Being a famous athlete brings acclaim and widespread public recognition, which is surely not a good thing if the person turns to robbery. Former Ohio State running back Maurice Clarett surrendered to police in Columbus, Ohio, after being charged with two counts of robbery related to an incident early New Year’s Day behind a nightclub in which he allegedly demanded money from two patrons of the club and gestured to a handgun in his waistband. Needless to say, everyone recognized him, including the club owner who broker up the incident. An AP story (here) discusses the charges against Clarett. In another incident shortly after Christmas, former major league baseball player Jeff Reardon, a long-time relief pitcher, robbed a jewelry store in Florida by handing the clerk a note that he was armed and then leaving with cash. Reardon quickly turned himself in, and he has been suffering from depression since the death of his son in 2004. No one was hurt in either incident, but robbery is a sure means to end up on the wrong side of the criminal justice system in a hurry, even for a former sports star. An AP story (here) discusses Reardon’s arrest. (ph)
Category: Celebrities
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Four members of the Minnesota Vikings, including injured star quarterback Daunte Culpepper, were charged with indecent conduct, disorderly conduct and lewd or lascivious conduct for their actions during a charter boat cruise on Lake Minnetonka in October. The football players avoided facing much more serious federal charges because among the female guests was an exotic dancer and others who traveled from out of the state to attend the party and were compensated for attending. The Mann Act, 18 U.S.C. Sec. 2421, provides: "Whoever knowingly transports any individual in interstate or foreign commerce, or in any Territory or Possession of the United States, with intent that such individual engage in prostitution, or in any sexual activity for which any person can be charged with a criminal offense, or attempts to do so, shall be fined under this title or imprisoned not more than 10 years, or both." An AP story (here) notes that the U.S. Attorney for the District of Minnesota declined to pursue such charges because of "insufficient evidence." (ph)
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Former Governor Rowland of Connecticut left office under a cloud after being sentenced to a year and a day in prison. His post-governor employment raised ethics issues at his sentencing and then again, when the state’s attorney’s office tried to have Rowland arrested for violating a criminal ethics prohibition of Connecticut. The Hartford Courant reports here that the judge hearing the case said – no way to arresting Rowland. And as noted in this newspaper story, even those opposed to Rowland appear to agree with this decision.
(esp)
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Three of the four defendants in the BALCO steroid manufacturing case entered guilty pleas today (see earlier post here). Victor Conte, Greg Anderson (former personal trainer for Barry Bonds), and James Valente appeared before U.S. District Court Judge Susan Illston and affirmed their guilt to drug distribution and, for Conte, money laundering charges. A fourth defendant, Remi Korchemny, decided not to go forward with a plea because, according to an AP story (on ESPN.com here), he got "cold feet" about admitting his guilt while waiting in the courtroom for a plea agreement to be completed in another unrelated drug case. Anderson stated "Yes" in response to the judge’s question whether he distributed steroids to athletes.
Judge Illston will hold a sentencing hearing for the three on Oct. 18 to finally accept the pleas and sentence them. While the guilty pleas mean that a number of well-known athletes, including Bond and New York Yankee Jason Giambi, will not have to testify, the specter of a continuing investigation for perjury lingers for any athlete who denied in the grand jury receiving steroids from BALCO. (ph)
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David Boies, one of the best known litigators in the country (Bill Gates and Gen. William Westmoreland are among his former opponents), is involved in two high-profile corporate crime cases, but in different roles. In the prosecution in New York Supreme Court of former Tyco CEO Dennis Kozlowski and CFO Mark Schwartz, Boies testified on behalf of the government about the lack of documentation for $37 million in loans to the two defendants that were foregiven by the company. Boies and his law firm, Boies, Schiller & Flexner, conducted the internal investigation of Tyco’s finances after Kozlowski was fired as CEO. A Wall Street Journal story (here) discusses the closing arguments in the retrial, including the comment by Schwartz’s attorney describing Boies as the "$45 million man" for the fees charged to conduct the internal investigation.
