Tuesday, February 15, 2011

Grand Juries Are Not For Trial Preparation

In a case pending and set for trial in March in the Central District of California, with allegations of FCPA and money laundering violations, DOJ prosecutors are seeking to start another grand jury investigation of the defendants. Lawyers for the defendants cried foul and moved to quash five subpoenas calling for testimony today. As a result, the federal judge presiding over the case imposed stringent conditions on any use of the grand jury by DOJ prosecutors. 

A grand jury is not to be used for "strengthening [a] case on a pending indictment or as a substitute for discovery." (Beasley, Simels, Arthur Andersen).  Prosecutors claimed that their purpose in questioning these witnesses, all current employees of the company under indictment, was for a "new" investigation. Interestingly, the filings show that this "new" grand jury investigation came immediately after DOJ prosecutors were denied access to the employees for pre-trial, witness preparation interviews.

Defense lawyers Jan Handzlik and Janet Levine also argued that the DOJ prosecutors were "manufacturing" a new investigation to create reasons to postpone the trial, set for March 29th. They suspected the government would seek a superseding indictment leading to a trial continuance. Prosecutors disagreed and filed an under seal, in camera declaration to justify the new investigation.

US District Judge Howard Matz denied the defense motion to quash the grand jury subpoenas, but issued an order that handed the DOJ prosecutors what some of us consider to be a stinging defeat. He placed conditions on what the government could do if it chose to proceed with its "new" investigation, stating in part:

(1) At the upcoming trial, the Government may not proffer or refer to any newly obtained evidence derived from the testimony of any witness before any grand jury session conducted after the return of the First Superseding Indictment on October 21, 2010. . . .

(2) The Government may not, and shall not, question any witness about any business and financial relationship that the [defendant ] Company had with [other individuals and entities named in the pending indictment]

(3) The Government may not, and shall not, question any witness about any of the other events that directly form the basis for the charges contained in the first superseding indictment.

(4) The Government shall file under seal a transcript or transcripts of the grand jury testimony it obtains from the aforementioned witnesses, and it shall do so by not later than one week before the start of trial, and

(5) The Government may not point to or rely on whatever evidence it obtains at the upcoming grand jury sessions to seek or obtain a continuance of the trial date.

Defense counsel in this case are Jan L. Handzlik (Greenberg Traurig LLP) and Janet I. Levine (Crowell Moring).

See Court's Order - Download Matz min order re GJ

See also Richard Cassin, FCPA Blog, Sparks Fly Before LA Trial


February 15, 2011 in Defense Counsel, FCPA, Grand Jury, Investigations, Judicial Opinions, Money Laundering, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Friday, January 14, 2011

Corruption in Florida?

At the end of this past year, the Statewide Grand Jury in Florida issued its first Interim Report - Statewide Grand Jury Makes Anti-Corruption Recommendations in First Interim Report(Report is here) According to the press release issued at that time -

"Key recommendations of the Statewide Grand Jury include:

- Expanding the definition of public employees to include private employees contracted by government entities that perform government services;
- Creating sentencing enhancements for offenses committed by officials who use their public position to facilitate their crimes;
- Creating an independent State Office of Inspector General, responsible for hiring and firing agency Inspectors General;
- Expanding definition of criminal bid tampering to include bid-rigging schemes; and
- Authorizing the Ethics Commission to initiate investigations with a supermajority vote of commission members."

This report comes at an interesting time, as the American Law Institute is gearing up for a new project called Principles of Government Ethics.


January 14, 2011 in Corruption, Government Reports, Grand Jury, News | Permalink | Comments (1) | TrackBack (0)

Friday, October 22, 2010

Three Federal Grand Jury Reforms

I had a fun time commenting about grand jury reform yesterday at the Overcriminalization 2.0 Conference in Washington, DC--our nation's capital.

Here are three of my ideas for improving the federal grand jury's fairness. No doubt others have thought of these improvements as well.

1. All fraternization between prosecutors and grand jurors should be strictly forbidden. Federal grand jury proceedings are supposed to be on the record. But this policy can be circumvented by informal conversations between grand jurors and prosecutors, before grand jury begins or during breaks. Even if testimony is not conveyed through such informal discussions, friendship and camaraderie can develop, particularly over the long haul of a white collar investigation. This makes it far more likely that the grand jurors will bend to the prosecutor's will and resolve all doubts and issues in his/her favor. My suggestion is that the grand jurors be treated more like petit jurors, in terms of the informal contact that prosecutors are allowed to have with them. In addition to promoting fairness, such a reform should impress upon the grand jurors the seriousness and sanctity of their work.

