Thursday, December 30, 2010

2010 White Collar Crime Awards

2010 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 2010:

The Collar for the Least Read Piece of Legislation By Congress - The Dodd-Frank Act.

The Collar for the Most Read Piece of Legislation By Corporate Counsel- The whistleblower provisions in the Dodd-Frank Act.

The Collar for Best Legislating from the Bench - The Supreme Court Justices who held in the Skilling decision that the honest services statute of mail fraud should be read to include bribery and kickbacks.

The Collar for the Best Rube Goldberg Maze - The Supreme Court Justices who failed in the Skilling decision to explain what will constitute bribery and kickbacks.

The Collar for Recognizing the Best Invention of the Year -  To Justice Scalia for his concurring opinion in Skilling.

The Collar for the Gun Used Most Often in Corporate Hold-ups - The Foreign Corrupt Practices Act.

The Collar for Second Chances Sometimes Don't Make A Difference- To Greg Reyes who was convicted in a retrial.

The Collar for Wanna-Be An Economic Stimulus to the Legal Profession - To the defendant formerly known as Sir Allen Stanford.

The Collar for "You Want It When?" - To Lloyd's of London for successfully avoiding further payment of defense costs to the criminal defendants in U.S. v. Stanford, et al. Note to corporate executives and boards: Remember to read the fine print before purchasing that D&O Policy.

The Collar for Missing the Boat - To the Office of the Comptroller of the Currency (OCC) for dragging its feet on the robo-signing fraud. The OCC gives new meaning to the term "light-touch."

The Collar for Better Late Than Never - To the prosecutors who finally dismissed charges in the Enron Barge prosecution

The Collar for Singing the Best Version of Going In the Right Direction - To AG Holder for his memo that recognizes that sentencing should be based on an individual assessment

The Collar for Shirley Jackson Traditonalism  - To the Department of Justice for thwarting all efforts to reform Federal Rule of Criminal Procedure Rule 16. The new DOJ has improved considerably under Mr. Holder, but still finds it hard to jettison a rigged system.

The Collar for Boosting the Incomes  of Former AUSA & US Attorneys - BP

The Collar for Most in Need of Hearing Aid Batteries- To all of the federal circuit court judges who continue to reverse district court downward variances on dubious procedural and substantive grounds. Hey folks! Haven't you heard about Apprendi, Blakely, Booker, Gall, Kimbrough, and Spears?

The Collar for the Most Likely to Have its Theme Song "I Won't Back Down" - The Department of Justice, for trying to "fix" honest services.

The Collar for Being Fired Twice - To Rod Blagojevich for being impeached and fired on Celebrity Apprentice. 

The Collar for US News WannaBe- To the ABA for its method of selecting best blogs. (two years in a row)

The Collar for Least Likely to Appear Together in "Dancing With the Stars" - President Obama and Justice Alito.

The Collar for Invited Error  - To Justice Alito for his comments during President Obama's State of the Union address.

The Collar for the "Best Offense may NOT be a Defense"  - To Steve Rattner for writing a book about his tenure as President Obama's car czar while under investigation by New York Attorney General Cuomo. Rattner still got slapped with a lawsuit by the state.

The Collar for Much Ado About Nothing - To the Department of Justice for devoting precious prosecutorial resources to insider trading and so-called foreign corrupt practices--activities that arguably shouldn't be illegal in the first place--while ignoring financial institution accounting irregularities that helped fuel the biggest recession since the 1930s. 

The Collar for Most Likely to Star In A Prison Picture titled  "Watch Our Government Waste Funds"- Wesley Snipes

The Collar for the Case Most Needing Review - Sholom Rubashkin's 27 year sentence. 

The Collar for Least Likely to Appear on the T.V. Show "I've Got a Secret" - The U.S. State Department.

The Collar for Getting it Right - To SEC Inspector General H. David Kotz for his hard hitting, spot-on report detailing the SEC's failure to adequately investigate or regulate R. Allen Stanford. 

