Wednesday, September 28, 2011

In the News & Around the Blogosphere

Bob Van Voris & Patricia Hurtado, San Francisco Chronicle, Bloomberg News, Ex-Galleon Trader Zvi Goffer Sentenced to 10 Years in Prison

Fox News, Italy G8 Corruption Case to Go to Trial

Annie Sweeney, Chicago Tribune, Federal judge delays Blagojevich sentencing

Forbes (AP), Sentencing postponed in Alabama gambling probe

DOJ Press Release, Investment Club Manager Pleads Guilty to $40 Million Fraud

Amanda Bronstad, NLJ, Prominent white-collar defender moves to Venable

Jennifer DePaul, Journalism & Women Symposium, Bernie Madoff: A Journalist’s Story About the Ponzi Scheme

Julia Werdigier & Jack Ewing,, NYTimes, Rogue Trading Leads UBS Chief to Resign (hat tip to Ivan Dominguez)

Mike Koehler, FCPA Professor, Individual DOJ Prosecutions By The Numbers

Keith Goldberg, Law360, Rajaratnam Sentencing Delayed Until October (subscription required)

Ben Present, Legal Intelligencer, Conahan Gets 17.5 Years for Role in Luzerne Scandal

Richard A. Oppel, Jr., NYTimes, Sentencing Shift Gives New Leverage to Prosecutors

Zoe Tillman, BLT Blog, Government Announces Return of $55M from Alleged Ponzi Schemes


September 28, 2011 in News | Permalink | Comments (0) | TrackBack (0)

FCPA In The Trenches

I get emails almost every day touting the latest FCPA seminars, webinars, panel discussions, compliance programs, and treatises. Many of these events are no doubt helpful to the white collar practitioner. But what really happens in the trenches for the few brave individuals who take the government to trial in FCPA cases? What do the final FCPA jury instructions look like? The following links are to selected portions of actual instructions given to juries by federal district courts in some recent prominent FCPA cases. Enjoy.

Bourke_Final_Jury_Charge Selected Instructions[1]

U.S. v. Green Selected Jury Instructions

Lindsey Manufacturing Selected Jury Instructions


Hat tip to Todd Foster for the Patel instructions.



September 28, 2011 in FCPA, Fraud, Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 27, 2011

SEC Counsel Criticized for Conflict of Interest

One would expect that the SEC, which brings actions against individuals or corporations based on their failure to disclose a material conflict of interest to the public, would be sensitive to conflicts of interest of its own employees.  Nonetheless, as a report released last week by SEC Inspector General H. David Kotz reveals, former SEC general counsel David M. Becker participated significantly in decisions relating to the distribution of SIPC funds relating to the Bernard Madoff case although he had a significant personal financial interest in the decisions.

Becker and two brothers in 2004 inherited and in 2009 liquidated $2 million in Madoff investment funds, $1.5 million of which were purported profits from the original investment.  Later in 2009, Becker was prominently involved in two substantial questions in which the SEC recommendations to the bankruptcy court, while not conclusive, would be expected to carry significant weight in the court, given the deference courts pay to administrative agency decisions.

One issue concerned what position the SEC would take as to what should be considered "net equity," the amount that customers can claim in a brokerage liquidation.  That question was essentially the same as what should be considered the "net equity" figure in a "clawback" action by the bankruptcy trustee, a decision in which Becker had a significant potential personal monetary interest, even though he and his family had not yet been sued (they were later).  Becker initially argued against the "money-in/money-out method" under which an investor could recover only the amount he invested and for the "last account statement method" under which an investor could recover the amount of the last - and fictitious - statement from Madoff.  The "last account statement method" would obviously have been beneficial to Becker in that it would have protected him in a "clawback" action by the Madoff bankruptcy trustee for the $1.5 million he and his brothers had received in Madoff "profits."

After consideration, Becker concluded that the last account statement method was unsupportable.  His position was in accord with that of the SEC, SIPC, the bankruptcy trustee, and ultimately the Second Circuit, In re Bernard Madoff Investment Securities, LLC, ___ F.3d ___ (2d Cir., August 16, 2011). Becker argued, however, contrary to the position of SIPC, for the "constant dollar approach" in which the recovery under the money-in/money-out method would be adjusted upward for inflation and lost real economic gain.  Under this approach, the bankruptcy trustee's potential clawback recovery from the Beckers would have been reduced by $138,500.

