Wednesday, July 8, 2020
NY Department of Financial Services and Deutsche Bank - Jeffrey Epstein
The NY Department of Financial Services entered into a Consent Order with Deutsche Bank AG (NY Branch) and Deutsche Bank Trust Company America with the Bank agreeing "to pay $150 million in penalties" "for significant compliance failures in connection with the Bank's relationship with Jeffrey Epstein and correspondent banking relationships with Danske Bank Estonia and FBME Bank." The press release notes that "[t]his agreement marks the first enforcement action by a regulator against a financial institution for dealings with Jeffrey Epstein." "
"Superintendent Lacewell said. 'In each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the Bank itself deemed to be high risk. In the case of Jeffrey Epstein in particular, despite knowing Mr. Epstein’s terrible criminal history, the Bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions.'"
It is a fascinating consent decree with details of alleged suspicious banking activities. One item stated in the Consent decree is "[t]he interpretation was exemplified by a later email exchange in March of 2017, when a member of the transaction monitoring team responded to an alert about payments to a Russian model and Russian publicity agent, stating, '[s]ince this type of activity is normal for this client it is not deemed suspicious.'"
In the Consent decree one sees a good number of unnamed individuals (Co-conspirator 1, 2, and 3; US Bank -1; Relationship Manager -1; Executive -1 and 2; AML Officer -1 and 2; Coverage Team Member -1; Accountant -1; AML Compliance Director-1; Attorney -1; Offshore Company -1).
July 8, 2020 in Investigations, Money Laundering, Settlement | Permalink | Comments (0)
Tuesday, March 10, 2020
Should Congress Be Allowed to Obtain President Trump's Financial Information?
The Supreme Court on March 31st will hear oral arguments in the cases of Trump v. Mazars USA, Trump v. Deutsche Bank, and Trump v. Vance, the first two of the cases consolidated for argument.
The question in the Mazars case is whether the Committee on Oversight and Reform of the U.S. House of Representatives has the constitutional and statutory authority to issue a subpoena to "the accountant of President Trump and several of his business entities" that "demands financial records belonging to the President." The question in the Deutsche Bank case is "whether three committees of the House of Representatives had the constitutional and statutory authority to issue subpoenas to third-party custodians for the personal records of the sitting President of the United States." The question in the Vance case is whether a subpoena issued by NY's DA against the President as part of "a criminal investigation that, by his own admission, targets the President of the United States for possible indictment and prosecution during his term in office," "violates Article II and the Supremacy Clause of the United States Constitution."
For background on the cases see Amy Howe's terrific introduction as part of a Scotus Blog Symposium on these three cases. (here). Also check out the other symposium pieces as they come online on the Scotus Blog here.
There are many amici briefs on these cases that provide unique points that highlight issues not covered in the main briefs. I want to focus on one amici brief - The Brief of Financial Investigation and Money Laundering Experts in Support of Respondent Committees of the U.S. House of Representations. The brief is filed by Jonathan J. Rusch as well as Steven E. Fineman and Daniel Chiplock of Lieff Cabraser Heimann & Berstein, LLP. This brief provides important history that "there is nothing unusal about Congressional investigations of the financial affairs of presidents and their family members." They note that what is unusual here is the fact that the President has "consistently demonstrated his resolute opposition to the disclosure of financial information relevant to Congress's concern." Obtaining this information from two banks is therefore needed.
To prohibit these subpoenas would mean that a President could engage in conduct that could never be scrutinized. It is sad to see a President failing to allow scrutiny of this information - information that would be coming from banks and not take up Presidential time. After all - if there is nothing improper, the subpoenas would provide that proof for all to see the propriety of the President's conduct. It is more troubling to see a resistance to important money-laundering initiatives that have come from both the executive and legislative branches of government.
March 10, 2020 in Investigations, Money Laundering, News, Privileges | 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 -
- 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.
- 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.
- 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?
- 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?
- 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.
- 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.
- 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.
- 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?
- 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.
March 12, 2019 in Fraud, Money Laundering, Prosecutions, Prosecutors, RICO | Permalink | Comments (0)
Monday, July 23, 2018
Government's Exhibit List in U.S. v. Manafort
For all of you Manafort trial junkies, here is the Government Exhibit List, recently filed in U.S. v. Paul J. Manafort, Jr., set to start soon in U.S. District Judge T.S. Ellis, III's Alexandria courtroom.
Here also is Judge Ellis's Order Denying Paul Manafort's Motion for Change of Venue. Judge Ellis ruled last week that Manafort is not entitled to a presumption that any Alexandria federal trial jury would be partial to the government. If Manafort can establish actual prejudicial partiality through voir dire, a herculean task under current federal criminal law, Judge Ellis will revisit the issue.
July 23, 2018 in Corruption, Current Affairs, Fraud, International, Judicial Opinions, Money Laundering, Mortgage Fraud, Obstruction, Prosecutions | Permalink | Comments (0)
Friday, February 2, 2018
ABA sends letter to Senate Judiciary Committee Opposing Anti-Money Laundering Bill
"American Bar Association President Hilarie Bass sent a letter to the Senate Judiciary Committee expressing concerns over a proposed anti-money laundering bill that would undermine the attorney-client privilege and impose burdensome and intrusive regulations on millions of small businesses, their lawyers and other agents, and the states." See more here.