The Collar for the Best Parent - retired years ago and renamed the Bill Olis Best Parent Award - unawarded this year since no one comes even close to Bill Olis, may he rest in peace.

(esp & slw)

December 30, 2010 in About This Blog | Permalink | Comments (2) | TrackBack (0)

Monday, December 27, 2010

Mens Rea Under Section 1001: Judge Kavanaugh's Concurrence in Moore

My colleague Ellen Podgor posted here about the Ninth Circuit's reversal of a securities fraud conviction on sufficiency grounds in United States v. Goyal, and specifically recommended Judge Alex Kozinski's concurrence. That concurrence led me to Judge Brett Kavanaugh's equally outstanding concurrence in United States v. Moore, 612 F.3d 698, 702-04 (D.C. Circuit 2010).

Moore involved an expansive application of 18 U.S.C. Section 1001. As explained by Judge Kavanaugh, "This  case is novel: The Government has obtained a false statements conviction under 18 U.S.C. [Section] 1001 against an individual who signed the wrong name on a postal delivery form....Federal prosecutors tried Moore twice for various drug offenses, but both times the jury hung. In the second trial, prosecutors tacked on a false statements charge under [Section] 1001."

Judge Kavanaugh wrote separately to discuss the mens rea issues which can arise under the "ever-metastasizing" statute. His concurrence should be required reading for all white collar practitioners. In essence, Judge Kavanaugh argues that the Government must prove, in a Section 1001 prosecution, that the defendant knew he was violating the law.  This is because Sectiuon 1001 contains a willfulness element. As Judge Kavanaugh points out, recent and not-so-recent Supreme Court pronouncements, in cases such as Bryan v. United States, 524 U.S. 184, 191-92 (1998), Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 57 n.9 (2007), and Dixon v. United States, 548 U.S. 1, 5 (2006), establish that a defendant cannot harbor willful criminal intent unless he knows in some sense that his conduct is unlawful. (The defendant need not know the specific code provision he is accused of violating, except in the case of highly technical statutes.) 

There is no reason, absent some particular statutory twist, why this principle should not apply across the board to statutes containing a willfulness element. But many of the federal circuit courts take a different approach with respect to certain fraud statutes, such as Section 1001, apparently because some of their precedents predate the most recent Supreme Court holdings and dicta. Judge Kavanaugh, who once clerked for Judge Kozinski, concurred with the majority opinion in Moore, but only because the defendant did not request an appropriate jury instruction on the willfulness element. Here is Judge Brett Kavanaugh's Concurrence in U.S. v. Moore.



December 27, 2010 in Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Friday, December 24, 2010

Happy Holiday

Wishing everyone a healthy, happy, and peaceful holiday.


December 24, 2010 in About This Blog | Permalink | Comments (0) | TrackBack (0)

11th Circuit Reversal on Rehearing

Probably the rarest of decisions is a reversal on a rehearing. But this week, the Eleventh Circuit Court of Appeals did just that in the case of United States v. Kottwitz.  In the original decision (see here), the court had concluded that the refusal to give the jury an instruction about reliance on an accountant's advice was error as to Counts Three, Four, and Five.  In this rehearing, the court extended this decision to Count One - a conspiracy count.  The court stated,  "[e]ven though no evidence directly showed that Defendants’ accountant was involved in initially entering/hiding transactions on the corporate books (for example, the personal-expense transactions), Defendants introduced enough circumstantial evidence to warrant an instruction that -- at some pertinent point -- Defendants may have relied on the accountant’s advice."