2. All summarizing of prior evidence and testimony by the prosecution should be strictly prohibited. Federal prosecutors are not allowed to "deliberate" with the grand jury. That means they can't sit in with the grand jurors and try to sway their votes. The prohibition applies whether or not the grand jury is engaged in deliberations just prior to voting. What sometimes happens over the 18 month course of a white collar grand jury investigation is that jurors ask questions about the credibility of witnesses and the content of prior evidence and testimony. The prosecutor cannot comment upon the credibiltiy of witnesses, but can summarize prior evidence and testimony. Suppose a grand juror says, "I just don't believe this last witness, Mr. Smith. Isn't what he said inconsistent with what Mrs. Jones said?" Under current rules, the prosecutor may respond as follows. "I cannot comment upon Mr. Smith's credibility, because I cannot deliberate with you. But I am allowed to summarize prior testimony. What I can tell you is that Mr. Smith's testimony is inconsistent with Mrs. Jones' testimony and with the testimony of every other witness we have heard from, including seven of your fellow citizens and five FBI Special Agents."  The ability to summarize thus inherently lends itself to potential abuse. This potential should be eliminated, and the prosecutor should be confined to telling grand jurors that they can ask to examine evidence or have prior testimony read back to them by an agent.

3. The case agent should be required to inform federal grand jurors under oath of all exculpatory information that the government is aware of. DOJ already encourages prosecutors to disclose exculpatory evidence to the grand jury and some jurisdictions require it as an ethical matter. I suggest here something further. The case agent should be required to reveal to the federal grand jurors under oath, in every case, all exculpatory information in the government's possession or that the government is aware of. This will facilitate the delivery of relevant information to the grand jurors, by forcing the prosecutor and case agent to focus on the question of exculpatory information. What could be more relevant to a grand jury's charging decision than information inconsitent with guilt? Isn't this the fair thing to do?

These three suggested reforms have at least three things in common: 1) they will improve the fairness of the grand jury process; 2) they pose no risk of physical harm or danger to any government witness or employee; and 3) they impose no significant time or cost burdens on the government.


October 22, 2010 in Conferences, Grand Jury | Permalink | Comments (1) | TrackBack (0)

Wednesday, September 8, 2010

Feds are armed and dangerous in BP criminal investigation

Guest Blogger - Dan Cogdell  

As the Justice Department prepares a grand jury investigation of possible crimes involved in the BP oil spill, ex-CEO Tony Hayward is looking smarter for leaving this country for reasons beyond his lack of popularity. 

Multiple indictments are likely to be sought, charges could reach well up the corporate ladder and British citizens who are not in this country when indicted might have protection from “double criminality,” which prevents extradition unless the same action is a criminal offense in both countries. It’s very possible the Justice Department will stretch the envelope and that could put their use of U.S. laws in a place not covered by European Union law.

There is no question the federal government is taking dead aim at environmental crimes in the BP oil spill or that the legal artillery is formidable. Federal prosecutors were already ramping up their environmental crime filings before the Deepwater Horizon started spewing oil into the gulf. Now, with massive public pressure, this could be the environmental version of the Enron prosecutions.

This week (8/23-8/27) the U.S. Coast Guard and the Interior Department are holding hearings in Houston to further investigate the BP disaster. Witnesses who invoke the Fifth Amendment may not look like team players, but they will be taking the smartest path.

Expect prosecutors to take fullest advantage of the powerful and far-reaching tools they have available. Expect them to issue more than just wrist slaps and corporate fines out of the Refuse Act, the Migratory Bird Treaty Act and the Clean Water Act. Expect them to seek jail time. There is a lot going in their favor.

Prosecutors will most assuredly rely on the “Responsible Corporate Officer Doctrine,” which allows Clean Water Act violations to be directed at even top corporate officers. Prosecutions under this theory have resulted in convictions of people who were not even at work sites and, in one case, not even working for a company but had “honorary power.” (See United States v. Hanousek, 176 F. 3rd 1116 (9th Cir. 1999), cert. denied, 528 U.S. 1102 (2000), and United States v Brittain, 931 F2d 1413 (10th Cir. 1991)) The “Responsible Corporate Officer Doctrine” may be the prosecutor’s ticket to tag BP’s hierarchical elite while soothing the related political nightmare currently facing the U.S. government.

