Tom Noe has been at the center of an expanding campaign finance and corruption investigation in Ohio for the past year. He was indicted on state charges related to investments he allegedly made on behalf of a state workers compensation fund in rare coins that turned out to be largely non-existent, resulting in a loss of over $1 million. Federal charges were filed in October 2005 related to campaign contribution violations. Noe was a leading fundraiser for the Bush-Cheney campaign in 2004, and contributed over $100,000 to various Republican campaigns. The federal charges involve funneling approximately $45,000 to the presidential campaign by making payments to others who would then donate in their own names in order to avoid the $2,000 contribution limit. An AP story (here) states that prosecutors have requested a change of plea hearing be scheduled. It is not clear whether part of the plea agreement will include cooperation in the various investigations. (ph)
Category: Corruption
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Former state school Superintendent of Georgia, Linda Schrenko, is now in the second week of her trial. So far there have been witnesses testifying for the prosecution saying that Shrenko was "illegally funneling money into then-Georgia School Superintendent Linda Schrenko’s 2002 campaign for governor." (See Atlanta Jrl Constitution here) The Atlanta Jrl Consitution has a blog covering the trial here.
UPDATE: Schrenko entered into a plea bargain with the government today, over a week into her trial, in which she will receive an eight-year prison term. According to an AP report (here), she will plead guilty to one count of money laundering and one count of fraud. (ph)
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Kentucky businessman Vernon Jackson admitted in federal court that he paid over $400,000 to Louisiana Representative William Jefferson to secure his assistance in obtaining government contracts and participating in deals in Africa. A press release issued by the U.S. Attorney’s Office for the Eastern District of Virginia (here) only identifies the official as "Representative A," although the media has disclosed that it is Representative Jefferson who is involved (see Washington Post story here). According to the press release:
[F]rom 1998 through the present, Jackson has been the Chairman and CEO of iGate, Incorporated, a Kentucky firm focused on developing technology which is designed to transmit data, audio, and video communications over copper wire. In his plea today, Jackson admits that in approximately 2000, he was introduced to a member of the U.S. House of Representatives (Representative A), who was active in promoting U.S. trade and business in Africa. Representative A then provided official assistance to Jackson in persuading the U.S. Army to test iGate’s broadband two-way technology and other iGate products. Representative A’s official assistance led to the placement of iGate on the U.S. General Services Administration (GSA) schedule, making iGate products eligible for use in various federal contracts. Ultimately, iGate’s products were used by the U.S. Army at Fort Stewart, Georgia.
Jackson further admits that in early 2001, Representative A told him that Representative A would not continue to provide official assistance to Jackson’s company, iGate, unless Jackson agreed to pay a nominee company ostensibly maintained in the names of Representative A’s spouse and children. Jackson agreed and signed a consulting services agreement committing iGate to pay the nominee company various things of value, thereby concealing Jackson’s payments in exchange for Representative A’s performance of official acts in furtherance of iGate’s business in Africa and elsewhere, including, but not limited to: a) monthly payments of $7,500; b) a percentage of iGate’s gross sales; c) a percentage of capital investments raised for iGate; and d) options for iGate stock.
In January 2005, a former aide in Representative Jefferson’s office pleaded guilty to a similar charge involving the solicitation of bribes. The grand jury has also subpoenaed six member of Representative Jefferson’s staff to testify, as discussed in an earlier post (here). Prosecutors appear to be closing in on yet another Congressman in the Department of Justice’s ongoing corruption probe. (ph)
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Although former Illinois Governor George Ryan and a codefendant were convicted on corruption and RICO charges a couple weeks ago, collateral proceedings from the case remain in the news. One defense witness was Edward McNally, who represented Ryan in 2001 during the investigation before serving as the former United States Attorney for the Southern District of Illinois; he is now in the Criminal Division at the Department of Justice. An issue raised by the government after McNally’s testimony was the fact that a number of former partners at a firm he was at that went bankrupt were being sued by the trustee in bankruptcy for certain firm debts. Counsel to the trustee was Winston & Strawn, the same firm that represented Ryan, and one partner not sued over the debt was none other than McNally. Prosecutors protested the potential conflict from that situation, and also claimed that McNally may have tape recorded a meeting between Ryan and FBI agents that McNally attended as counsel. The Chicago Sun-Times reports (here) that the Office of Professional Responsibility in the Department of Justice has begun an investigation of the taping allegation against McNally, according to a letter sent to Illinois Senators Durbin and Obama.