On of Boies’ current clients is former AIG CEO Maurice Greenberg, who is at the center of the government’s investigation of improper accounting for reinsurance transactions and other problems at AIG. Greenberg asserted the Fifth Amendment rather than testify before federal and state investigators, and is likely the prime target of the criminal investigations, although it is an open question still whether he will be charged with any crimes. Look for Boies to take a leading role in arguing that his client made reasonable accounting decisions, a point already made by Greenberg in a letter to AIG’s board after it disclosed the conclusions of an internal investigation that included statements regarding former management, i.e. Greenberg among others (see earlier post here). Boies is sure to have had a hand in the drafting of that missive, and in shaping Greenberg’s response to the various government investigations. (ph)
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Federal Reserve Chairman Alan Greenspan endorsed the changes in business practices mandated by the Sarbanes-Oxley Act in the commencement address (here) delivered to the graduates of the Wharton School at the University of Pennsylvania on May 15. In a speech that stressed the need for trust and honesty in business, Greenspan said:
The Sarbanes-Oxley Act of 2002 appropriately places the explicit responsibility for certification of the soundness of accounting and disclosure procedures on the chief executive officer, who holds most of the decisionmaking power in the modern corporation. Merely certifying that generally accepted accounting principles were being followed is no longer enough. Even full adherence to those principles, given some of the imaginative accounting of recent years, has proved inadequate. I am surprised that the Sarbanes-Oxley Act, so rapidly developed and enacted, has functioned as well as it has. It will doubtless be fine-tuned as experience with the act’s details points the way.
Corporations have been pushing back at the internal controls requirements imposed by Section 404 of the Act, arguing that the costs are too great for the benefit provided (see earlier post here). For example, the U.S. Chamber of Commerce argues (here):
The unintended expansion of corporate governance rules and excessive compliance demands will cost the nation’s 17,000 public companies billions of dollars this year. Entire industries have been consumed by multiple, sweeping demands from competing regulators for their data, e-mails, and correspondence. These excesses have discouraged bold business decision making, have sent both domestic and foreign companies fleeing from public markets, and have hurt efforts to attract strong board members and executives to public companies.It will be interesting to see how Greenspan’s support for the law affects the debate over whether its stringent internal controls certification provision will be eased. (ph) -
The U.S. Attorney’s Office for the Eastern District of Virginia announced that former University of Virginia and NBA basketball player Ralph Sampson was arrested in Georgia for failure to pay child support. A press release issued by the USAO (here) states:
Sampson, a former NBA basketball player for the Sacramento Kings and Houston Rockets, was indicted in the Eastern District of Virginia on March 19, 2003, for failing to pay more than $21,000 in child support obligations. The 2003 charges arose from Sampson’s failure to comply with a 1990 Stafford County Juvenile and Domestic Relations Court order that directed him to pay $1,500 a month in support of a daughter living in Falmouth, Virginia. The order was modified in 1992 to reduce Sampson’s obligations to $675 per month. Sampson pled guilty to the federal charge on April 4, 2003, and was sentenced to two years probation on July 8, 2003. As a condition of his sentence and probation, Sampson was ordered to pay all current and delinquent child support obligations. Sampson has failed to maintain the child support obligations for this child and is currently more than $6,000 in arrears.
On May 4, 2005, Sampson was again indicted in the Eastern District of Virginia. The current indictment alleges that Sampson has not only failed to pay child support obligations as required by the 2003 federal order for the child mentioned above, but also has failed to pay court-ordered child support for a second daughter, who resides in Alexandria, Virginia. Despite a 1988 order from the District of Columbia’s Superior Court, Family Division, Domestic Relations Branch directing him to pay $1,500 a month in child support for this daughter, the indictment alleges that as of April 30, 2005, Sampson owed more than $247,500 in past due child support obligations for her.
