Wednesday, March 21, 2018

Supreme Court Overturns Conviction And Narrows Reach Of Tax Code's Omnibus Clause

Today in United States v. Marinello, the U.S. Supreme Court resolved a circuit split and significantly narrowed the reach of Internal Revenue Code Section 7212(a)'s Omnibus Clause, which makes it a felony to "corruptly or by force...endeavor[r] to obstruct or imped[e] the due administration of this title [the Internal Revenue Code]."

The Court held that the phrase "'due administration of [the Tax Code]' does not cover routine administrative procedures that are near-universally applied to all taxpayers, such as the ordinary processing of tax returns. Rather the clause as a whole refers to specific interference with targeted governmental tax-related proceedings, such as a particular investigation or audit."

Justice Breyer  wrote the 7-2 opinion for the Court. Justice Thomas, joined by Justice Alito, dissented.

The majority relied in part on analogous cases from its general obstruction jurisprudence, including United States v. Aguilar and Arthur Andersen v. United States. Although the focus was on the nexus required between the obstruction and a particular act of administration, the Court also stressed the rule of lenity and the need to provide fair warning to the public. This approach could be potentially relevant to any obstruction of justice case that Special Counsel Mueller may one day bring against President Trump or administration officials. Some of the theories floating around cable television about what constitutes obstruction under the federal criminal code are unusually broad and unlikely to survive rigorous analysis based on Aguilar and Arthur Andersen.



March 21, 2018 in Arthur Andersen, Fraud, Investigations, Judicial Opinions, Obstruction, Prosecutions, Prosecutors | Permalink | Comments (0)

Wednesday, August 28, 2013

Judicial Oversight of Corporate Pleas -Protection of the Public Interest

United States v. Orthofix, Inc was an important decision for several reasons. First, the Memorandum  Opinion issued by Judge Young (D. Mass), on July 26, 2013, takes a turn in what typically happens when there is a corporate plea arrangement.   Second, the judge explains at length policy considerations for sentencing corporations.  The case also raises questions for the future of corporate plea agreements.  

This decision involves two cases involving corporate pleas where the court rejected the pleas.  The court notes the importance of considering the "public interest" in accepting pleas. Hon. Young states:

"Just as the Court must take account of the public interest when it exercises its discretion to fashion its own sentence, so too the Court must take account of the public interest when called upon to review a sentencing recommendation attached to a plea bargain."

The court considers the history behind plea bargains and contract law and notes the problem of considering it as a prosecution-defense relationship as opposed to a triadic relationship. Hon. Young states, that "this Court makes no attempt to question the policy choices of executive administrative agencies; it merely seeks to ensure that the sentence imposed upon Orthofix fosters (1) the protection of the public, (2) specific and general deterence, and (3) respect for the law."

The court states that "[o]rganizational criminals pose greater concerns than natural persons for two important reasons."  One of the concerns raised in the case of Orthofix, by the court, was that the plea of five years failed to impose the Corporate Integrity Agreement as part of the probation.

This Memorandum decision raises other interesting questions that were not discussed here, and perhaps not relevant to these matters. But one has to wonder whether courts should also be examining plea agreements that place undue pressure on corporations and individuals to plea because the risk of going to trial is too severe? In a post-Arthur Andersen world do corporations have the choice of risking a trial or is the necessity  of entering a plea too great to avoid the repercussions of an indictment and possible conviction? Should oversight of pleas go beyond the sentencing aspect to also scrutinze the bargaining position of the parties and the fairness of the general bargain?

See also Doug Berman's Sentencing Law & Policy Blog here, Jef Feeley & Janelle Lawrence, Bloomberg's,  Orthofix’s Settlement of Medicare Probe Rejected by Judge


August 28, 2013 in Arthur Andersen, Deferred Prosecution Agreements, Judicial Opinions, Prosecutions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Friday, June 21, 2013

Jeff Skilling Sentence Reduced To 14 Years

by: Solomon L. Wisenberg

Judge Lake effectively ratified the deal struck months ago by federal prosecutors and the former Enron CEO. The agreement called for a sentence of from 14 to 17.5 years. Skilling agreed to stop fighting his conviction and to hand over restitution funds to the victims. He obviously gets credit for time already served. WSJ has the story here.