Representing the defendant in this case was Jerry Froelich, Jim Jenkins, and Bruce Maloy of Atlanta, Georgia and the lawfirm of Bernhoftlaw was co-counsel and lead on the Kottwitz appeal for a lead defendant in the case.  See Robert G. Bernhoft's Petition for Panel Rehearing -Download 1_09-09-10_PetitionPanelRehearing


December 24, 2010 in Judicial Opinions, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, December 23, 2010

In the News & Around the Blogopshere

DOJ Press Release, Manhattan Federal Jury Convicts U.S. Military Officer of Honest Services Fraud and Accepting Bribes while Stationed in Iraq

Michael Pollick, Herald Tribune, Beau Diamond sentenced to 15.5 years

David Ingram, BLT Blog, Congressmen Ask About Probe of GAO Probe

Sue Reisinger, Corporate Counsel, Half-Baked Justice? Corporate Prosecutions Are All Over the Map

M.L. Elrick, Tresa Blades, David Ashenfelter & Jim Schaefer, Detroit Free Press, Some Who Paid to Play in Detroit Corruption Probe Won't Be Charged

DOJ Press Release, Former Senior Executives of Latin Node Inc. Charged with Bribing Honduran Officials and Money Laundering

Brian Baxter, AmLaw Daily, Record-Setting Madoff Settlement Announced with Picower Estate

Rami Grunbaum, Seattle Times, Tax-fraud figure has lesson for UW business students

Jenna Greene, BLT Blog, SEC Appoints Stephen Cohen as Associate Director of Enforcement Division

Shana-Tara Regon & Robert Alt, AOL News, Opinion: You Might Be Committing a Federal Crime

DOJ Press Release, Former UBS Investment Banker Pleads Guilty in Manhattan Federal Court to Insider Trading Charges

Liz Rappaport & Michael Rapoport, WSJ, Ernst Accused of Lehman Whitewash

DOJ Press Release, Georgia Hospital Pays U.S. $13.9 Million to Resolve Medicaid False Claims Act Allegations

Sheri Qualters, NLJ, DOJ announces $280M settlement with Dey Pharma over inflated drug pricing

Nathan Vardi, Forbes, Deutsche Bank Will Pay $554 Million For Illegal Tax Shelter Activity

Julie Triedman, AmLaw, Name Partner at Elite Italian Firm Gets Suspended Sentence in Parmalat Trial (hat tip to Professor Clark Furlow, Stetson)

Charlie Savage, NYTimes, Justice Dept. Is Criticized as Corruption Cases Close (hat tip to Attorney Linda Friedman Ramirez)

AP,, N.J. man sentenced for not reporting Swiss account

Craig R. McCoy & Nathan Gorenstein, Philadelphia Inquirer, Fumo fights federal bid for longer sentence


December 23, 2010 in News | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 22, 2010

People of the State of New York v. Ernst & Young LLP

Here is the civil complaint filed in New York v. Ernst & Young LLP. The pleading is a well drafted speaking complaint detailing Ernst & Young LLP's auditing actions, and alleged failures to act, in connection with Lehman's Repo 105 transactions. New York is seeking the return of $150 million in auditing fees earned by Ernst & Young on the Lehman account. Assuming that the allegations are true, the complaint is a powerful argument in favor of Dodd-Frank's enhanced whistleblower provisions. Most of the alleged activities occurred after Sarbanes-Oxley was enacted into law. 


December 22, 2010 in Civil Enforcement, Civil Litigation, Current Affairs, Fraud, Investigations | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 21, 2010

Ryan Denied Skilling Relief and Bail

A US District Court for the Northern District of Illinois- Eastern Division, denied former Illinois Governor George H. Ryan Sr.'s request of Skilling relief  and "bail pending the ultimate resolution of this motion."  In a 59 page order here, the court held:

  • The Skilling decision "announces a new substantive rule of criminal law" allowing the "re-set[ting] the clock for filing [  ] post-conviction" relief.
  • Ryan's "conduct for which he was convicted - steering contracts, leases, and other governmental benefits in exchange for private gain - was well-recognized before his conviction as conduct that falls into the 'solid core' of honest services fraud."
  • Claiming improper jury instructions, the court finds "that the Bloom instruction, the conflict-of-interest instruction, and the state law instructions should not have been given"  but then holds the error as harmless.
  • Page 42 et seq. of the opinion has a wonderful footnote (# 14) and text that reviews relevant post-McNally and Skilling holdings. 
  • The court rejects any spillover effect of Ryan being prejudiced "by the admission of evidence that would not have been admissible in a post-Skilling honest services fraud prosecution." 