In a Clean Water Act misdemeanor case, the government does not have to prove that anyone intentionally caused this enormous harm. Negligence is a comfortably lower bar for these prosecutors. And this isn’t BP’s first rodeo. A company culture that prosecutors contend encourages money-saving over safety has landed BP in the government’s sights time and time again, and will only bolster the prosecutor Howard Stewart’s efforts.

Whether BP employees or contractors believe they are targets or not, they must balance the idea of seeing justice done with protecting themselves and their employer. Taking the Fifth at this point may be the least popular but most prudent move.

Dan Cogdell is a Houston-based criminal defense attorney with Cogdell & Ardoin who has represented numerous clients in environmental and white-collar criminal cases.


September 8, 2010 in Environment, Grand Jury, International, Investigations | Permalink | Comments (1) | TrackBack (0)

Thursday, August 19, 2010

Roger Clemens Indicted

The Washington Post story is here and has a link to the indictment. Nothing yet up on PACER. Clemens is charged in six counts with perjury, false statements, and obstruction of Congress.


August 19, 2010 in Celebrities, Congress, Current Affairs, Grand Jury, Investigations, Media, Obstruction, Perjury, Prosecutions, Sports | Permalink | Comments (2) | TrackBack (0)

Clemens to be Charged?

The Wall Street Journal is reporting here that baseball great Roger Clemens will soon be indicted by a federal grand jury for perjury.


August 19, 2010 in Celebrities, Congress, Current Affairs, Grand Jury, Investigations, Obstruction, Perjury, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 3, 2010

The Grand Jury - SEALS Panel Explores Reforms

A panel of law professors at the Southeast Association of Law Schools (SEALS) explored grand jury reform. The first speaker was Professor Roger Fairfax (George Washington), who provided a historical overview of the grand jury.  He noted its place constitutionally and provided what role reform might play if the Congress revises federal criminal law.  Next up, Professor Eric Miller (Saint Louis), looked at encouraging grand jurors to act more forcefully in telling the prosecutor what should be prosecuted. Professor Ric Simmons (Ohio State) looked at how to make the grand jury more independent. One item he advocated for was having evidence rules apply to the grand jury. Professor Andrew Leipold noted how little reform has occurred with regard to the grand jury -- "an incredibly stable world."  He asked whether this is a problem that needs a solution. The final speaker was Professor Margaret Lawton (Charleston), who said that we should look at reforms being suggested.  She noted how reforms put forth by NACDL match with items in the US Attorneys' Manual. But the question here, she stated, may be what is happening in practice. 

The panel was moderated by Professor Katrice Copeland (Penn State), who asked thoughtful questions that brought out important points on reforming the grand jury process.  From these questions, the panel talked about - what would the world look like without a grand jury. They looked at various reform proposals - such as why not have the grand jury having options beyond indict or not indict.  Mentioned several times was whether the grand jury should have a role of providing diversion.  They also considered whether a reform proposal would work to the benefit of the defendant or prosecutor. Professor Copeland questioned whether more things should be added to the grand jury's role when so many agree they are not doing a satisfactory job.  The panel discussed what procedures from state grand jury procedures should be adopted in the federal system.

Professor Roger Fairfax noted his forthcoming book - Grand Jury 2.0 (Carolina) that includes pieces from law professors on many aspects of the grand jury and reforms that might enhance this process.

(esp) (blogging from Palm Beach, Florida)

August 3, 2010 in Conferences, Grand Jury | Permalink | Comments (0) | TrackBack (0)

Thursday, March 6, 2008

Zach Scruggs, Meet Frank Costello

Mob boss Frank Costello, one--time head of the Luciano crime family, faced charges in the 1950s for tax evasion, the favored means to attack the Mafia before the advent of RICO -- think Al Capone.  Costello's case went to the Supreme Court on the question of whether a defendant can challenge a grand jury indictment on the ground that there was insufficient admissible evidence on which to charge a crime.  Costello came to mind when I read Zach Scruggs' latest challenge to the attempted bribery charges against him and his father, Dickie Scruggs.  In a motion filed on March 3 (available below), Zach seeks dismissal for prosecutorial misconduct because two government witnesses, an FBI agent and the alleged offeror of the bribe, Tim Balducci, gave testimony to the grand jury that he claims was "patently false and misleading in material respects and undoubtedly led to the erroneous indictment of Defendant Zach Scruggs."

