White Collar Crime Prof Blog

Breaking News: William Jefferson Sentenced to 13 Years

Guest Blogger:  Tiffany M. Joslyn, National Association of Criminal Defense Lawyers (NACDL)

U.S. District Judge T.S. Ellis III has sentenced ex-congressman William Jefferson to 13 years in prison for his conviction on 11 counts of public corruption. See breaking news coverage below:

Bruce Alpert, Times-Picayune, William Jefferson sentenced to 13 years in prison

Matthew Barakat, The Washington Post (AP), Ex-congressman gets 13 years in freezer cash case

John Bresnahan, Politico, William Jefferson gets 13 years in prison

(tmj)

Year & A Day in FCPA Case - But Will It Hold on Appeal?

Guest Blog - Matthew Reinhard, Miller & Chevalier Chartered

Lost in this week’s maelstrom of white collar activity – the acquittal of the Bear Stearns bankers, the accusations that Blackwater bribed Iraqi officials, and the sentencing of former Congressman Jefferson this Friday – was the sentencing of handbag mogul turned would-be Caspian petroleum mogul Frederic Bourke. Convicted earlier this summer of conspiring to violate the Foreign Corrupt Practices Act ("FCPA") and making false statements to the FBI in connection with his investment in a consortium attempting to purchase the Azerbaijan state-owned oil company ("SOCAR"), Bourke’s trial was straight out of Hollywood and included testimony from a former U.S. Senator, allegations of suitcases full of cash changing hands, and an alleged co-conspirator nicknamed the "Pirate of Prague" who is currently fighting extradition from his estate in the Bahamas while freely admitting he bribed Azeri officials.

Judge Shira Scheindlin, of the Southern District of New York, sentenced Bourke to a year and one day (the "one day" being important in that it will allow Bourke to receive good behavior credit if he is ever incarcerated) and fined him $1 million. Any confinement in a federal prison is something to be avoided at all costs, but the 366 days doled out by the court is far less than the 10-year sentence prosecutors were seeking and could signal the court’s doubts about Bourke’s ultimate culpability. While any appeal from a jury verdict presents enormous challenges, I like Bourke’s odds at this point.

Bourke’s appeal will squarely frame important evidentiary issues concerning how the government must prove knowledge and, thus, intent, in FCPA and white-collar conspiracy contexts. The Government’s allegations against Bourke notably did not claim that Bourke himself paid bribes. Rather, the Government charged that, as an investor in a consortium attempting to gain control of SOCAR, Bourke had knowledge of the conspiracy’s "unlawful purpose" (i.e., to bribe Azeri officials). However, not only did the Government not charge Bourke with actually making the bribes, it set out to prove Bourke’s "knowledge" for the purpose of the conspiracy not by showing that he had "actual" knowledge of the unlawful purpose, but that he "consciously avoided" gaining actual knowledge – essentially that Bourke stuck his head in the sand to avoid "knowing" that he was engaging in a criminal enterprise.

The Government did not create the "conscious avoidance" standard out of whole cloth. Indeed, it is defined within the FCPA’s broader knowledge standard, which states that "when knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless he actually believes the circumstance does not exist." 15 U.S.C. §　78dd-1(f)(2)(B) (2004) (emphasis added). When the government indicated its intention to travel on this standard, Judge Scheindlin appropriately ruled that to prevail on such a theory the Government would need to prove that Bourke decided not to learn a key fact, not that he was merely negligent in failing to learn it. To a lay-person (and perhaps even to many lawyers) that may seem like a tough distinction to make, but it is also the bright line that separates civil liability from criminal activity.

This distinction quickly became an issue during and after Bourke’s trial. During trial the court admitted testimony and evidence from the Government about Azeri officials’ general reputation for corruption, and conversations between Bourke and other investors regarding concerns that the head of the investor consortium was paying bribes. In objecting to this evidence Bourke’s lawyers specifically noted that the evidence could confuse the jury into believing that the "conscious avoidance" standard is the same as the "should have known" negligence standard. Such fears appear well founded. Interviewed after the verdict, the jury foreman sounded as if he was reading from a tort-law hornbook when he dismissed the need for the court to have even given the "conscious avoidance" instruction, stating: "We thought he knew and he definitely should have known. He’s an investor. It’s his job to know." See Entrepreneur Is Found Guilty of Conspiracy in Azerbaijan, Mark Hamblett, New York Law Journal, July 13, 2009 (emphasis added). That is a clear enunciation of the negligence standard, but it is notably not the "conscious avoidance" standard. I expect Bourke’s attorneys to include a judicially-appropriate re-phrasing of "we told you so" in their appeal briefs.

