Sunday, October 31, 2010

An Overlooked Key to Combating Overcriminalization: Reflecting on a Decade of Supreme Court Decisions Disfavoring Overly-Expansive Interpretations of Criminal Statutes

Guest Blogger - Dane C. Ball - Gerger & Clarke

Federal courts often make an understandable mistake when faced with issues of statutory interpretation in criminal cases, focusing only on precedent that is directly on point.  As a result, courts sometimes miss important trends that are broader than a specific statute or case.  The fight against overcriminalization—which in part stems from overly-expansive readings of criminal statutes—is one such trend.  By reflecting on a decade of Supreme Court decisions invalidating overly-expansive readings of criminal statutes, lower courts might notice the trend and avoid repeating previous mistakes that led to overcriminalization. 

Since 1999, and in the midst of stiff opposition from prosecutors and lower courts, the Supreme Court has spend much of its effort curtailing the seemingly-limitless reach of various federal criminal statutes. 

  1. Mail and Wire Fraud:  In Neder, the Supreme Court rejected the argument that the federal fraud statutes contain no “materiality” requirement in relation to misrepresentations or omissions.  In Cleveland, the Court rejected the position that a State’s “right” to truthful information in a license application is “property” protected by the fraud statutes.  And most recently, in Skilling, the Court limited the honest-services fraud statute to “bribe and kickback” schemes, rejecting a more expansive interpretation extending the statute to undisclosed “conflicts of interest” and “self dealing.”
  2. Money Laundering:  In Cuellar, the Supreme Court disagreed that the federal money laundering statutes criminalize the act of concealing money merely to transport it, rather than transporting  money to conceal it.  And in Santos, the Court held that the term “proceeds”—at least when applied to illegal gambling—means “profits,” not “gross receipts.” 
  3. Bribery:  In Sun-Diamond Growers of California, the Supreme Court determined that, contrary to the government’s position, bribery under 18 U.S.C. § 201 requires a quid pro quo—i.e., a link between a “thing of value” and a specific “official act.”

 Read in isolation, each decision addresses a specific statute and utilizes—in addition to common canons of statutory interpretation—specific principles to narrow the statute (e.g., fair notice or federalism).  But when courts read these cases in isolation, they inevitably end up watering down their true meaning and intended effect.  For example, after Neder, courts so broadly interpreted the “materiality” element that misrepresentations and omissions rarely are deemed immaterial; after Santos, lower courts overwhelmingly refused to apply the decision’s definition of “proceeds” outside the gambling context (and Congress later amended the definition to expressly include “gross receipts” in all cases); after Sun Diamond, most courts have refused to require a specific quid pro quo under bribery statutes similar to section 201, such as section 666; and after Skilling, at least one court (the Northern District of New York, in a case called Queri) has allowed the government to repackage invalidated honest-services theories as “intangible property” theories.

If the Supreme Court cases are read together, on the other hand, they show a decade-long trend disfavoring overly-expansive readings of criminal statutes, which contribute to overcriminalization.  Equally important, when read together the cases provide all the tools needed to avoid expansive interpretations and overcriminalization, rather than one tool discussed in one case addressing one statute.  Lower court’s should keep this Supreme Court trend in mind in future cases. 

Dane C. Ball is a Houston-based criminal defense attorney with Gerger & Clarke.


October 31, 2010 in Corruption, Money Laundering | Permalink | Comments (0) | TrackBack (0)

Saturday, October 30, 2010

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 4 of a 5-Part Series

Guest Blogger - T. Markus Funk

OECD Phase 3 Report's General Findings

The 68-page OECD Phase 3 report, issued on October 21, 2010, represents what some regard as the largest available collection of statistics and other information on the Foreign Corrupt Practices Act (FCPA). The assessment provides issue-by-issue analysis of ongoing U.S. enforcement efforts, highlighting a number of key trends and successful practices:

  • Resolving most FCPA cases through plea agreements, deferred-prosecution agreements, and non-prosecution agreements has paid off, resulting in strong enforcement and private sector compliance, without the attendant costs, time, and resource-drain of trials.
  • The Federal Sentencing Guidelines allowing for stiff criminal sanction, more focused SEC guidance, and the potential for hefty civil penalties motivate companies to establish effective compliance policies and procedures.
  • Internal audits of both domestic and foreign subsidiaries, trainings, and whistleblower tip hotlines are the most critical compliance measures.
  • Many FCPA investigations are launched by, or through, U.S. foreign service officers serving in U.S. Embassies overseas.
  • Foreign data protection laws frequently impede companies' abilities to obtain access to the books and records of subsidiaries abroad.
  • From a risk-evaluation standpoint, there are three primary areas requiring the most robust anti-bribery measures: (1) Third parties, including local agents and joint venture partners, (2) facilitation payments, especially to customs officials, and (3) payments for travel, gifts and hospitality.
  • The business community considers corporate monitors with DOJ experience as being the most desirable.
  • The U.S. has devoted significant resources to FCPA enforcement, creating dedicated FCPA units in the DOJ, SEC, and FBI, which, in turn, yield economies of scale, concentrated expertise, and increased enforcement consistency.
  • New federal legislation, including the recent Dodd-Frank whistleblower bounty provisions, is expected to accelerate the detection of FCPA violations and the initiation of investigations and prosecutions.