While not quite the same claim as Costello, Scruggs is asking for dismissal because the evidence to charge him with a crime was insufficient.  Calling it a motion to dismiss for "prosecutorial misconduct" is a way to avoid the Supreme Court's decision in Costello v. United States, 350 U.S. 359 (1956), which held that "[a]n indictment returned by a legally constituted and unbiased grand jury, like an information drawn by the prosecutor, if valid on its face, is enough to call for trial of the charge on the merits."  The Court rejected Costello's claim that the grand jury did not have enough evidence to charge him because only summary witnesses testified, and further denied his request to use its supervisory power to require prosecutors to present admissible evidence to the grand jury.  The Court stated, "Petitioner urges that this Court should exercise its power to supervise the administration of justice in federal courts and establish a rule permitting defendants to challenge indictments on the ground that they are not supported by adequate or competent evidence. No persuasive reasons are advanced for establishing such a rule."  It seems that Zach's motion is exactly that, asking the district court to review the evidence and find it so flawed that he would not have been indicted.  Costello rejected the use of supervisory power to fashion a rule to challenge indictments, and the Court has been rather hostile to dismissal based on generalized claims of misconduct (see United States v. Williams, 504 U.S. 36 (1992)).

Defendants who want to challenge an indictment because they don't believe there is sufficient evidence to even charge them with a crime have only one option: go to trial and win the case.  That's not the most inviting way to challenge an indictment, but Costello makes it clear that a head-on challenge to an indictment is not going to succeed.  (ph)

Download us_v_scruggs_zach_scruggs_motion_to_dismiss_indictment_march_3_2008.pdf

March 6, 2008 in Corruption, Grand Jury | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 5, 2008

How Not to Ask Questions

Perjury is definitely in the news these days, with the FBI investigating Roger Clemens for his statements before a Congressional committee and Detroit Mayor Kwame Kilpatrick's testimony in a whistleblower lawsuit denying a relationship with an aide under review by the local prosecutors office.  One of the highest profile perjury cases involves home run king (and apparently unwanted free agent) Barry Bonds, whose charges was dismissed by U.S. District Judge Susan Illston because of flaws in the indictment.  Judge Illston ordered the release of the transcript of Bonds' grand jury testimony in 2003 (available below) that now reveals the entirety of the nearly three-hour examination by two Assistant U.S. Attorneys. 

While the indictment presents Bonds in a bad light by isolating specific instances of allegedly false answers, skimming through the full transcript shows just how disorganized the prosecutors seemed to be, and how at least one of them couldn't ask a simple question.  Whether it was nervousness or perhaps being intimidated by Bonds, the questions come across almost like a stream of consciousness approach to the examination.  Here's just one example of the kind of questions Bonds faced: "Let me ask the same question about Greg at this point, we'll go into this in a bit more detail, but did you ever get anything else from Greg besides advice or tips on your weight lifting and also the vitamins and the proteins that you already referenced?" (Pg. 23)  Huh?  Understanding that a transcript does not necessarily convey the full flavor of the actual interchanges, in reading through the questioning I'm struck by how convoluted the questions are, punctuated throughout with "I mean," "you know," and similar distracting phrases.

What makes perjury so difficult to prove is that the allegedly false answer is not necessarily the most important thing.  As the Supreme Court noted in Bronston v. United States, 409 U.S. 352 (1973), "Precise questioning is imperative as a predicate for the offense of perjury."  Among the questions recited in the original indictment was this model of obfuscatory inquiry: "So, I guess I got to ask the question again, I mean, did you take steroids?  And specifically this test the [sic] is in November 2000.  So I'm going to ask you in the weeks and months leading up to November 2000  were you taking steroids . . . or anything like that?" 

Prosecutors will no doubt come back with a new indictment of Bonds in the next couple weeks, one which is honed down and focused on just single questions and answers to avoid the duplicity problem that led to the dismissal.  But they can only work with the transcript they have, and finding a clear question -- and answer -- may be quite a challenge.  The questioning of Bonds was not a model of how to set a perjury trap, if that was the goal in having him testify. (ph)

Download us_v_bonds_grand_jury_transcript_bonds.pdf

March 5, 2008 in Congress, Grand Jury, Perjury | Permalink | Comments (1) | TrackBack (0)

Monday, September 17, 2007

Was the Rider Related Case A Runaway Grand Jury?

