White Collar Crime Prof Blog

Corporate Social Responsibility and Supply Chains Practice: Proposed Dodd-Frank Conflict Minerals Rules

Chart by T. Markus Funk & Jean-Jacques Cabou of PerkinsCoie - Dodd- Frank Conflict Minerals Flow Chart- Download Conflict Minerals Flow Chart_TMF

(esp)

Federal Sentencing Guidelines Conference - Fraud Panel

The recent federal sentencing guideline conference had a panel moderated by Professor Doug Berman (Ohio State) on fraud/theft - it was part two for this conference on the topic of the fraud/theft sentencing guidelines. The panelists were: Harry Chernoff (AUSA Southern District of NY); Lisa Mathewson (Law Offices of Lisa A. Mathewson); Tracy A. Miner (Mintz Levin Cohn Ferris Glovsky & Popeo).

Harry Chernoff emphasized his belief that who the judge is can make a difference in the sentence received in a fraud/theft case. Lisa Mathewson noted how "loss is an imperfect" statement of culpability. Tracy A. Miner suggested that one needs to "look at the motivation of the particular individual." In this regard there was discussion how a corporation may be getting a pass because of a deferred prosecution.

Looking at 2B1.1 and how to assess "gain or loss," Lisa Mathewson reminded listeners that when the loss is "0" that is a number that can and should be used. Tracy Miner noted that prosecutors are trained to increase the loss figure. In this regard it was noted that loss in some cases can end up as 360 to life, because there are so many potential aggravators. It was noted that is important to look at lack of gain as a mitigating factor that warrants a move downward.

It was noted how courts set the bar extremely low in what will be considered "sophisticated means." Tracy Miner noted that computers being used should not make the conduct sophisticated, as even kindergarten students use computers these days.

 

Some panelists noted that one needs to look at what was the real conduct and whether it being increased just because this was conduct highlighted in recent days. Tracy Miner reminded listeners to try and convince the government of the benefits of the defendant’s conduct. For example, there may be good collateral consequences such as did special education kids benefit and will there be severe consequences if the loss is placed very high.

The end of the panel discussion looked at commission considerations on the horizon and one position taken by some was that the commission should look at the whole guideline as opposed to just tweaking parts.

 (esp)

Should Edwards Be Retried?

As noted here, John Edwards was found not guilty on one count, and the jury was unable to reach a verdict on the remaining counts. Prosecutors should now move on and not retry Edwards on these remaining counts. 

The government has expended enough taxpayer money on this case and Edwards most likely has had to incur the cost of his defense. Prosecutors have already hurt Edward's reputation with the evidence presented at trial - so there is no punishment basis for proceeding further.  Evidence not presented at trial left the murky question of whether this money was even a political contribution, and the testimony of Federal Election Commissioner Scott E. Thomas that was not heard by the jury raises additional issues on campaign contributions.   But the place to resolve this is not in the criminal courtroom.  More importantly, if skilled folks can differ on this question then one certainly should not hold someone criminally liable.

No one walks out unhurt by this trial.  And that is the huge cost that comes with a prosecution.  It is for this reason that prosecutors need to consider carefully prior to charging anyone with criminal conduct.

(esp)

Edwards - Not Guilty Count Three; Hung on Remaining Counts

Media, twitter, etc. all reporting that Edwards not guilty on count three and that the court has finally declared a mistrial on the remaining five counts. See here and here.

(esp)

Edwards Trial - False Alarm

News media initially said that there was a verdict in the Edwards case, but it proved to be somewhat of a false alarm.  The jury reached a verdict on one count, but the court did not take the verdict and sent them back to continue with more deliberations in the hope that they would reach a verdict in the remaining five counts.

Nine days of deliberations - isn't that enough?  And the jury did not even hear important defense evidence by former Federal Election Commissioner Scott E. Thomas.

(esp)

Corporate Sentencing Statistics With Commentary

Some have been claiming that corporate prosecutions are down in numbers.  It certainly has not seemed that way, so I was glad to see the numbers, which demonstrate that corporate sentencings have been average over the past few years.