June 21, 2013 in Arthur Andersen, Enron, Prosecutions, Prosecutors, Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 2, 2013

DOJ Should Be Commended for Requiring a Conviction by UBS

by: Lawrence S. Goldman

It is not often that I praise the Department of Justice ("DOJ"), especially for bringing a prosecution.  However, I commend the decision to prosecute -- really prosecute, and not just indict and offer a deferred prosecution -- a UBS subsidiary for its role in manipulating the benchmark LIBOR interest rate.  See here.

To be sure, UBS was allowed to offer as the defendant in this case a Japanese subsidiary (UBS Securities Japan Co. Ltd.), for which a conviction would bring considerably less collateral damage than it would upon the parent company.  Substituting others for prosecution, whether corporations or individuals, of course, is not a common benefit offered to criminal targets.  Nonetheless, for DOJ, bringing a prosecution against a major financial institution, even a subsidiary, is a considerable and commendable step.

Generally, I believe that prosecutions should not be brought against large institutions because of a few rogue employees, unless at least one is a director or "a high managerial agent acting within the scope of his employment and in behalf of the corporation."  New York Penal Law Section 20.20(2)(b).  See also Model Penal Code Section 2.07.  UBS, however, is a serial offender with a history (not alone among Swiss and other banks) as an eager accomplice of money launderers and tax evaders throughout the world.  Although UBS' belated and commendable efforts to clean up its act and cooperate deserve credit, in this case DOJ apparently felt it did not make up for its past conduct enough to deserve non-prosecution, and appropriately broke its usual pattern of allowing major financial institutions to avoid criminal convictions.

As a practical matter, one may ask what the difference is between an indictment/deferred prosecution (as occurred in the case of the parent, UBS AG of Zurich) and indictment/conviction if both ultimate results carry huge financial penalties and other requirements, such as monitoring.  Aside from the collateral consequences -- which can, as in the obvious case of Arthur Andersen, be fatal to a major financial institution (although I agree to an extent with Gabriel Markoff (see here) that such a fear is exaggerated) -- the conviction here has importance as a symbol, and perhaps also a deterrent in both the specific and general aspects.

Although the huge UBS fines will be borne by current UBS shareholders (not necessarily the same stockholders who benefited from the LIBOR bid-rigging), one would hope that UBS makes an effort to recoup the substantial financial gains through bonuses and other compensation geared to profits that those in leadership and supervisory roles made as a result of UBS' now-admitted criminality even if those leaders were uninvolved or unaware of the wrongdoing.  I suspect that there will be no such serious effort, or at least little or no success if there is one. 


January 2, 2013 in Arthur Andersen, Current Affairs, Deferred Prosecution Agreements, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 25, 2012

Should Wal-Mart Be Prosecuted, Really Prosecuted?

I expect that any day now one of my non-white-collar criminal clients will come to my office and ask me to incorporate him to protect him from future criminal liability.  Of course, incorporation does not immunize an individual from criminal liability.  Nor, generally, does it protect small corporations from prosecution.

However, it appears that just as massive corporations are "too big to fail," they are too big to prosecute.  In the wake of the government's destruction of Arthur Andersen because of an ill-conceived, aggressive and ultimately unsuccessful indictment which caused the loss of thousands of jobs, DOJ has been highly reluctant to aggressively prosecute major corporations.

Although there are occasionally indictments of major corporations, most often these are disposed of by "deferred prosecutions," which are essentially delayed dismissals with financial penalties in numbers that are large in absolute terms but meager in comparison to the profits and assets of the corporation.  To be sure, even when prosecuted to conviction, corporations do not go to jail and thus there may be little practical difference between a conviction of a corporation and a deferred prosecution.  However, to the extent a goal of the criminal justice system is to achieve apparent fairness and equality, there is a genuine, if symbolic, reason for the prosecution of the large and powerful, whether they be individuals or corporations.

According to a thorough account in the New York Times this past Saturday, April 21, see here, Wal-Mart in Mexico, where the company has, according to the Times, one-fifth of its stores, engaged in a systemic countrywide scheme in which it spent millions of dollars to bribe hundreds of Mexican officials to gain favorable and expedited treatment and a competitive advantage.  According to the Times, this conspiracy was not, as is often the case in corporate wrongdoing, the act of a rogue individual or group.  Rather, it was orchestrated from the very top of the Wal-Mart Mexican hierarchy.  Additionally, again according to the Times, when reports of this corruption reached Wal-Mart's U.S. headquarters, top executives took great pains to cover up the wrongdoing.