For the full text of the OECD Phase 3 report:

v "[The U.S. has achieved a] record level of monetary penalties and disgorgement, which should provide a major disincentive to bribing foreign public officials by U.S. companies, FMNEs listed in the U.S., and individuals and a major incentive for establishing effective compliance programmes and measures."

v "Across the board, these companies cited active enforcement by the DOJ and the SEC, in particular recently imposed large financial penalties, as the main thrust for putting into place these measures."

v "The U.S. authorities believe that in light of [the Dodd-Frank Act's whistleblower bounty provisions], reporting violations of the FCPA is likely to increase."

v "FCPA enforcement figures are expected to increase in the near future."

The corresponding USDOJ press release can be found at

By T. Markus Funk ( Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at


October 30, 2010 in Corruption | Permalink | Comments (1) | TrackBack (0)

Conrad Black Seventh Circuit Remand Opinion

Oh well. Nobody ever accused Judge Posner of being subtle. Bottom line: the Seventh Circuit upholds the obstruction of justice and two fraud counts and sends one count back for retrial. But then Judge Posner suggests that the government move to dismiss the remanded count and that the trial court re-sentence Black to the original sentence based on the acquitted conduct. He also manages to hold forth on "the obviously nonexistent crime" of "carnal knowledge of a fictional mouse." You just have to read it. Here is yesterday's opinion in U.S. v. Conrad M. Black, et al.


October 30, 2010 in Current Affairs, Fraud | Permalink | Comments (0) | TrackBack (0)

Thursday, October 28, 2010

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 3 of a 5-Part Series

Guest Blogger - T. Markus Funk

DOJ's Heavy Reliance on Non-Prosecution and Deferred-Prosecution Agreements

Although non-prosecution agreements and deferred prosecution agreements have been in use since the early 1990s, the October 21, 2010, OECD Phase 3 report points out that only in recent have they become household tools for Main Justice prosecutors:

  • Non-prosecution agreements and deferred prosecution agreements in FCPA cases began in 2004; since then, they have been used in 30 out of 39 completed criminal enforcement actions against companies.
  • DOJ's annual average number of non-prosecution agreements and deferred prosecution agreements has grown from less than 5 in 2004 to a high of 38 in 2007.
  • Since 1998, 23 of the 44 criminal FCPA enforcement actions have resulted in appointment of corporate monitors to ensure compliance with the agreement's terms, in most cases for three years.

U.S. Administration Message: This Is Only The Beginning

During his May 31, 2010, address to the OECD in Paris, Attorney General Eric Holder reiterated the U.S. Government's continued resolute support for the Anti-Bribery Convention: "As Attorney General, I have made combating [global] corruption one of the highest priorities of the Department of Justice." Attorney General Holder also announced the U.S. government’s intent to strengthen global anti-bribery efforts through enhanced transnational collaboration and the sharing of "best practices." Said Attorney General Holder:

The OECD has been at the forefront of efforts to combat corruption wherever and however it occurs . . . . As Attorney General, I have made combating corruption one of the highest priorities of the Department of Justice . . . . [N]one of the progress the United States has made would have been possible without the long-term cooperation of our law enforcement partners around the globe – cooperation fostered by relationships established through the OECD . . . . I urge the countries [that have not yet achieved criminal convictions in anti-bribery cases] to deepen their commitment to this global effort by dedicating the appropriate resources, such as prosecutors and investigators focused exclusively on foreign bribery cases, and by prioritizing the prosecution of corruption, no matter where the evidence leads.

Attorney General Holder also delivered a diplomatically worded, but in reality quite withering, broadside to the outsized group of foot-dragging signatories: "[I]t is important to note that many of the 38 OECD member countries have no criminal convictions to date. This is not because bribes are not paid by companies in these OECD countries. It is because investigating and prosecuting corruption is difficult, requiring more will, resources, experience, and effort than most crimes." 

Not coincidentally, in the month following the Attorney General's OECD speech, the U.S. House passed the Dodd-Frank Act’s conference report of the bill containing the innovative whistleblower bounty provisions. Such proactive public pronouncements, coupled with targeted, stepped-up law enforcement action yielding tangible results, explain why the OECD report so effusively lauds U.S. efforts to date.

For the full text of the OECD Phase 3 report:

The corresponding USDOJ press release can be found at

By T. Markus Funk ( Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at


October 28, 2010 in Corruption | Permalink | Comments (0) | TrackBack (0)

Cooperation Costs - New Scholarship

Cooperation Costs by Miriam H. Baer (Brooklyn) - forthcoming article is Washington U. Law Review - here

SSRN Abstract:
This Article explores the costs and benefits of criminal cooperation, the widespread practice by which prosecutors offer criminal defendants reduced sentences in exchange for their assistance in apprehending other criminals. On one hand, cooperation increases the likelihood that criminals will be detected and prosecuted successfully. This is the "Detection Effect" of cooperation, and it has long been cited as the policy’s primary justification.