February 2, 2018 in Money Laundering, Statutes | Permalink | Comments (0)
Saturday, December 23, 2017
Media Coverage of Friday’s International Soccer Convictions
On Friday, two international soccer executives were convicted in federal court in Brooklyn, New York, for their roles in a global bribery scandal. The defendants were alleged to have received bribes and kickbacks to influence decisions regarding media rights associated with significant FIFA soccer tournaments. The defendants were also alleged to have accepted payments to influence the selection of venues for the World Cup and other important tournaments.
Juan Angel Napout, former head of South America’s football governing body, was accused of accepting $10.5 million in bribes, and Jose Maria Marin, former president of Brazil’s Football Confederation, was accused of accepting $6.55 million in bribes. Napout was convicted of several counts, including racketeering conspiracy, wire fraud, and money laundering. Napout was convicted of racketeering conspiracy and wire fraud.
After the convictions, FIFA stated, “FIFA strongly supports and encourages the U.S. authorities’ efforts to hold accountable those individuals who abused their positions and corrupted international football for their own personal benefit.”
The jury was unable to reach a verdict regarding the third defendant in the case, Manuel Burga, former president of the Peru soccer federation. Jurors will return next week to continue deliberating in his matter.
Since the investigation into international soccer began in 2015, more than 20 defendants have pleaded guilty. Several news outlets have in-depth coverage of Friday’s convictions, including the New York Times, Sports Illustrated, the BBC and Bloomberg.
December 23, 2017 in Corruption, Current Affairs, International, Money Laundering, News, Prosecutions, Sports, Verdict | Permalink | Comments (0)
Friday, December 1, 2017
Australia Launches Royal Commission to Examine Banking Sector
As detailed by The Sydney Morning Herald, the Australian government announced this week that it will convene a Royal Commission to examine potential misconduct by the Australian banking and financial services sector. The announcement was made by Prime Minister Malcolm Turnbull after a letter was received from four banks asking that a commission be established. The communication from Commonwealth Bank, Westpac, National Australian Bank, and ANZ Banking Group asked that a “properly constituted inquiry” be conducted. The bank letter opened by saying,
We are writing to you as the leaders of Australia’s major banks. In light of the latest wave of speculation about a parliamentary commission of inquiry into the banking and finance sector, we believe it is now imperative for the Australian Government to act decisively to deliver certainty to Australia’s financial services sector, our customers and the community.
Our banks have consistently argued the view that further inquiries into the sector, including a Royal Commission, are unwarranted. They are costly and unnecessary distractions at a time when the finance sector faces significant challenges and disruption from technology and growing global macroeconomic uncertainty.
However, it is now in the national interest for the political uncertainty to end. It is hurting confidence in our financial services system, including in offshore markets, and has diminished trust and respect for our sector and people. It also risks undermining the critical perception that our banks are unquestionably strong.
The establishment of the Royal Commission comes after several scandals involving financial institutions, including regulatory actions regarding rate rigging, money laundering, and misuse of client funds.
According to the draft terms of the reference, the Royal Commission inquiry will be broader than simply investigating alleged criminal activity. The reference includes instructions to examine:
- “[T]he nature, extent and effect of misconduct by a financial services entity (including by its directors, officers or employees, or by anyone acting on its behalf)”
- “[A]ny conduct, practices, behaviour or business activity by a financial services entity that falls below community standards and expectations”
- [T]he use by a financial services entity of superannuation members' retirement savings for any purpose that does not meet community standards and expectations or is otherwise not in the best interest of members”
The Royal Commission will last for twelve months and a final report is expected by February 2019. Given the breadth of the inquiry, however, it would not be surprising to see the work of the commission continue on longer.
December 1, 2017 in Current Affairs, Government Reports, International, Investigations, Money Laundering | Permalink | Comments (0)
Friday, December 30, 2016
2016 White Collar Crime Awards
Each year this blog has honored individuals and organizations for their work in the white collar crime arena by bestowing "The Collar" on those who deserve praise, scorn, acknowledgment, blessing, curse, or whatever else might be appropriate. With the appropriate fanfare, and without further ado, The Collars for 2016:
The Collar for the Best Left Hand Turn – To the Supreme Court following Justice Scalia’s death in affirming both insider trading and bank fraud convictions.
The Collar for Failing to Deliver the Goods – To the government for prosecuting Fed Ex and then needing to dismiss the case following opening statements.
The Collar for Needing New Glasses – To James Comey so that he can read Agency policy to not do anything election related within 60 days of an election.
The Collar for Sports MVP – To the world of tennis, which stole some of the focus from FIFA this year with the BBC's allegations of significant match-fixing.
The Collar for Slow and Steady – To Britain's Serious Fraud Office, which, after announcing the implementation of DPAs in October 2012, entered into its first DPA in November 2015 and its second in July 2016.