A Grand Jury in Mercer County, New Jersey brought an indictment against school officials, including a dean of students, at Rider University for activities related to the death of a student. (see here)  And it was not surprising to see these charges later dismissed by prosecutors, as the idea of indicting school officials in this context was unusual. (see here).  The ABA L Jrl News is now questioning whether these charges were in fact the result of a runaway grand jury. (see here)

The saying has long been that a prosecutor can get a grand jury to indict a ham sandwich.  But runaway grand juries do happen on occasion.  White collar cases, unlike cases of street crimes, are more likely to use the grand jury process for an investigation.  In street crime cases, the police usually conduct the investigation and present the evidence in a shortened form to the grand jury that decides whether to issue an indictment.  In contrast, in white collar cases the grand jury can be used extensively to procure information via subpoena and to have witnesses testify in the investigation of possible criminal activity.   Although there is no legal requirement to present exculpatory evidence (U.S. v. Williams) to a grand jury, there is an ethical standard that provides that "[n]o prosecutor should knowingly fail to disclose to the grand jury evidence which tends to negate guilt or mitigate the offense." (ABA Standard 3-3.6). There is no allegation here of the prosecutor failing to present exculpatory evidence to the grand jury. But perhaps what is the interesting question is the prosecutorial discretion that a prosecutor has in deciding what cases he or she will investigate before a grand jury.


Addedum - See here for details on an upcoming program on "The Impact of Criminal Law on Student Affairs Professionals: Insights into Investigations and Indictments."

September 17, 2007 in Grand Jury | Permalink | Comments (0) | TrackBack (0)

Sunday, August 26, 2007

Reviewing Grand Jury Transcript

The ABA Jrl, in an article by Debra Cassens Weiss, explores the effect of a recent federal court ruling that allows witnesses to review their grand jury testimony. The title of the article is, "Ruling Thwarts Perjury Prosecutions." 

The court's opinion in In Re Grand Jury states:

"This case raises a question that, surprisingly, has not yet been decided by this court: whether federal grand jury witnesses, after they have testified, are entitled to examine the transcripts of their own testimony. Applying Federal Rule of Criminal Procedure 6(e)(3)(E)(i), we hold that grand jury witnesses are entitled to review the transcripts of their own testimony in private at the U.S. Attorney’s Office or a place agreed to by the parties or designated by the district court."

In rejecting one of the government's arguments, the DC Circuit Court states:

"[T]he Government is concerned about grand jury witnesses (or their attorneys) who disclose information to other grand jury witnesses (or their attorneys) with the purpose of obstructing the criminal investigation. The Government identifies joint defense agreements among attorneys as a threat to the integrity of the grand jury process. But denying witnesses access to their own transcripts to help prevent witnesses from talking to others makes little sense to begin with – and makes even less sense given that grand jury witnesses are under no legal obligation of secrecy. A grand jury witness is legally free to tell, for example, his or her attorney, family, friends, associates, reporters, or bloggers what happened in the grand jury. For that matter, the witness can stand on the courthouse steps and tell the public everything the witness was asked and answered. See Fed. R. Crim. P. 6(e)(2)(A)-(B); Fed. R. Crim. P. 6, Advisory Committee Notes, 1944 Adoption, Note to Subdivision (e) ("rule does not impose any obligation of secrecy on witnesses"). The secrecy rules therefore are no justification for denying witnesses access to their own transcripts."

(esp)(hat tip to John Wesley Hall)

August 26, 2007 in Grand Jury, Perjury | Permalink | Comments (0) | TrackBack (0)

Saturday, March 31, 2007

That's What a Subpoena Is For

Every once in a while a line in a company's discussion of a government investigation catches your eye when it appears to miss the point.  Beazer Homes USA is facing a government investigation of its mortgage lending practices, as discussed in a prior post (here).  On March 29, the company filed an 8-K(here) about the investigation, after the media stories first reported the FBI's confirmation of the investigation, that states, "The Company has received a grand jury subpoena from the United States Attorney’s Office in the Western District of North Carolina seeking the production of documents.  The subpoena was issued upon application of the Office of Housing and Urban Development, Office of Inspector General and focuses on the Company’s mortgage origination services.  The Company has not received a request for information or documents from the FBI or IRS in this regard. (Italics added)  Of course, a grand jury subpoena means the FBI is going to get the documents, and it does not have to "request" any information because the subpoena requires Beazer to provide it.  Similarly, if there is a criminal tax investigation, then the IRS can't ask for documents, or even issue a summons, because the case is now in the exclusive jurisdiction of the Department of Justice.  Once the grand jury subpoena arrives, rest assured that a federal investigative agency will be looking at the materials provided for any potential criminal violations -- they don't even need to say "Please" any more. (ph)

March 31, 2007 in Grand Jury, Investigations | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 14, 2007

Au Revoir, New Century Financial?