On another front, defense attorneys have asked the court to have the jury forewoman testify under oath regarding whether she gave false answers on her juror questionnaire. During the jury deliberations, U.S. District Judge Pallmeyer dismissed two jurors because of questions raised in the media about prior convictions they did not disclose. According to an AP story (here), Ryan’s attorneys claim that the forewoman did not disclose her divorce proceeding and two domestic violence complaints in answering questions about whether she had ever been a crime victim or her involvement in legal proceedings. Post-verdict challenges for juror bias or deception are very difficult to win, as was shown in the defense challenge to a juror in the Martha Stewart case that was rejected by the Second Circuit. Ryan’s sentencing is set for August 4, 2006, and juror issues are much more likely to come up during the appeal of the conviction. (ph)
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Richard Scrushy, previously acquitted in a federal trial involving his activities with HealthSouth, will begin his second trial today. Scrushy is charged with conspiracy, bribery, and mail fraud for "allegedly making two hidden payments totaling $500,000 in 1999 and 2000 to then-Alabama Gov. Don Siegelman in return for a spot on a state regulatory panel that oversees HealthSouth and other health-care providers. " See Wall Street Journal here.
His co-defendants at trial include former Governor Don Siegelman, who is on trial in the height of his campaign for the Democratic Nomination for Governor of Alabama.
This trial may prove to be as fascinating at Scrushy’s last trial. The Wall Street Journal here describes events occurring outside the courtroom.
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The Wall Street Journal reports (here) that the investigation spawned by the bribery of former San Diego Congressman Randy "Duke" Cunningham has branched out to include looking into whether prostitutes were supplied to Congressmen and staffers by defense contractors. Cunningham has been sentenced to a 100-month prison term, and Mitchell Wade, listed as coconspirator #2 in filings in the case, agreed to plead guilty and cooperate. The target of the investigation is coconspirator #1, identified as Brent Wilkes, who the article asserts may have played a role in providing prostitutes to Cunningham and possibly others in order to gain no-bid defense contracts for his company, ADCS Inc. The FBI has already sought records from the Watergate Hotel, which is part of the complex made famous by a third-rate burglary undertaken on behalf of another former California Congressman, along with records from limousine and escort services.
The Journal article notes that Wilkes has not entered into a plea agreement with the government and indicates that he will fight any charges that might be brought against him. That could turn a trial in the case into a truly sordid affair in which the government’s prime witnesses may have been a purveyor and user of prostitutes, in addition to the payment and acceptance of large sums of money. Those are not the most appealing witnesses for the prosecution, but then bribery cases almost demand the use of cooperators who are hardly pristine. Look for the case to become even more tawdry if the government can confirm the use of prostitutes as a currency for the bribes. (ph)
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A Third Circuit opinion discusses the application of the crime-fraud exception to the attorney-client privilege in an investigation that shows how a subpoena recipient should not respond unless the person wants to move into the "target" category in a hurry. In In re: Grand Jury Investigation (here), the court reviewed a challenge to the district court’s order to an attorney to testify about his communication with his client — Jane Doe — about the content of a grand jury subpoena for e-mail records. Doe was the executive director of an Organization that was affiliated with the primary target of the investigation involving possible corruption of a public official, and her attorney forwarded to her a grand jury subpoena seeking e-mail records of the Organization. The government apparently was unsatisfied with the response, setting in motion a chain of events that led to the attorney being called to testify before the grand jury:
On February 10, 2005, pursuant to an agreement among the parties, an FBI computer technician went to the Organization’s place of business and "imaged" the hard drive on Jane Doe’s computer. The Government thus made an exact copy of the contents of the hard drive, including deleted email files. It uncovered numerous stored messages which could be construed to show a conscious effort by the Organization’s staff to destroy emails.
Concerned about the potential obstruction of justice by Jane Doe and others at the Organization, the Government issued a subpoena duces tecum to Attorney on March 1, 2005. It sought to compel grand jury testimony regarding his discussions with Jane Doe as to her compliance (or apparent non-compliance) with the prior subpoenas for production of the Organization’s e-mails.
The Third Circuit held that there was sufficient evidence of a pending or future crime by Doe, namely obstruction of justice, for not preventing the deletion of the e-mails. The court upheld the district court’s order directing the attorney to testify.
