Sunday, March 24, 2019

AG Barr's Summary of the Mueller Report

One needs to give credit to AG Barr for his quick release of a preliminary statement (see here - Download AG March 24 2019 Letter to House and Senate Judiciary Committees) concerning the Report of Special Counsel Mueller, which is titled, Report on the Investigation into Russian Interference in the 2016 Presidential Election.  But one also needs to read this four-page statement carefully, because the public needs to grasp all of what is being said and what is not being said here. 

  1. AG Barr's Summary notes the extensiveness of this investigation ("employed 19 lawyers who were assisted by a team of approximately 40 FBI agents, intelligence analysts, forensic accountants, and other profession staff. The Special Counsel issued more than 2,800 subpoenas, executed nearly 500 search warrants, obtained more than 230 orders for communication records, issued almost 50 orders authorizing use of  pen registers, made 13 requests to foreign governments for evidence, and interviewed approximately 500 witnesses.")
  2. AG Barr's Summary does not provide the same specificity in telling the public the number of indictments and convictions of individual and entities in connection with his investigation, instead saying "all of which have been publicly disclosed." Well that number does seem pretty important, as this investigation had so far 7 guilty pleas, 27 people indicted, and 37 indictments with some of the cases still ongoing.
  3. AG Barr's Summary says that "The Report does not recommend any further indictments, nor did the Special Counsel obtain any sealed indictments that have yet to be made public."
  4. AG Barr's Summary does not say how many matters were turned over to other federal or state offices, perhaps because there was criminality that did not pertain to Russian Interference in the 2016 Presidential Election. Although it does say that "During the course of his investigation, the Special Counsel also referred several matters to other offices for further action."
  5.  We now know for certain that the Investigation had two parts, or at least the Report does: Russian Interference in the 2016 US Presidential Election and Obstruction of Justice.
  6. AG Barr's Summary confirms that there were Russian efforts to influence our 2016 US election.   AG Barr's Summary states that - "The report outlines the Russian effort to influence the election and documents crimes committed by persons associated with the Russian government in connection with these efforts."   This is an important statement that needs both executive and legislative follow-up. How will we be assuring that future efforts by another country do not undermine our election?  And even if they "did not establish that members of the Trump Campaign conspired or coordinated with the Russian government in its election interference activities," do we know if the results of the election were accurate?
  7.  AG Barr's Summary confirms "that Russian government actors successfully hacked into computers and obtained emails from persons affiliated with the Clinton campaign and Democratic Party organizations, and publicly disseminated those materials through various intermediaries, including WikiLeaks." Again, did we have a fair election? What is the appropriate remedy?  What will happen in future elections to preclude such activity?
  8. On Part II - Obstruction of Justice - AG Barr's Summary states that "the Special Counsel considered whether to evaluate the conduct under Department standards governing prosecution and declination decisions but ultimately determined not to make a traditional prosecutorial judgment." Barr's Summary says that "[i]nstead, for each of the relevant actions investigated, the report sets out evidence on both sides of the question and leaves unresolved what the Special Counsel views as 'difficult issues' of law and fact concerning whether the President's actions and intent could be viewed as obstruction."  So it does sound like the President was a "subject" as opposed to "witness" of this investigation.
  9. AG Barr's Summary does not say that evaluating the evidence is typically the job of the jury, after a determination has been made that there is probable cause to indict.  Instead AG Barr restates Mueller's Report that "while this report does not conclude that the President committed a crime, it also does not exonerate him."  AG Barr goes on to say that he and Rod Rosenstein have made the decision "that the evidence developed during the Special Counsel's investigation is not sufficient to establish that the President committed an obstruction-of-justice offense."
  10.  In many ways it is good to see that a "short-cut offense" of obstruction of justice will not be used (see my article here), but one has to wonder about the defendants who have been charged with obstruction of justice.  It will be important for everyone to know what has been declined here so that everyone can understand the DOJ's standard for evaluating obstruction.  Isn't it always stated that "intent can be inferred from the circumstances" in letting juries make those decisions? But it is also good to see DOJ taking a hard line in not prosecuting uncertain cases - it is hopeful that all US Attorneys will follow this lead with the obstruction cases they are currently handling. Having the full Report will provide this important transparency. 
  11. I leave for another day a discussion of AG Barr's decision to extract 6(e) grand jury material from the report prior to its release.