The shake-out in the subprime lending market may well take down mortgage lender New Century Financial, which disclosed that its banks have cut off most of its access to credit, the lifeblood of any financial institution.  While executives scramble to prevent a complete meltdown, with the company's shares having lost most of their value and now delisted from the New York Stock Exchange, they also have to deal with grand jury and SEC investigations that will likely target individuals at the company.  According to New Century's 8-K filing on March 13 (here):

On February 28, 2007, the Company received a letter from the United States Attorney’s Office for the Central District of California (the "U.S. Attorney’s Office") indicating that it was conducting a criminal inquiry under the federal securities laws in connection with trading in the Company’s securities, as well as accounting errors regarding the Company’s allowance for repurchase losses. The Company has subsequently received a grand jury subpoena requesting production of certain documents. The Company intends to cooperate with the requests of the U.S. Attorney’s Office.

On March 12, 2007, the Company received a letter from the staff of the Pacific Regional Office of the Securities Exchange Commission stating that the staff was conducting a preliminary investigation involving the Company and requesting production of certain documents. The staff of the SEC had also previously requested a meeting with the Company to discuss the events leading up to the Company’s previous announcement of the need to restate certain of its historical financial statements. The Company intends to cooperate with the requests of the SEC.

If New Century ends up declaring bankruptcy, then the trustee is likely to undertake its own investigation while also providing information to government investigators, which would likely include a waiver of the attorney-client privilege and work product protection.  It is not clear what trading is being looked at, but accounting issues are sure to involve senior management among those who will be questioned. (ph)

March 14, 2007 in Grand Jury, Investigations, Securities | Permalink | Comments (0) | TrackBack (0)

Saturday, February 24, 2007

Criminal Investigation of KB Home's Options Backdating

The Department of Justice is looking at the options issuance practices of KB Home, joining a previously-disclosed SEC formal investigation.  According to a company press release (here): "KB Home's past stock option grant practices are being investigated by the Securities and Exchange Commission. The Department of Justice is also looking into these practices but has informed KB Home that it is not a target of this investigation. KB Home has and intends to fully cooperate with any government agency looking into this matter."  On November 12, 2006, the company announced (here) that long-time CEO Bruce Karatz was retiring, and he "voluntarily" agreed to repay the difference between the lower, backdated strike price and the proper price on options he had exercised.  In addition, KB Home's human resources director was fired, and its general counsel resigned.  While the disclosure of a criminal investigation does not necessarily mean charges will be filed, the fact that it comes on the heels of the SEC upgrading its investigation from an informal inquiry likely means the government will be looking at a wide range of transactions, and the company's former officers are the probable targets of the investigation. (ph)

February 24, 2007 in Grand Jury, Investigations, Securities | Permalink | Comments (1) | TrackBack (0)

Thursday, February 15, 2007

SF Chronicle Reporters Avoid Jail for Civil Contempt

The mystery about who leaked the grand jury transcript of erstwhile San Francisco Giants slugger Barry Bonds has been solved, much to the relief of the two reporters who published stories based on the testimony.  Sacramento attorney Troy Ellerman, who at one time represented Balco founder Victor Conte in the steroids prosecution, agreed to plead guilty to permitting San Francisco Chronicle reporters Lance Williams and Mark Fainaru-Wada view the transcripts that had been produced as part of the pre-trial discovery in the case.  Williams and Fainaru-Wada were held in contempt for refusing to testify about the identity of their source of the transcripts that is part of a larger investigation of Bonds for perjury.  Their case was before the Ninth Circuit, and given how the appellate courts have ruled on such media confidentiality claims lately, the two reporters did not have a strong chance of avoiding jail.  As it is, they are now off the hook, and only Bonds'  former trainer, Greg Anderson, remains incarcerated for civil contempt for refusing to testify about steroid use by the baseball star.  At some point, a decision will have to be made about whether to move forward with a prosecution of Bonds or drop the case.  A story on ESPN.com (here) discusses the latest twist in the Bond perjury saga. (ph)

February 15, 2007 in Grand Jury, Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)