On the other hand, cooperation also reduces the expected sanction for offenders who believe they can cooperate if caught. This is the Sanction Effect of cooperation, and it may grow substantially if the government signs up too many cooperators, sentences them too generously, or causes them to become overly optimistic about their chances of receiving a cooperation agreement.

When the government allows the Sanction Effect to grow too large, it undermines one of its key tools for improving deterrence. Indeed, when the Sanction Effect outweighs the Detection Effect, cooperation reduces deterrence, and the government unwittingly encourages more crime. Since cooperation is itself administratively costly, the policy perversely causes society to pay for additional crime.

This Article reorients the cooperation debate around the fundamental question of whether cooperation deters wrongdoing. Drawing on economics and behavioral psychology, it provides a framework for better understanding how and when cooperation "works." Government actors who laud and rely on cooperation must address the fundamental question of whether it actually deters wrongdoing. To do otherwise, is to leave society vulnerable to cooperation’s greatest cost.


October 28, 2010 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 26, 2010

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 2 of a 5-Part Series

Guest Blogger - T. Markus Funk

U.S. Anti-Corruption Efforts At An All-Time High

The U.S. government has placed the fight against bribery of foreign public officials at the top of its list of critical law enforcement priorities. The October 21, 2010, OECD Phase 3 report concludes that this focus translates into vigorous law enforcement action:

  • Prosecutions have increased from less than 5 per year between 2001 and 2005, to almost 19 per year between 2006 and 2009.
  • Between 1998 and September 2010, some 50 individuals and 28 companies were convicted of foreign bribery-related offenses, while 69 individuals and companies have been held civilly liable for foreign bribery.
  • Of the 36 individuals who have been convicted of FCPA violations and sentenced during this period, 25 received sentences of imprisonment, with the average sentence being slightly more than 30 months.
  • 26 companies have been publically sanctioned for foreign bribery under increasingly-popular non-prosecution agreements and deferred prosecution agreements.
  • Since 1998, the U.S. has imposed over $2 billion in bribery-related criminal fines against legal persons.

Rounding out this impressive -- and peerless -- enforcement picture, the OECD report emphasizes the U.S. government's imposition of massive sanctions for accounting misconduct and money laundering related to foreign bribery. Consider, for example, that between 1998 and 2003, the maximum monetary sanctions leveled against a company in an FCPA case was $2.5 million. But in the past 6 years some 23 companies were sanctioned to the tune of more than $10 million each, and during roughly the same time U.S. disgorgement actions have reeled in more than $1 billion in foreign bribery proceeds. In fact, in one case, the U.S. government imposed sanctions totaling $800 million against a single company.

The SEC, a federal agency increasingly in anti-bribery motion, obtains civil penalties separate from DOJ criminal fines for foreign bribery-related misconduct. In the first 9 months of 2010 alone, the SEC obtained over $404 million in disgorgement, interest and civil penalties from 13 companies and 8 individuals.

And the business and legal communities have certainly noticed these ramped-up, multi-faceted (and multi-agency) enforcement efforts. According to the OECD report, business leaders credit heavy sanctions and amplified prosecutions for having "significantly raised the FCPA‘s profile," resulting directly in more finely-tuned anti-bribery measures and internal controls, and more carefully-calibrated compliance systems.

For the full text of the OECD Phase 3 report:

The corresponding USDOJ press release can be found at

By T. Markus Funk ( Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at


October 26, 2010 in Corruption | Permalink | Comments (2) | TrackBack (0)

In the News & Around the Blogosphere

Daniel Wise,, NYLJ, AIG's Greenberg Found Liable for Fraudulent Action

Ginny LaRoe,, The Recorder, Federal Prosecutors Want to Ditch Remainder of Silicon Valley Economic Espionage Case  (hat tip to Ivan Dominguez)

Lynnley Browning, NYTimes, U.S. Drops Criminal Charges Against UBS

ABC News - Should Cyberbullying Be Illegal?, (Including commentary by Dan Gelb (Gelb & Gelb))

Andrew M. Harris, Bloomberg, Ex-Illinois Governor Blagojevich Wins Delay in Retrial of Corruption Case

Nedra Pickler, AP, LATimes, Prosecutor uses lobbyist's own e-mails in corruption trial; defense calls them obvious jokes

David Ingram, BLT Blog, Constitutional Clash Hangs Over Corruption Case

Josh Gerstein, Politico, Judge: Feds violated U.S. Islamic group's rights

Spencer S. Hsu, Wash Post, Retrial of Abramoff lobbyist Ring begins in D.C. federal court

DOJ Press Release, California Company and Two Executives Indicted for Their Alleged Participation in Scheme to Bribe Officials at State-owned Electrical Utility in Mexico

DOJ Press Release, Texas Businessman Pleads Guilty in Virginia to Role in $100 Million Fraud Scheme Involving Life Settlements

DOJ Press Release, Houston-area Patient Recruiter Pleads Guilty in a $5.2 Million Medicare Fraud Scheme

DOJ Press Release, Two Miami Corporations and Four Individuals Indicted for Health Care Fraud Scheme Involving Approximately $200 Million in Medicare Billing

John R. Emshwiller, WSJ, Retrial Dropped, Enron Figure Talks

Samuel Rubenfeld, WSJ, Manhattan DA Announces New Unit To Investigate Public Corruption