(esp)

March 24, 2019 in Investigations, News, Obstruction, Prosecutions, RICO | Permalink | Comments (0)

Sunday, March 17, 2019

Assistant Attorney General Brian A. Benczkowski's Speech at ABA White Collar Conference

I wasn't there, but was just reading Assistant AG Benczkowski's written remarks from the 33rd Annual ABA National Institute on White Collar Crime (see here).  Here are some thoughts that caught my eye -

  1. It is good to see his approach on recognizing that companies are more likely to comply if they know the rules of the game in reporting and cooperating.  Transparency is key to enforcing corporate compliance and it is wonderful to see this recognized.
  2. He claims that there have been "6,500 defendants in white-collar prosecutions, a modest increase over the prior year."  But he doesn't tell us how he defines white collar crime.  Trac (see here) claims the number is down.  And as I noted, there is no consistent methodology for reporting white collar crime -especially as to what crimes are included.  So we really can't assess who is accurate. When he gets to specific internal numbers, like what the Fraud Section's Securities and Financial Fraud Unit charged, that makes sense.  But claiming that white collar prosecutions as a whole have  increased needs a lot more explaining.
  3. It is good to see that DOJ will be using an "'anti-piling on' policy to reduce or apportion financial fines, forfeitures, and restitution between authorities to ensure that the overall outcome is equitable and just." There needs to be a coordinated effort so it is good to see this new practice continuing.
  4.  It is likewise good to see that the internal DOJ/SEC Resource Guide for FCPA matters will now be "reflected in the Corporate Enforcement Policy itself."  Or does this mean that an internal policy, unenforceable at law, is just being moved from one place on the web to another?
  5. It is likewise good to see a training program for assuring consistency in prosecutorial discretion on evaluating effectiveness of corporate compliance programs. But wouldn't it be best to have this done outside the DOJ since if the program is held to be ineffective, it will be the DOJ moving ahead against the company.
  6. But my real concern with the comments lie here - "In 2018, our Fraud Section prosecutors charged 406 individuals, won 268 convictions, and brought 10 corporate enforcement actions." It is the use of the term "won" that raises flags.  Prosecutors do not win convictions and do not lose cases -  prosecutors do justice and that happens irrespective of whether there is a "win," "conviction," "not guilty," or "declination."

Overall, it's sounds good to see that "corporate transparency" will be something of the future, as this can enhance compliance efforts.

(esp)

March 17, 2019 in Prosecutions | Permalink | Comments (0)

Friday, March 15, 2019

White Collar Prosecutions - Down?

Trac Reports titles the recent report, White Collar Prosecutions Hit All-Time Low in January 2019. They note that "[t]his is an historic low since monthly tracking began in October 1998." They note that "this number is down 20.3 percent over the previous month, and continues a five-month downward slide." Additionally, they say that "[c]ompared to five years ago, January filings were down 35.7 percent." President Trump's term they say has a number "lower than in previous administrations."

I don't doubt that the white collar prosecutions are down.  I also don't doubt that comparing the prosecutions from the current administration to the last administration using the same metrics support it being down.

But there is a separate issue here that raises concerns - how does DOJ measure white collar crime.   Trac includes thirty (30) categories of crimes, including ones related to fraud, antitrust, intellectual property violations, identity theft, and arson for profit.  The list of different types of fraud is impressive, including tax fraud, federal procurement fraud, insurance fraud, securities fraud, computer fraud, health care fraud, and many other classes of fraudulent conduct. 

But what I don't see are the "short-cut" offenses that are often used in white collar prosecutions. Unreported here are obstruction of justice, false statements, and perjury.  And yet we all know that these are common offenses used in white collar cases. And is RICO included in the statistics?  Cases under the Racketeer Influenced Corrupt Organization Act can have many different predicate offenses, some of which are street crimes like homicide, and others are mail and wire fraud.     

So there is no doubt that white collar prosecutions are down.  But we should also be asking -- isn't it about time that DOJ started looking at a better methodology for reporting white collar prosecutions.  See Lucian Dervan & Ellen Podgor, White Collar Crime: Still Hazy After All These Years.