The alleged conspiracy, if the Times report is accurate, appears to be the kind of corporate crime, therefore, that deserves aggressive prosecution (not just an indictment and a deferred prosecution), especially if the government wants the Federal Corrupt Practices Act ("FCPA") to be taken seriously.  Of course, there may be statute of limitations or other fact-finding or evidentiary problems involved in putting together a case involving facts from 2005, the year, according to the article, the bribe payments were made.  It is far easier to write an article reporting corruption than to prove it under the rules of evidence beyond a reasonable doubt.  It will be interesting to see what, if anything, DOJ does with respect to this matter.


April 25, 2012 in Arthur Andersen, Corruption, Deferred Prosecution Agreements, FCPA, International, Investigations, Obstruction, Prosecutions, Prosecutors | Permalink | Comments (2) | TrackBack (0)

Sunday, February 5, 2012

Attorney General Holder Speaks Out on the Importance of Counsel for Indigent Defendants

As we get closer to the 50th Anniversary of the Gideondecision, it is wonderful to see Attorney General Eric Holder being a true "minister of justice" in his support for counsel for indigent defendants. (see here)  It is wonderful to see his recognition of the problems with indigent defense -

"Across the country, public defender offices and other indigent defense providers are underfunded and understaffed.   Too often, when legal representation is available to the poor, it’s rendered less effective by insufficient resources, overwhelming caseloads, and inadequate oversight."

 Across the country, public defender offices are handling cases of defendants charged with crimes related to mortgage fraud, Ponzi schemes, and other white collar offenses.  AG Holder's recognition of the problems here and efforts to correct this situation are important to assuring a fair criminal justice process.


February 5, 2012 in Arthur Andersen, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Sunday, May 22, 2011

11th Circuit Obstruction Decision - No Evidence That Defendant Knew

Obstruction of justice is a common offense used by prosecutors in white collar matters.  I call it, along with perjury and false statements, "short-cut"offenses - as they usually allow prosecutors to obtain a conviction fairly easily without needing to present a lengthy document case - and white collar cases can be very document intense.  But lately, the government has not been so fortunate in its use of the short-cut approach. Because even if proceeding with a short-cut crime, you still need to prove the case. More importantly, you need to have a case with sufficient evidence of all the elements of the crime.  

The Eleventh Circuit in U.S. v. Dennis Friske, a.k.a. Denny, ruled that the "government failed to introduce sufficient evidence to permit the jury to find that he knew the existence of the forfeiture proceeding."   Bottom line - the case was remanded for the district court to enter an acquittal.  

Although this is not a white collar case, it is an important decision for white collar practitioners as it emphasizes the need to focus on whether the government has the sufficient nexus for an obstruction crime. The court in Friske cites to the Supreme Court decisions in Aguilar and Arthur Andersen in holding that the "government was required to prove that Friske knew of, or at least foresaw, the forfeiture proceeding." Merely acting suspiciously will not be enough.

See also Paul Kish, Federal Criminal Lawyer Blog, Atlanta-based Federal Court of Appeals Reverses Obstruction Conviction Because No Evidence Defendant Aware of the Proceeding He Supposedly Obstructed

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

May 22, 2011 in Arthur Andersen, Judicial Opinions, Obstruction, Prosecutions | Permalink | Comments (1) | TrackBack (0)

Saturday, May 7, 2011

20th Annual National Seminar on Federal Sentencing Guidelines - Corporate Plea Negotiations and Sentencing

This panel was moderated by Jeff Ifrah (Ifrah Law), with AUSA Arlo Devlin-Brown (SDNY) and Steven Bunnell (O'Melveny & Myers) as speakers.  After the typical DOJ disclaimer that he was not speaking on behalf of DOJ, AUSA Devlin-Brown said that monitors are still in use.   Monitors, he said, are usually selected by the US Attorney, but getting input in the selection from defense counsel is something done in some cases. The panelists spoke about the lack of attorney-client privilege with the monitor.  Steven Bunnell  spoke about how expensive monitors can be. One of the items discussed is how the scope of the monitorship is negotiated.  