The Collar for Quick and Steady – To the DOJ, which, according to Professor Brandon Garrett’s website, has entered into well over 100 DPAs and NPAs since October 2012.
The Collar for Best Reading of this Blog– To the Supreme Court in reversing Virginia Governor Bob McDonnell’s conviction, this blog’s 2015 case of most needing review.
The Collar for the Longest Attempt to Justify a Decision – To the 11th Circuit for its 124-page decision in United States v. Clay that attempts to justify how “deliberate indifference” meets the Global Tech standard.
The Collar for Worst Schmoozing at an Airport – To former President Bill Clinton for causing AG Loretta Lynch to accept the FBI’s decision-making after Bill Clinton came abroad her airplane.
The Collar for the Most Underreported Settlement – To Trump University’s agreement to pay $25 million settlement in the Trump University case.
The Collar for Mandating Corporate Backstabbing – To Deputy AG Sally Yates, who keeps insisting her memo that promoted a corporate divide from its constituents – widely referred to as the “Yates Memo” -- should be called the Individual Accountability Policy.
The Collar for the Pre-mature Weiner Release – To James Comey for his overly excited announcement about the former Congressman’s emails.
The Collar for Community Service to Russia – To all those who failed to investigate and release reports on computer hacking that caused the release of information during the election.
The Collar for the Quickest Backpeddling – To Rudy Giuliani for “clarifying” his statement that he knew about a confidential FBI investigation related to Hillary Clinton’s emails.
The Collar for Best Game of Hide and Seek – To Donald J. Trump for explaining that he could not release his already-filed tax returns because he was under an IRS audit.
The Collar for Best Self-Serving Confession – To the Russian Sports Federation for admitting there was systematic doping of Olympic athletes (but Putin didn't know about it).
The Collar for Quickest Recantation (aka the "Mea Culpa Collar") – To DOJ Chief Leslie Caldwell for criticizing overly aggressive AUSAs at a Federalist Society function and apologizing to DOJ attorneys a few days later.
The Collar for Best Judicial Watchdog – To Judge George Levi Russell III of the United States District Court for the District of Maryland for his post-trial decision reversing the conviction of Reddy Annappareddy and dismissing the indictment with prejudice based on prosecutorial misconduct.
The Collar for Never Giving In – To Josh Greenberg and Mark Schamel who tirelessly and brilliantly represented Reddy Annappareddy post-trial and secured his freedom.
The Collar for Best Money Laundering – To the New York City and Los Angeles real estate developers who sell eight-figure condo apartments to anonymous LLP's owned by foreign officials and their families.
The Collar for the Best Child – To Don Siegelman’s daughter, who continues to fight to “Free Don.”
The Collar for the Best Parent – Retired years ago and renamed the Bill Olis Best Parent Award –not awarded again this year since no one comes even close to Bill Olis, may he rest in peace.
(wisenberg), (goldman), (esp)
December 30, 2016 in About This Blog, Current Affairs, Deferred Prosecution Agreements, Government Reports, Investigations, Judicial Opinions, Money Laundering, News, Prosecutions, Prosecutors | Permalink | Comments (0)
Monday, November 2, 2015
A Reply to Steven H. Levin's Responsive Blog on Hassert
Last Friday attorney Steven H. Levin posted a guest blog disagreeing with my view in a blog earlier that day that Dennis Hastert should not have been prosecuted. Hastert was charged with, and pleaded guilty to, structuring withdrawals from financial institutions of his own apparently legitimately derived funds, purportedly to conceal payoffs to an alleged extortionist whom he had purportedly sexually victimized over 30 years ago. Hastert, Mr. Levin said, "had to be prosecuted" because his prosecution had "potential deterrent effect" on "would-be structurers" and "would-be extortionists."
Even if the Hastert prosecution were to have a deterrent effect on such "would-be" criminals, I still believe, for the reasons I expressed, that this case was an appropriate one for the exercise of prosecutorial discretion. I do recognize that deterrence is a commonly recognized goal of prosecution and sentencing, and accept that prosecutions do have a deterrent effect on some "would-be" white-collar criminals (but far less an effect on those who might commit crimes involving violence and narcotics). Nonetheless, I question whether this prosecution will cause a positive deterrent effect on those who are considering the commission of either structuring or extortion.
I do accept that the publicity attendant to the prosecution will to an extent increase public awareness of the existence of a crime called structuring whose broad expanse covers acts committed by otherwise law-abiding citizens to maintain their privacy and avoid disclosure of things they prefer be confidential, and therefore may have some deterrent effect on those persons. However, deterring people from committing essentially harmless acts even though criminalized by an overbroad statute does not appear to me to be much of a societal benefit. And, to the extent that the attendant publicity will educate money launderers of criminal proceeds and deter them from violating the structuring statute, of which sophisticated criminals are overwhelmingly aware in any case, the positive effect is also questionable since its potential effects will be further concealment and consequent limitations on governmental discovery of criminality.