T. Markus Funk (Perkins Coie), Wolff, Honey & Obstruction


October 26, 2010 in News | Permalink | Comments (0) | TrackBack (0)

Overcriminalization 2.0 - An Incredible Conference

Held at the Georgetown Conference Center, the Journal of Law, Economics and Policy, the Law and Economics Center at George Mason University School of Law, NACDL, and the Foundation of Criminal Justice joined together last Thursday for a conference entitled Covercriminalization 2.0: Developing Consensus Solutions. An introduction to this conference by Norman Reimer, Executive Director of NACDL, was followed by a keynote address by former Deputy Attorney General and now Senior Vice President - Government Affairs, General Counsel & Secretary for PepsiCo, Inc., Larry Thompson.  He said, prosecutors need to ask questions such as: "Is a corporate criminal prosecution really necessary?  Does it serve the goals of deterrence and retribution?" 

The day was spent coming up with solutions to the problem of overcriminalization and many ideas were offered.  Four key presentations were offered by  Professor Roger Fairfax (GW) who spoke about "smart on crime" solutions"; Professor Larry Ribstein (Illinois) who spoke about agency costs and monitoring prosecutors;  Professor Darryl Brown (Virginia) who spoke about regulation or criminalization; and Professor Geraldine Szott Moohr (Houston) who looked at how to restore the mens rea.  

There were a host of commentators.  For example, Cynthia Orr had an incredible Powerpoint that showed the small list of crimes that existed in the early days of this country. She talked about the response to the problem de jour. Solomon Wisenberg, gave his confession of a former prosecutor (see here). Paul Rosenzweig looked at whether elections can make a difference in monitoring prosecutors.He cited to Professor Ron Wright's article How Prosecutor Elections Fail Us, 6 Ohio State J. Crim.. L. 581 (2009) and also looked at what prosecutors were saying in the elections. Glenn Lemmi spoke about the responsible corporate officer doctrine. Professor Lucian Dervan (Southern Illinois) looked at the role of plea bargains. Overcriminalization allowed novel theories to go untested, he noted. Professor Sara Sun Beale noted that guns, drugs, immigration are the bulk of cases and we need to keep our eyes on these big areas. Professor Kate Stith and Carmen Hernandez brought in sentencing considerations.

Three judges wrapped up the day (Hon. Frederic Block, Cormac Carney, and Jed Rakoff). Discussion turned to sentencing issues that cause overcriminalization problems, although there were many other points mentioned.

The papers that are produced from this day are likely to be well read as it was an incredible day with many ideas to move the overcriminalization discussion forward. The Journal of Law, Economics, and Policy will be the proud sponsor of the articles from this issue.


October 26, 2010 in Conferences | Permalink | Comments (0) | TrackBack (0)

Monday, October 25, 2010

High Marks for Mounting U.S. Foreign Anti-Bribery Efforts -Part 1 of a 5-Part Series

Guest Blogger - T. Markus Funk

On October 21, 2010, the Organization for Economic Cooperation and Development (OECD) issued its much-anticipated "Phase 3" report. This weighty report formally grades the U.S.'s constantly constricting anti-bribery enforcement noose, concluding that U.S. efforts provide a model other nations seeking to similarly fortify their anti-corruption efforts should emulate.

The OECD points its shaming finger at signatory nations not living up to their anti-bribery obligations, and the organization in its report also identifies certain discrete areas for U.S. improvement. But the deep-dive assessment's bottom-line message is that the U.S. government is out in front – way out front – in its all-out offensive against foreign bribery. And the U.S. is not waiting for others to catch up.

OECD Anti-Bribery Convention: The World's Leading Anti-Bribery Instrument

By way of some background, the historic 1997 OECD "Convention of Combating Bribery of Foreign Public Officials in International Business Transactions," adopted by 38 countries, announces standards criminalizing foreign bribery. The OECD Anti-Bribery Convention, in fact, remains the only such international anti-corruption instrument.

In an effort to encourage compliance, the highly-regarded OECD peer-reviewed Working Group on Bribery Monitoring carefully, and publicly, scrutinizes signatories’ performance. The Working Group, in so doing, takes a holistic approach, collecting input not only from the subject signatory governments, but also from representatives of the private sector and civil society. The end-product is an all-things-considered written assessment which enjoys the high regard of the broader international legal and political community.

In terms of procedure, OECD evaluations take place in phases: Phase 1 evaluates the adequacy of a country’s legislation to implement the OECD Anti-Bribery Convention, and Phase 2 assesses whether a country is applying this legislation effectively. Phase 3 then focuses on enforcement of the Convention, the 2009 Anti-Bribery Recommendation, and any earlier recommendations that remain outstanding. An evaluation for good reason feared by many signatory nations, the OECD Phase 3 probing U.S. compliance with the Anti-Bribery Convention will undoubtedly receive a warm, appreciative reception in the Nation's capitol.