Interestingly, the court cited to the Second Circuit’s recent decision in United States v. Quattrone as support for the proposition that failing to stop the destruction of e-mails after learning of a subpoena for those records can constitute obstruction. The court stated: "The Government’s position in this case is that the communication between Attorney and Jane Doe provided her with knowledge of the type of material the Government sought, comparable to the documents relating to the IPO allocation process sought in Quattrone." While the conviction in Quattrone was overturned due to faulty jury instructions, the Second and Third Circuit decisions do show that the handling of e-mail can rise to the level of obstruction of justice, showing once again how important this type of evidence is in white collar crime investigations and prosecutions. (ph)
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A former school district official in South Carolina was indicted on twelve counts of mail and wire fraud related to embezzling funds from the federal government through the E-Rate program, which provides funds to disadvantaged school districts to pay for communications networks and internet access for students and teachers. Cynthia Ayer was technology director for the Bamberg County School District, and the charges arise from funneling money from the grants through a company that she set up. According to a Department of Justice press release (here):
[F]rom April 1, 1999, until Feb. 1, 2003, Ayer used her position as the technology director of the school district to award technology contracts to her company, Go Between Communications, by submitting fraudulent applications for E-Rate funding of more than $3.5 million to the Federal Communications Commission’s (FCC) Universal Service Company (USAC) without a competitive bidding process. The indictment further charges that, as a result of her scheme to defraud the E-Rate program, Ayer fraudulently obtained $468,496 in payments from USAC.
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Jury selection began in the corruption trial of former HealthSouth CEO Richard Scrushy, former Alabama Governor Don Siegelman, and two former members of Siegelman’s cabinet. The judge expects to complete jury selection in two days, and then begin the trial on May 1. Based on the government’s witness list, U.S. District Judge Mark Fuller said that the trial will last from four to six weeks, which puts it perilously close to the June 6 Democratic gubernatorial primary in which Siegelman is a candidate. Among the other candidates for the Democratic nomination is Lt. Governor Lucy Baxley, former wife of Lt. Governor Bill Baxley, who happens to be defense counsel to one of the other defendants. According to an AP story (here), potential witnesses include a number of current and former state legislators and three former Governors: Guy Hunt, Jim Folsom Jr. and Fob James. As if things were not political enough, the judge rejected the government’s motion to prohibit Siegelman from arguing that the charges were brought based on political considerations (AP story here) because the request was untimely. And this is just one of the defendants.
Scrushy’s motion to dismiss the indictment on the grounds that the grand jury was selected in a racially biased manner still has not been decided (see earlier post here). That is a difficult claim to establish, so it is unlikely the judge would proceed with jury selection if there were any reasonable likelihood of the indictment being dismissed. Along with the political aspects of the case, Scrushy may try to raise issues of racial and economic bias. This trial could make Scrushy’s earlier fraud prosecution in Birmingham look like an out-of-town tryout for the main attraction. (ph)
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Some random thoughts on the Ryan Verdict:
1. These days, one finds a very supportive public if bringing a corruption case with believable witnesses.The public is not tolerant of public officials who are accused of misusing their office.
2. People who judge these cases are individuals who might not read the newspapers and might not watch TV.
3. What may start as a minor issue can become a nightmare to the accused in a corruption investigation. The Ryan case was initially a license for bribe investigation.
4. Those at the top, like a former or present Governor, have the most to lose when the government is conducting an investigation as they are likely to be last to be offered any deal. Because they are a front-pager, they are the ones who stand the most to lose. See, e.g. Rowland, Edwards
5. White collar cases can be lengthy trials and costly to the public. Is it wise for the government to bring a case with so many counts against Ryan? It resulted in a lengthy trial, a trial more likely to contain error subject to reversal, a trial that proved to be an enormous cost to the jurors and parties to the proceedings. Could the same result be accomplished with fewer charges, less witnesses, and a shorter trial. After all, how many years can a man of 72 years old serve?
6. Sometimes the government is lucky – like here, when the verdict, which includes a tax offense, comes out on the very last day for individuals to file tax returns or extensions.
7. Why is it that the government will comment on some items after a trial and refuse to comment on others? Were there leaks in this case? What happened to merit replacement jurors in this case?
8. Patrick Fitzgerald is a no-nonsense prosecutor and those who might have links to "Scooter" Libby should be getting nervous. He will not let political party affiliation stand in his way.
9. Seventh Circuit prosecutors have never been shy to bring RICO charges in corruption cases. But it was the Supreme Court decision in the McNally case, a case pertaining to intangible rights used in a mail fraud prosecution that destroyed many a Seventh Circuit conviction coming from Operation Greylord. Will the Supreme Court now reexamine the new "honest-services" doctrine in this soon to be Seventh Circuit appellate case?
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MattBray.net 