Next, at sentencing, Judge Scheindlin provided Bourke’s counsel with even more ammunition for appeal. In sentencing Bourke, Judge Scheindlin observed that: "After years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both." That sounds a lot like reasonable doubt to my ears. Judge Sheindlin obviously did not feel she had enough to overturn the jury verdict on a Motion for Judgment of Acquittal ("MJOA"), but when a sentencing judge says she is not sure whether a defendant is a "victim or a crook" that must raise substantial questions about the quality of the Government’s evidence.

This case may ultimately be proof that the road to Hell is paved with good intentions. Few would disagree with Judge Scheindlin’s admonition that "[b]ribes must and will result in jail sentences." Nonetheless, the Bourke case will now force the influential Second Circuit Court of Appeals to pass on the appropriate knowledge standard in FCPA and white-collar conspiracy cases, and what evidence can be used to prove that "knowledge." However, given the number of close facts, the apparent skepticism of the trial judge, and the confusion evidenced (perhaps unwittingly) by the jury itself, many observers may rightfully be left wondering whether this is really the case where the Government wants test these theories. We all know that jury verdicts are notoriously difficult to overturn on appeal, but I like Bourke’s chances here.

* For a terrific in-depth analysis of the "conscious avoidance" standard, as well as other important FCPA issues that arose during the Bourke trial, see the article written by my colleague, James Tillen, for Bloomberg Law Reports.

(mr)

In the News & Around the Blogosphere

Amanda Bronstad, NLJ, law.com, Former Broadcom executive seeks a rehearing before 9th Circuit

Patricia Hurtado, Bob Van Voris and Linda Sandler, Bloomberg, Bear Managers’ Acquittal May Hamper U.S. Fraud Prosecutions

John Mazzetti & James Risen, NYTimes, Blackwater Said to Pursue Bribes to Iraq After 17 Died

DOJ Press Release, Alleged International Hacking Ring Caught in $9 Million Fraud

Ashby Jones, WSJ, Grand Theft Auto Dealer? A New Chapter in the Rothstein Saga

(esp)

Not Guilty for Former Bear Stearns Managers

Zachery Kouwe, NYTimes, Bear Stearns Managers Acquitted of Fraud Charges reports on the acquittal of two former Bear Stearns Managers who faced government indictment. Unlike many, these two individuals risked going to trial and were acquitted by a jury that heard the evidence. As initially noted on this blog here, "[t]he case is the classic case of the funds going down and everyone then looking for someone to blame."  This blog also stated:

Clearly honesty in the market is important.  But one also has to wonder if the use of criminal charges is appropriate in cases that would not have occurred but for the poor economy. It is also a concern that the government is using overly broad statutes to criminalize an alleged lack of honesty.

Interestingly, although one rarely finds press releases from a U.S.Attorney following a not guilty verdict, one was issued by the U.S. Attorney's Office from the Eastern District of New York. The press release is definitely a step in the right direction for the DOJ, but they should not be "disappointed by the outcome in this case" as "ministers of justice" should be elated with all jury verdicts as they demonstrate that justice has been served.

(esp)

In the News & Around the Blogosphere

Dan Levine, The Recorder, law.com, 9th Circuit Stands Firm on Prosecutors' Misconduct in Reyes Backdating Case

law.com (AP), Disbarred Ga. Attorney Sentenced to Prison for Ponzi Scheme

50 Great Blogs for and by Law Professors (includes this white collar crime prof blog)

R. Robin McDonald, Fulton County Daily Report, law.com, Legal Fees Paid by Drug Trafficker at Issue in Ga. Money-Laundering Case

Andrew Longstreth,The American Lawyer, Munger Tolles Seeks to Dismiss $4 Million SEC 'Clawback' Suit Against Ex-CEO

Mark Hamblett, New York Law Journal, Former SEC Attorney Pleads Guilty to Impersonation in Dreier Case

(esp)

Upcoming Conferences & Events

Public Address on White Collar Crime by Preet Bharara, USA for the Southern District of NY, Nov. 19, 2009. Details here

(esp)

Post-Booker Sentencing Provides Greater Equity

Amir Efrati, WSJ, Looser Rules on Sentencing Stir Concerns About Equity - speaks about recent sentencing of white collar offenders.  My response -

Supreme Court decisions clearly allow for more judicial discretion in white collar sentencing -  but is this a negative?  Hardly not.  It provides judges with the opportunity to examine the defendant on an individual basis as opposed to being strictly focused on a mathematical computation of loss.  In some cases the sentence may be higher than the guidelines, and in other cases it may be lower. It is easy to say that this creates disparity - but the real question is whether the disparity was there and this now corrects that disparity.

It is important to recognize that some of these white collar sentences are above the guidelines.  Further many double-digit white collar sentences are now being handed down (see, e,g, here, here and what about Ebbers, Skilling, MacFarland, and others), and there are even triple digits now seen on occasion.  One would be hard-pressed to find the number of double-digit sentences we are presently seeing in white collar cases, in the pre-guideline years. Further, it is clear that the "culture" of the guidelines is respected by most judges and that the government has an appellate process when they believe that the sentence is unreasonable.

