:

Caren Bohan, Reuters, Obama picks new head of SEC

Forbes, Profile - Mary L. Schapiro

WSJ - Marketwatch, EQUITIES Magazine Congratulates Mary Schapiro, First Woman to Head SEC

Financial Industry Regulatory Authority, Mary L. Schapiro - Chief Executive Officer - bio

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Verdicts in KPMG Related Case

The KPMG related case has had a history like none other (for background see here).  Although nineteen individuals were initially accused, Hon. Lewis Kaplan issued an opinion that dismissed many because of government conduct that placed pressure on the company to withhold payment of attorney fees for employees charged with criminal conduct, when the company's past practice was to pay these fees. This decision was upheld by the Second Circuit Court of Appeals (see here). Two defendants had initially plead guilty, which left four for trial.  The trial of these four individuals has now concluded and press reports on the verdicts are below:

See Ashby Jones, WSJ, Breaking: Jury Convicts Two Ex-KPMGers, One Lawyer on Tax Charges; Mark Hamblett, NYL.J., Former Attorney, Two Others Convicted of KPMG Tax Shelter Charges; Lynnley Browning, NYTimes, 3 Convicted in KPMG Tax Shelter Case.

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Addendum - Martha Graybow, Reuters, Guardian UK - U.S. jury convicts three in tax shelter trial

In the News & Around the Blogosphere

BLT Blog, Mike Scarcella, Prosecutor Disputes Claim of Coached Testimony at Stevens Trial

DOJ Press Release, Chief Executive Officers of Two Los Angeles-area Medical Companies Indicted for Medicare Fraud

DOJ Press Release, Ex-Houston Auto Executive and Former Skydiving Company Owner Sentenced to Prison for Tax Fraud

ChicagoBreakingNews, Michael Madigan launches impeachment inquiry

Bebra Cassens Weiss, Gov Hires ‘Courtroom Bulldog’ as Ill. House Launches Impeachment

Dan Levine, Legal Pad (law.com), An In-House Lawyer's Wild Backdating Ride

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Others on Madoff

Lauren Cox, ABC News, What Was Madoff Thinking? Former Con Artist, Psychologists Explain What Drives People to High-Stakes Fraud

John Pacenti and Bud Newman, Daily Business Review, law.com, Lawyers Summoned to Salvage Fortunes for Madoff's Investors

Beth Healy, Boston Globe, Group's clients lose $3b in fraud -Now-confessed swindler got MassMutual funds; Investors told 'we were all victimized' by Madoff

Julie Kay, National L Jrl, Lawyers from Florida to New York besieged by Madoff investors -New strategy emerges — suing third parties

Jane Musgrave, Palm Beach Post, Madoff's arrest in billion-dollar fraud case shocks Palm Beach investors

Stephanie Strom, NYTimes, Wall St. Fraud Leaves Charities Reeling

Larry Ribstein,  Ideoblog, Why the SEC missed the Madoff fraud

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