For the full text of the OECD Phase 3 report:

The corresponding USDOJ press release can be found at

By T. Markus Funk ( Markus is a partner in Perkins Coie's Investigations and White Collar Defense Group. Markus spent the past 10 years as an Assistant U.S. Attorney in Chicago, Illinois, most recently serving in U.S. Attorney Patrick Fitzgerald's Public Corruption and Organized Crime Section. Markus' full bio is at


October 25, 2010 in Corruption | Permalink | Comments (0) | TrackBack (0)

Sunday, October 24, 2010

Dodd-Frank Rules Could Create Multiple Corporate Headaches

Guest Blogger - Philip Hilder

Critics are complaining that a likely downside to the Dodd-Frank Wall Street Reform and Consumer Protection Act will be a tsunami of complaints from gold digging bounty hunters in the workplace, including many false allegations.

Certainly the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission will have a lot more work. Dodd-Frank also means they will have a lot more help in finding fraud and insider trading.

A bigger problem may be that empowered whistleblowers will be encouraged to ignore their corporate ladder, ignore their internal rules and rush to the government with any perceived problem they hope will be the “original information” that can be the foundation of an enforcement action. This race for cash rewards could conflict with internal company compliance and ethics programs, which encourage employees to internally report wrongdoing.

It also could be good for lawyers who get paid to help clean up the mess, but bad for companies that may lose the opportunity to self-correct before a government investigation is launched.

It is foreseeable that such an investigation could trigger shareholder or derivative lawsuits against the company as well.

My client Sherron Watkins, a former Enron vice president, reported accounting problems at that now-dead company by following the internal rules. Under Dodd-Frank, the next person in Watkins’ position will more likely become a true whistleblower, bypassing internal protocol and heading outside the company to grab for the golden ring.

Just as Congress created Sarbanes-Oxley protections in response to Enron, in part because of Watkins' testimony, Congress also created Dodd-Frank in reaction to the Bernie Madoff scandal. Congress created more lucrative bounties and effectively deputized millions of Americans to skip company protocol by telling the government about insider trading, securities fraud, bribery of overseas businesses and governments, and a host of financial crimes that employees may see on the job.

The stakes are higher than when Watkins warned her bosses in 2001. She was rewarded with inquiries about how to fire her. Dodd-Frank would help in that scenario, too. It not only beefs up the payment to those who reveal real crimes, but it also strengthens the protections against retaliation, and doubles the amount someone can recover in a successful retaliation lawsuit.

Before this Act, total awards to whistleblowers were discretionary and only rewarded for certain insider trading tips. Now, successful enforcement exceeding $1 million could bring a whistleblower between a mandatory 10 percent up to 30 percent of what is government recovered.

Now corporations need not worry only about current and former employees but also about folks at subsidiaries and affiliates of publicly traded companies. Even contractors, consultants and sales agents can blow whistles for cash. Those who can’t reap the rewards include someone convicted of a crime related to the information provided to the government, certain auditors and employees of the SEC, CFTC and U.S. Department of Justice.

Prior to Dodd-Frank being passed, the Department of Labor was barely pursuing whistleblower retaliation complaints. It denied awards in about 98 percent of cases and tossed out more than 1,000 claims. Whistleblowers can now skip over the DOL and proceed directly to federal court where they can double their back pay with interest if they prevail in a lawsuit.

Now we’ll see emboldened employees along with companies who need to be more careful with compliance and self-policing. Congress’ empowerment of employees may create a litigation rich environment where a lot more dirty laundry is aired. 

Philip H. Hilder is a former federal prosecutor and founder of Houston-based Hilder & Associates, P.C., who focuses on white-collar criminal defense and whistle blower lawsuits.


October 24, 2010 in Civil Enforcement, Civil Litigation | Permalink | Comments (1) | TrackBack (0)

Saturday, October 23, 2010

Overcriminalization Hurts

Lesley Clark at the Miami Herald tells the story of Abner Schoenwetter, a victim of overcriminalization, in an article titled Congress Looks at Law that Criminalizes Non-Criminal Behavior.  Mr. Schoenwetter recently traveled to Washington to testify before a congressional committee.  His testimony, along with others at the hearing, can be found here. Mr. Schoenwetter's case arose with an individual named David McNabb - a case involving the importation of spiny lobster tails from Honduras to the U.S.  Despite the fact that the Attorney General of Honduras said that there was no violation of law, the 11the Circuit refused to reverse this conviction premised on a violation of the Lacey Act.  For more discussion of this case, see my article - A New Dimension to the Prosecution of White Collar Crime: Enforcing the Extraterritorial Social Harms.   

In reading the Miami Herald I couldn't help but notice the difficulties that Abbie Schoenwetter now faces.  I, for one, intend to purchase something from his business here. Overcriminalization hurts real people.


October 23, 2010 in Fraud, International, Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Friday, October 22, 2010

Three Federal Grand Jury Reforms

I had a fun time commenting about grand jury reform yesterday at the Overcriminalization 2.0 Conference in Washington, DC--our nation's capital.

Here are three of my ideas for improving the federal grand jury's fairness. No doubt others have thought of these improvements as well.