Lisa Rich, Director of the Office of Legislative and Policy Affairs at the United States Sentencing Commission provided the following corporate statistics for the recent Federal Sentencing Conference (although I have reworded some of what she provided): In FY 2011, there were 160 organizational cases and 151 pled guilty and 9 were convicted after jury trials. Probation was ordered in 111 cases and 31 had court ordered compliance/ethics programs. Three cases received credit for self-reporting and 44 received credit for cooperating with the government. But of the approximately 74 cases in FY2011 for which the Commission had Chapter 8 culpability information, there were no entities receiving full credit for having an effective compliance program. Not one of the 74 cases received credit under subsection (f).

These statistics do not reach the full corporate efforts by DOJ since they fail to include non-prosecution agreements or deferred prosecution agreements that have not gone through chapter 8.  So some bottom line observations: 1) if the government decides to prosecute a corporation - it has an incredibly high chance of success; 2) more emphasis needs to be put into teaching corporations how to operate an effective compliance program; 3) studies need to examine whether by using deferred and non-prosecution agreements the government is increasing prosecutions against corporate individuals (it certainly seems likely that this would be the case).

(esp)  

Ninth Circuit Looks at Selective Waiver

In In re: Pacific Pictures the Ninth Circuit looks at "whether a party waives attorney-client privilege forever by voluntarily disclosing privileged documents to the federal government." The court starts with the principle that "voluntarily disclosing privileged documents to third parties will generally destroy the privilege."  The court rejects the petitioners argument that disclosing documents to the government is different from disclosing them to civil litigants and that a selective waiver should apply. The court notes that legislative attempts to change the evidence rules to allow for selective waiver have failed so far.

The court also does not enforce a confidentiality letter between the corporation and the government. The court states:

"The only justification behind enforcing such agreements would be to encourage cooperation with the government.  But Congress has declined to adopt even this limited form of selective waiver."

The court rejected a claim that "adopting such a rule will drastically impair law enforcement attempts to investigate espionage against 'attorneys, financial institutions, medical providers, national security agencies, judges, large corporations, or law firms.'"

Entities provide significant materials to the government as part of deferred and non-prosecution agreements. Not having a privilege needs to be considered by corporate counsel in deciding what to give to the government.

(esp)

DOJ "Punishment" of Stevens Prosecutors Too Lenient

I have not read the 672-page Department of Justice report finding that federal prosecutors Joseph W. Bottini and James A. Goelke acted recklessly -- but not intentionally -- in withholding exculpatory information from Sen. Ted Stevens at his trial for corruption.  Nor have I read the 525-page Scheulke/Shields report commissioned by Judge Emmet Sullivan that concluded to the contrary that their misconduct was intentional.  I therefore am hesitant to say that the DOJ finding was wrong.

I have little hesitancy, however, in criticizing the lenient punishment meted out by DOJ.  Bottini was suspended without pay for 40 days, Goelke for 15.  Even if, as the DOJ report contends, they did not act intentionally but did act with "reckless disregard" of their constitutional obligations to provide exculpatory evidence, the slap on the wrist of a loss of net income from $5,000 to $12,000 respectively (along with a compensating two to seven weeks of extra vacation) appears inappropriate.

The determined "reckless" conduct was, among other things, the failure to disclose evidence concerning Stevens' willingness to pay for the renovations in question, and a contractor's expectation that the cost of the renovations would be added to Stevens' bill, evidence central to the case.  Its disclosure might well have prevented Stevens' conviction, loss of reputation and Senate seat, and (but for his death in a plane crash) probable imprisonment.

If a truck driver causes serious personal injury by reckless driving, is there any doubt he would be fired?  The injury to Senator Stevens was serious; the punishment was far too gentle.

                                                           *          *          *

In a way, the finding of reckless misconduct reflects worse on DOJ than a finding of intentional misconduct.  According to the DOJ report, these were not rogue prosecutors deliberately concealing evidence.  Rather, they were seasoned and respectable prosecutors who recklessly ignored a most basic constitutional obligation, not to conceal exculpatory evidence.  The finding leads to serious questions about DOJ's training and professionalism and leads me to wonder (again) how many serious Brady violations by other seasoned and respectable prosecutors go undetected.