Additionally, I doubt that many would-be extortionists would be deterred from acts of extortion by this prosecution, in which, it so far appears, the purported extortion victim has been prosecuted and the purported extortion perpetrator remains free and also has probably received millions of dollars in payments (and also perhaps achieved some measure of retribution by the exposure, so far limited, of Hassert's alleged misdeeds) . To the extent it has any effect on rational would-be extortionists who weigh the benefit/risk ratio, this prosecution encourages rather than deters them.
November 2, 2015 in Celebrities, Legal Ethics, Money Laundering, Prosecutions, Prosecutors, Sentencing | Permalink | Comments (0)
Friday, October 30, 2015
Why Hastert Had To Be Prosecuted
Guest Blogger - Steven H. Levin
White-collar laws are written broadly in order to permit federal prosecutors to combat the increasingly creative, technologically complex efforts of enterprising criminals. Most, but certainly not all, prosecutors make rational decisions based upon the best possible expenditure of resources, the assessment of the jury appeal of a particular case, and the desire to maintain a good reputation with the bench, if not the bar. In bringing a case, prosecutors also must consider the deterrent effect of a particular prosecution.
In the case involving Dennis Hastert, it has been reported that he was paying “hush money” to cover up alleged misconduct that occurred several decades ago. Mr. Hastert’s structuring fell squarely within the broadly worded federal statute. In his piece (“Should Hastert Have Been Prosecuted?”) Lawrence Goldman is correct to question the purpose such a prosecution serves. The answer is found in the concept of deterrence. Mr. Hastert’s prosecution has potential deterrent effect, both in terms of deterring those engaged in structuring (to cover up crimes) and those engaged in blackmail (threatening to expose crimes).
Once the investigation became known, the public learned that Mr. Hastert had been accused of taking money out of a bank account in order to pay an extortionist. Both would-be structurers and would-be extortionists were put on notice by the federal government: blackmailing may not be successful in the future, because the victim of the extortion may be better off going to law enforcement rather than a bank. Further, it might deter an individual from engaging in the initial misconduct in the first place, knowing that such actions may ultimately see the light of day, even decades later.
Still, as Mr. Goldman writes, Mr. Hastert is, at least in part, a victim. And the decision to prosecute is different than a demand for jail time, which, under the plea agreement, is what prosecutors may seek. Mr. Hastert’s conduct does not warrant jail time, as the collateral consequences of the prosecution itself are significant enough to deter at least some future would-be extortionists from engaging in blackmail and their victims from submitting to it. This fact is all-too-often overlooked by prosecutors.
October 30, 2015 in Fraud, Money Laundering, News, Prosecutions, Prosecutors, Sentencing | Permalink | Comments (1)
Thursday, October 29, 2015
Should Hastert Have Been Prosecuted?
Former Speaker of the House Dennis Hastert yesterday pleaded guilty to money laundering in a Chicago federal court. Hastert admitted that he structured banking transactions by taking out amounts under $10,000 to avoid reporting requirements in order to conceal the reason he was using the money, which according to the plea agreement was "to compensate and keep confidential his prior misconduct." Although the facts were not revealed in court (but may later be in sentencing proceedings), sources reported that he was paying "hush money" to a former student he allegedly molested over 30 years ago when he taught high school and coached wrestling.
It thus appears that Hastert was an extortion victim, coerced into paying a former student millions of dollars to avoid public disclosure of his misdeeds and the destruction of his reputation. (I assume that the applicable Illinois statute of limitations had passed.)
I question whether Hastert should have been prosecuted. The money laundering statutes, although clearly an intrusion into privacy, serve a generally laudable purpose in making it difficult for criminals to accumulate and spend ill-gotten gains. Here, however, Hastert (although he may have done serious wrongs many years ago) was not a criminal, but a victim.
Congress has given the government broad power to prosecute violators of the money laundering laws well beyond those who derive funds from crime. I do not know what drove the decision to prosecute Hastert. Perhaps it was outrage over his long-ago sexual misconduct; perhaps it was to put forth a case which would derive considerable publicity, something to which prosecutors are not averse; perhaps it was just a rigid application of the law. Although Hastert's banking conduct does clearly fall within the statutory bounds, and there may be arguably legitimate reason to prosecute him, on balance I believe prosecutorial discretion should have been exercised and a case not brought. I wonder whether it would have been brought against an ordinary Joe Smith.
October 29, 2015 in Celebrities, Legal Ethics, Money Laundering, Prosecutions, Prosecutors | Permalink | Comments (0)
Thursday, May 29, 2014
Credit Suisse Conviction Does Not Demonstrate Substantial Change In Department Of Justice Enforcement
The Department of Justice (DOJ) and Attorney General Eric Holder were strutting last week over the criminal conviction by plea of guilty of Credit Suisse, a major financial institution. "This case shows that no financial institution, no matter its size or global reach, is above the law," declared the Attorney General. Recent prosecutions of major financial institutions had resulted in lesser results, "deferred prosecutions," a somewhat deceptive term for "delayed dismissals," or a guilty plea by a minor affiliate.
