Thursday, April 28, 2016

Textualism and White Collar Crime

A wonderful article appeared in the NYLJ back in March concerning textualism in white collar law.  Authors Elkan Abramowitz and Jonathan Sack remark on the broadly worded statutes one finds in the white collar arsenal, and how Justice Scalia was a leader in using a textualist approach in interpreting these statutes.   The authors of this article reflect on the "exculpatory no" and obstruction of justice as two examples in demonstrating the use of textualism.

With Justice Scalia no longer with us, it will be interesting to see if others pick up this theme in current cases such as former Gov. McDonnell.

Article - Download Justice Scalia’s Approach to Textualism in White-Collar Law - Sack Abramowitz

(esp)   

April 28, 2016 in About This Blog, Scholarship | Permalink | Comments (0)

Monday, April 25, 2016

Supremes Take A Bank Fraud Case

The United States Supreme Court accepted cert this morning in Shaw v. United States here. In 2014 the Court had looked at section 1344(2) of the bank fraud statute. (Loughrin v. United States).  In contrast to Loughrin, this new case examines subsection (1), specifically the "scheme to defraud a financial institution" and whether it requires proof of a specific intent not only to deceive.  The case comes from the 9th Circuit where the court examined the question of "whether that means the government must prove the defendant intended the bank to be the principal financial victim of the fraud."  The Ninth Circuit  held that although there needs to be an intent to defraud the bank under section 1, there is no requirement that the bank "be the intended financial victim of the fraud." Other circuits, however, have "held that risk of financial loss to the bank is an element that must be proven under section 1344(1). Stay tuned...

(esp)

April 25, 2016 in Fraud, Judicial Opinions | Permalink | Comments (0)

Wednesday, April 20, 2016

Silver's Alleged Extramarital Affairs to be Considered at Sentencing

   Judge Valerie Caproni, the Southern District of New York judge presiding over the case of convicted former New York State Assembly Speaker Sheldon Silver, has unsealed papers submitted by United States Attorney Preet Bharara alleging that the convicted politician had affairs with two women who allegedly received favorable treatment from him in his professional capacity.   The women, whose names were redacted from court papers (but identified, with accompanying photos, by the New York Daily News) were allegedly a prominent lobbyist who dealt regularly with Silver in his official capacity and a former state official whom Silver allegedly helped get a state position.  

   The government, whose efforts to introduce evidence of the relationships at trial were rebuffed by the judge,  argued it should be able to provide such evidence at sentencing, purportedly to demonstrate that these relationships and favors provided by Silver demonstrated a pattern of abuse of power and possibly to rebut any evidence, including Silver's 50-year marriage, of Silver's good character.   The judge seemed to accept the first argument, stating that she viewed this information "as a piece with the crimes for which Mr. Silver stands convicted,"  although "not exactly  the same since no one is suggesting a quid pro quo, but of a piece of a misuse of his public office, and that's why I think it is relevant."

   Generally, a federal judge has a right to consider virtually any information on sentencing, but I am uneasy about the injection of information of extramarital affairs of a defendant into the sentencing decision.   If "no one is suggesting a quid pro quo," as Judge Caproni said, I question its relevance.  Unless there is some basis that Silver did something favorable for these women because of their alleged sexual relationships - which I would call a "quid pro quo - I wonder whether his alleged actions constitute a "misuse of public office." 

  There, of course, is a difference between allowing a party to present evidence or argument at sentencing and factoring that information into the sentencing decision, and, absent specific facts, I am hesitant to say the material should not be considered.  I am troubled, however, by the possibility that a defendant's alleged marital infidelity will become a regular part of a prosecutor's sentencing toolbox.

  I am relatively sure that my first boss, from almost fifty years ago, Frank Hogan, the legendary and exemplary longtime District Attorney of New York County, would not  have proffered such evidence, but Mr. Hogan was a man with a perhaps old-fashioned notion of fair play in a perhaps gentler age in which prosecutors rarely took aggressive (or even any) positions on sentencing (and the press did not publicize  the dalliances of public officials).

 (I note that Mr. Silver, whom I never met or spoke with, or contributed to, appointed me three times (and failed to reappoint me a fourth) to serve on the New York State Commission on Judicial Conduct).

April 20, 2016 in Corruption, Current Affairs, News, Prosecutions, Sentencing | Permalink | Comments (0)

Sunday, April 17, 2016

First Circuit Refines Mens Rea and Aiding and Abetting

Last week in a significant opinion involving mens rea and the federal aiding and abetting statute, 18 U.S.C. Section 2(a), the First Circuit threw out a conviction based on faulty jury instructions.