Steven Brunnell noted that corporate plea bargaining is a kind of begging. The corporate reputation is important. Sentencing guidelines are usually not a direct concern.  AUSA Devlin-Brown noted how the collateral consequences of charging a corporation, make a difference (I call that the Arthur Andersen effect). As a result both sides try to reach a settlement. He also spoke about the delicate interests of parallel proceedings.

Hypotheticals were used to consider some of the issues.  For example, what is the government view of the corporation indemnifying the CEO?  How do you deal with employee resistance?  One thing was clear from each hypo - the government has a lot of power.

My commentary - One topic discussed during this panel discussion concerned the level of trust between the corporation's attorney and the DOJ. It seemed to make a difference. But I have to ask the academic question -- should the trust between the private attorney and DOJ be a factor in how things progress in a criminal investigation? It is always interesting to see DOJ looking for consistency in sentencing, but then having individual US Attorneys and AUSAs making decisions on different aspects of a case that will be inconsistent based upon the AUSA or the defense attorney handling the matter.


May 7, 2011 in Arthur Andersen, Conferences, Deferred Prosecution Agreements, FCPA, Investigations, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Saturday, April 23, 2011

Lauren Stevens Case To Start Tuesday: Has The Government Overcharged?

The federal criminal trial involving former GlaxoSmithKline ("GSK") Vice President and Associate General Counsel Lauren Stevens commences this Tuesday in Greenbelt, Maryland. When I first read the Indictment, without knowing anything else about the facts, it struck me that the government may have overcharged. That is probably not a good sign for the feds, since the Stevens charging instrument is a classic one-sided speaking Indictment that seeks to put the United States' case in the best possible light.

The crux of the prosecution theory is that Stevens, who headed up a team of inside and outside GSK counsel responding to an FDA inquiry, withheld information about off-label marketing of Wellbutrin. Specifically, Stevens allegedly learned that several doctors, paid by GSK and speaking at GSK-sponsored events, promoted off-label (weight-loss) use of the drug. GSK's responses were part of a voluntary production pursuant to a written request from the FDA's Division of Drug Marketing, Advertising, and Communications ("DDMAC"). Stevens allegedly agreed, orally and in writing, to provide DDMA with "materials and documents presented at GSK-sponsored promotional programs, even if not created by, or under the custody or control of GSK." But, according to the Indictment, Stevens knowingly failed to produce numerous off-label promotional and presentation materials, provided to GSK by the doctors in question, with intent to obstruct an FDA proceeding. Rather than focusing entirely or primarily on this failure to produce, the Indictment lumps in many other broad statements contained in Stevens' various cover letters to the government. It seems to me that at least some of these statements are open to differing interpretations. Perhaps the government should have more narrowly honed in on the failure to turn over the presentation/promotional materials.

Part of Stevens' defense will entail her purported reliance on the advice of outside counsel in sending GSK's written responses to the FDA. The original Indictment was thrown out by Judge Roger Titus, because federal prosecutors incorrectly instructed the grand jury that reliance on the advice of counsel is only an affirmative defense. In fact, good faith reliance on advice of counsel negates the specific intent element under the federal obstruction and false statement statutes at issue in the trial.

This prosecution should strike terror into the hearts of inside and outside counsel throughout corporate America. Of particular note is that the FDA inquiry into off-label Wellbutrin marketing did not involve a compelled production and was not even quasi-criminal in nature.

Attached for our readers' benefit are some documents setting out the government's case and what are likely to be key portions of Ms. Stevens' defense.

Here are: Court's Memorandum Opinion Dismissing Indictment, Lauren Stevens Indictment(2), Background Section of Defense Response on Opinion Testimony, and Declaration of Brian O'Connor.


April 23, 2011 in Arthur Andersen, Corruption, Current Affairs, Defense Counsel, Fraud, Grand Jury, Judicial Opinions, Legal Ethics, Obstruction, Prosecutions, Statutes | Permalink | Comments (0) | TrackBack (0)

Saturday, March 10, 2007

The Aftermath of Andersen

The Andersen conviction, followed by its eventual reversal in the United States Supreme Court, is all history.  But CNN Money reports that a federal judge approved this past week a final settlement in the class action lawsuit that was brought by investors.