The Credit Suisse guilty plea does not represent a sea change in the attitude of DOJ toward major financial institutions; rather, it appears to be a small ratcheting-up of the baseline penalty for serious criminal financial acts by such institutions. Credit Suisse, despite paying a hefty $2.6 billion fine, will not suffer the severe collateral consequences that ordinary individual defendants do upon a criminal conviction. (See here, NACDL's report "Collateral Damage: America's Failure to Forgive or Forget in the War on Crime -- A Roadmap to Restore Rights and Status After Arrest or Conviction," released today, Thursday, May 29, 2014.) It will still be able to act as an investment advisor, due to waivers agreed to by federal and New York State governmental agencies. Thus, its conviction, according to its chief executive Brady Dougan, will not have "any material impact on our operational or business capabilities." In other words, for Credit Suisse, it will be business as usual.
I hold no sympathy for Credit Suisse. Its crimes, continuous and notorious, have enabled American citizens and citizens of other countries to launder and evade tax payments on billions of dollars. In effect, Credit Suisse (not alone among Swiss banks) (see here) was a criminal enterprise, for many years making huge profits from extraordinary fees for its knowing and willful provision of a presumably safe haven for untaxed income, ill-gotten or otherwise. Mr. Dougan had stated to a Senate hearing in February that the tax evasion scheme was the work of a small group of private bankers that was hidden from senior management. That hard-to-believe claim was challenged in a statement by Schweitzerisher Bankpersonalverband, the organization representing the bank's employees: "It was common knowledge that tax evasion was the strategy, a business model pursued by many banks for a long time." See here.
To be sure, Credit Suisse's crimes did not cause the vast hardship to tens of millions of Americans that the wrongs -- criminal or not -- of other major financial institutions did in the last several years. And, further, its acts -- while subject to the long-arm jurisdiction of American courts -- were apparently legal under Swiss law, and seemingly condoned by the Swiss government.
Some commentators have suggested that there is considerable unfairness in prosecuting corporations for acts of low- or mid-level employees without knowledge of corporate leaders (see here), a position with which I generally agree. The demi-prosecution of Credit Suisse, however, does not appear to fit within that category, despite Mr. Dougan's claim. I see no unfairness in the government's requiring Credit Suisse to plead guilty.
I do, however, wonder about the effectiveness of the insistence on a guilty plea if the collateral consequences are waived. The conviction of a major financial institution with a considerable financial penalty but a waiver of regulatory bars is to me little different from a civil finding of wrongdoing with such a penalty. Other than its current status as a convicted felon, Credit Suisse today is essentially in the same position it was two weeks ago.
Given the legitimate (but probably exaggerated) fear that a felony conviction of a major financial institution without regulatory waivers will have on its existence and thus on the economy and societal well-being, it may well be that guilty pleas (and trial convictions too) of such corporations should be accompanied by limited collateral consequences. Such prosecutions, however, will then serve little more than a symbolic purpose (which I accept as a legitimate purpose). Overall, DOJ's prosecution to conviction of Credit Suisse is a positive step, albeit a small one.
The resolution here suggests again that the criminal process is inadequate to prosecute large financial institutions. Society looks to the criminal law to solve far more problems than the criminal law is capable of solving. Meaningful reform of a flawed financial system will not come from criminal prosecutions of corporations, but, if at all, from strong, substantial regulatory rulemaking and non-criminal legislation.
May 29, 2014 in Current Affairs, Deferred Prosecution Agreements, International, Money Laundering, News, Prosecutions, Prosecutors, Tax | Permalink | Comments (0) | TrackBack (0)
Wednesday, October 30, 2013
Sixth Circuit Reverses Convictions Under 18 USC Sections 1014 and 1028A
In United States v. Miller, the Sixth Circuit today reversed three of four counts of conviction in a mortgage fraud prosecution. The court held that appellant Miller did not unlawfully "use" a means of identification within the meaning of 18 U.S.C. Section 1028A, the Aggravated Identity Theft statute, when he falsely stated that two named individuals had given him authority to act on behalf of an LLC. Since Miller did not steal their identity, pass himself off as them, or purport to be acting on their behalf as individuals, he is not guilty of violating the statute. The government had argued for a broader construction, but the Sixth Circuit applied the rule of lenity.
The court also reversed a Section 1014 count, because it was bottomed on Miller's signing of a loan renewal and modification agreement. Since the modification and renewal agreement did not repeat the false statement contained in the original loan papers, Miller could not be guilty under Section 1014. The court indicated that Miller had engaged in fraud and false pretenses during the loan modification process. But this was not enough to support a Section 1014 conviction, which requires a knowingly false statement.
October 30, 2013 in Fraud, Judicial Opinions, Money Laundering, Prosecutions | Permalink | Comments (0) | TrackBack (0)
Monday, December 17, 2012
HSBC Settlement: The Unanswered Questions
You can debate all day whether the government should allow any financial institution to get too big to fail. You can also debate whether such an institution, if it is too big to fail, should be too big to prosecute, even when it engages in blatantly criminal conduct over a lengthy period of time. However, you cannot seriously debate whether to prosecute senior bank officials of an international mega-bank who knowingly directed the criminal enterprise in question. Corporations only act through agents. Those agents are human beings.