But the saddest part of this decision is that the court fails to grant bail to Ryan pending the resolution of this motion despite acknowledging "the sad news that his wife of more than fifty years is suffering from a terminal illness."  This is particularly troubling as the court notes that Ryan "poses no risk of recidivism nor danger, were he to be released."  Sometimes the law is very cold to humanity and this is sad.


December 21, 2010 in Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Medicaid fraud crackdown threatens citizens’ rights

Guest Blogger - Philip Hilder

Constitutional protections are being hastily overlooked in our government's zeal to crack down on Medicaid fraud. But even that worthy cause doesn't merit a denigration of citizens' rights. In the case of Medicaid fraud, the Texas Legislature has not only encouraged but required government agencies to mix civil and criminal investigations on such a regular basis that the constitutional rights of the people and businesses being investigated are being trampled routinely.

Any television police drama will tell you that subjects of a government investigation have the right to remain silent and to be told they have the right to remain silent. But the arm of Texas government that conducts criminal Medicaid fraud investigations is gathering information under the guise of the arm that looks at possible civil violations. Both civil and criminal investigators work for the Texas attorney general.

The problem is that the targets lawfully need to know when they are being targeted by the criminal group. But instead they are being asked for documents using a civil process and they aren't being told the information is being shared with criminal investigators.

You might think it's just the government either way. If these folks might have done something wrong, why should we care? But these rights are there to protect the innocent and the guilty. They are there to protect someone being investigated now, as well as you and me, who could be investigated for something else another day.

We all must care when a target isn't given the opportunity to invoke his or her rights in a criminal investigation because the state has purposefully made it appear there is no such investigation. In its zeal to control the state's annual $17 billion in Medicaid costs, Texas has lost its grip on protecting the rights of its citizenry.

The Texas Legislature has blurred what should be clearly demarcated barriers between civil and criminal investigations of health care providers. Various state agencies investigate Medicaid providers for compliance issues and fraud. The Medicaid Fraud Control Unit oversees relevant state felonies, such as fraud and theft, and its investigations may result in imprisonment, fines and exclusion from the Medicaid program. But this criminal arm has concurrent jurisdiction with the Civil Medicaid Fraud Division, which pursues civil fraud.That means the civil division can issue a subpoena for documents from a Medicaid provider who doesn't even know that a parallel criminal investigation is ongoing when the information is shared with criminal investigators.

And the criminal investigators supplement the civil staff by conducting site inspections, usually for providers who meet the profile for criminal fraud. That means criminal investigators are using the guise of an administrative review to start a criminal investigation. This level of cooperation and coordination is statutorily required so the two sides of the legal coin don't run parallel investigations, but rather attack a case in a coordinated effort.

Parallel civil and criminal proceedings that examine the same conduct are not only permissible but often are labeled as being in the public interest. However, when parallel civil and criminal investigations become too intertwined, they cease to be parallel and create ample opportunities for violations of the Constitution's Fourth, Fifth and/or Sixth Amendments.

Courts have found that such efforts can cross the line and to determine whether that's happened, they look at: (1) whether there was notice that evidence could be used in a criminal proceeding; (2) whether a civil investigation was brought in bad faith; and (3) whether the target of the investigation had a lawyer.In the securities cases against HealthSouth mogul Richard Scrushy, a court reasoned that there was a "danger of prejudice flowing from testimony out of a defendant's mouth at a civil proceeding [which] is even more acute when he is unaware of the pending criminal charge."

Texas HB 2292 may appear to have created efficiency but it actually created dangerous legal territory. Until the criminal and civil investigations in Texas are taken out of lock step, judges should toss the evidence gathered under a civil ruse and used in criminal investigations. Our Legislature needs to go back to the drawing board and protect us both against Medicaid fraud and the erosion of civil rights.