March 10, 2007 in Arthur Andersen | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 23, 2005

Government Announces That It Will Not Re-Prosecute Andersen

Arthur Andersen, LLP, prosecuted and initially convicted for the alleged crime of obstruction of justice, had its conviction overturned by the US Supreme Court.  CNN reports here that The Department of Justice has now announced that it would not re-prosecute the company. Unfortunately, this turn of events does not assist the many employees who lost their jobs when the government indicted this company.  What three lessons can be learned here -

1. That the government prosecutorial power carries enormous weight, and DOJ needs to recognize its power and use it wisely.

2. That  innocent until proven guilty does not always work in our judicial system; especially when an appellate or supreme tribunal may overturn a conviction and the ramifications of the initial guilt still remain.

3. That using obstruction of justice as a shortcut, as opposed to investigating and prosecuting underlying conduct is not always the easiest avenue to pursue, especially in the long run.


November 23, 2005 in Arthur Andersen | Permalink | Comments (0) | TrackBack (1)

Sunday, August 21, 2005

Mississippi and KMPG

KPMG may have more on its hands than just civil law suits (see post here). The LATimes (Reuters) reports here that Mississippi is considering filing "criminal charges" against KPMG. Will other states follow?  Should states be allowed to bring cases against national companies for criminal charges  where the federal government does not bring the charges?  Could a state bring a company down as was done by the federal government in the case of Arthur Andersen?  Should this be permitted? Stay tuned.


August 21, 2005 in Arthur Andersen, Prosecutions, WorldCom | Permalink | TrackBack (1)

Sunday, June 12, 2005

WLF Program on Andersen

The Washington Legal Foundation has a program here that examines the Arthur Andersen decision.   The program is moderated by the Hon. Richard Thornburgh who asks an initial question with regard to this decision  as to whether is it a "bump in the road or a sea change" in white collar prosecutions. 

The program offers commentary from:

1. Gary Grindler (King & Spaulding) who notes that DOJ needs to consider collateral consequences; 

2.Robert Weiner (Arnold & Porter), who authored the National Association of Criminal Defense Lawyers (NACDL) amicus brief in this case, discusses the impact of this decision on attorneys;

3.Ronald W. Peppe II, Vice President Law & Technology, Association of Corporate Counsel, who brings out the fact that so many documents today are not hard documents, but rather electronic. 

The program covers the topic of how the Andersen decision may influence 1519 cases (Sarbanes Oxley).


June 12, 2005 in Arthur Andersen | Permalink | TrackBack (0)

Friday, June 3, 2005

Some Outside Commentary on Arthur Andersen

As one might suspect, there has been interesting commentary on the Arthur Andersen Case.  Some links are below:

Rich Smith, Andersen Innocent?  Think Again (here)

NPR (here)

Floyd Norris, Who Killed Andersen? It Was Suicide, NYTimes (here)

Ann Woolner, Bloomberg (here) (On my quote, the reason we don't know is because the government chose to proceed with an obstruction charge as opposed to investigating any substantive crimes that they may have been considering) (See my Commentary here discussing the problem with taking shortcuts).

Corporate Compliance Blog (here)

June 3, 2005 in Arthur Andersen | Permalink | TrackBack (0)

Wednesday, June 1, 2005

DOJ Comments on Andersen

DOJ issued a press release here expressing disappointment, but acceptance in the Andersen decision. It states:

Department of Justice is disappointed in today’s decision by the U.S. Supreme Court regarding jury instructions given in the case, but of course we respect the Court’s decision.

“The Justice Department’s decision to charge Arthur Andersen was based at the time on the determination that the substantial destruction of documents in anticipation of an investigation by the Securities and Exchange Commission violated the law. We remain convinced that even the most powerful corporations have the responsibility of adhering to the rule of law.

“We will carefully examine today’s decision and determine whether to re-try the case.”