We are not talking about technical matters here. This is not a question of whether each party to a complex transaction understood the fine print which revealed, or obscured, that an investment bank was betting against the deal it was pushing. According to the published reports and press statements, obvious narcotics-related money laundering was repeatedly facilitated by the bank, despite multiple regulatory warnings. The sources of funds connected to outlaw regimes were intentionally and repeatedly hidden. If this stuff happened, people did it. And they were no doubt high-ranking people.
No credible person will contend that the prosecution of corrupt bank officers can ever endanger the financial community. No matter how important the institution or high-ranking the officer, employees are fungible. The global financial impact of prosecuting these officers, no matter how important they think they are, will always be negligible.
Assistant AG Lanny Breuer said at his press conference that individual prosecutions were not being ruled out. (Similar statements were made at the time of the robo-signing settlement press conference, and we all know what an avalanche of individual DOJ prosecutions followed in the wake of that!) But other comments Breuer made, discussing how hard it supposedly is to prosecute the individuals involved, appear to be window-dressing rehearsals for future DOJ declinations.
Reporters should not let this issue slide into oblivion. The DOJ does not typically comment upon pending investigations of individuals. (Of course this does not stop some FBI and IRS agents from telling all of a target's friends that he is being criminally investigated, thereby ruining the target's life.) Here is an occasion where the policy should be ignored, particularly since the DOJ can comment on a pending investigation without revealing the names of the subjects and targets.
The question every self-respecting reporter should be asking AG Holder and Assistant AG Breuer is not whether individual indictments have been ruled in or out. The questions to be asked at every opportunity in the coming weeks and months are:
"What is the status of the investigation?"
"Is there really any investigation?"
"Are you treating this investigation like you treat the investigation of other individuals suspected of facilitating murder and drug crimes?"
Here is an account by Rolling Stone's Matt Taibbi of his appearance on Eliot Spitzer's Viewpoint program discussing the HSBC settlement. Taibbi's account contains a link to the Spitzer interview. Hat tip to Jack Darby of Austin's Krimelabb. com for alerting me to this posting. Taibbi also has an interesting opinion piece about the HSBC settlement on his Rolling Stone TAIBBLOG.
December 17, 2012 in Current Affairs, Deferred Prosecution Agreements, International, Investigations, Money Laundering, Prosecutors | Permalink | Comments (1) | TrackBack (0)
Wednesday, January 4, 2012
Yesterday In Fraud
A 5th Circuit panel (including Chief Judge Edith Jones!) unanimously reversed two Section 1956 money laundering convictions based on insufficient evidence. The case is U.S. v. Harris (5th Cir. 2012) (Section 1956 money laundering evidence insufficient). The reasoning? The government conflated the underlying crime with the separate crime of money laundering. The proven transactions were not proceeds of specified unlawful activity. The evidence only showed "payment of the purchase price for drugs. Money does not become proceeds of illegal activity until the unlawful activity is complete. The crime of money laundering is targeted at the activities that generally follow the unlawful activity in time."
January 4, 2012 in Money Laundering, Prosecutions | Permalink | Comments (0) | TrackBack (0)
Friday, June 17, 2011
NACDL's 1st Annual West Coast White Collar Conference, “Turning The Tables On The Government” – Keynote Address: Benedict P. Kuehne, Friday, June 17, 2011
Guest Blogger: Darin Thompson, Assistant Federal Public Defender, Office of the Federal Public Defender (Cleveland,OH)
The Keynote Presentation, "Standing Tall: Criminal Defense Lawyers as Constitutional First Responder s in Today’s War on Crime," was given by Benedict P. Kuehne.
Benedict Kuehne spoke regarding the important role that criminal defense attorneys play in America. He noted that criminal defense lawyers often put at risk not only their fee, but their own liberty. Because the role of criminal defense lawyers is to safeguard our constitutional rights, that role itself is threatened. Mr. Kuehne used his personal story to examine these principles. In 2004, his office was searched pursuant to a federal warrant. He was the subject of a grand jury investigation into conspiracy and money laundering. His alleged crime related to legal advice he provided another criminal defense lawyer regarding the source of his fee.
This prosecution was part of an overall trend towards the broadening of the scope of money laundering prosecutions, Mr. Kuehne suggested, noting that money laundering has replaced conspiracy as the prosecution’s weapon of choice.
Mr. Kuehne noted that this prosecution theory threatened to chill the assertion of the Sixth Amendment right to counsel and the willingness of counsel to provide legal representation to individuals facing prosecution.
Mr. Kuehne then explored the history of litigation surrounding the specific statutory exemption for criminal defense fees. For 20 years, the government persisted in attempts to convince courts that the exemption did not mean what it said. These efforts, combined with the ability to seek forfeiture of fees, had a chilling effect on that Sixth Amendment right.
His case resulted in the decision U.S. v. Velez, vindicating the criminal defense fees exemption in money laundering cases. Mr. Kuehne's story is an inspiring one that clearly demonstrates the importance of the work that we defense lawyers do everyday.
