Friday, October 31, 2014
Earlier this month, I had the pleasure of once again attending the ABA Criminal Justice Section’s annual International White Collar Crime Institute in London. This year’s event included a host of excellent speakers from around the world addressing some of the most pressing issues in the field. I thought I would take just a few moments to share some of the insights and themes from the conference.
First, there was much discussion about deferred prosecution agreements in the UK. Though a very common means of resolving a criminal investigation in the US, DPAs only became possible in the UK earlier this year. Thus far, no DPAs have been announced in the UK. That might be about to change, however, as several speakers informed the audience that there are rumors in London that the first such DPA may be entered into towards the end of this year. We’ll be keeping an eye out for this significant development.
Second, many speakers pointed out important differences that exist globally when discussing white collar crime and enforcement. For example, in the UK, the SFO prefers that corporations not interview employees during an internal investigation. Once the US DOJ becomes involved, however, the DOJ tends to insist on interviews, thus creating a conflict of approaches. As another examples, the trend of requiring monitors as part of settlements is beginning to lose favor in the US. By comparison, the UK is currently moving towards monitorships. As a final example, the role of whistleblowers remains drastically different around the globe. In the US, whistleblowers and whistleblower incentive programs like the FCA and Dodd-Frank are generally considered important tools for discovering misconduct. In France, by comparison, whistleblowing is discouraged. In fact, according to our speakers, in France it would be illegal for an employer to require employees to engage in any form of whistleblowing. These are just a handful of examples of the significant differences that exist around the world and that create complex issues for resolution in cross-border criminal investigations and prosecutions.
Finally, I’ll briefly mention the panel I moderated. The panel examined collateral consequences of conviction around the world. Collateral consequences are an issue that is garnering much attention in the United States today. This is partly because of the ABA’s collateral consequences website, which is an excellent tool for researching the collateral consequences that might be applicable in a particular case. The website also gives some incredible insights into the breadth and scope of these collateral consequences. In Illinois, for examples, there are 2,266 statues, rules, and regulations imposing various collateral consequences. These include things like losing the right to vote, the right to drive, and the right to hold public office. One might lose a public pension, a business license, or even parental rights. One might lose access to public housing and food stamps. The list is voluminous. One of the most unusual collateral consequences in Illinois makes it a felony for a felon to “knowingly own, possess, have custody, or reside in residence with… an unspayed or unneutered dog or puppy older than 12 weeks of age…." Our conversation in London revealed that the trend of expanding collateral consequences is not limited to the United States. In the UK, prosecutors are now more likely to put forward collateral consequences during a prosecution and the courts are becoming more likely to impose them on individual defendants.
While there are many other fascinating issues that were covered during the conference, including discussion of virtual currencies, anti-bribery initiatives, whistleblowing generally, financial regulations, anti-trust prosecutions, and cyber security, I’ll stop here. But I hope this gives some insight into the complexities of international white collar crime in a global environment where significant differences abound.
Wednesday, October 29, 2014
James (Jimmy) LaRossa, one of New York City's top criminal defense lawyers, died recently. LaRossa, according to the New York Times obituary, see here, was "'the last of the gladiators' -- his characterization of defense lawyers." He was an old-fashioned criminal trial lawyer who tried big case after big case, often with little time for preparation. For him, cooperators were snitches and cooperation akin to treason. He was an extremely talented lawyer -- with great courtroom presence and a lightning quick mind. He was probably the best cross-examiner I have ever seen in a courtroom.
Although not the "last" of the "gladiators," LaRossa was one of a dying breed -- the "warriors" who were combative, never brought their clients to the prosecutor's office to make a proffer, and fought the government at every turn. The criminal defense bar and the practice of criminal law have in many ways changed in the last decade. Defense lawyers today are, as a rule, less experienced and therefore less skilled at trial, less antagonistic toward the government, and more willing to make cooperation deals so that their clients -- and they themselves in a sense -- become part of the prosecution team. LaRossa's death marks not only the loss of a "gladiator" but hastens the end of an era.
Monday, October 27, 2014
Imagine being so angry at prosecutorial shenanigans in one of your cases that you decide to write a book. A book that names names and settles scores. A book that details the Brady violations you believe occurred in your client's trial. A book that compares those purported violations to the undeniable Brady errors judicially noticed in the Ted Stevens prosecution. A book that identifies the DOJ officials connected to both your case and the Ted Stevens case and traces the rise, high within the ranks of DOJ and the White House, of the prosecutors you loathe. A book with a forward by none other than Ninth Circuit Chief Judge Alex Kozinski. Imagine this and you have imagined Sidney Powell's Licensed to Lie: Exposing Corruption in the Department of Justice.