Subpoena Fight Over New Jersey Legislative Records

The Office of Legislative Services (OLS) for the New Jersey State Legislature is fighting a federal grand jury subpoena seeking records related to possible conflicts of interest in the state budgeting process, according to an article in the Newark Star-Ledger (here).  The investigation grows out of an earlier investigation of Medicaid and Medicare fraud at the University of Medicine and Dentistry of New Jersey (UMDNJ) that was settled with a substantial penalty and appointment of a monitor.  A report by the monitor identified a possible no-show job for a state Senator at UMDNJ, and federal prosecutors are now looking at a wider range of possible corruption involving the award of discretionary grants by legislators.  OLS, which is a non-partisan arm of the legislature that received the subpoena, asserts that the records sought, including e-mails and internal memos, are confidential, and seeks to quash the subpoena. 

The problem the state legislature faces is that federal grand juries are entitled -- in a time-worn phrase sure to appear in the district court's decision -- "to every man's evidence."  A state confidentiality statute is unlikely to win out over the authority of a federal grand jury to compel the production of records, and state legislative privileges are not recognized under the federal Speech or Debate Clause, so that road is unavailable to prevent enforcement of the subpoena.  Public corruption investigations of state and local officials always raise sensitive issues of federal authority, and the fact that a Republican U.S. Attorney leads the office investigating the actions of Democratic state officials makes it even more complicated.  But on the narrow issue of the enforceability of a federal grand jury subpoena, the smart money is usually on the federal government getting what it demands. (ph)

February 15, 2007 in Corruption, Grand Jury, Investigations | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 31, 2007

A "Just in Case You're Indicted" Clause in Bonds' Contract

The new contract Barry Bonds agreed to with the San Francisco Giants that will pay him $15+ million has an unusual clause allowing the team to void the contract if he is indicted for perjury in the ongoing Balco (Bay Area Laboratory Co-operative) steroids investigation.  Some baseball contracts permit a team to back out if a player sustains a certain type of injury, such as the recent contract J.D. Drew signed with the Boston Red Sox relating to a previously-injured shoulder.  Baseball also has a "good conduct" requirement, but a criminal indictment alone would not necessarily keep him from pursuing Hank Aaron's home run record.

Bonds has been under investigation for nearly two years for possible perjury related to his grand jury testimony in 2003 in which he denied knowingly taking steroids.  Another issue that emerged relates to possible tax evasion for not reporting income from autograph signings and memorabilia sales. Whether Bonds is charged is very much an open question since the U.S. Attorney for the Northern District of California, Kevin Ryan, lost his position.  That change raises doubts about whether new leadership in the office will continue to pursue a case that has already triggered civil contempts and appeals to the Ninth Circuit for three witnesses who have refused to testify: Bonds' former trainer and two San Francisco Chronicle reporters. 

It could be, though, that the Giants know something about the direction of the case.  In July 2006, the team submitted Bonds' medical records to the grand jury, and a team physician and trainer testified.  It is not clear whether the contract provision will pass muster with the players union or the Commissioner's office, so it may come to naught.  A Chronicle story (here) discusses Bonds' new contract. (ph)

January 31, 2007 in Grand Jury, Investigations, Perjury | Permalink | Comments (0) | TrackBack (0)

Thursday, January 25, 2007

Extortion and Reggie Bush

A report on Yahoo.Com (here) states that a federal investigation of possible extortion of former Heisman Trophy winner Reggie Bush includes tapes made by sports marketers who may have given Bush and his family large financial benefits while he was a "student-athlete" at USC.  The allegations of improper payments first emerged after Bush finished his career USC in January 2006, and there were claims that he had agreed to be the first client for a new sports marketing agency.  When the deal didn't come to fruition, Bush alleged that he received extortion threats, triggering a federal grand jury investigation in San Diego, where the agency was headquartered.  Among the items subpoenaed were tapes that allegedly include Bush stating he would repay the money he received and for a car he drove.  The receipt of such benefits by a college athlete means the person loses their eligibility, and likely would trigger NCAA sanctions against USC; Bush is beyond the jurisdiction of the college sports czars, and is a likely choice for NFL Rookie of the Year for his play with the New Orleans Saints this season.

This would not be the first federal case involving questionable payments to "student-athletes" by shady characters.  The prosecution of Norby Walters in the 1980s on RICO and mail fraud charges involved secret payments by a sport agents to college players who later reneged on their deals, and threats against them.  For a summary of the case, see United States v. Walters, 997 F.3d 1219 (7th Cir. 1993). (ph)

January 25, 2007 in Grand Jury, Investigations | Permalink | Comments (0) | TrackBack (0)

Thursday, December 28, 2006

Ninth Circuit Clears Seizure of Baseball Drug Tests -- Did Barry Bonds Flunk One?

