The RICO corruption trial of former Atlanta Mayor Bill Campbell took a sordid turn when the government called Marion Brooks, who had been a television anchor in Atlanta in the late 1990s, to discuss Campbell’s lavish spending during their secret four-year affair. The government is trying to establish that Campbell took large sums of cash from businesses with city contracts, and Brooks testified about his cash expenditures for various trips they made during the affair. Prosecutors showed photographs of the two from a trip to Paris that the government alleges was paid for in part by a contractor, United Water, that had a $21 million-a-year contract with the city to privatize its water system. In response to the defense contention that Campbell had the cash from his gambling winnings, Brooks testified that Campbell told her he mostly broke even. According to the Atlanta Journal-Constitution (here), the defense did not dispute the fact of the affair and conducted only a limited cross-examination of Brooks. The testimony certainly enlivened what the newspaper described as the "tedious" pace of a trial in which the government is essentially taking a net worth approach usually seen in tax evasion cases to establish its corruption allegations by showing that Campbell spent far more than he is supposed to have made from his job as Mayor. (ph)
Category: Corruption
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Lonoke, Arkansas, a town of 4,300 east of Little Rock, has a bit of a leadership crisis this week. On Feb. 6, the mayor, the police chief and his wife, and two bail bondsmen were arrested for alleged conduct that might seem too outlandish for a Desperate Housewives episode. The mayor is accused of having used state prisoners to do work at his home, while the police chief is charged with conspiring with the bondsmen to manufacture methamphetamine. Meanwhile, the chief and his wife are charged with stealing antique jewelry from a home and pawning it. As if that’s not sordid enough, the chief’s wife is also accused of taking two inmates from the jail to have sex with them in various locations, leading to escape charges. All are well-known in the town, and no doubt the local chatter has been in overdrive. The town’s website (here) states that the police force has twelve officers, and it is served by a 20-member volunteer fire department. An AP story (here) discusses the charges. (ph)
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While the Enron trial has been moving quickly, in the north, Governor Ryan’s case is moving slowly. The latest, as reported by the Chicago Tribune here is the admission of a log that displays a long list of gifts received by Ryan. So it looks like he received some beanie babies as gifts. Were they Maple, or Izzy, or what? Which beanie babies could make a difference. Then again, will the defense be arguing that getting things like beanie babies and teashirts really are just a perk of the job? For prior posts on the Ryan trial, see here, here, here, here, and here.
(esp)
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Many of the white collar laws that are created come from reactions to criminal activity. Clearly Sarbanes-Oxley, as well as increased financial institution fraud fines, demonstrate this reaction. This is not new, as one can even go back as far as the 1872 mail fraud statute that was created as part of a revision of the Postal Act, and was initially targeted to prohibit lottery schemes occurring at this period of time.
Some individuals, perhaps, would not have committed the crimes if the statutes had been in place originally. This usually doesn’t help them much in making a defense as the prosecution usually has ample tools to prosecute the conduct as there are an array of extremely broad statutes like mail and wire fraud. But it is interesting to see new legislation created each time new white collar conduct becomes a "hit" in the media.
The NYTimes reports here on new lobbying laws in Tennessee. And as noted in their article, it is in "response to an undercover F.B.I. bribery investigation that ensnared four lawmakers."
What I always wonder is whether the crimes would have occurred if the legislation were already in place. Perhaps if we approached criminality proactively, as opposed to reactively, we might reduce criminal conduct further.
(esp)
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Former Connecticut state Senator Ernest Newton received a five-year prison term after pleading guilty to bribery, tax evasion, and honest services fraud charges. Former Connecticut Governor John Rowland was sentenced to a year-and-a-day for accepting over $100,000 in gifts, while Newton received a much more substantial sentence based on his guilty plea to accepting a $5,000 bribe — which was not reported on his taxes, not surprisingly — and taking campaign contributions for personal use. Newton’s attorney requested a sentence of home confinement, which in the current political environment was quite unlikely.