It is apparent, as any law student who has taken an ethics course would realize, and as the Inspector General determined, that Becker had a conflict of interest in the resolution of these questions.  Yet, the SEC's "ethics" officer, who reported to and was evaluated by Becker, saw no conflict.  The ethics officer, revealing a narrow view of conflict of interest, and an apparent misunderstanding of relevant securities law, found no conflict in part because there was "no direct and predictable effect" between the SEC's position and the trustee's clawback decision.

SEC Chairwoman Mary L. Schapiro was aware, to some extent, of Becker's Madoff financial interest, but she did not suggest he recuse himself.  She and Becker both contended before Congress last week that he had acted properly by reporting the conflict to her and others.  That defense, however, is limited and misplaced.

Reporting a conflict - especially if only to underlings and colleagues - is not sufficient.  Even public disclosure of Becker's personal interest - and it was not disclosed to the public, Congress, the courts, or four of the SEC's five commissioners - would not have cured the conflict.  Becker simply should have recused himself and not have participated at all in decisions as to the formulation of SEC policy relating to recovery of Madoff assets.

Schapiro was no doubt swayed by her respect for Becker's legal ability and integrity.  Becker, who has written that he did "not remember giving any consideration to how the various proposed outcomes would affect me," may well have believed that his personal interest would not affect his professional judgment.  In any case, his decision not to recuse himself and Schapiro's at least implicit condonation of this decision, demonstrate that the agency which polices conflicts of interest in the marketplace fails to appreciate them when they occur in its own house.

The Inspector General referred this matter to DOJ for consideration for criminal prosecution.  I do not suggest that Becker acted criminally with respect to 18 U.S.C. 208, the statute proscribing acts affecting a personal financial interest, or any other law.  He may well have lacked whatever scienter is required under the law based on his reporting to others or other acts or circumstances.  Not every improper act is criminal.


September 27, 2011 in News, SEC, Securities | Permalink | Comments (0) | TrackBack (0)


In the news again - Gary Fields & John R. Emshwiller, WSJ, As Federal Crime List Grows, Threshold of Guilt Declines

(esp)(w/ a hat tip to Professor Michael Finch)

September 27, 2011 in News | Permalink | Comments (0) | TrackBack (0)

Lindsey FCPA Defendants File Reply Brief

The Lindsey Manufacturing Reply Brief was filed Sunday night by Defendants Lindsey Manufacturing Company, Keith E. Lindsey, and Steve K, Lee. This is a reply to the Government's Opposition to Defendants' Supplemental Brief in Support of Their Motion to Dismiss the Indictment With Prejudice Due to Repeated and Intentional Government Misconduct. The case is in front of U.S. District Judge Howard Matz in the Central District of California.


September 27, 2011 in Fraud, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Sunday, September 25, 2011

Solyndra Execs: The Best Week Possible

The Washington Post's Chris Cillizza thinks Solyndra had the worst week in Washington, because its CEO and CFO invoked the Fifth Amendment's Privilege Against Self-Incrimination in front of the House Energy and Commerce Committee. According to Cillizza, the silence of the executives "won't win them any allies in Washington." What allies? These guys already have bruises all over their bodies from where politicians have been touching them with eleven foot poles. Cillizza believes that their taking five "ensures that the probe into how Solyndra won the initial loan in 2009...will not only continue...but grow." This is silly. A vigorous criminal investigation is already assured. If the execs had talked they only would have made the DOJ's job easier.

The first place a bank looks when a big loan goes bad is the borrower's application, including the financial statement. For decades the DOJ has operated as a criminal collection agency for our country's financial institutions. It only gets worse if the loan, in this case about a half billion, is guaranteed by Uncle Sugar. Add in the DC gang mentality attendant upon what has become a political scandal and you would have to be a cretin to open yourself up to possible charges of false statements, perjury, or obstruction of justice. This one was a no-brainer. Kudos to the executives and their attorneys for not being idiots.


September 25, 2011 in Congress, Current Affairs, Fraud, Investigations, News, Privileges | Permalink | Comments (1) | TrackBack (0)

Wednesday, September 21, 2011

In the News & Around the Blogosphere

Rich Rosenfeld joined Mayer Brown as the co-chair of Securities Litigation and Enforcement Department here

Darren Samuelson, PoliticoPro, Solyndra Execs to Take the Fifth

David Ingram, BLT Blog, Embattled Solar Company Solyndra Hires McDermott

Matthew Huisman, BLT Blog,  Silbert: Federal Sentencing Guidelines 'Beyond Draconian'

AP, Washington Post, Prosecutors ask Paris court to dismiss corruption case against former President Chirac