(goldman)

In the News & Around the Blogosphere

David Voreacos & Greg Farrell, Bloomberg Businessweek, Wal-Mart Not Alone in Late Disclosure of Bribe Probe

Mike Scarcella, law.com, At odds in the Stevens case - Internal DOJ report shows fighting over punishment of prosecutors

Dan Ariely, WSJ, Why We Lie (hat tip to David Gerger)

Adam Liptak, NYTimes, A Tough Judge’s Proposal for Fairer Sentencing

Kristen Hays, Reuters, Judge says Enron's Skilling can seek new trial

Mike Scarcella, BLT Blog, DOJ Preparing to Release Internal Probe of Ted Stevens Case 

Grant McCool, Reuters, Gupta insider trading jury to hear Rajaratnam tapes; Walter Pavlo, Forbes, Prosecutors Say Rajat Gupta Close To Rajaratnam, But Does It Matter?; NYDaily News, Rajat Gupta's trial: Prosecutors play FBI wiretaps

Samuel Rubenfeld, WSJ, Former NY Lawmaker Bruno Faces New Corruption Charges

Robert Barnes, Washington Post, Supreme Court faces pressure to reconsider Citizens United ruling

AP, Washington Post, Jurors in John Edwards’ campaign corruption trial take weekend break, resume Monday

John May, The FCPA Blog, Facilitation: A Jury Question

Patricia Hurtado & Seth Stern, Bloomberg, U.S. Said to Start Probe of $2 Billion JPMorgan Loss

Michael Pollick, Herald Tribune, Marian Morgan's big mistake: Not taking a plea

Mike Scarcella, BLT Blog, Roger Clemens Presses Constitutional Dispute with Congress

Richard Sharpstein Joins Akerman Senterfitt & Ari H. Gerstin Also Joins Akerman

Fd. org., TRAC's Report Claiming "Surprising Judge-to-Judge Variation" Fails to Compare Similar Cases

 

(esp)

Government Dismisses Lindsey Manufacturing Case Appeal

The DOJ filed a motion to voluntarily dismiss (Download USA v Lindsey, etc., et al.___ecf.ca9.uscourts) in the U.S. Court of Appeals for the Ninth Circuit the FCPA case involving Lindsey Manufacturing Co., its CEO and CFO.  The government had filed an appeal on December 1, 2011 following an Order of District Judge Howard Martz, who ruled that the Lindsey prosecution had been tainted by a pervasive pattern of flagrant government misconduct. Contributing Blogger Solomon Wisenberg posted here excerpts from this initial Order. By today's dismissal, the government is finally dropping this prosecution and it also ends the efforts to get the company to forfeit $24 million.  

Attorney Jan Handzlik of Venable LLP stated, "This is a great day for the fair administration of justice.  We couldn't be happier for Keith, Steve and the 110 loyal, hard-working employees of Lindsey Manufacturing Company.  This dismissal further vindicates Dr. Lindsey's belief in our system of justice and in his innocence.  Keith and Steve were steadfast in their belief that the government had not played fair and that the truth would come out."

Congratulations also go to Janet Levine (CrowellMoring), who also represented an accused in this case.  Both Jan Handzlik and Janet Levine were the inaugural recipients of the White Collar Criminal Defense Award given at the NACDL White Collar Criminal Defense College at Stetson (see here).

(esp)

Statement of Williams & Connolly on DOJ's "Laughable" Punishment of Ted Stevens's Prosecutors

The Statement of Williams Connolly LLP, through Rob Cary, Brendan Sullivan, and Simon Latcovich, truly speaks for itself. We will have more to come on the DOJ's actions.

(wisenberg)

DOJ Press Release Treads on Presumption of Innocence

The Department of Justice yesterday announced the indictment of four Georgia residents for tax fraud.  The press release (see here) stated, as is required by the ABA Fair Trial and Free Press Standards, ". . . the defendants are presumed innocent until proven guilty beyond a reasonable doubt."  Nonetheless, the headline read "Georgia Tax Cheats Indicted for Conspiring to Defraud the United States," certainly not affording these defendants the presumption of innocence to which the DOJ release paid lip service.