(esp)(w/ disclosure that she has a B.S. degree from Syracuse U.- home of the Trac Reports). 

March 15, 2019 in About This Blog, Prosecutions | Permalink | Comments (0)

Wednesday, March 13, 2019

Manafort Sentences - Federal Courts

Paul Manafort has now been sentenced by two different judges in two different courts on two different cases.  It remains to be seen if we will have a third sentencing as Manhattan District Attorney Cyrus Vance Jr. just announced additional charges against Manafort. (see here & here).  A week ago  Manafort received a sentence of 47 months from a Virginia federal district court judge.  (see Doug Berman's Sentencing Law & Policy Blog here) Today he received a sentence of 73 months from a D.C. federal district court judge. Although the latter sentence was 73 months, some of the sentence is consecutive and some of it concurrent.  In total it comes to a sentence of  7 1/2 years.  Some claimed the first sentence, a below guidelines sentence, was too light. And many wondered if this could be appealed.  Others felt it was best to wait for this next sentence as the next judge would likely be closer to the guideline range. Some thoughts:

  1. When the sentencing guidelines were created they initially were mandatory, not permitting judicial discretion to sentence the individual as an individual and not a mere numerical calculation. I certainly criticized this. 
  2. When discretion with sentencing happened as a result of a litany of Supreme Court decisions - Blakely, Booker, Gall, Rita, etc. - judges could look at the 3553(a) sentencing factors and sentence the individual as opposed to a mere numerical calculation. I was pleased to see this happen.
  3. But many of us also wondered what would happen once judges were given discretion to deviate from the guidelines.  Would this remove the original intent of the guidelines, an intent to have "predictability and consistency" in sentencing.  Would it send sentencing back to the "wild west" of a no guidelines era?
  4. In my opinion guidelines needed to happen because appellate court judges were not willing to really review district court sentencing. Clearly, because they are not the finders of fact, appellate judges need to give the trial court discretion.  But appellate courts also need to monitor sentences that are appealed, in order to ascertain whether there has been an abuse of discretion.
  5. White collar sentences are different from sentences in street crimes cases.  This should not be because of privilege, and certainly not because of race.  But rather because the very nature of these crimes are different. (see The Challenge of White Collar Sentencing).  And clearly when they differ because of race or privilege that needs to be corrected. 
  6. Back in 2007 I wrote a short piece in the Yale Law Journal Forum (see here), with Andrew Weissmann (w/ Joshua Block) writing a piece presenting another side (see here) of this picture. The opening statement of the Weissmann/Block Essay is "At the margins, the current Federal Sentencing Guidelines for fraud and other white-collar offenses are too severe." He then goes on to criticize my arguments. My piece, Throwing Away the Key" argued that "[t]he problem [then was] not only the draconian sentences that white-collar offenders are receiving, but the fact that because of the elimination of parole they [would] actually have to serve them."  It bothered me that Chalana McFarland, a first-time offender, received a thirty-year prison term for her role in a mortgage fraud scheme that skimmed twenty million dollars from the sale of over one hundred homes from 1999 to 2002. Thirty years was too high for this first-time offender who had a sentence determined by a numerical calculation. 
  7. So the outliers are questioned here, whether it be the unusually low sentence in Manafort's first case, or the usually high sentence that individuals like Chalana McFarland initially received. And perhaps with Manafort's sentence of today, and potential sentence from new charges, it will find the medium place that alleviates my questioning. But we do need to ask appellate court judges to review sentences to assure that sentences are not extreme - whether it high or low.
  8. I don't expect an answer from Andrew Weissmann on this now and respect the quiet approach of the Special Counsel's investigation.  But perhaps when it is over we should be writing the joint article that looks at how best to achieve predictability and consistency in sentencing without outliers and without taking away judicial discretion.  