June 17, 2011 in Attorney Fees, Conferences, Defense Counsel, Legal Ethics, Money Laundering | Permalink | Comments (1) | TrackBack (0)
Monday, May 23, 2011
President Obama Grants Eight Pardons
It is good to see that President Obama is using his pardon powers, granting eight pardons this past week. (See Press Release here) Clearly more pardons would have been better as there are many suffering from the collateral consequences of a conviction that should not have happened. Likewise, there are many that have significantly reformed their lives and are deserving of a second chance. Some observations about these pardons:
- Four of the eight included a conspiracy count.
- Three of the eight had a drug related charge.
- The largest sentence that had been given in any of these offenses was five years.
- Four had a sentence of no prison time.
- The most recent sentencing from these cases was 2001.
- Seven of the eight cases were prior to 2000.
- Only two cases were from the same state, that being Indiana.
An important question to ask is whether any of these cases should have been criminal activity in the first place. Did we really need to send someone to prison for "the possession and sale of illegal American alligator hides" in violation of the Lacey Act? Would a civil fine have been sufficient?
May 23, 2011 in Government Reports, Money Laundering, News, Prosecutions, Sentencing, Verdict | Permalink | Comments (3) | TrackBack (0)
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)
Saturday, January 15, 2011
Tom Delay: Political Prisoner (Part 2)
In commenting here Wednesday about former Travis County District Attorney Ronnie Earle's shameful money laundering prosecution of Tom DeLay, I noted that:
"The election code conspiracy charge [against DeLay] was almost immediately thrown out because there was no such crime in existence in Texas, as Earle should have known, and as the state’s highest criminal court later confirmed."
R. K. Weaver sent in a comment disagreeing with my analysis. According to Weaver:
"While it is true that there is no express 'conspiracy' provision in the Election Code, there is a general 'conspiracy' provision in the Penal Code which, on its face, and historically was considered to apply to all crimes in Texas. The Texas Court of Criminal Appeals, an elected body that is entirely occupied by Republicans, held for the first time in the history of Texas law, and contrary to abundant precedent, that this provision was limited to Penal Code crimes and was not applicable to the thousands of crimes that exist outside the Penal Code. That decision is generally considered by Texas lawyers to be absurd on its face and blatantly political. Unfortunately, it is also not terribly uncommon. There is a good reason that this court is referred to as 'the clowns on the Colorado.'" [emphasis added].
"When Earle indicted DeLay for conspiracy to violate the criminal provisions of the Election Code he was acting on established and well known Texas legal principals. DeLay's victory before the Court of Criminal Appeals was more about the political landscape in Texas than about the state of the law. I anticipate that when the current case gets before that court they will once again carve a 'DeLay exception 'to the law." [emphasis added].
Weaver is mistaken.
Title 4, Section 15.02 of the Texas Penal Code is the general criminal conspiracy statute. In 1977, long before Tom DeLay's rise to prominence, the Texas Court of Criminal Appeals, the highest court in Texas authorized to rule on criminal cases, held in Baker v. State, 547 S.W.2d 627 (Tex.Cr.App.1977), that Section 15.02 (the general conspiracy statute) could not be applied to a criminal offense defined by another law (that is, defined by a law located outside of the Penal Code) unless the other law explicitly referenced the Penal Code. The non-Penal Code offense at issue in Baker was the Texas Controlled Substances Act. Baker followed a similar holding in Moore v. State, 540 S.W.2d 140 (Tex.Cr.App. 1977), which had found Section 15.01 of the Penal Code, the general attempt statute, inapplicable to the Controlled Substances Act. Both rulings were based on a strict reading of Penal Code Section 1.03(b) which stated in part that “[t]he provisions of Titles 1, 2 and 3 of this code apply to offenses defined by other laws, unless the statute defining the offense provides otherwise.” Since the conspiracy and attempt statutes were contained in Title 4, they could not apply to the Controlled Substances Act, the Court of Criminal Appeals reasoned, unless the Controlled Substances Act provided otherwise. The Controlled Substances Act did not provide otherwise, and did not contain its own attempt or conspiracy provisions. (The Texas Legislature later amended the Controlled Substances Act and it now expressly references Title 4 Penal Code offenses.) Both Baker and Moore were written by Tom G. Davis, a widely respected mainstream jurist. Judge Davis was a Democrat, as were all of the judges on the Court of Criminal Appeals at the time. In reversing Baker’s conviction and ordering the prosecution dismissed, Davis ruled that “[t]he complaint and information in the instant case do not allege an offense against the laws of this state."
Baker was still the law in Texas in 2005, when Earle brought his indictment against DeLay, and had been the law for 28 years. The pertinent portions of the conspiracy statute (Section 15.02) and of Section 1.03(b) remained the same. Earle’s original indictment of Tom DeLay charged that DeLay conspired in October of 2002 to violate the Texas Election Code. The Election Code is not a part of the Penal Code. In 2002, the Election Code did not contain a conspiracy provision or reference or incorporate Section 15.02. In other words, under authority of Baker and Moore, one could not conspire to violate the Election Code. The Election Code was amended, effective September 1, 2003, to permit application of Title 4 offenses, including the Section 15.02 conspiracy statute. But the amended version could not be applied to DeLay’s alleged conduct without violating Ex Post Facto principles. Ergo, Earle’s original indictment of DeLay did not, in the words of Tom G. Davis, “allege an offense against the laws of this state.”