Philip H. Hilder, a former federal prosecutor and founder of Hilder & Associates, P.C., focuses on white-collar criminal defense.

Reprinted from the Houston Chronicle - With Permission

December 21, 2010 in Fraud | Permalink | Comments (3) | TrackBack (0)

Monday, December 20, 2010

SEC Agrees to First Non-Prosecution Agreement in Fraud and Insider Trading

Guest Blogger - Michael Volkov (Mayer Brown)

The SEC announced that it has entered a non-prosecution agreement with Carter's Inc. under which the Atlanta-based company will not be charged with any violations of the federal securities laws relating to its Executive Vice President’s (Joseph M. Elle’s) alleged role in insider trading and financial fraud.  The non-prosecution agreement reflects the first use of the SEC’s cooperation policy announced earlier this year which seeks to incentivize cooperation in SEC investigations.

In support of its decision, the SEC cited the relatively isolated nature of the unlawful conduct, Carter's prompt and complete self-reporting of the misconduct to the SEC, its exemplary and extensive cooperation in the investigation, including undertaking a thorough and comprehensive internal investigation, and Carter's extensive and substantial remedial actions. 

According to the SEC's complaint filed in U.S. District Court for the Northern District of Georgia, Elles allegedly conducted his scheme from 2004 to 2009 while serving as Carter's Executive Vice President of Sales. The SEC alleges that Elles fraudulently manipulated the dollar amount of discounts that Carter's granted to its largest wholesale customer — a large national department store — in order to induce that customer to purchase greater quantities of Carter's clothing for resale. Elles then allegedly concealed his misconduct by persuading the customer to defer subtracting the discounts from payments until later financial reporting periods. He allegedly created and signed false documents that misrepresented to Carter's accounting personnel the timing and amount of those discounts.

The SEC further alleges that Elles realized sizeable gains from insider trading in shares of Carter's common stock during the fraud. Between May 2005 and March 2009, Elles realized a profit before tax of approximately $4,739,862 from the exercises of options granted to him by Carter's and sales of the resulting shares. Each of these stock sales occurred prior to the company's initial disclosure relating to the fraud on Oct. 27, 2009, immediately after which the company's common stock share price dropped 23.8 percent.

After discovering Elles's actions and conducting its own internal investigation, Carter's was required to issue restated financial results for the affected periods.

Under the terms of the non-prosecution agreement, Carter's agreed to cooperate fully and truthfully in action filed against any further investigation conducted by the SEC staff as well as in the enforcement Elles.


December 20, 2010 in Deferred Prosecution Agreements, SEC | Permalink | Comments (0) | TrackBack (0)

Saturday, December 18, 2010

In the News & Around the Blogosphere

Friday, December 17, 2010

Glenn Straub: Not Guilty!

The federal government charged Glenn Straub, and his company Palm Beach Polo Holdings, Inc., with filling in two wetlands within the jurisdiction of the United States in violation of the Clean Water Act, 33 USC 1319. The case involved two pieces of property in Wellington, Florida.

In fact, Straub engaged a contractor to remove Melaleuca trees and Brazilian Pepper trees from two of his properties.  The State of Florida recognizes these plants as invasive noxious weeds which destroy wetlands. Straub obtained a vegetation removal permit from the Village of Wellington prior to starting the work, and hired a contractor who used a rotary cutter specially designed to avoid any impact on the soil.  

The case was brought in the Southern District of Florida. The trial, in Ft. Lauderdale, lasted six days. Yesterday, after deliberating four hours, the jury found both defendants not guilty on all counts. Congratulations to Straub’s attorney, Stephen Binhak, of Miami, and Palm Beach Polo Holdings’ attorney, Craig Galle, of Wellington.  


December 17, 2010 in Environment | Permalink | Comments (0) | TrackBack (0)

Can You Convict for Honest Services When You Haven't Charged Honest Services?