AP, Houston Chronicle, Jurors picked for Pa. corruption trial

Sue Reisinger, Corporate Counsel, Former SEC General Counsel Expected to Face DOJ Investigation

Mike Scarcella, BLT Blog, Williams & Connolly Fights SEC For Documents In Cendant Case


September 21, 2011 in News | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 20, 2011

Kevin Ring Sentencing

 Hon. Ellen Segal Huvelle issued a 42 page memorandum opinion regarding the sentencing of Kevin Ring. It was accompanied by a two page chart that includes what were the government recommendations in other related cases (here).  The court notes the sharp difference in recommendationbetween the government and defense in this case - a 17 year difference. The case comes from the Jack Abramoff lobbying scandal that caused several Greenberg Traurig lobbyists to "pled guilty to participating in an influence peddling and bribery scheme." 

A key issue raised by the defense is "that the government is retaliating against him for exercising his Sixth Amendment right to trial." The court notes that "the government cannot retaliate against defendant for exercising his rights."  The detailed sentencing methodology follows with the court's conclusion of a guidelines range of 46-57 months.

See also Doug Berman, Sentencing Law & Policy Blog here; Mary Jacoby, Main Justice, Judge Rejects Recommended Sentence for Ex-Abramoff Lobbyist


September 20, 2011 in Fraud, Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Monday, September 19, 2011

New Scholarship - Overcriminalization 2.0: The Symbiotic Relationship Between Plea Bargaining and Overcriminalization

Lucian Dervan (Southern Illinois) has a new article titled, "Overcriminalization 2.0: The Symbiotic Relationship Between Plea Bargaining and Overcriminalization" that appears in George Mason's Journal of Law, Economics and Policy.  The abstract states:

"In discussing imperfections in the adversarial system, Professor Ribstein notes in his article entitled Agents Prosecuting Agents, that "prosecutors can avoid the need to test their theories at trial by using significant leverage to virtually force even innocent, or at least questionably guilty, defendants to plead guilty." If this is true, then there is an enormous problem with plea bargaining, particularly given that over 95% of defendants in the federal criminal justice system succumb to the power of bargained justice. As such, this piece provides a detailed analysis of modern-day plea bargaining and its role in spurring the rise of overcriminalization. In fact, this article argues that a symbiotic relationship exists between plea bargaining and overcriminalization because these legal phenomena do not merely occupy the same space in our justice system, but also rely on each other for their very existence."


September 19, 2011 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Saudi Arabia-based Tamimi Global Company Ltd (TAFGA) Gets DPA

A DOJ Press Release here reports that "Saudi Arabia-based Tamimi Global Company Ltd (TAFGA) has agreed to pay the United States $13 million to resolve criminal and civil allegations that the company paid kickbacks to a Kellogg Brown & Root Inc. (KBR) employee and illegal gratuities to a former U.S. Army sergeant, in connection with contracts in support of the Army’s operations in Iraq and Kuwait."  The press release states:

"Under the terms of that agreement, TAFGA will pay the United States $5.6 million as part of a deferred prosecution and institute a strict compliance program to ensure that the company and its employees will abide by the legal and ethical standards required for government contracts.  If TAFGA meets its obligations under the agreement without violation for 18 months, the United States will dismiss the criminal charges."


September 19, 2011 in Deferred Prosecution Agreements, Fraud, News, Prosecutions, Settlement | Permalink | Comments (0) | TrackBack (0)

Saturday, September 17, 2011

Eighth Circuit Affirms Rubashkin Case

One of the 2010 White Collar Crime Blog Awards went to the Sholom Rubashkin case. (see here).  It gave it a "collar  for the Case Most Needing Review - Sholom Rubashkin’s 27 year sentence."

The Eighth Circuit has now reviewed that case, but unfortunately for Rubashkin, with a result that does not change its prior outcome.  The court held that "Rubashkin did not make a timely recusal motion . . " and that "[a]fter studying the lengthy record we find no evidence that the district court's decision to remain on the case prejudiced Rubashkin's verdict."  The court also concluded "that Rubashkin's money laundering convictions were lawful and did not merge with any other of his crimes."  Finally, the court upheld the sentence, saying that "the district court's loss calculation" was not error.  The Eighth Circuit states, "[s]entences within the guideline range are presumed to be substantively reasonable."

And so for now, Rubashkin's 27 year sentence remains. Top law professors who are key sentencing experts wrote an amici brief in this case, in support of Rubashkin. Hopefully, the Supreme Court will re-examine this case.

Opinion here.