The indictment was announced by the new Assistant Attorney General of the Tax Division, Kathryn Keneally, until recently my able and respected colleague in the New York City criminal defense bar.  My assumption is that AAG Keneally neither wrote nor reviewed the headline.

(goldman)

Ethics Resource Center Report on Sentencing Guidelines

A Blue-Ribbon Report calls for changes to sentencing guidelines implementation. They advocate for "more consistent promotion and recognition of compliance and ethics programs by the U.S. enforcement community" as this "would incentivize businesses to invest more fully in self policing efforts against corporate crime." The Advisory Group on this report is most impressive with folks like Mancy Higgins (VP and Chief Ethics & Compliance Officer for Bechtel), Michael E. Horowitz who served on the group prior to being appointed Justice Department's (DOJ) Inspector General; former Deputy Attorney General Paul NcNulty who joined Baker & McKenzie LLP in 2007; Hon. Diana E. Murphy of the United States Court of Appeals for the Eighth Circuit; Michael Oxley, former Congressman and Chairman of the House Financial Services Committee; and Former Deputy Attorney General Larry Thompson, who retired as senior vice president of government affairs, general counsel, and secretary for PepsiCo.  Others who are part of this independent advisory group are equally as impressive.

(esp)

FBI Investigates JPMorgan Chase Trading Loss. Why?

Here is a Huffington Post piece from several days ago on the FBI probe of JPMorgan Chase's $2 billion trading loss. Can anybody tell me what the crime is here? Doesn't there have to be a potential crime before the FBI investigates? Can somebody please identify that potential crime? The probe is a farce, and the mainstream press's failure to ask the most obvious question is par for the course.

(wisenberg)

Rajat Gupta Trial Day One: Judge Rakoff Moves the Case Along

By 3:00PM on the first day of trial a jury was selected! FoxBusiness.com has the story here. Buffett may be called to testify. That's Warrren, not Jimmy.

According to Fox:

"Earlier Monday, a jury of 12 New Yorkers and four alternates were chosen. They include a fourth grade teacher, a physician’s assistant and an executive at a nonprofit. The four man, eight woman group also includes a psychiatric nurse and a freelance beauty consultant. They’ll decide whether Gupta leaked confidential information about Goldman and P&G to former Galleon hedge fund manager Raj Rajaratnam."

Uh-oh. Sounds like a lunchbucket Manhattan jury. Not always a good sign for high-dollar, high-rolling white collar defendants. On the other hand, the government's case here is much weaker than the one it brought against Raj Rajaratnam. And Gupta is represented by Gary Naftalis, whose skill is every bit as great as his reputation. This should be the first fair fight in a big insider trading case in quite some time.

(wisenberg)

Clemens Daily Wrap-Up

Here is the Houston Chronicle's take on today's proceedings in U.S. v. William Roger Clemens. Brian McNamee was allowed to testify on re-direct that he injected three other players with HGH. Judge Walton gave the jury a limiting instruction that the testimony could only be used to bolster McNamee's credibility--not to infer Clemens' guilt. Still, this was a significant break for the government.

I am now batting 0 for 2 in my most recent predictions. I predicted that Judge Walton would strike some of Andy Pettitte's testimony and that the judge would not let McNamee talk about injecting other players. So take this next observation wiht a grain of salt. To me, the jurors' questions at the end of each day show their skepticism regarding the government's case and the credibility of key government witnesses.

(wisenberg)

Solomon Wisenberg Named Super Lawyer

Contributing Blogger Solomon Wisenberg of Barnes & Thornberg, LLP, has been named a Washington DC Super Lawyer 2012. (see here)

(esp)

Trying to Re-Open the Door in Roger Clemens Case

The name says it all. On Friday the Clemens prosecutors filed the Government's Motion to Admit Evidence of Brian McNamee's HGH-Based Interactions With Other Players and His Cooperation Relating to the Same to Rehabilitate the Witness.  Call it anything you want, it is nothing more than an attempt to convict Clemens through guilt by association. As Judge Walton said before the first trial, in keeping this evidence out:

"I’m just still having some real problems with this because I can see how even with a cautionary instruction, assuming I could craft one that would be intelligible to the jury, I could see how they could still potentially misuse that evidence. I mean, I don’t know. I mean, I use to get cortisone shots when I was playing football in college. And I had to rely upon what the trainer was giving me. And I would not want to be held responsible for having done something inappropriate based upon what that trainer was giving to other people. And that’s the concern that I have.”