According to the 8th Circuit Court in the case of United States v. Redzic, the answer to this question is "yes." The defendant was convicted of mail fraud, wire fraud, bribery, and conspiracy.  The mail fraud and wire fraud charges were premised upon sections 1341 and 1343, not 1346. The defendant notes on appeal  that he had been indicted, that the government's argument at trial, and that the jury instructions at trial all pertained to a defrauding of property under 1341 and 1343.  The problem was that the property in this case happened to be licenses and as previously held in the Cleveland case, regulatory licenses are not property for purposes of mail fraud. So the government's response is - well then let's call this honest services.  But there appears to be one problem in doing that - they failed to charge the case this way.

The 8th Circuit holds "[w]hile we believe it would have been preferable in Redzic's case for the indictment to have included the term 'honest services,' its omission was not fatal." 

To put this all in context -  this opinion is a post-Skilling remand. And yes, the 5th Cicuit held in United States v. Griffin, 324 F.3d 330 (2003):

There is no doubt that the district court erred by instructing the jury that a scheme to defraud includes "a scheme to deprive another of the intangible right to honest services" because the indictment did not contain a reference to 18 U.S.C. § 1346 or its language. And, that error was obvious. Furthermore, we can not permit the district court to second guess "what was in the mind[ ] of the grand jury at the time [it] returned the indictment." Russell,369 U.S. at 770, 82 S.Ct. 1038. To do so would violate the Appellants' Fifth Amendment right to indictment by a grand jury and undermine the public's faith in the integrity of our judicial proceedings. 

I wonder what Justice Scalia will think about the 8th Circuit's decision in Redzic?

(esp) (with a hat tip to Dane Ball)

December 17, 2010 in Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Monday, December 13, 2010

Kozinski Tells Prosecutors to Quit Wasting Taxpayer Resources

The Ninth Circuit Court of Appeals reversed the conviction of Prabhat Goyal, former chief financial officer of Network Associates (formerly known as McAfee), holding that the government "failed to carry its burden" on an issue of materiality.  The court stated that "Goyal's desire to meet NAI's revenue targets, and his knowledge of and participation in deals to help make that happen, is simply evidence of Goyal's doing his job diligently." The court noted that "Goyal's presumed knowledge of GAAP as a qualified CFO does not make him criminally responsible for his every conceivable mistake."

But be sure to read the concurring opinion by Hon. Kozinski.  He states in part:

This case has consumed an inordinate amount of taxpayer resources, and has no doubt devastated the defendant's personal and professional life.  The defendant's former employer also paid a price, footing a multimillion dollar bill for the defense.  And, in the end, the government couldn't prove that the defendant engaged in any criminal conduct.  This is just one of a string of cases in which courts have found that federal prosecutors overreached by trying to stretch criminal law beyond its proper bounds." (citations omitted)

He ends his concurrence with: "Although we now vindicate Mr. Goyal, much damage has been done.  One can only hope that he and his family will recover from the ordeal.  And perhaps, that the government will be more cautious in the future."

Opinion here

(esp)(hat tip Christopher R. Noyes)

December 13, 2010 in Fraud, Judicial Opinions | Permalink | Comments (1) | TrackBack (0)

Sunday, December 12, 2010

Operation Broken Trust - But Who Broke the Trust?

The government is announcing here some statistics from Operation Broken Trust. (see also here) They are stating:

"Starting on Aug. 16, 2010, to date Operation Broken Trust has involved enforcement actions against 343 criminal defendants and 189 civil defendants for fraud schemes involving more than 120,000 victims throughout the country. The operation’s criminal cases involved more than $8.3 billion in estimated losses, and the civil cases involved estimated losses of more than $2.1 billion"

But the real question is who broke the trust, not what are the ramifications of the eventual trust being broken.  Would earlier enforcement have resulted in less damage to individuals?  And would proactive education have proved even more significant in curtailing these fraud schemes?