June 1, 2005 in Arthur Andersen | Permalink | TrackBack (0)

A (Slightly) Different Take on the Arthur Andersen Opinion

The Supreme Court clearly foreshadowed its decision in the Arthur Andersen case (opinion here) when the Justices uniformly expressed concern about the scope of the government's argument, which would sweep much lawful activity, particularly the advice of lawyers, within the definition of "corruptly persuades" in Section 1512.  I am hesitant to read too much into the Court's castigation of the position of the United States as a validation of what Andersen did in the Enron engagement.  The Court did not hold that Andersen was not guilty of the offense, and there was no issue before the Court regarding the sufficiency of the government evidence.  While the opinion was certainly negative regarding the strength of the government's case, that needs to be viewed in the context of a decision about whether the jury instructions were sufficiently flawed to require reversal of the conviction.  While the Chief Justice's opinion -- which may well be one of his last decisions for the Court -- does not mention harmless error, that is the standard for judging mistaken jury instructions.  The Court is concerned with whether the jury might have reached its decision based on an improper interpretation of the law, so that the strength of the government's evidence is important, but it never said that Andersen was not guilty of the crime.  One can question whether the government would win a retrial -- and I'm certainly hopeful that the case will end at this point because further proceedings would be meaningless given the state of the firm -- but the fact remains that it can pursue the charges.

Was Arthur Andersen picked on unfairly?  Again, the wisdom of charging the firm with a crime is open to question, but Andersen was not an unwitting innocent.  It began shredding documents once Enron began to collapse, and continued to do so throughout the period until it received the SEC subpoena.  The repeated admonitions to Andersen employees to follow the firm's "document retention policy" without an explicit directive not to destroy any records was at least misguided, and quite possibly a cynical signal to get rid of as much of the documentation as possible.  One cannot view the conduct of Andersen's legal department as a template for how to handle a potential government investigation.  While the Court notes that many firms have such policies, a lawyer takes a significant risk if he or she permits an organization -- especially an accounting firm -- to destroy documents in the face of an impending government investigation and a potential client meltdown.  Of course, there is much 20-20 hindsight involved because no one knew how quickly Enron would be enveloped by its fraudulent transactions, but a cautious lawyer will assume the worst and work from there. 

The Enron relationship was not Andersen's first brush with problematic accounting, and the firm's once pristine reputation had already been sullied by other accounting engagements in which significant problems arose (e.g. the Baptist Foundation lawsuit in Arizona, the Sunbeam/SEC action).  While that alone does not justify bringing criminal charges against the firm, its conduct certainly raised questions about whether it had obstructed justice to avoid implicating itself in another client's fraud.  One can question the prosecutorial judgment whether to file charges, but I don't think the factual basis for the charge is open to serious question.

Finally, I wonder whether the Chief Justice's opinion will spawn the "Mom would have done the same thing" defense.  The opinion notes, "Indeed, 'persuad[ing]' a person 'with intent to . . . cause' that person to 'withhold' testimony or documents from a Government proceeding or Government official is not inherently malign. Consider, for instance, a mother who suggests to her son that he invoke his right against compelled self-incrimination, see U. S. Const., Amdt. 5, or a wife who persuades her husband not to disclose marital confidences, see Trammel v. United States, 445 U. S. 40 (1980)."  Obstruction cases can now feature references to each person's mother, and whether she would have taken the same approach.  My mother would no more tell me to assert the Fifth than root for the New York Yankees (she was Worcester Irish through and through). (ph)


UPDATE (6/1): Blog co-editor Ellen Podgor is quoted in stories about the Andersen decision in the New York Times (here), Wall Street Journal (here), and Legal Times (here). That's a hat trick, if we still had hockey. (ph)

June 1, 2005 in Arthur Andersen, Judicial Opinions | Permalink | TrackBack (0)

Tuesday, May 31, 2005

Commentary on Arthur Andersen Decision

Several things are important to note here-

1. It is a 9-0 decision.  Reaction -  The government had it wrong and the Court thought it clear enough to speak with a single voice.

2.  It only took 11 1/2 pages to write a decision that rejects two government arguments (that knowingly does modify "corruptly persuades" and a nexis requirement is required)

3. This decision sends a message that the Court is troubled with cases brought on a mere thread of criminal culpability. This is particularly important in white collar decisions as the law is complex, people have trouble understanding it, and criminal liability should only be imposed when there is a proper mens rea.