According to a story in the Washington Post, Earle did not learn that there might be a problem with the original charge until his assistants told him about it, shortly after the indictment was returned. How sad. The Penal Code went into effect in 1973. The Election Code was enacted in 1975. Earle was elected Travis County District Attorney in 1976. Baker was decided in 1977. DeLay was indicted in 2005. When Earle found out about his mistake, he did not drop the Election Code conspiracy charge, which would have been the right thing to do. He re-indicted DeLay, using a new grand jury under dubious circumstances, but kept the Election Code conspiracy charge in the indictment. The trial court properly threw it out. The Court of Criminal Appeals affirmed in a 5-4 opinion.
January 15, 2011 in Celebrities, Current Affairs, Judicial Opinions, Money Laundering, Prosecutions, Prosecutors, Sentencing | Permalink | Comments (0) | TrackBack (0)
Wednesday, January 12, 2011
Tom DeLay: Political Prisoner
The Washington Post reports here on the three year prison sentence handed down Monday to former House Majority Leader Tom DeLay by Texas state judge Pat Priest. DeLay was found guilty last November by an Austin jury of money laundering and conspiracy to commit money laundering under Texas criminal statutes.
The prosecution of DeLay by Travis County District Attorney Ronnie Earle and his successor has been nothing less than a travesty of justice. This is really not about Tom Delay. You can love him or you can hate him. It is instead about our collective glee whenever a person of an opposing ideology gets indicted.
Earle originally indicted DeLay for conspiracy to commit money laundering and conspiracy to violate the state election code. The election code conspiracy charge was almost immediately thrown out because there was no such crime in existence in Texas, as Earle should have known, and as the state’s highest criminal court later confirmed. The money laundering charge, and the conspiracy charge on which it is bottomed, should have never been brought either. Here’s why.
Delay's alleged laundering activity was accomplished through the writing of checks. DeLay was accused and convicted of knowingly conducting, supervising, and facilitating a transaction involving the "proceeds" of criminal activity in violation of the state money laundering statute, Texas Penal Code Section 34.02. In 2002, the year of the alleged offense, Section 34.01 of the Penal Code provided that "‘Proceeds’ meant "funds acquired or derived directly or indirectly from, produced through, or realized through an act." Section 34.01 defined "funds" as follows.
(A) coin or paper money of the United States or any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issue;
(B) United States silver certificates, United States Treasury notes, and Federal Reserve System notes; and
(C) official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign country and foreign bank drafts."
So, in 2002 the "proceeds" of criminal activity meant "funds" acquired, derived, produced or realized through an act. "Funds" in turn included: coin or paper money designated as legal tender, circulating, and used as a medium of exchange; United States silver certificates, United States Treasury notes, and Federal Reserve System notes; and, official foreign bank notes used and accepted as a medium of exchange in a foreign country, and foreign bank drafts. Most conspicuously, "funds" did not include checks. This was no accident. The final version of the 1993 money laundering statute was far narrower than the draft first introduced in the Texas House of Representatives. The initial draft prohibited the knowing facilitation of a transaction involving "property" that was the "proceeds" of criminal activity. Property was defined broadly to cover tangible or intangible personal property as well as "a document, including money, that represents or embodies anything of value."
I am aware of no reported cases under the original Texas money laundering statute, prior to DeLay’s indictment, in which the proceeds of criminal activity were identified as checks. In the vast majority of the cases, the laundered proceeds consisted of currency. There were no reported cases even discussing whether a check could constitute laundered funds. The reason for this is obvious. Virtually no prosecutor in Texas thought that checks were "funds" under the old money laundering statute.
In 2005, the Texas Legislature amended the money laundering statute and broadened the definition of "funds" to include "currency or its equivalent including an electronic fund, personal check, bank check, traveler’s check, money order, bearer negotiable instrument, bearer investment security, bearer security, or certificate of stock in a form that allows title to pass on delivery." The House Research Organization’s analysis of the amendment stated that it would "broaden the definition of ‘funds’ to include money other than cash." The analysis also notes, in the "Supporters Say" section, that "[u]nder current law, prosecutors may not prosecute offenders for money-laundering if the offender received a form of money other than cash, such as checks or money orders. This is inadequate as it prevents prosecution under this statute in an array of cases." The new bill "would fix this problem by covering money received in a variety of forms other than cash." It gets even worse. Members of Travis County District Attorney Ronnie Earle’s own staff helped in the drafting of the 2005 amendment!
Of course DeLay could not be prosecuted under the 2005 version of the statute, for conduct that allegedly occurred in 2002, without violating the Constitution’s ex post facto clause. But that sort of problem did not bother Earle. He simply used the 2002 version, even though nobody thought back then that "laundering" via checks constituted laundering under Section 34.02.
The case is now headed for the higher courts. Here’s hoping that one of them does the right thing.
January 12, 2011 in Celebrities, Corruption, Current Affairs, Money Laundering, Sentencing | Permalink | Comments (0) | TrackBack (0)