December 12, 2010 in Fraud | Permalink | Comments (0) | TrackBack (0)

Saturday, December 11, 2010

In the News & Around the Blogosphere

Mike Scarcella, BLT Blog, Roger Clemens' Lawyers See Document Fight on Horizon

Liam Moloney & Salvatore Pizzo, WSJ, Parmalat Founder Receives 18-Year Prison Sentence

Pater Lattman, NYTimes Dealbook, Ex-Goldman Programmer Found Guilty of Code Theft

Jenna Greene, BLT Blog, SEC Settles Vitesse Stock Option Backdating Case 

Samuel Rubenfeld, WSJ Blog, Lanny Breuer Hails US Anti-Corruption Efforts At UN Conference

Michael A. Memoli, LATimes, Senate convicts federal judge Thomas Porteous of corruption and perjury

DOJ Press Release, Three Former Financial Services Executives Indicted for Fraudulent Conduct Affecting Contracts Related to Municipal Bonds

DOJ Press Release, Former Goldman Sachs Computer Programmer Found Guilty in Manhattan Federal Court of Theft of Trade Secrets

DOJ Press Release, Former Employee of U.S. Army Contractor in Afghanistan Sentenced in Manhattan Federal Court to 41 Months in Prison for Accepting Corrupt Payments

DOJ Press Release, Perpetrator of $50 Million Real Estate Ponzi Scheme Sentenced to Six Years in Prison

DOJ Press Release, Former New York State Senator and Putnam County Executive-Elect Pleads Guilty in White Plains Federal Court to Obstruction of Justice and Tax Charges

Jonathan Weil, Bloomberg Opinion, Wall Street's Worst at Least Can Do the Math: 

Jesse Eisinger, Propublica, Where Are the Financial Crisis Prosecutions?

DOJ Press Release, Former CEO of the Morgan Crucible Co. Sentenced to Serve 18 Months in Prison for Role in Conspiracy to Obstruct Justice

DOJ Press Release, RAE Systems Agrees to Pay $1.7 Million Criminal Penalty to Resolve Violations of the Foreign Corrupt Practices Act -Voluntary Disclosure Results in Non-Prosecution Agreement

DOJ Press Release, Justice Department Charges Seventh Individual for Allegedly Filing Fraudulent Claims for Oil Spill Compensation -Seven Defendants in Total Charged to Date in North Carolina, Texas, Mississippi, Michigan, Alabama and Louisiana


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

Thursday, December 9, 2010

Ninth Circuit Sentencing Case - Denial of Rehearing En Banc

The Ninth Circuit in U.S. v. Edwards had an unusual set of events.  It seems a judge sua sponte asked the court to rehear a case en banc.  The court then voted not to take the matter up, and a stinging dissent was authored by four judges - dissenting from the denial of the rehearing en banc.  The issue is simple - the dissenting judges believed that the sentence was too low in this white collar case, as well as other white collar matters in the Ninth Circuit, and something needed to be done about this.  To quote -  

"our court's practice of uncritically affirming unreasonably lenient sentences for white-collar criminals renders the Sentencing Guidelines a nullity, makes us an outlier among the circuit courts, and impairs our ability effectively to review sentences for substantive reasonableness. Our "rubber-stamp" approach to reasonableness review permits district courts to abuse their sentencing discretion by paying lip service to appropriate sentencing considerations while paying inadequate heed to the substance of those considerations. Hence we can end up with people like Edwards who engage in fraud and other criminal activities intended to cause extremely large monetary damages, yet who spend token and inadequate time, or even not one day, in jail."

This dissent claims that the Ninth Circuit is "an outlier when contrasted with other circuits' substantive scrutiny of lenient white-collar sentences." It notes that, "[u]nless and until an en banc opinion posts an outer limit on sentencing discretion, we can expect to see more non-imprisonment sentences for serious offenses committed by repeat white-collar offenders. As a circuit we are not taking seriously the recommendations of the Sentencing Guidelines Commission in white-collar criminal matters."