But what is also clear is that the guidelines are not the end of the sentencing process.  Supreme Court decisions now allow neutral judges necessary discretion to sentence the specific individual before her or him.  One important improvement coming from these Supreme Court decisions is that it levels the playing field between the prosecution and defense.  The prosecution has had the sole ability to reduce a sentence by filing a 5K1.1 motion - a disparity that often went unnoticed.  The new Supreme Court decisions allow the defense to also now be heard.

So what's my opinion? Looser rules should not be "stir[ring] concerns about equity."  Rather, looser rules are now allowing us to achieve greater equity by giving judges the ability to account for circumstances that are beyond an efficiency based arithmetic exercise.  

(esp)(blogging from Portland, Oregon)

Lawyers

Martha Neil, ABA Jrl Law News Now, 2 Lawyers Charged in Claimed $1.1M Client Embezzlement Scheme

Vesselin Mitev, Law.com, New York Law Journal, Disbarred Attorney Pleads Guilty to Guardian Account Thefts

Linda Sandler & Carlyn Kolker, Bloomberg, Ropes & Gray Lawyer Cutillo ‘Fueled’ $20 Million Insider Scheme ; DOJ Press Release, Manhattan U.S. Attorney Charges 14 Defendants With More than $20 Million in Insider Trading- Charged Defendants Include Hedge Fund Managers, Trading Firm Executives, Lawyers, and Corporate Insiders; Five Already Have Pleaded Guilty To Insider Trading Charges

Jordana Mishory, Daily Business Review, law.com, Fla. Firm's Attorneys Rally Their Defenses as Partner Faces Fraud Allegations - FBI and IRS agents raided the law firm Wednesday, seizing 44 boxes of evidence, hard drives and trash

(esp)(blogging from Portland, Oregon)

 

In the News & Around the Blogosphere

Sam Dolnick, NYTimes, Kerik Pleads Guilty in Corruption Case

David Glovin & Bob Van Voris, Bloomberg, Ex-Galleon Worker, 13 Others Charged in Insider Scam

DOJ Press Release, Former Pepsico Executive Arraigned in White Plains Federal Court on Embezzlement Charges

DOJ Press Release, Former Professional Football Player Pleads Guilty in Manhattan Federal Court to Bankruptcy Fraud

(esp)(blogging from Portland, Oregon)

Cert Petition in Brown

A Petition for Cert has been filed in the Supreme Court in the case of Brown v. U.S., coming from the 5th Circuit. It's the Brown from the Merrill Lynch- Enron case. Brown I was dismissed by the court holding that  "the alleged conduct is not a federal crime under the honest services theory of fraud specifically." The problem was that the government decided to recycle the case without the 1346 allegation.  A fascinating question presented is whether section 1343 is a separate offense from 1346 - and how does this play with double jeopardy. 1346 was created to define that a scheme to defraud could include an intangible right to honest services.  But 1346 is a definition statute and has no additional elements. As stated in the Petition for Cert-

In these Circuits, a second trial of Brown on these wire fraud charges would violate double jeopardy because the government’s allegations of “honest services” and citation to § 1346 were superfluous – the government’s redactions changed nothing. Thus, the offense is the identical wire fraud, with the same elements, and there is no separate wire fraud for which Brown can be tried a second time for the same (non-criminal) conduct.

Petition - Download Brown FINAL CERT PETITION 1023

(esp)

In the News & Around the Blogosphere

Libby Nelson, Chronicle of Higher Education, Former Education Dept. Official to Plead Guilty Over Stock Holdings in Lender

Ashby Jones, WSJ Blog, Kovachev, Dreier’s Wingman, Pleads Guilty to Fraud

TIGTA, Woman Charged with Exceeding Authorized Access to a Computer

Sherman & Sterling, FCPA Digest - Recent Trends and Patterns in the Enforcement of the Foreign Corrupt Practices Act

Tom Kirkendall, Houston Clearthinkers, John O'Quinn, R.I.P.

DOJ Press Release, D.C. Lobbyist Indicted for Conspiring to Violate Sudanese Sanctions and to Act as Illegal Agent of Sudan

(esp)

Conrad Black - Reply Brief - Gotcha

Up to bat in the year of the mail fraud is Conrad Black.  Set for oral argument on December 8, 2009, the briefs are now being filed. The most recent filing is the Defendant's reply brief - Download Black-Reply

One passage from page one says it all  -

The government contends that the majority rule unjustifiably adds a non-textual “element” of contemplated harm to mail fraud prosecutions, and proposes that the true path lies in the recognition that the 1988 Congress relied on the established element of materiality as the sole limitation on what federal prosecutors might choose to charge as “honest services fraud.” This is a surprising argument, because the government argued vigorously in Neder v. United States, 527 U.S. 1 (1999), a full decade after Congress supposedly contemplated such a thing, that materiality (which does not appear in the statutory text) is never an element of mail fraud. The government deservedly lost that argument, but it is a bit much for it now to say that in 1988 Congress clearly relied on a requirement for which the Solicitor General could find no evidence in 1999.