4. Document retention policies deserve some respect- the Court specifically says that they are "common in business."  To say that one "impedes" the government merely because they have and use such a policy is wrong.  More should be required.  Likewise to say that you can be guilty of obstruction if you merely "impede" the government is absurd.  The Court goes so far to use the example of "a mother who suggests to her son that he invoke his right against compelled self-incrimination."  Obviously this should not be considered as obstructive conduct. Equally important to lawyers is that they be permitted to properly advise clients without fear of being accused of obstructing justice.

5. What happened here -  The government chose to bring an obstruction of justice charge, usually an easy shortcut way of proceeding, as opposed to investigating and proceeding on substantive charges that might exist.   Reaction - Taking shortcuts runs risks.

6. What effect will this decision have on pending cases and future cases - After the Arthur Andersen indictment, Congress amended the statute.  Obviously because of ex post facto the government cannot proceed against Andersen under the new statute for the alleged conduct. Congress also added a new statute 18 U.S.C. s 1519. These amendments and the new statute were previously discussed here.  Section 1512 and 1519 both have the word "knowingly" in them, so some of the findings of this Court may still apply.  The Court's decision emphasizes with italics the word knowingly when it states that "Section 1512(b) punishes not just corruptly persuad[ing]  another, but 'knowingly . . . corruptly persuad[ing]' another."

7.  Sorry Martha, but this case may not be of much assistance in your appeal.  Martha Stewart was indicted under section 1505 which has the word corruptly but does not have the modifier "knowingly." (see footnote 9 of the Court's decision that distinguishes obstruction cases brought under 1503 and 1505).

The moral of the story - the government gave a corporate death sentence here, and when you are dead there isn't much that can be done even when it is later proved that you were wrong.  The truly unfortunate part here is that innocent employees suffered.


May 31, 2005 in Arthur Andersen, Obstruction | Permalink | TrackBack (4)

Andersen Conviction Reversed by High Court

Not surprisingly, the Supreme Court in a 9-0 decision reversed the conviction of Arthur Andersen LLP. In a 11 1/2 page opinion authored by Chief Justice Rehnquist, the Court found that the "jury instructions failed to convey properly the elements of a 'corrup[t] persuas[ion]' conviction under sec. 1512(b)."  The Court also found that the jury instructions improperly told the jury that "it did not have to find any nexus between the 'persua[sion]' to destroy documents and any particular proceeding."

It's a brief opinion, but there is a lot to say about it.  Commentary on the decision will be forthcoming.

Decision is here - Download 04-368P.pdf


May 31, 2005 in Arthur Andersen, Judicial Opinions | Permalink | TrackBack (2)

Wednesday, April 27, 2005

Arthur Andersen Argument Report

An AP story (here) reports on the oral argument this morning in Arthur Andersen v. United States.  It appears that Michael Dreeben from the Solicitor General's office got the tougher questions from the Court, including -- and this will shock many -- questions expressing incredulity from Justice Scalia.  A transcript of the oral argument should be available within the next two weeks, and I will post a link. (ph)

April 27, 2005 in Arthur Andersen | Permalink | TrackBack (0)

Tuesday, April 26, 2005

The Final Rounds for Arthur Andersen

Arthur Andersen LLP appears to be nearing the end of its run as a litigant, perhaps its final acts as a legal entity.  Tomorrow, the Supreme Court concludes its oral argument schedule for the 2004 Term with Arthur Andersen v. United States (earlier post here).  The Andersen Reply Brief filed last week is available here, and the fight concerns the proper interpretation of "corruptly" under 18 U.S.C. Sec 1512.  Today, Andersen was the final defendant to settle in the WorldCom securities fraud class action litigation that has resulted in payments by investment banks and Worldcom's former directors of over $6 billion (earlier post here).  According to a Wall St. Journal article (here), Andersen agreed to pay $65 million, plus 20% of any funds paid out to its U.S. partners after the partnership is finally wound up.  No indication in the settlement documents how much that could be, and there is a chance it could be a multiple of zero. Even a reversal of the criminal conviction, which would probably be the end of the criminal case because the government is unlikely to retry the organization, will not bring Andersen back.  A sad end to a once-great name, at one time the best of the Big Eight accounting firms for those who remember back that far. (ph)

April 26, 2005 in Arthur Andersen | Permalink | TrackBack (1)