The investigation of possible perjury in the Balco (Bay Area Laboratory Co-Operative) steroids investigation took another interesting turn with the release of a Ninth Circuit opinion (here) overturning lower court orders directing the government to return drug tests because the searches were unconstitutional.  The government originally subpoenaed two drug testing labs in early 2004 for the results of drug tests of ten major league baseball players with Balco connections who may have tested positive for steroids.  The most famous player linked to Balco is San Francisco Giants slugger Barry Bonds, who testified before a federal grand jury in 2003 that he did not knowingly take steroids provided by his trainer, Greg Anderson, who was involved with Balco.  After the labs refused to provide the drug tests, investigators obtained search warrants for the facilities and seized records of the drug tests of all major leaguers, and athletes in a number of other sports.  The government then issued another subpoena to obtain many of the records it had already seized.  District court judges in Los Angeles, Las Vegas, and San Francisco ordered the return of the records and granted a motion to quash a subpoena at the urging of the baseball players union, which intervened to represent the interests of all the players whose records were seized.

In its decision in United States v. Comprehensive Drug Testing, Inc., a divided panel upheld the search warrants, including the seizure of computer records, and ordered the lower court to segregate records that fall outside the scope of the warrant for review by a magistrate judge.  A second issue decided by the Ninth Circuit majority was to reverse the district judge's order quashing the subpoena issued after the search as unreasonable.  The appellate court determined that the government may issue a subpoena for documents held by a third party even after a search for the same records. 

A strong dissent by Circuit Judge Sidney Thomas, which runs 60+ pages, accuses the government of acting improperly in both the search and subpoena issuance.  Judge Thomas concluded about the seizure of private medical records not covered by the warrants:

In discussions of the alleged use of steroids by baseball players, much is made about “the integrity of the game.” Even more important is the integrity of our legal system. Perhaps baseball has become consumed by a “Game of Shadows” [a book written about Bonds' steroid use], but that is no reason for the government to engage in a “Prosecution of Shadows.” The district judges were entirely right to order the government to return the thousands of private medical records it wrongfully seized by use of pretext and artifice.

The Ninth Circuit decision raises a number of interesting issues that are coming up more often in white collar crime cases, such as the scope of a warrant to search a computer, plain view of computer files, the government's right to seize intermingled documents, and the prosecutor's authority to use both a search warrant and a grand jury subpoena for the same records.  These are not issues the Supreme Court has confronted in the context of white collar-related investigations, and much of the Court's Fourth Amendment jurisprudence arises in drug and gun cases that are not always a good fit when applied in corporate and business crime investigations -- how often does the auto search exception arise in a mail fraud case? 

The union has some very deep pockets, and a strong interest in keeping the drug testing results secret, so I expect the players' lawyers (from leading San Francisco firm Keker & Van Nest) will seek rehearing en banc and, if that fails, certiorari from the Supreme Court.  While the government has won this round, don't look for a quick resolution of the question whether prosecutors can use any drug test taken by Bonds as evidence for a potential perjury prosecution. Bonds has denied failing a drug test, so the value of the evidence remains to be seen. (ph)


UPDATE (12/28):  Not surprisingly, Donald Fehr, head of the baseball players union, said the union will consider further action to overturn the Ninth Circuit panel's 2-1 ruling allowing prosecutors access to player drug tests in 2003.  In a prepared statement (here), Fehr said, "We will consult with our counsel, and then determine what our next step should be in our fight to protect the Constitutional rights -- including the basic right to privacy -- of our members." (ph)

December 28, 2006 in Grand Jury, Investigations, Judicial Opinions | Permalink | Comments (2) | TrackBack (3)

Sunday, December 24, 2006

Things Are Heating Up in Alaska

As noted here an Alaskan state representative was recently indicted. But it looks like this might not be the end of things.  According to the Anchorage Daily News , the investigation continues. Richard Mauer of the Anchorage Daily News provides an incredible detailed account of the investigation from start to present. But what remains to be seen is if the feds have a direction that is causing them to subpoena certain records.  And is that direction one that looks at possible state corruption or federal corruption.


December 24, 2006 in Environment, Grand Jury, Investigations, Prosecutions | Permalink | Comments (0) | TrackBack (0)