Note - Weyhrauch is also set for December 8, 2009. see here.

(esp)

In the News & Around the Blogosphere

Mary Flood, Houston Chronicle, Ex-Enron broadband figure given home confinement

(esp)

In the News & Around the Blogopshere

Chronicle of Higher Education, The Ticker, U. of Florida Engineering Professor Is Arrested on Fraud and Money- Laundering Charges

Jay Weaver, Miami Herald, Corruption-fighter takes over S. Florida FBI office

Michael Quint, Bloomberg, New York Ex-Senate Head Bruno’s Trial Focuses on $3 Million Sum

(esp)

Happy Birthday Blog - Five Years Old

Today the White Collar Crime Prof Blog Turns Five (5) Years Old and I would like to thank all the readers out there who have clicked this way.

As you may imagine, blogging takes an enormous amount of time - and some days it can be difficult to find the minutes to post what needs to be said.  So thanks for sticking with me during the last five years and I hope you will continue to stop by. Please continue to send items this way.  If I didn't get to post it -  I am sorry - but I can only do so much. I assure you that it is always appreciated.

The best to everyone out there -

(esp)  

In the News & Around the Blogosphere

Mike Scarcella, BLT Blog, Top DOJ Fraud Section Supervisors Planning to Leave Justice

(esp)

Federal Convictions Reversed

Alexander Bunin - Federal Defender - has just issued an updated edition of Federal Convictions Reversed.  See here - Download Federal Convictions Reversed 10.2009

(esp)

In the News & Around the Blogosphere

Mike Scarcella, Nat. L.J.,DOJ Witness in Stevens Case Sentenced to Prison ; DOJ Press Release, Bill Allen and Richard Smith, Former Officers of VECO Corporation, Sentenced for Roles in Alaska Public Corruption Scheme

DOJ Press Release, West Suburban Man Charged with Defrauding 60 Investors of $28 Million in Alleged "Ponzi" Scheme

DOJ Press Release, Former Subcontractor Representative Pleads Guilty to Indictment Involving Conspiracy at New Jersey Superfund Site

John Bresnahan & Maru Raju, Politico,Sen. John Ensign's aides pay the price for his affair(w/ a hat tip to Dennis Beal)

Curt Anderson, AP, UBS ex-client avoids prison for tax conviction

Hans Villarica, Medill Reports, Researchers expose a pattern for white-collar crime

Richard Lacayo, Time, Skilling's Enron Appeal: Is 'Honest Services Fraud' a Bogus Charge?

Mark Hamblett, law.com, N.Y.L.J., Dead in Reported Suicide, Attorney Faced SEC Complaint Over Leak of Law Firm Data

Nicolas Vaux-Montagny, Washington Post, Church of Scientology convicted of fraud in France

(esp)

In the News & Around the Blogosphere

Doreen Carvajal & Stephen Castle, NYTimes, Fraud Plagues Sugar Subsidy System in Europe

DOJ Press Release, Utah-Based Tax Shelter Operators Plead Guilty in $200 Million Dollar Tax Fraud

Amanda Bronstad, National Law Journal, Defense shifts blame elsewhere as Broadcom trial gets underway

Katherine Burton & David Glovin, Bloomberg, Galleon Wiretaps Rattle Hedge Funds as Insider Trading Targeted

Erin Geiger Smith, Business Insider, Akin Gump Takes Over Rajaratnam's Defense Counsel From Gibson Dunn; Zusha Elinson, The Recorder, law.com, Galleon Insider-Trading Case Feeds Silicon Valley White-Collar Bar

Mary Jacoby, Main Justice, SDNY Criminal Chief’s Father Had Close Ties to Madoff Investor

(esp)

Eleventh Circuit Upholds Dismissal of Count One in Kuehne Case

No surprises in the Eleventh Circuit opinion affirming the trial court's dismissal of Count One in the Ben Kuehne case.  The nine page opinion authored by Hon. Barkett, and joined by Hon. Hull and Quist provides a quick response to the government's contention that 18 U.S.C. 1957 (f)(1) was "nullified" by the Court's decision in Caplin & Drysdale - not so. The court states:

It would therefore make little sense- and would be entirely superfluous-to read § 1957(f)(1) as an exemption from criminal penalties for non-tainted proceeds spent on legal representation, as those funds can always be used for any legal purpose. We do not believe Congress intended such an absurd result ...

See also David Oscar Markus, Southern District of Florida Blog here.  For background see here and here.

(esp)(w/ a hat tip to Joe Beeler)