The prosecution is under the criminal provision of the federal Child Support Recovery Act of 1992 (18 U.S.C. Sec. 228 — available here), which provides: "Any person who . . . willfully fails to pay a support obligation with respect to a child who resides in another State, if such obligation has remained unpaid for a period longer than 1 year, or is greater than $5,000 . . . ." The punishment for a first offense is up to six months in prison, and a second offense is punishable by up to two years. This is the second time Sampson has been charged, so he may be facing a prison term if convicted in this case. An interesting question is whether the federal criminal law should be used to prosecute "deadbeat" parents who fail to pay state-ordered child support.
Basketball aficionados may recall the last great "Battle of the Centers" in December 1982 when Sampson’s UVa team faced Patrick Ewing’s Georgetown Hoyas. I got to attend the game at the Capital Centre in Landover, MD. Does anyone remember the score? (ph)
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Steve Madden, the shoe guru, will be getting out of federal prison soon after serving a 3+ year sentence for securities fraud. His company, Steve Madden Ltd., which is publicly traded, has started running ads welcoming his return in a manner that has brought to mind the rousing welcome Martha Stewart received upon her release and return to work at her company. A New York Times article (here) notes that ads being run in various magazines that turn on the idea of "spring" — both the season and Madden’s release from prison to a halfway house (his sentence runs through Sept. 2005). While he has been serving time in the Coleman (Low) FCI in Florida, Madden’s position with the company has been its "Creative and Design Chief." The company’s 10-K (here) discusses the employment agreement:
The Company has an employment agreement with Steve Madden, its Creative and Design Chief, which provides for an annual base salary of $700 through June 30, 2011. Mr. Madden is entitled to receive base salary payments during periods that he is not actively engaged in the duties of Creative and Design Chief. The agreement also provides for an annual performance bonus, an annual option grant at exercise prices equal to the market price on the date of grant and a non-accountable expense allowance. However, the Company is not required to pay the bonus for any fiscal year that Mr. Madden is not actively engaged in the duties of Creative and Design Chief for at least six months, the Company is not required to grant an annual option if Mr. Madden is not actively engaged in the duties of Creative and Design Chief for at least six months out of the twelve months immediately preceding the grant date for such annual option and the Company is not required to pay the expense allowance for any month during which Mr. Madden is not actively engaged in the duties of Creative and Design Chief.
If I’m reading the disclosure correctly, Madden has received his base salary while in prison, but not the bonuses, assuming he conformed with Bureau of Prison regulations that do not permit federal prisoners to conduct outside business while in its custody. Madden also owns approximately 26% of the company’s shares.
It may be that those with eponymous companies in fields requiring creativity (as opposed to manufacturing or financial skills) are untainted by convictions because their creative ability is such a valuable asset to the company. (ph)
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For fans of the entrapment defense, the death of John DeLorean on March 19 marks the passing of one of the exemplars of that often-offered by usually unsuccessful defense. An obituary from The Guardian (here), which describes him as an "American carmaker and con man" reviews DeLorean’s many run-ins with the courts and investors. (ph)
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Michael Milken was the face of 1980s greed and hubris after his guilty plea on six felony counts
related to his work at the famed junk bond machine Drexel Burnham Lambert. Of course, that is now ancient history–it was almost 15 years ago–and the S&L crises and the Enron/Worldcom corporate debacles since then have taken center stage. A New York Times article (Dec. 18) discusses Milken’s latest investment foray, into the world of for-profit educational enterprises that includes a substantial investment in the buy-out of KinderCare, an old Drexel junk bond client. Milken is barred from the securities industry, but the large ($1 billion+) fortune he amassed from his investment banking days can make him a major player in almost any industry, and his contacts in the financial world remain deep. His rehabilitation is viewed as a model for other white collar criminals who seek to rebuild their life after a conviction and term of imprisonment.For-profit education companies are growing, and the University of Phoenix is the largest post-secondary educator in the country. Perhaps the Milken College of Law one day? The white collar crime class could have its first guest speaker already lined up.
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