1. All fraternization between prosecutors and grand jurors should be strictly forbidden. Federal grand jury proceedings are supposed to be on the record. But this policy can be circumvented by informal conversations between grand jurors and prosecutors, before grand jury begins or during breaks. Even if testimony is not conveyed through such informal discussions, friendship and camaraderie can develop, particularly over the long haul of a white collar investigation. This makes it far more likely that the grand jurors will bend to the prosecutor's will and resolve all doubts and issues in his/her favor. My suggestion is that the grand jurors be treated more like petit jurors, in terms of the informal contact that prosecutors are allowed to have with them. In addition to promoting fairness, such a reform should impress upon the grand jurors the seriousness and sanctity of their work.

2. All summarizing of prior evidence and testimony by the prosecution should be strictly prohibited. Federal prosecutors are not allowed to "deliberate" with the grand jury. That means they can't sit in with the grand jurors and try to sway their votes. The prohibition applies whether or not the grand jury is engaged in deliberations just prior to voting. What sometimes happens over the 18 month course of a white collar grand jury investigation is that jurors ask questions about the credibility of witnesses and the content of prior evidence and testimony. The prosecutor cannot comment upon the credibiltiy of witnesses, but can summarize prior evidence and testimony. Suppose a grand juror says, "I just don't believe this last witness, Mr. Smith. Isn't what he said inconsistent with what Mrs. Jones said?" Under current rules, the prosecutor may respond as follows. "I cannot comment upon Mr. Smith's credibility, because I cannot deliberate with you. But I am allowed to summarize prior testimony. What I can tell you is that Mr. Smith's testimony is inconsistent with Mrs. Jones' testimony and with the testimony of every other witness we have heard from, including seven of your fellow citizens and five FBI Special Agents."  The ability to summarize thus inherently lends itself to potential abuse. This potential should be eliminated, and the prosecutor should be confined to telling grand jurors that they can ask to examine evidence or have prior testimony read back to them by an agent.

3. The case agent should be required to inform federal grand jurors under oath of all exculpatory information that the government is aware of. DOJ already encourages prosecutors to disclose exculpatory evidence to the grand jury and some jurisdictions require it as an ethical matter. I suggest here something further. The case agent should be required to reveal to the federal grand jurors under oath, in every case, all exculpatory information in the government's possession or that the government is aware of. This will facilitate the delivery of relevant information to the grand jurors, by forcing the prosecutor and case agent to focus on the question of exculpatory information. What could be more relevant to a grand jury's charging decision than information inconsitent with guilt? Isn't this the fair thing to do?

These three suggested reforms have at least three things in common: 1) they will improve the fairness of the grand jury process; 2) they pose no risk of physical harm or danger to any government witness or employee; and 3) they impose no significant time or cost burdens on the government.


October 22, 2010 in Conferences, Grand Jury | Permalink | Comments (1) | TrackBack (0)

Tuesday, October 19, 2010

Nick Thiros: The Lawyer for All

2297870_1Nick Thiros was not only a lawyer's lawyer, but also a lawyer for so many people from all walks of life. He was the best of the best in the courtroom and he was also a mentor to newcomers.  His gift was his understanding of people, and he used that ability to appreciate and care for them.  

His courtroom skills were legendary.  As a young prosecutor in Lake County, Indiana, I would rearrange my schedule to be in the courtroom to watch his closing arguments  --as he mesmerized juries with his basic understanding of human nature. Nick T. had the gift of getting the answer he wanted from a witness.  He had the rare gift of explaining his client's case for all to understand and appreciate.  He found the "human" in each person. And most of all he argued to juries what he believed in and made each juror appreciate justice.

Nick Thiros was there when you needed him. He represented many a lawyer and judge, and often in difficult situations. He was so deserving of becoming a Fellow of the American Board of Criminal Lawyers (ABCL).

It was Nick Thiros who convinced me to join the National Association of Criminal Defense Lawyers (NACDL) and to this day, I am forever grateful. My heart goes out to his family and friends, as he will be missed. Rest in peace, Nick....


October 19, 2010 in Defense Counsel | Permalink | Comments (2) | TrackBack (0)

Sunday, October 17, 2010

In the News & Around the Blogosphere

Friday, October 15, 2010

Civil Settlement for Players in Countrywide Case

The Securities Exchange Commission is reporting here that Former Countrywide CEO Angelo Mozilo will pay the SEC $22.5 million to settle SEC charges "that he and two other former Countrywide executives misled investors as the subprime mortgage crisis emerged. The settlement also permanently bars Mozilo from ever again serving as an officer or director of a publicly traded company."  The SEC notice also states:

"Former Countrywide chief operating officer David Sambol agreed to a settlement in which he is liable for $5 million in disgorgement and a $520,000 penalty, and a three-year officer and director bar. Former chief financial officer Eric Sieracki agreed to pay a $130,000 penalty and a one-year bar from practicing before the Commission. In settling the SEC’s charges, the former executives neither admit nor deny the allegations against them."

Some may ask - what about a criminal action?

1. Just because a civil case is proceeding with a resolution doesn’t mean that a criminal case might not be forthcoming. When the civil and criminal case are ongoing at the same time we call them parallel proceedings. But it doesn’t always mean that they have to start at the same time. In some instances, the criminal case will proceed after the civil has been ongoing for some time.