(esp)(w/ a hat tip to Professor Jerold Israel)

December 9, 2010 in Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Thanks For Your Patience

Thanks for your patience with the slow blogging of these past couple of months.  I am going through my emails and will be posting in the next couple of weeks the many items that you have been kind enough to send.  Please continue to send me your news.


December 9, 2010 in News | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 8, 2010


Tuesday, December 7, 2010

In the News & Around the Blogosphere

Friday, December 3, 2010

Pepper On Deck

The U.S. Supreme Court will hear argument Monday in Pepper v. United States, out of the Eighth Circuit. The questions presented are: 1) whether a court of appeals can categorically prevent a sentencing court from considering a defendant's post-sentencing rehabilitation; and 2) whether, when a new judge is assigned to re-sentence the defendant after remand, the judge is obligated under law of the case doctrine to follow the original sentencing judge's findings that were left undisturbed on appeal.

Although Pepper  was a drug prosecution, the case will have important consequences for white collar practitioners. On a broader level, the Eighth Circuit's opinion should be seen as part of a massive resistance to the Booker-Gall-Kimbrough line of cases by some of our federal appellate courts. Title 18, United States Code, Section 3553(a)(1) commands the sentencing court to consider "the history and characteristics of the defendant" in determining the sentence to be imposed and Section 3661 directs that "[n]o limitation shall be placed on the information concerning the background, character, and conduct of a person convicted of an offense which a court of the United States may receive and consider for the purpose of imposing an appropriate sentence."

As the U.S. Supreme Court established in Booker, and reiterated in Gall and Kimbrough, a sentencing Court has broad discretion to consider nearly every aspect of a particular case (and a particular defendant) in fashioning an appropriate sentence. “It has been uniform and constant in the federal judicial tradition for the sentencing judge to consider every convicted person as an individual and every case as a unique study in the human failings that sometimes mitigate, sometimes magnify, the crime and the punishment to ensue.”  Gall, 552 U.S. at 52 (citing Koon v. United States, 518 U.S. 81, 113 (1996)).

Apparently none of this impressed the Eighth Circuit. When the district court originally sentenced Jason Pepper to 24 months, based on a 75% downward departure for substantial assistance, the Eighth Circuit reversed in Pepper I. On remand the district court gave Pepper a 40% downward departure for substantial assistance, followed by a 59% downward variance, resulting once more in a 24 month sentence. One of the reasons the sentencing court cited for the variance was Pepper's post-sentencing rehabilitation. The Eighth Circuit reversed again, in Pepper II, upholding the 40% departure, but overturning the variance, based, among other things, on its flat rule prohibiting consideration of post-sentencing rehabilitation. The Supreme Court vacated the judgment and remanded the case to the Eighth Circuit for reconsideration in light of Gall. The Eighth Circuit reconsidered but reached the same result in Pepper III. Pepper was then resentenced by a different sentencing court that did not consider itself bound by the 40% downward departure for substantial assistance and also rejected any downward variance. The new sentence was 77 months, later reduced to 65 months after the Government filed a Rule 35(b) Motion. That sentence was affirmed in Pepper IV. Believe it or not, this is a truncated history.

The portion of the Eighth Circuit's ruling prohibiting consideration of post-sentencing rehabilitation is so bad that not even DOJ will defend it. The Eighth Circuit is certainly not alone in trying to gut Booker-Gall-Kimbrough. Many other circuits are piling on, usually under the guise of finding procedural errors by the district courts. More and more of these procedural errors look suspiciously substantive in nature. We are at a critical juncture.

Here are some of the briefs: Pepper Brief for Petitioner Pepper Brief for the United States Pepper Petitioner's Reply Brief Pepper NACDL Amicus Brief Pepper U.S. Reply Brief Pepper Amicus Brief in Support of Judgment Below


December 3, 2010 in Sentencing | Permalink | Comments (1) | TrackBack (0)