Saturday, February 9, 2008

Indicted for Writing Opinion Letters

Would the government actually indict an attorney premised upon allegations that the attorney wrote several opinion letters for another lawyer?  As surprising as it might seem, the answer is "yes." The government has indicted Attorney Ben Kuehne for his alleged writing of six opinion letters based upon his investigation of whether funds being paid to an attorney were proceeds of criminal conduct.

Several observations and comments on the Indictment and the accompanying Motion to Seal:

  • The indictment is preceded by a page titled - "Motion to Seal."  It is signed by a "trial attorney - DOJ." It requests the indictment be sealed "for the reason that the named defendants may flee and the integrity of the ongoing investigation may be compromised." - Did the government really believe that Attorney Ben Kuehne would flee?  A later sentence states that"many of the named defendants are foreign nationals." But the government fails to limit the language used in the prior sentence that explicitly states "that the named defendants may flee" to only those who might be foreign nationals.  That is a powerful statement to claim that a prominent Miami attorney might flee.  If they didn't mean to apply this statement to him, is it prosecutorial over-reaching, an attempt to taint the accused, or just sloppy drafting? 
  • The indictment alleges that Kuehne's opinion letters were inaccurate in stating that some of the moneys had come from an individual/company that "his investigation" "had determined.... were reputable and well-established, without any connection to illegal activities."  The indictment claims that some of these opinions were untrue because moneys had in fact come from "undercover law enforcement operations."  ----  Isn't the very purpose of an undercover operation to make it seem like things are real?  Is this a situation of accusing someone of issuing incorrect opinion letters because the government did a good job of misleading him?
  • Count Six of the Indictment charges Obstruction of Justice. The charge is expressed in a total of 2 sentences. It states: 

"From on or about January 23, 2003, continuing to the date of this indictment, the defendants, .......did corruptly endeavor to influence, obstruct and impede the due administration of justice; that is investigations by the grand jury; to wit, endeavoring to influence, obstruct, and impede a federal investigation, as set forth above.  In violation of Title 18, United States Code, s 1503."  (names omitted)

A charge without any facts?  Did the government actually put a mere restatement of section 1503 as the basis of a criminal charge against an attorney? Co-blogger Peter Henning called the Indictment of Ben Kuehne a "head-scratcher," but that was prior to receiving the document. But after reading it, I'd go a step further - they have actually indicted an attorney for obstruction of justice and alleged no facts in this count to support the charge.  It almost sounds like a case the 11th Circuit reversed, U.S. v. Thomas, 916 F.2d 547 (11th Cir. 1990).

Perhaps the most troubling aspect of this indictment is that it represents yet another instance of the government interfering in the payment of attorney fees for the criminally accused.  As opposed to going to court and asking for the fees to be returned as improper, they have opted to proceed with criminal charges that in some cases carry up to 20 years.

Indictment - Download us_v_kuehne_indictment_oct_2007.pdf


February 9, 2008 in Attorney Fees, Money Laundering, Obstruction, Prosecutions | Permalink | Comments (3) | TrackBack (0)

Wednesday, February 6, 2008

Wilkes in More Hot Water

As if defense contractor Brent Wilkes isn't in a heap of trouble already from his convictions for bribing former Representative Randy ""Duke" Cunningham to obtain no-bid Pentagon contracts, now he's accused of lying about his finances to get court-appointed counsel for a second corruption trial.  As discussed in a recent post (here), the Presentence Report on the Cunningham convictions recommends a sixty-year prison term -- essentially life -- based on the gains from the bribery to Wilkes company, ADCS Inc.  The second case involves alleged bribery of former top CIA official Dusty Foggo, and because of national security issues, all the lawyers in the case needed to have a top secret clearance to review materials.  Unfortunately for Wilkes, his lawyer from the first trial, Mark Geragos, declined to undergo the background check required for the clearance -- it's not clear why -- and so Wilkes needed new counsel.  He briefly had another lawyer, Eugene Iredale,* who never officially entered an appearance, and then sought court-appointed counsel based on an ex parte financial affidavit, which the district court granted.  Wilkes is now represented by the Federal Defenders office, but the government is seeking to have them removed from the case because of alleged misstatements about his purported financial need in the affidavit.

In a brief (available below) seeking to revoke the appointment of counsel, reimbursement of the costs of the Federal Defenders, and release of the financial affidavit, the government asserts:

Based upon a sealed ex parte financial affidavit, defendant Wilkes convinced the Court that he was unable to retain counsel to represent him in Criminal Case No. 07CR0329. Yet, at the time this affidavit was provided to the Court, Defendant and his wife were: (1) in the process of distributing over $2.5 million in cash proceeds; (2) the owners of a residence in Poway that had equity of approximately $800,000; and (3) owners of two properties in Rancho Bernardo and one in Chula Vista. Following the appointment of public counsel, defendant Wilkes, unknown to the Court or the government, distributed over $1 million in assets, including $100,000 in cash provided to the Wilkeses (apparently for spending money), $40,000 to their divorce attorneys, and an untold amount of cash that was transferred to their children’s trust accounts. The use of public funds while defendant continues to spend his ill-gotten gains must stop.