2.White collar criminal cases take a long time to investigate - they are document driven cases and as such require expertise that one doesn’t find when investigating a simple burglary or robbery case.

3. Civil cases have a different standard of proof - a much lower standard than criminal cases which require that prosecutors prove the case beyond a reasonable doubt. It is a more difficult burden and prosecutors need to assess whether they have accomplished what is needed with a civil enforcement action or if a criminal prosecution is needed. They also need to assess whether there is any criminal activity to warrant a criminal action.

4. The government needs to also determine if any conduct violates the law - or were the decisions that were made business decisions that may be wrong -- but ones that do not meet a level of criminality.

5.  Hopefully prosecutors will also consider how best to spend our tax dollars.


Addendum, Gretchen Morgenson, NYTimes, How Countrywide Covered the Cracks 

October 15, 2010 in Civil Litigation, Fraud, SEC, Settlement | Permalink | Comments (1) | TrackBack (0)

Wednesday, October 13, 2010

Overcriminalization 2.0: Developing Consensus Solutions (October 21, 2010)

The Journal of Law, Economics & Policy at the George Mason University School of Law will host its annual symposium on October 21, 2010, in partnership with the Law & Economics Center at George Mason University, National Association of Criminal Defense Lawyers, and the Foundation for Criminal Justice.  There is widespread recognition, across the political and ideological spectrum, that the United States is over-criminalized, and that over-criminalization poses serious threats to our liberties, our values, and our prosperity.  With recognition and examination of this problem, it is now time to move to the next level – developing solutions. This symposium will capture the broad consensus on the over-criminalization problem and serve as the motivation for reform.

View the entire program here.

Some of the speakers confirmed for the symposium include:

Larry Thompson, General Counsel and Senior Vice President for Government Affiairs, PepsiCo, Inc.

Hon. Jed S. Rakoff, United States District Judge, Southern District of New York

Larry Ribstein, Mildred Van Voorhis Jones Chair and Associate Dean for Research, University of Illinois College of Law

Darryl Brown, O.M. Vicars Professor of Law and David H. Ibbeken ’71 Research Professor of Law, University of Virginia School of Law

Sara Sun Beale, Charles L. B. Lowndes Professor of Law, Duke University School of Law

Hon. Frederic Block, United States District Judge, Eastern District of New York

Hon. Cormac J. Carney, United States District Judge, Central District of California

Roger Fairfax, George Washington University Law School

Jim E. Lavine, Zimmermann, Lavine, Zimmermann & Sampson P.C., and President, National Association of Criminal Defense Lawyers

Cynthia Orr, Attorney, Goldstein, Goldstein & Hilley and Immediate Past President, National Association of Criminal Defense Lawyers

Solomon L. Wisenberg, Partner & Co-chair of the White Collar Crime Defense Group, Barnes & Thornburg, LLP

Lucian E. Dervan, Southern Ilinois University School of Law

Kate Stith, Lafayete S. Foster Professor of Law, Yale Law School

Lawrence S. Goldman, Law Office of Lawrence S. Goldman and Past President, National Association of Criminal Defense Lawyers

Hon. Nancy Gertner, United States District Judge, District of Massachusetts

Harvey Silverglate, Author and Of Counsel, Zalkind, Rodriguez, Lunt and Duncan, LLP

The full agenda and registration are now available.  The registration fee is $125 by October 1st, $175 after October 1st, and $30 for students.  5.0 Virginia CLE credits are approved.  We will also support you in submitting any CLE paperwork for your state bar association.


October 13, 2010 in Conferences | Permalink | Comments (0) | TrackBack (0)

Monday, October 11, 2010

In the News & Around the Blogosphere

Mike Koehler, FCPA Professor, ABB Ltd. Deferred Prosecution Agreement

 Kurt Anderson, (AP), Ex-Rothstein COO Gets Maximum 10-Year Prison Sentence 

Leo Strupczewski, The Legal Intelligencer,, Judge Who Pleaded Guilty in Pa. Corruption Scandal Reaches New Plea Deal (Note - this was a post-Skilling resolution)

Pat Forgey, Juneau Empire, Feds to drop charges against Clark  (Note- this was a post-Skilling resolution)

Chicago Tribune, (AP) Prosecutors oppose early release for George Ryan (Note- this is also related to the Skilling case)


October 11, 2010 in News | Permalink | Comments (0) | TrackBack (0)

Thursday, October 7, 2010

Harvard Law and Policy Review - Online Jrl - Miranda

With more and more white collar cases experiencing issues that normally would come up in street crime cases, it becomes important to see what is happening with topics such as Miranda. So check out the Harvard Law & Policy Review - Online Jrl article, Death by a Thousand Cuts: Miranda and the Supreme Court’s 2009-10 Term by Anthony J. Franze.


October 7, 2010 in Scholarship | Permalink | Comments (0) | TrackBack (0)

The Post-Skilling Battle That Could Decide the War

Guest Blogger - Dane C. Ball - Gerger & Clarke

We’ve all memorized Skilling’s core holding: 18 U.S.C. § 1346 (“honest-services fraud”) criminalizes only “bribe or kickback schemes” that violate a “fiduciary duty.”  Prosecutors and criminal defense attorneys are now fighting over questions like:  What kind of “fiduciary duty” is required—one created by state or federal law, contract, or simply a relationship of trust?  What’s the definition of “bribe or kickback”—a quid pro quo or something less?  Though these are important issues, regardless their outcome Skilling will remain a significant victory for the criminal defense bar.

