State Department Inspector General Howard "Cookie" Krongard has recused himself from a second investigation by his office. After withdrawing from any investigations of security company Blackwater Worldwide’s conduct in Iraq due to his brother’s connections to the company, Krongard announced that he is also recusing himself from the investigation of allegations of corruption, fraud, and abuse in the construction of the massive new U.S. Embassy in Baghdad. The House Oversight and Government Reform Committee has been investigating the issue, and has put Krongard in the cross-hairs because of allegations that he squelched an inquiry into corruption at the Embassy. With Krongard now having recused himself from the two most significant investigations involving his office, has it reached the point where the IG should hand over the reigns of the office to someone who can lead the investigations rather than just removing himself from them? An AP story (here) discusses Krongard’s latest recusal. (ph)
Category: Corruption
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Karl Vick of the Washington Post has a lengthy story on the latest happenings in the Alaska investigations. It is titled, "‘I’ll Sell My Soul to the Devil’.
(esp)
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An interesting article from the Fulton County Daily Report (available on Law.com here) discusses the persistent problems e-mails present in cases. While the article largely focuses on employment discrimination cases, the point is equally applicable to white collar crime investigations in which e-mails continue to play such a prominent role. One e-mail discussed began, "This is off the record" — except, of course, anything in an e-mail is definitely preserved and forever on the record. According to the writer, "The ‘send’ button — together with its evil cousins, ‘forward’ and ‘reply all’ — are causing a world of trouble for corporations as they connect to evidence in legal proceedings and create a new mess for in-house lawyers to clean up."
Who among us hasn’t regretted hitting the send button on an e-mail, as former New York City Police Commissioner and erstwhile nominee to head the Department of Homeland Security Bernie Kerik has discovered in his indictment (here) on corruption, mail/wire fraud, tax, and false statement charges. How do I segue from e-mail to Kerik? The indictment quotes an e-mail he sent in July 1999, shortly after a meeting Kerik had with City officials in which he defended the bona fides of a company seeking a contract, allegedly in exchange for $255,000 in renovations to his Bronx apartment. Kerik complained about being on "welfare" compared to "John Doe #3" who worked for the company whose virtues he extolled, and then bemoaned the fact that there was still "A b***s*** $170,000., [sic] I had to beg, borrow and [expletive] for the down payment and I’m still [expletive] over the $5,000. [sic] I need for closing." [NB: we’re still a family-friendly blog, so naughty words are edited.] Needless to say, the e-mail may be a bit hard to explain.
The Kerik indictment has tax charges that include a claim he did not properly report the "nanny tax," which is the second time now that this has shown up in a criminal indictment (see earlier post here for the first case with a "nanny tax" charge, also in the SDNY). A handy chart provided by the U.S. Attorney’s Office (here) outlines the basis for the tax counts. The corruption charges are based on the right of honest services fraud, and there are a number of false statement counts related to Kerik’s abortive nomination to be Secretary of DHS, including false statements to White House officials and on federal financial disclosure forms. (ph)
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Former Alabama Governor Don Siegelman and his lawyers must feel a bit like a ping-pong ball at this point as his request for bail pending appeal of his conviction on corruption charges goes back before U.S. District Judge Mark Fuller for a third time. After turning down the original request for bail by Siegelman and his co-defendant, former HealthSouth Richard Scrushy, after their convictions, Judge Fuller took the unusual step — at least in a white collar case — of ordering the defendants to begin their prison terms immediately after sentencing. The defendants appealed to the Eleventh Circuit for bail, and that court remanded the requests of both defendants to the district court for further consideration.
On October 4, Judge Fuller again rejected Siegelman’s request for bail, stating that he did not find the defendant carried his burden under 18 U.S.C. Sec. 3143(b) of showing a substantial question that would lead to reversal of the conviction. The Judge gave no real explanation for his conclusion, stating, "This Court is mindful of the Eleventh Circuit’s order, which requests ‘expeditious consideration and disposition’ of these issues. Therefore, while this Court has given the merit of the issues due consideration, it will not issue a lengthy written opinion on this matter." That didn’t quite cut it with Eleventh Circuit Judges Black and Marcus, who remanded the case again for a bit more thorough discussion of the denial of bail. In its limited remand order (available below), the appellate judges wrote, "We believe, however, that a more detailed explanation of the district court’s reasoning would facilitate meaningful appellate review. Thus, while we appreciate the district court’s alacrity in issuing its order on limited remand, we REMAND this matter once again to the district court, on a limited basis, so that we can properly determine whether Siegelman has met his burden of entitlement to release pending the resolution of this appeal."