***

“I fully appreciate that the jury is going to have to assess Mr. McNamee’s credibility, and that his credibility is going to be seriously attacked by the defense. But I don’t think, at least at this point, that the mere fact that they are going to seriously attack his credibility necessarily opens the door to bring in evidence regarding Mr. McNamee’s dealing with other players. Because as I say, my main concern is that if Mr. Clemens’ position, and I understand it is at least in part his position that he did not know what he was receiving, it seems to me that there’s a real danger, that the jury may say, well, if they all knew, and that’s especially I guess true in reference to players who are also on the same team, that why wouldn’t Mr. Clemens know? And I think that would be a problem, for them to in some way use the evidence regarding what he was doing with these other players to impute knowledge on the part [of] Mr. Clemens."

Judge Walton's original ruling, which shocked the government, was provisional:

"I’ll reserve a final ruling until I see what transpires during the trial. And if somehow I feel that the door has been opened, I may be inclined to change my position. But my tentative position is that the evidence is not going to come in.”

Now the government is making its move. Of course the prosecutors would have filed this motion irrespective of how McNamee's cross-examination actually went. They immediately violated the Court's order during opening statement of the first trial by mentioning other Yankee players who received illegal substances.

I'm betting that Judge Walton keeps the evidence out.

(wisenberg)

Roger Clemens Trial - In Defense of the Judge

Sitting on the bench in a high profile case is not easy on any lawyer or the judge for that matter.  Everyone is scrutinizing your motions, your rulings, and even what you may be wearing. Co-blogger Solomon Wisenberg noted here how the judge has the ability to move the Clemens trial along.  This may be true - but I am not sure that he should.

Giving time for each attorney to state their objections, restate their objections, preserve the record, and yes, restate them even again, is important for everyone. Judge Walton is noted for giving defendants a fair trial - albeit he is also known for being tough if one is convicted. This is all the more reason to make sure that everything is properly on the record, should the defense be unsuccessful at trial.

I am firmly convinced that when prosecutors or defense counsel deliberately clog up a case with needless motions and objections, the jury may eventually catch on. And when prosecutors deliberately attempt to break the stride of the defense counsel or weaken the presentation with objections and distracting arguments, don't always assume it will benefit the prosecution. And keep in mind, that if there is a conviction the appellate court gets to read the entire record and they will have the opportunity to see the motions being made, the arguments supporting the motions, and they will have the opportunity to discern whether one side was deliberately wasting time with worthless motions.

So making sure everything is on the record, and that all arguments are heard is not such a bad thing.

(esp)

Notes From The Roger Clemens Trial: The Jury Is Bored

Judge Walton says that the jury is bored at the Clemens trial, and of course he blames the lawyers. Maybe he should look in the mirror. The proceedings would have moved much faster had the Court put a stop to the government's pettifogging objections to cross-examination questions that allegedly strayed beyond the scope of direct.

The judge has also, according to the latest press reports, characterized Rusty Hardin's lengthy cross-examination of Brian McNamee as confusing.

I stopped in on the trial yesterday morning during Hardin's cross-examination of McNamee. Although there was no smoking gun moment, it was an accomplished cross that ably exposed McNamee's shifty, evasive personality. Near the end, Hardin asked a perfectly acceptable question, the point of which was to stress that McNamee would have been valuable to Clemens as a private trainer irrespective of McNamee's ability to provide illegal drugs. The prosecution objected. Rather than simply ruling on the objection, Walton engaged in an unnecessarily lengthy exchange with the attorneys on the finer points of evidentiary law. You would have thought they were discussing the Ex Post Facto Clause or the Magna Carta.

The trial judge has great discretion to move a case along--even a big case. This doesn't mean that the Court should prevent either side from putting on its evidence or vigorously questioning witnesses. The Clemens case would benefit from quicker bench rulings on objections, particularly objections that only serve to break the other side's pace and stride. The government objections that I witnessed on Wednesday did not merit the lengthy treatment they were given by the Court.

(wisenberg)