See Linda Friedman Ramirez, International Criminal, Extradition and Immigration Defense News, White Collar Crime: 8th Circuit Affirms Rubashkin's Conviction and Sentence (Agriprocessor Fraud Offenses)

See also Doug Berman, Sentencing Law & Policy, Eighth Circuit panel unanimously affirms Rubashkin federal convictions and lengthy prison sentence


September 17, 2011 in Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Friday, September 16, 2011

In the News & Around the Blogosphere

Thursday, September 15, 2011

"Rogue Trader" - OUCH

UBS is having another "ouch" moment as the media is reporting on a rogue trader. The typical questions are - how could this have happened; why was it not discovered sooner; who should be held liable; and should there be criminal liability?  It is too soon to answer many of these questions. But here are some points of interest -

UBS has a corporate responsibility policy that states:

"UBS is firmly committed to corporate responsibility and actively strives to understand, assess, weigh and address the concerns and expectations of the firm's stakeholders. This process supports UBS in its efforts to safeguard and advance the firm’s reputation for responsible corporate conduct. In very direct ways, responsible corporate conduct helps create sustainable value for the company."

Its policies include a host of different preventative measures, such as money laundering prevention here.  It takes pride in employees and notes that "[o]ur employees have the breadth of our businesses, global career opportunities and a collaborative, performance-oriented culture as a platform for individual success."

Rogue employees are not a new development for the corporate arena. No matter how many controls are in place and no matter how much oversight there might be, it is a problem to have full compliance. Knowing this, it seems important to provide companies with a "good faith" defense when a rogue employee commits acts that might be considered criminal.  Unfortunately, to date, courts have only seen fit to insert such as defense in the civil area and not the criminal sphere.  (See Podgor, A New Corporate World Mandates a Good Faith Affirmative Defense)  But corporate criminality in the federal system is premised on respondeat superior and the acts of a rogue employee are hardly for the benefit of the company.

See also -

Dan Fisher, Why Rogue Traders Get Jail But Bad Execs Get A Pension

Frank Jordans & Paisley Dodds, Houston Chronicle, Rogue trader suspected in $2 billion UBS loss

Nathan Vardi, Forbes, Rogue Trader Deals Big Blow To UBS

Victoria Howley & Emma Thomasson, Reuters, UBS $2 billion rogue trade suspect held in London

The Telepgraph, UBS rogue trader: statement to employees in full


September 15, 2011 in Fraud, Media, News, Securities | Permalink | Comments (1) | TrackBack (0)

Wednesday, September 14, 2011

New Scholarship - Public Perceptions of White Collar Crime Culpability: Drawing Lines Amid Moral Ambiguity

Stuart P. Green (Rutgers-Newark) and Matthew B. Kugler (Lehigh) have a new piece titled "Public Perceptions of White Collar Crime Culpability: Drawing Lines Amid Moral Ambiguity." The abstract states:  

"Although we are accustomed to thinking of "crime" as involving the most unambiguously blameworthy sorts of conduct in which citizens can engage, the reality is more complex, especially when we look at certain kinds of "white collar" behavior. In this set of empirical studies, participants were asked to assess a series of scenarios that presented potentially criminal white collar behavior. Lay persons made fairly fine-grained distinctions when deciding which behaviors they thought worthy of criminalization. In some cases, the distinctions made by respondents were consistent with current law. For example, in the case of fraud, participants distinguished between misrepresentations that went to the heart of the bargain and misrepresentations that were extraneous. In other cases, however, there were significant divergences between lay subjects’ views and current law. In the case of perjury, for example, participants drew a weaker distinction between lying in court under oath and lying to police while not under oath, and between literally false statements and literally true but misleading statements, than does the law. There are also divergences with respect to bribery: respondents sought to criminalize both commercial bribery and payments accepted by an office-holder in return for performing a non-official act, while American federal law criminalizes neither."


September 14, 2011 in Scholarship | Permalink | Comments (0) | TrackBack (0)

DOJ Hiring - What Constitutes Merit?

David Ingram, BLT Blog, Senator Wants Inquiry Into DOJ Civil Rights Hires has an interesting post on a request for an investigation of hiring practices at DOJ.  DOJ hiring practices was an issue in a prior administration (see here, here, and here)(see also The Tainted Federal Prosecutor in an Overcriminalized Justice System). 