While I doubt Judge Fuller will change his mind, and we’re probably going to get that more "lengthy written opinion" on the issues, I suspect the Eleventh Circuit is sending a signal about granting bail here, despite the assertion that the remand is not a decision on the merits. The Siegelman prosecution has been the subject of a House Judiciary Committee hearing into political motivations for prosecutions, and the court of appeals judges noted that it was a "complex" trial, so maybe bail would be a good thing. It’s not clear why the panel does not just order bail for Siegelman on its own rather than sending the case back again. A decision in favor of a defendant on the bail issue is certainly not unknown — the Tenth Circuit granted former Qwest CEO Joseph Nacchio’s request for bail after the denial by the district court without requiring an explanation of the decision.
With Siegelman’s case remanded, co-defendant Scrushy’s bail request may be headed for a similar bounce back from Atlanta to Montgomery. In an opinion (available below) issued on November 1, Judge Fuller gave the same basic reason for denying Scrushy’s request, noting again that he chose to abjure a "lengthy written opinion." Unlike Siegelman’s case, however, Judge Fuller also found that Scrushy posed a flight risk. The Judge wrote:
The Court rejects Scrushy’s creative argument that once sentence was imposed and he learned that he would be incarcerated for a period of time less than the Government had sought he had less reason than ever to flee. In this Court’s view, there is a significant difference between facing the abstract possibility of imprisonment for a period of time and the knowledge that a sentence of eighty-seven months of incarceration will be imposed if his appeal fails. The circumstances have changed. Scrushy now knows how much time in prison he faces. The Court finds that he has failed to show by clear and convincing evidence that he is not likely to flee if allowed to be released on bond pending appeal.
Whether the Eleventh Circuit judges will view Scrushy’s case differently because of the flight risk determination remains to be seen. That issue is a tougher one for the appellate court to overcome because the district court is much closer to the situation, and flight is more of a judgment call that a court of appeals may not want to second guess, while the "substantial question" standard is more a legal determination in which appellate judges will have their own opinions on the merits. Scrushy is certain to cite to the limited remand in Siegelman’s case to get another shot in the district court, and a decision should be forthcoming soon. (ph)
Download us_v_siegelman_11th_cir_remand_order_nov_7_2007.pdf
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Embezzlement is bad enough, and when it involves the theft of tax money, the corruption overlay just spreads the harm even further. Two officials in the Washington, D.C. real property tax office were arrested for stealing approximately $16 million through bogus tax refunds that were directed to straw accounts maintained by three other defendants also charged in the case. The charges are mail fraud, bank fraud, money laundering, interstate transportation of stolen property, and conspiracy. According to a press release (here) from the U.S. Attorney’s Office:
The District of Columbia tax code imposes property taxes on real estate in the District and provides a mechanism for property tax refunds when, for example, an individual or company overpays real estate taxes. According to the affidavits filed in support of the arrest and search warrants, from 2004 through the present, Harriette Walters, Diane Gustus, and other D.C. government employees were involved in preparing or approving fraudulent property tax refund requests to generate over 40 separate fraudulent refund checks averaging over $388,000 each. Those fraudulent tax refund checks were deposited primarily into sham corporate accounts controlled by Harriette Walters’s relatives, including Turnbull’s “Chappa Home Services” and “Legna Home Services” accounts, and Richard Walters’s “Helmet Plumbing and Heating” account.
The fraudulently obtained funds then allegedly were distributed through cash, cashier’s checks, and wire transfers to the co-conspirators and family members, who used the funds to purchase homes, vehicles, jewelry, luxury clothing and houseware items, and other real and personal property, among other things. For example, it is alleged that between September 2000 and the present, Harriette Walters spent more than $1.4 million at Neiman Marcus. Additionally, the affidavits allege, some of the money stolen from the District of Columbia has been sent to a money exchange institution in the Dominican Republic that has no bank branches in the United States.
$1.4 million at Needless Markup?! Now that’s a spending spree. According to the Washington Post (here), the search turned up a receipt for a handbag purchased for $26,000, although it has not been located yet.