If the court strips Wilkes of the court-appointed lawyers, then the pending trial will have to be postponed until he retains new counsel, who will have to undergo the requisite background check.  Moreover, if the court finds that Wilkes' financial affidavit was false, it could lead to a separate perjury charge and a sentencing enhancement for obstruction of justice -- although if he receives anything near the recommended sentence for the Cunningham bribery, any additional term won't matter too much.  Wilkes has filed a motion (available below) for a new trial on the first convictions, arguing that the government violated its Brady obligation and that he was prejudiced by the denial of a continuance.  These motions are difficult to win, and the grounds asserted are not the type that usually lead to overturning a verdict. (ph)

*  Law-Geek Trivia: The attorney who briefly entered the case on Wilkes's behalf before the appointment of the Federal Defenders, Eugene Iredale, is a well-known defense lawyer who was disqualified because of a potential conflict of interest in Wheat v. United States, 486 U.S. 153 (1988), the Supreme Court case that established the broad discretion district courts have in criminal cases to disqualify counsel.

Download us_v_wilkes_motion_to_terminate_counsel_feb_4_2008.pdf

Download us_v_wilkes_new_trial_motion_feb_5_2008.pdf

February 6, 2008 in Attorney Fees, Corruption, Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 19, 2007

Outside Lawyer Charged in Refco Fraud -- Who Pays the Legal Fees?

The lead outside lawyer for the now-defunct commodities brokerage Refco Inc. was indicted on charges of aiding the company's CEO in hiding debts by engaging in "round-trip" transactions at the end of quarters.  The eleven-count indictment (available below) includes conspiracy, false filing, wire fraud, bank fraud, and securities fraud counts in connection with the spectacular collapse of Refco, which went into bankruptcy only two months after its initial public offering.  The prosecution is part of a growing trend in which corporate lawyers are finding themselves as targets of investigations and defendants in criminal and civil enforcement actions -- the SEC filed charges against the lawyer, too.

The prosecution raises an interesting question for me about the payment of attorney fees for the indicted lawyer.  The defense will probably cost at least $10 million if the criminal case goes to trial, and could reach $20 million is there is a conviction and an appeal.  Defense counsel is from Cooley Godward's New York office, so the rates will not be cheap.  The lawyer is a partner at Mayer Brown and was head of its derivatives group, so he certainly has been well-paid, but the financial drain in this type of case is enormous.  For executives at public companies, there is usually an indemnification clause in the corporate by-laws or an employment agreement to cover the attorney's fees that also includes in most cases an advancement requirement.  For example, corporate defendants like Conrad Black and Joseph Nacchio had a substantial portion of the attorney's fees in their prosecutions covered by their former corporate employers.

I doubt an outside lawyer would be covered by a corporate indemnification clause for work on behalf of the business.  It may be that the retainer agreement would require the company to cover any costs related to the representation, although in this case Refco is in bankruptcy and unlikely to pay anything toward the defense, especially when the alleged fraud is what triggered its collapse.  Mayer Brown is an LLP, and its partnership agreement may have an indemnification clause similar to what one would see in a corporation.  I'm not familiar enough with such things -- being up in an ivory tower -- so I can't say whether that is a realistic possibility.  Advancement of fees is perhaps of greater importance because a defendant would prefer not to have to wait until the end of the case to get the funds to pay the lawyers, who cannot work on a contingency basis in a criminal case.

A recent filing by former Milberg Weiss partner Stephen Schulman seeks payment of his attorney's fees in a criminal prosecution against the firm and a number of its former partners that is illustrative of a claim for fees by outside counsel.  Schulman filed his claim to compel arbitration (available below) because the firm cut off payment of the fees after he agreed to plead guilty and a grand jury indicted former name partner Melvyn Weiss.  The legal fees until Schulman's guilty plea were $4.5 million, which have been paid, and he has incurred another $1.2 million since then that the firm has refused to pay.  The Milberg Weiss partnership agreement states, "Any amounts for which a Partner becomes liable in connection with the rendition of services to a client  . . . whether or not insured or insurable against (and whether or not insurance has been or is obtained) shall be an expense of the Partnership."  Schulman's claim is not based solely on this provision, but it does provide an example of a partnership provision that may provide some protection for outside lawyers who are charged with a crime or in a civil enforcement action related to their work for a client.

With the increased focus on attorneys by federal prosecutors and the SEC, it may be a good time for lawyers to check the indemnification provisions in their firm's organizing documents to see just how much protection they have. (ph)

Download us_v_collins_refco_indictment_dec_18_2007.pdf

Download schulman_v_milberg_weiss_attorneys_fees_motion_nov_27_2007.pdf

December 19, 2007 in Attorney Fees, Fraud, Prosecutions | Permalink | Comments (0) | TrackBack (0)