The instruction allowed the jury to convict the defendant if she “knew or had reason to know” that her husband had been previously convicted of a criminal offense punishable by a term of over one year.

The court ruled that the “had reason to know” language impermissibly allowed for conviction on a theory of negligence.

Here is the key language:

“Notwithstanding Xavier and its progeny, we therefore adhere to our view that, in order to establish criminal liability under 18 U.S.C. § 2 for aiding and abetting criminal behavior, and subject to several caveats we will next address, the government need prove beyond a reasonable doubt that the putative aider and abettor knew the facts that make the principal's conduct criminal. In this case, that means that the government must prove that Darlene knew that James had previously been convicted of a crime punishable by more than a year in prison. Having so concluded, and before turning to consider the effect of this holding on this appeal, we add several important caveats.”

The chief caveat imposed by the court was that “knowledge” can be established through a “willful blindness” instruction, if  "(1) the defendant claims lack of knowledge; (2) the evidence would support an inference that the defendant consciously engaged in a course of deliberate ignorance; and (3) the proposed instruction, as a whole, could not lead the jury to conclude that an inference of knowledge [is] mandatory."

The case is  U.S. v. Ford (1st Cir. 2016) (mens rea for aiding and abetting).

(wisenberg)

April 17, 2016 | Permalink | Comments (0)

Saturday, April 9, 2016

Settlement by Trump Required Alleged Victims to Tell DA They Don't Want to Assist

The New York Times reported on Tuesday, April 5 that Donald Trump, contrary to his asserted practice of refusing to settle civil cases against him, had settled a civil fraud suit brought by disgruntled purchasers of Trump SoHo (New York) condos setting forth fraud allegations that also were being investigated by the District Attorney of New York County ("Donald Trump Settled a Real Estate Lawsuit, and a Criminal Case Was Dismissed").  The suit alleged that Trump and two of his children had misrepresented the status of purchaser interest in the condos to make it appear that they were a good investment.

What made this case most interesting to me is language, no doubt inserted by Trump's lawyers, that required as a condition of settlement that the plaintiffs "who may have previously cooperated" with the District Attorney notify him that they no longer wished to "participate in any investigation or criminal prosecution" related to the subject of the lawsuit.  The settlement papers did allow the plaintiffs to respond to a subpoena or court order (as they would be required by law), but required that if they did they notify the defendants.

These somewhat unusual and to an extent daring conditions were no doubt designed to impair the District Attorney's investigation and enhance the ability of the defendants to track and combat it, while skirting the New York State penal statutes relating to bribery of and tampering with a witness.  The New York statute relating to bribery of a witness proscribes conferring, offering or agreeing to confer a benefit on a witness or prospective witness upon an agreement that the witness "will absent himself or otherwise avoid or seek to avoid appearing or testifying at [an] action or proceeding" (or an agreement to influence his testimony). Penal Law 215.11 (see also Penal Law 215.30, Tampering with a Witness).  Denying a prosecutor the ability to speak with prospective victims outside a grand jury makes the prosecutor's job of gathering and understanding evidence difficult in any case.  Here, where it is likely, primarily because of a 120-day maximum residency limit on condo purchasers, that many were foreigners or non-New York residents and thus not easily served with process, the non-cooperation clause may have impaired the investigation more than it would have in most cases. 

A clause requiring a purchaser to declare a lack of desire to participate, of course, is not the same as an absolute requirement that the purchaser not participate.  And, absent legal process compelling one's attendance, one has no legal duty to cooperate with a prosecutor.  It is questionable that if, after one expressed  a desire not to participate, his later decision to assist the prosecutor voluntarily would violate the contract (but many purchasers would not want to take a chance).  The condition of  the contract thus, in my view,  did not violate the New York statutes, especially since the New York Court of Appeals has strictly construed their language.  People v. Harper, 75 N.Y.2d 373 (1990)(paying victim to "drop" the case not violative of statute).

I have no idea whether the settlement payment to the plaintiffs would have been less without the condition they notify the District Attorney of  their desire not to cooperate.  And, although the non-cooperation of the alleged victims no doubt made the District Attorney's path to charges more difficult, the facts, as reported, do not seem to make out a sustainable criminal prosecution.  Allegedly, the purchasers relied on deceptive statements, as quoted in newspaper articles, by Mr. Trump's daughter Ivanka and son Donald Jr. that purportedly overstated the number of apartments sold and by Mr. Trump that purportedly overstated the number of those who had applied for or expressed interest in the condos,  each implying that the condos, whose sales had actually been slow, were highly sought.  A threshold question for the prosecutors undoubtedly was whether the statements,  if made and if inaccurate, had gone beyond acceptable (or at least non-criminal) puffing into unacceptable (and criminal) misrepresentations.