(esp)

March 13, 2019 | Permalink | Comments (0)

Tuesday, March 12, 2019

"Operation Varsity Blues"

The allegations coming from "Operation Varsity Blues" are incredibly sad -- from all perspectives.  The DOJ Press Release (here) tells of the arrest of "dozens of individuals" alleged to be "involved in a nationwide conspiracy" of cheating on college entrance exams and the admissions of students into top universities. The DOJ Press Release states:  "The conspiracy involved 1) bribing SAT and ACT exam administrators to allow a test taker, typically XXX, to secretly take college entrance exams in place of students or to correct the students’ answers after they had taken the exam; 2) bribing university athletic coaches and administrators—including coaches at Yale, Stanford, Georgetown, the University of Southern California, and the University of Texas—to facilitate the admission of students to elite universities under the guise of being recruited as athletes; and (3) using the façade of XXX’s charitable organization to conceal the nature and source of the bribes." (XXX's inserted here)

So it looks like there are several aspects to the allegations in Operation Varsity Blues 1) a college entrance exam cheating scheme; 2) a college recruitment scheme; and 3) a tax fraud conspiracy.

Some of the individuals (4) are charged by Information - a clear indication that they have reached an agreement with the government.  We see two cooperating witnesses mentioned in the documents.  The crimes alleged in the Information include charges of racketeering conspiracy, money laundering conspiracy, conspiracy to defraud the US, mail and wire fraud and obstruction of justice. Twelve others face indictment on a charge of  racketeering conspiracy.  The remaining individuals have criminal complaints against them of either conspiracy to commit mail fraud and honest services mail fraud or conspiracy to commit mail and wire fraud. The affidavit for one of the criminal complaints is over 200 pages long (see here).  There are also forfeiture allegations for some of the accused individuals. It will be interesting to see how many of the criminal complaints turn into Informations (requires waivers by the defense) as opposed to Indictments in the next for weeks.

Some thoughts -

  1. The prosecutorial power of using conspiracy and picking one's venue is emphasized here as the cases are being brought in the District of Massachusetts, although the majority of those accused of criminal activity are not from that jurisdiction. The ACT is headquartered in Iowa City and the Educational Testing Service for the SAT is in New York and New Jersey.  
  2. Likewise the prosecutorial power of granting cooperation status appears likely as some of the cases have references to CW-1 and CW-2. Prosecutors get to decide who gets the cooperation status and who gets the cooperator's testimony against them.
  3. The alleged fraud appears to be massive, and one has to wonder how this could have occurred- but compromised college related entrance exams are not something new. Just today the Central District of California filed a 26-count Indictment with charges of conspiracy of false passport, and aggravated identity theft, against defendants for allegedly "using false passports" to take TOEFL (English proficiency) exams for others. (see here).  It may be tougher to detect some issues of fraud outside the United States, but internally this should not be happening. Will the verification processes used with college entrance exams be re-evaluated?  Or were they the ones who detected fraud?
  4. As an educator, I am wondering how the students fared in college.  Were the alleged improper scores an accurate prediction of their college abilities? Could the value of these tests become an issue should someone go to trial?
  5. How many students were improperly admitted to a college, taking a seat of a student who might have had this opportunity?  And if the admitted students were not aware of what their parents had done, one can only imagine the hurt they are feeling right now. So you have issues related to both the admitted students and those who may have been borderline but denied at these institutions.
  6. Likewise, the parents who are accused of this activity were attempting to assist their children, and it is likely that the damage caused is even greater right now. As is so often the case, especially in white collar cases, the collateral consequences can be significant.
  7. And should the collateral consequences to the families who may have committed these acts be considered if determining the plea offers and later sentences that might occur here.
  8. Many of those accused are probably trying to decide how best to handle these charges - plead not guilty and go to trial, or reach a quick agreement with the government. With tapes and other supporting evidence the decisions will likely be examined against possible cross-examination against cooperating witnesses who were involved in multiple cases.  How much sympathy will a parent trying to assist their children receive, and will it surpass criticism against privilege. And there are also legal questions to examine here - is this the intended use of mail and wire fraud, is conspiracy too broad a crime here, and was this a "wheel-and-spoke' conspiracy?   But what is the risk of making such challenges?
  9. The colleges and universities also need to reflect on the allegations here. What kind of compliance programs did they have in place to root out such conduct from individuals involved in sports activities on campus, and what now needs to be done to make certain that this doesn't occur in the future. Perhaps there is nothing they can do, but if the allegations prove true, it should be examined.

There will be much to learn from what happened today.  It was a sad day for many people.

(esp)

March 12, 2019 in Fraud, Money Laundering, Prosecutions, Prosecutors, RICO | Permalink | Comments (0)