But this new request for an investigation seems different.  What was alleged in the past was politicized hiring, something that is clearly improper.  To now call for an investigation merely because folks might have membership in certain groups is different from claiming that folks are hired because of this status.  It does not seem unusual that those seeking to join the civil rights division of the DOJ would have been active in groups that pressed for civil rights in the past.  In fact, such activities (not membership) might add to the qualifications of the individual if they had experience researching, writing, or handling civil rights issues. To think that these activities is a function of just one political party demeans the excluded party.   

Listening (here) and reading (here) the testimony of Thomas Perez, Assistant Attorney General Civil Rights Division shows a most impressive record. For example, "[i]n fiscal year 2009, we filed more criminal civil rights cases than ever before, and then exceeded that record in Fiscal Year 2010, filing 125 criminal cases."  He also spoke about the protection being provided to servicemembers from improper foreclsures. I'm impressed.


September 14, 2011 in Prosecutors | Permalink | Comments (0) | TrackBack (0)

Monday, September 12, 2011

Maxim Healthcare Gets DPA

A DOJ Press Release here  states that "Maxim Healthcare Services Inc., one of the nation’s leading providers of home healthcare services, has entered into a settlement to resolve criminal and civil charges relating to a nationwide scheme to defraud Medicaid programs and the Veterans Affairs program of more than $61 million."  The Deferred Prosecution Agreement (DPA) provides that Maxim will pay "a criminal penalty of $20 million and to pay approximately $130 million in civil settlements in the matter."  The DPA, which requires the company to meet reform and compliance measures, lasts for two years.

As with many companies who enter into DPAs, there are also individuals being prosecuted.  In this case the press release notes that "[t]o date, nine individuals – eight former Maxim employees, including three senior managers and the parent of a former Maxim patient – have pleaded guilty to felony charges arising out of the submission of fraudulent billings to government health care programs, the creation of fraudulent documentation associated with government program billings, or false statements to government health care program officials regarding Maxim’s activities."

The press release also states that "[t]he government’s willingness to enter into a DPA with Maxim is due, in significant part, to the company’s cooperation and the reforms and remedial actions the company has taken – beginning particularly in May 2009 – including significant personnel changes: terminating senior executives and other employees the company identified as responsible for the misconduct; establishing and filling of positions of chief executive officer, chief compliance officer, chief operations officer/chief clinical officer, chief quality officer/chief medical officer, chief culture officer, chief financial and strategy officer, and vice president of human resources; and hiring a new general counsel."


September 12, 2011 in Fraud, Investigations, Prosecutions | Permalink | Comments (1) | TrackBack (0)

Saturday, September 10, 2011

New Scholarship - Reconsidering Antitrust Goals

Maurice E. Stucke (University of Tennessee) has a new piece titled Reconsidering Antitrust's Goals The abstract of the piece provides in part:

"This Article first summarizes the quest during the past 30 years for a single economic goal. It discusses why this quest failed. Four oft-cited economic goals (ensuring an effective competitive process, promoting consumer welfare, maximizing efficiency, and ensuring economic freedom) never unified antitrust analysis. After discussing why it is unrealistic to believe that a single well-defined antitrust objective exists, the Article proposes how to account antitrust’s multiple policy objectives into the legal framework. It outlines a blended goal approach, and the benefits of this approach in providing better legal standards and reviving antitrust’s relevance."


September 10, 2011 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, September 9, 2011

In the News & Around the Blogosphere

Federal Criminal Rules and Code - Plus - New Book

Check out the O'Connors 2011 edition of  Sean Buckley, Alexander Bunin, Edward Mallett, and Jeffrey S. Weiner's book Federal Criminal Rules & Codes plus. (see here).  The website says,

"O’Connor’s Federal Criminal Rules & Codes 2011 is the only codebook with annotated Federal Rules of Criminal Procedure and Federal Rules of Evidence. The book also includes other federal rules, Title 18 U.S.C., and selections from many other U.S.C. titles that provide for offenses or relate to criminal procedure."

The author list on this book is truly incredible.


September 9, 2011 in Books, Books [1] | Permalink | Comments (1) | TrackBack (0)

Government Successful in Yet Another Post-Skilling Case

In United States v. Langford, the Eleventh Circuit Court of Appeals found sufficient evidence in reviewing a post-Skilling case. The court notes in this decision that "[w]e have not expressly explored at length what manner of concealment, if any, is necessary to prove honest services mail or wire fraud.  However, we have said that honest services fraud 'may be proved through the defendant's non-action or non-disclosure of material facts intended to create a false and fraudulent representation."(citations omitted).  There is also an interesting question of "in furtherance" here.

(esp)(w/ a hat tip to Linda Friedman Ramirez)

September 9, 2011 in Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)