Lawyers settling civil cases where there are ongoing or potential parallel criminal investigations are concerned whether payments to alleged victims may be construed by aggressive prosecutors as bribes, and often shy away from inserting restrictions on the victims cooperating with prosecutors.  On the other hand, those lawyers (and their clients) want some protection against a criminal prosecution based on the same allegations as the civil suit.  Here, Trump's lawyers boldly inserted a clause that likely hampered the prosecutors' case and did so within the law.  Nonetheless, lawyers seeking to emulate the Trump lawyers should be extremely cautious and be aware of the specific legal (and ethical) limits in their jurisdictions.  For instance, I personally would be extremely hesitant to condition a settlement of a civil case on an alleged victim's notifying a federal prosecutor he does not want to participate in a parallel federal investigation.  The federal statutes concerning obstruction of justice and witness tampering are broader and more liberally construed than the corresponding New York statutes.

 

April 9, 2016 in Celebrities, Civil Litigation, Current Affairs, Defense Counsel, Fraud, Investigations, Legal Ethics, News, Obstruction, Prosecutors | Permalink | Comments (0)

Wednesday, April 6, 2016

DC Circuit - Executive Controls DPA - Fokker Services Case

The DC Circuit Court of Appeals, Hon. Srinivasan, vacated the district court order in the Fokker case finding that these "determinations are for the Executive - not the courts - to make." The case arose "from the interplay between the operation of a DPA and the running of time limitations under the Speedy Trial Act."  The Court of Appeals held "that the Act confers no authority in a court to withhold exclusion of time pursuant to a DPA based on concerns that the government should bring different charges or should charge different defendants." Some key quotes from the decision -

"The Constitution allocates primacy in criminal charging decisions to the Executive Branch."

"It has long been settled that the Judiciary generally lacks authority to second-guess those Executive determinations, much less to impose its own charging preferences."

"Nothing in the statute's terms or structure suggests any intention to subvert those constitutionally rooted principles so as to enable the Judiciary to second-guess the Executive's exercise of discretion over the initiation and dismissal of criminal charges."

"The context of a DPA is markedly different.  Unlike a plea agreement - and more like a dismissal under Rule 48(a) - a DPA involves no formal judicial action imposing or adopting its terms."

Opinion here.

(esp)

April 6, 2016 in Judicial Opinions | Permalink | Comments (0)

Friday, April 1, 2016

The Criminalization of Compliance

Todd Haugh, Indiana University - Kelley School of Business - has an interesting new article posted online entitled "The Criminalization of Compliance."

From the abstract:

Corporate compliance is becoming increasingly “criminalized.” What began as a means of industry self-regulation has morphed into a multi-billion dollar effort to avoid government intervention in business, specifically criminal and quasi-criminal investigations and prosecutions. In order to avoid application of the criminal law, companies have adopted compliance programs that are motivated by and mimic that law, using the precepts of criminal legislation, enforcement, and adjudication to advance their compliance goals. This approach to compliance is inherently flawed, however — it can never be fully effective in abating corporate wrongdoing. Explaining why that is forms this Article’s main contribution. Criminalized compliance regimes are inherently ineffective because they impose unintended behavioral consequences on corporate employees. Employees subject to criminalized compliance have greater opportunities to rationalize their future unethical or illegal behavior. Rationalizations are a key component in the psychological process necessary for the commission of corporate crime — they allow offenders to square their self-perception as “good people” with the illegal behavior they are contemplating, thereby allowing the behavior to go forward. Criminalized compliance regimes fuel these rationalizations, and in turn bad corporate conduct. By importing into the corporation many of the criminal law’s delegitimatizing features, criminalized compliance creates space for rationalizations, facilitating the necessary precursors to the commission of white collar and corporate crime. The result is that many compliance programs, by mimicking the criminal law in hopes of reducing employee misconduct, are actually fostering it. This insight, which offers a new way of conceptualizing corporate compliance, explains the ineffectiveness of many compliance programs and also suggests how companies might go about fixing them.

 (LED)

April 1, 2016 in Scholarship | Permalink | Comments (0)