The Post article notes that the investigation is continuing, and others in the real estate tax office may have had some involvement in the scheme, or at least an inkling of what was going on, because they received lavish gifts from the two officials. Even worse, while the investigation to this point has identified improper tax refund checks from 2004, there’s a chance that the scheme began as far back as 2000, so the loss to the D.C. government may be even worse. That’s an awful lot of money to skim off without anyone noticing for over three years, especially in these days of tight government budgets. (ph)
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The media is quoting unnamed government sources that former New York City Police Commissioner Bernard Kerik is likely to be indicted by a federal grand jury on bribery and tax evasion charges, with an arraignment to occur on Friday, November 9. Kerik was briefly nominated to head the Department of Homeland Security in 2004 before withdrawing from consideration due to "nanny tax" issues. The charges relate to a $240,000 renovation of his Bronx apartment in 1999 — pretty swanky for that part of town, but then nothing is cheap in New York — that was allegedly paid for by contractors seeking his help in obtaining city contracts. An AP story (here) notes that Kerik agreed earlier to extend the statute of limitations on the charge, and that waiver expires on November 15, so the indictment will come shortly if there is to be charges. (ph)
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Former Representative Randy "Duke" Cunningham did not take the witness stand, but the individual accused of bribing him was convicted despite this. (see here) The defense contractor, who continues to maintain his innocence despite this jury verdict, was accused of charges arising from his alleged providing of "cash, meals, trips and other gifts in exchange for nearly $90 million in Pentagon work." (see here) One issue likely to be mentioned on appeal is whether the government improperly leaked information to the press. Although presently free on bond, the court has advised the accused of incarceration pending appeal.
(esp)
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The prosecution of an Iowa state Senator on corruption charges has triggered a filing seeking dismissal of the indictment on the ground of prosecutorial misconduct. The trial is set to begin on October 29 on an indictment (here) charging a single violation of the Hobbs Act for extortion under color of official right related to an alleged demand for payment for home security systems in what the state Senator called a business deal that went sour. The defense motion (available below) argues that
the government has withheld exculpatory evidence, has provided deliberately false and misleading answers to discovery, has made false and misleading representations to the Court, has manipulated the Grand Jury process and stood silent in the face of testimony that the AUSA knew constituted perjury and did nothing to correct the record. In isolation, any one of these outrageous acts would warrant dismissal. Collectively, these actions mandate dismissal and additional sanctions to curb blatant prosecutorial abuse.
A copy of the correspondence between defense counsel and the prosecutors is also available below as exhibits to the motion to dismiss. In addition to seeking dismissal of the indictment, the defense asks for the postponement of the trial. (ph)
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The Department of Justice has made public corruption one of its main priorities, and the number of investigations of members of Congress, along with state and local officials, shows that this area is receiving increased attention. The states also have authority to investigate corruption involving their own officials, although parallel federal and state investigations can present problems. In the investigation of corruption in the Alaska legislature and its elected federal representatives, the Department of Justice has — politely — asked Alaska’s Attorney General not to pursue a separate state investigation. A letter (here courtesy of TPMuckraker) from the principal deputy chief of the Public Integrity Section in Washington, D.C., says that "because of the long-standing federal investigation into these matters, we believe that concurrent state investigative activity will have the effect of compromising certain aspects of the ongoing federal public corruption investigation." In other words, don’t mess with our case . . . please.
While the federal government cannot stop a state from conducting its own investigation, and under the Double Jeopardy Clause’s dual sovereignty doctrine the state could file its own charges in addition to any federal prosecution, the specter of interfering with an ongoing investigation may be enough to cause Alaska to back away. I argued in a law review article, Federalism and the Federal Prosecution of State and Local Corruption, 92 Ky. L.J. 75 (2003), that federal prosecutors are best equipped to pursue corruption cases involving state officials because of their relative detachment from the political ties that can affect local prosecutors and state attorneys general. Asking the Alaska Attorney General to defer to the federal investigation may be more than just a fight over turf. (ph)
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The trial of defense contractor Brent Wilkes for allegedly paying bribes to former Representative Randy "Duke" Cunningham began with his attorney, Mark Geragos, asserting that there were no improper payments but instead just the usual business of a Congressman lobbying the Pentagon. According to a San Diego Union-Tribune story (here), Geragos said in his opening statement that Cunningham lobbied on behalf of a constituent (Wilkes) with the usual currency of Capitol Hill in dealing with the bureaucracy: threats and other forms of pressure. This is the "business as usual" defense, that if everyone does it then it can’t be bribery. Any benefits conferred on Cunningham were not connected to the lobbying, and so the argument would be that a quid pro quo cannot be established for a bribery conviction. Needless to say, the government takes a somewhat less benign view of Cunningham’s efforts on Wilkes’ behalf, and has already threatened to bring out testimony about the presence of prostitutes in a hot tub as one of the unseemly benefits Wilkes gave in exchange for Cunningham’s help to obtain $85 million in no-bid contracts. Whether the jury will accept the defense assertion that there is an "innocent explanation" for the benefits is an open question, and Geragos made it clear that if the government doesn’t call the former Congressman the defense will. That testimony promises to generate a few fireworks. (ph)
MattBray.net 