This book is a terrific read, particularly for anyone making a living in the world of federal white collar investigations and trials. Both the federal white collar specialist and the intelligent lay reader should find it engrossing. I particularly enjoyed the "you are there" descriptions of defense strategy sessions and courtroom hearings.
Powell played a minor role on the Arthur Andersen appellate team and the lead role in the post-trial defense of Enron Barge defendant, and former Merrill Lynch executive, Jim Brown. She covers most or all of the Enron Task Force sins that have long been the subject of controversy in the white collar defense bar, including the practices of: providing mere summaries, rather than full interview reports, of exculpatory materials to the defense; withholding certain exculpatory information altogether; withholding agent notes of witness interviews; creating composite 302s that fail to reveal changing witness statements over time; designating potential defense witnesses as targets, in effect threatening them with prosecution if they testify; convincing compliant trial judges to approve clearly faulty jury instructions.
Powell reminds us as well that every Enron-related conviction that went up on appeal resulted in a partial or complete reversal. And although she had no involvement in the Ted Stevens case, Powell does an excellent job of summarizing, based on two publicly released investigations, the multiple material Brady/Giglio violations that occurred in that prosecution.
And yet this book, as informative and fun to read as it is, has some problems.
For openers, Powell sees the world in black and white terms. You are with her or against her on this ride, and God help you if get on Sidney's bad side. You tend to get painted in black and white terms. Ergo:
Enron Task Force Chief Andrew Weissman is "a narrow faced man with a beak of a nose."
DOJ Criminal Division Chief Michael Chertoff is "sharp-featured."
DOJ's Rita Glavin has "long black hair, sharp features, an easy smirk, and an affinity for androgynous attire."
Original Enron Task Froce Chief Leslie Caldwell is "a short no-nonsense looking woman with closely cropped hair."
FBI Special Agent Raju Bhatia is "smarmy."
Enron Barge Case prosecutor Kathryn Ruemmler, who later served President Obama as White House Counsel, has "a well known passion for expensive Chrisitan Louboutin red-soled stiletto heels." Those heels show up in more than one description of Ruemmler.
Matthew Friedrich, later Acting Assistant AG in charge of the Criminal Division, has "a boyish face that easily appeared smug."
You get the picture. But if you are lucky enough to be on Sidney's side. Well:
Ike Sorkin is "a handsome man with thick gray hair."
Richard Schaeffer is "a tall handsome impeccably dressed New York lawyer."
And so on.
Fifth Circuit Judges who might rule against Powell are suspected of being politically biased or intellectually corrupt. Thus, in describing the panel she drew for her Fifth Circuit argument that Jim Brown deserved a new trial (based on multiple Brady violations), Powell wonders "if [Judge] Graves...might have some connection with Ruemmler. She, logically, would have been the person to advise the president on Graves' nomination and assist Graves in the confirmation process." Powell also wonders "if Friedrich had been part of the confirmation process with [Judge] Southwick. Friedrich's meteoric rise within the department placed him as chief of staff to Attorney General Gonzalez when Southwick was nominated and confirmed." After the panel ruled unanimously against her, in an opinion authored by Judge Jerry Smith, Powell "struggled to grasp how a court that I had respected so much for so long could issue an opinion as result-driven, tortured, and just plain bad as this one was."
Second, Powell posits a past DOJ Golden Age, when prosecutors were fair and committed to doing justice, and contrasts it unfavorably with our present era of so-called corruption. Here's a news flash for Ms. Powell. There was never a Golden Age of prosecutorial fairness in the DOJ. There have always been good prosecutors and bad prosecutors, and Assistant U.S. Attorneys have long played a prosecutorial game quite legally and openly rigged in favor of the house.
Last, but by no means least, Powell refuses to deal seriously, or to deal very much at all, with Judge Jerry Smith's Fifth Circuit panel opinion denying Jim Brown a new trial. Powell passionately argues throughout the book that the government hid Brady material from Brown's trial defense team in a grave miscarriage of justice. Virtually every argument she makes, in front of every federal tribunal, is meticulously rendered in 400 plus pages. But her discussion of Judge Smith's opinion is curiously brief, covering two pages, and fails to address Smith's main points.
The Enron Barge case concerned an allegedly sham transaction between Enron and Merrill Lynch to purchase Enron barges. The government maintained that the deal was a sham, and not a real purchase, because Enron orally promised/guaranteed to take Merrill out of the transaction, by buying back the barges, or finding a third party buyer, within six months. Although Jim Brown and the other Enron Barge defendants saw their fraud convictions overturned by the Fifth Circuit, Brown had also been convicted of perjury and obstruction of justice for grand jury testimony regarding his understanding of the transaction.