But a more dangerous battle is being fought in the Northern District of New York in United States v. Queri.  This battle could decide the war—if the government wins, Skilling may end up meaning next to nothing.

In Quire the government has taken the position that Skilling-barred honest services theories (e.g., undisclosed self dealing or conflicts of interest) are viable traditional money and propertyfraud theories under §§ 1341 and 1343.  The government reasons that such nondisclosures deprive others of an intangible property right to information that “could impact financial decisions” or cause a “change in business conduct.”[1]

If the criminal defense bar is to successfully respond, it must understand Skilling at a deeper level than “honest-services fraud prosecutions require a bribe or kickback scheme.”  At a minimum, it must be made clear (to lower courts) that:

  1. Skilling must mean something.  And the government’s approach in Queri renders Skilling meaningless.  An employer may always claim that disclosure of a conflict or self dealing would have caused it to “change its business conduct.”  It would have investigated, demoted, suspended, terminated the employee or avoided a deal altogether if tainted by “misconduct.”
  2. It is not just unlikely, but unthinkable that in Skilling’s 3 opinions and 60 pages, 9 Justices failed to mention that the case actually was a waste of time because the honest-services fraud theories at issue were viable intangible property rights theories.  Their silence does not leave the questions open—there was no reason to address this issue because the government asserted in extensive briefing that § 1346 was a crucial enforcement tool that catches many schemes that fall through the cracks of §§ 1341 and 1343.  The government certainly did not take the position that the very same theories at issue in Skilling also passed scrutiny under §§ 1341 and 1343.  A wise decision considering that § 1346 is a definitional statute (not a separate crime) expanding the universe of actionable schemes under the mail and wire fraud statutes.
  3. Finally, and perhaps most importantly, morphing Skilling-barred honest-services fraud theories into traditional money and property fraud theories does not avoid the constitutional problems Skillingsought to remedy:  wishy-washy theories based on undisclosed self dealing and conflicts of interest are too “amorphous” to provide fair notice to criminal defendants.  Removing the “right to honest services” label and replacing it with “intangible property right to information” is constitutionally insignificant.  Such repackaging also ignores the federalism concerns that run throughout Skilling and earlier decisions like McNally and Cleveland.

In sum, we must understand and explain that Skilling has meaning outside the honest-services fraud context.  If we fail, we will have snatched defeat from the jaws of victory.

Dane C. Ball is a Houston-based criminal defense attorney with Gerger & Clarke.


[1] The facts in the Quire—employees received side payments from those doing business with the employer and didn’t tell anyone—demonstrate that Skilling’s “bribe or kickback scheme” requirement appears to have teeth.  The government dropped its honest-services theory after Skilling and opted for more clever traditional money and property theories that look a whole lot like honest-services theories, but require no true “bribe” or “kickback.”

October 7, 2010 in Enron, Fraud, Judicial Opinions | Permalink | Comments (2) | TrackBack (0)

Wednesday, October 6, 2010

In the News & Around the Blogosphere

David Gialanella,, New Jersey Law Journal, Former Prosecutor Charged With Aiding False Confession

Mike Scarcella, BLT Blog, PMA Group Founder Pleads Guilty to Campaign Contribution Charges

Michael L. Volkov joins Mayer Brown

Geraldine Baum and Stuart Pfeifer, LATimes, Dozens charged in schemes to steal from bank accounts using computer viruses (hat tip to Ted Gest)

DOJ Press Release, Six International Freight Forwarding Companies Agree to Plead Guilty to Criminal Price-fixing Charges -Companies Agree to Pay a Total of $50.27 Million in Criminal Fines

DOJ Press Release,Owner of Two Houston Health Care Companies Pleads Guilty to Defrauding Medicare $6.3 Million

 DOJ Press Release, ABB Ltd and Two Subsidiaries Resolve Foreign Corrupt Practices Act Investigation and Will Pay $19 Million in Criminal Penalties- Company to Pay More Than $58 Million in Criminal and Civil Penalties, Disgorgement and Interest

Zuckerman Spaeder LLP Partner Blair G. Brown Admitted to American College of Trial Lawyers

Daniel Wise, NYLJ,, 2nd Circuit Upsets Order Requiring Wiretap Turnover in SEC Case Against Galleon

Julie Kay, Daily Business Review,, Fla. Judge Quashes State Subpoena in Foreclosure Probe -State attorney general had hoped to discipline three attorneys

Lionel Laurent, Wash Post, French trader jailed, told to pay $6.7 billion (Hat Tip to Ivan Dominguez)

Jerry Mitchell, Jackson Clarion Ledger, Appeal by Minor declined - Former lawyer, ex-judges await resentencing

Stephanie Ebbert, Boston Globe, Congressman Tierney's wife convicted in federal tax fraud case


October 6, 2010 in News | Permalink | Comments (1) | TrackBack (0)