Prosecutors refused to disclose the FBI's raw notes of Andrew Fastow's interviews to Brown's trial team, instead providing summaries. The raw notes, unlike the summaries, quoted Fastow as saying that he "never used the word promise" in conversations about a buy-back with Merrill executives. Judge Smith pointed out, however, that "any potential exculpatory value of the passages from the Fastow notes that were not disclosed to the defense is eliminated when we read them in context rather than looking just to the portions of the sentences that Brown cherry-picks."
Smith pointed to other portions of the raw notes and explained that:
The notes say, to give only a few examples, (1) “It was [Enron’s] obligation to use ‘best efforts’ to find 3rd party takeout + went on to say there would be 3rd party b/c AF is manager of third party,” (emphasis added); (2) “LJM was 3rd party + was already found;” (3) “[Fastow] told [Merrill Lynch] that [Enron] would get [Merrill Lynch] out, would get [illegible] or LJM to buy out;” and (4) “Come June 2000, if [Enron] did not have a buyer then LJM would step in to buy out.”
In other words, Fastow controlled a captive third party, LJM, and could effectively guarantee that if a buyer could not be found, LJM would take Merrilll out of the transaction in six months. Judge Smith noted that:
[T]he sentences that Brown cites from the Fastow notes do not say that the agreement as a whole was a “best efforts” agreement, pace Brown’s testimony; they say only that Enron would use its “best efforts” to find a buyer but that Fastow guaranteed that LJM2, which he controlled, would be that buyer if no one else was found. Indeed, Fastow admitted that, “[i]f call was transcribed—it should have blown the accounting.”
Now I'm perfectly willing to believe, and in fact I assume, that the Enron Barge defendants, including Jim Brown, got a really raw deal and should never have been indicted. And I'm also willing to hear a good argument that Judge Smith got his Brady analysis backasswards. But in a book devoted to exposing Brady error, written by one of the country's foremost appellate lawyers, I expect more than two pages of cursory, conclusory attacks on a key federal appellate decision. Powell fails to fairly present, much less refute, Judge Smith's specific points (incorrectly referring to his careful 19 page opinion as a "meager" nine pages). I call this a material omission.
Monday, October 6, 2014
Rob Cary's book, "Not Guilty: The Unlawful Prosecution of U.S. Senator Ted Stevens" is a wonderful read and reminder of what needs to be corrected in our criminal justice system. Discovery in a criminal case is incredibly important, and this book emphasizes its importance in the criminal justice system and to society. In white collar document driven cases, the amount of paperwork can be overwhelming. It becomes important to not merely provide discovery to defense counsel, but also that it be given in an organized manner. Dumping documents on defense counsel is not enough. And failing to provide crucial documents, witnesses, and evidence is even more problematic. More needs to be done to correct discovery injustices in society and hopefully this book can serve as the momentum and real-life story to make it happen.
Friday, October 3, 2014
In May, the Sentencing Council for England and Wales issued their "Fraud, Bribery and Money Laundering Offences - Definitive Guidelines." The Guidelines apply to "all individual offenders aged 18 and older and to organisations who are sentenced on or after 1 October 2014, regardless of the date of the offence."
Bret Campbell, Adam Lurie, Joseph Monreno, and Karen Woody of Cadwalader, Wickersham & Taft have a nice piece examining the new Guidelines in the Westlaw Journal of White-Collar Crime entitled UK Issues Sentencing Guideline for Individuals Convicted of White-Collar Offenses (28 No. 11, Westlaw Journal White-Collar Crime 1 (July 25, 2014)).
In reviewing the new Guidelines, it is fascinating to see the difference in approach when compared to the U.S. Sentencing Guidelines. To take just one example, the fraud guidelines for England and Wales focus on "culpability" and "harm." For culpability, the guidelines consider a number of factors indicating whether the person had "High Culpability," "Medium Culpability," or "Low Culpability." The factors include entries such as the role in group activities, the sophistication of the offense, and the motivation behind the actions. In examining harm, there are just five categories of loss, the highest of which is £500,000 or more. Finally, when determining the sentence, there are a limited number of categories and the highest range is 5-8 years in custody.
For anyone who works with the U.S. guidelines, the guidelines for England and Wales are a fascinating read for comparison, and I highly recommend you give them a look.
Wednesday, October 1, 2014
And here it is. DeLay v. State of Texas. To clarify my ealier comments, the majority held that DeLay did not commit or conspire to commit money laundering. He did not launder or conspire to launder criminally derived proceeds, because the facts proved by the State failed to prove a violation of the Texas Election Code. In other words, the State proved no underlying crime.
This just in. The Texas Court of Criminal Appeals has affirmed 8-1 the lower appellate court ruling vacating Tom DeLay's money laundering conviction. Why was the conviction vacated? DeLay's actions, even if proven, did not constitute the crime of money laundering under Texas law at the time he committed them. Here is the brief KPRC-TV story. Hat Tip to Roger Aronoff for the alert.