Regarding the disparity between the Rowland and Newton sentences, a Hartford Courant article (here) notes that the U.S. Attorney stated the government had sought a longer term for Rowland, and that Newton plead guilty to three charges and Rowland only one, although the number of counts of conviction usually does not affect the prison term that much. The two were sentenced by different judges, and Senior U.S. District Judge Nevas stated in sentencing Newton that his own political experience in the state legislature informed his view of the harm caused by Newton. Still, a former governor receiving a year and a state senator receiving five years for roughly comparable corruption is hard to explain. (ph)
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Robert Stein, who was a contracting officer for the Southern Region of the Coalition Provisional Authority in Iraq, has agreed to plead guilty to charges of fraud and conspiracy related to a scheme to steal upwards of $2 million through contract awards to a businessman identified as Philip Bloom. Stein awarded approximately $8.6 million worth of contracts to Bloom, each less than $500,000 because that was the limit of his authority without further authorization. In an example of the type of stuff no one engaged in a fraud would ever commit to paper, but for some reason is written into an e-mail, Stein wrote to Bloom that "I love to give you money" related to a $200,000 to build a police academy. In response to an e-mail from Bloom regarding using different company names for the contracts, Stein responded, "Since we are paid in cash it really doesn’t matter tax wise." That’s right, if you’re evading taxes, but it surely does matter for a fraud (and tax evasion) case. In addition to Bloom, an AP story reports (here) that five Army reserve officers have also been implicated in the fraud/kickback scheme. Of course, there may have been another tip-off to possible problems involving Stein: he was convicted in 1996 of bank fraud and sentenced to an eight-month term of imprisonment (see earlier post here). (ph)
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The Roger Williams Medical Center in Providence, Rhode Island, entered into a deferred prosecution agreement (document available below) with the U.S. Attorney’s Office to settle corruption charges. The hospital was charged, along with its former CEO and two officers (one of whom worked for a subsidiary), with funneling money to a Rhode Island state Senator to protect its interests by disguising the source and reason for the payments. The state Senator, John Celona, has already entered a guilty plea, and the hospital originally asserted that it was not guilty. Since the indictment in early January, however, pressure has grown to settle the case (see earlier post here), and the hospital terminated the indicted CEO and resumed negotiations with federal prosecutors that resulted in the deferred prosecution agreement.
Under the agreement, the Medical Center admits that its officers engaged in criminal conduct, and agreed to cooperate in the government’s prosecution. The hospital also agreed to provide $4 million in free health care to the poor over and above what it already provides over the next two years. The free health care is the substitute for a fine that a for-profit corporation would be expected to pay as part of a deferred prosecution agreement. Similar to other such agreements, the Medical Center will waive its work product protection and the attorney-client privilege related to the underlying conduct, and appoint an ethics compliance officer to ensure proper procedures are followed. For the hospital, in addition to getting out from under the criminal charges, the Department of Justice also agreed not to recommend that it be debarred from federal health care programs (Medicare and Medicaid) for its conduct. The Medical Center is already the subject of a Corporate Integrity Agreement with the Department of Health and Human Services, and if the current charges had triggered a debarment from the federal health programs, that would likely cause it to shut down. A Providence Journal story (here) discusses the deferred prosecution agreement. (ph — thanks to a Rhode Island reader for passing along the deferred prosecution agreement)
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Roger Williams Medical Center in Providence, Rhode Island, was indicted along with its now former CEO, Robert Urciuoli, and two other officers, on corruption charges related to payments to a former state Senator. The hospital rejected a plea bargain offered before the indictment on Jan. 5, and became the uncommon corporate defendant in a public corruption case. After initially putting Urciuoli on paid administrative leave, the Medical Center’s board fired him "for cause" on Monday, Jan. 16, after a long meeting. With his termination, Urciuoli loses not only his severance pay — which would be equal to 30 months of his salary — but also the payment of his attorney’s fees. Urciuoli’s attorney blasted the hospital, which originally stated that it would fight the charges, stating that the firing was "a regrettable attempt to appease the United States Attorney" and that "[w]e are appalled by the hospital Board’s flip flop on the position it has taken for months on end concerning the legality of Bob Urciuoli’s actions." The board’s move will likely trigger litigation with Urciuoli regarding whether the termination was "for cause" and whether he can recover his attorney’s fees. Regardless of how that turns out, the cost of his defense will be significant and put him under additional pressure.
Rhode Island Governor Gov. Donald Carcieri has been critical of the Medical Center’s board for not negotiating a plea with the federal prosecutors, and this latest turn likely signals that the hospital is trying to work out a deal with the government. As a non-profit, it is likely that any punishment imposed on the Medical Center will not be significant because it could affect its ability to provide medical services to the poor. An article from the Providence Journal (here) discussed Urciuoli’s firing. (ph)
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Just to show that corruption is not limited to the Republican side of the aisle in Congress, Brent Pfeffer, a former legislative assistant to Louisiana Democratic Rep. William Jefferson, pled guilty in the U.S. District Court for the Eastern District of Virginia to bribery and conspiracy charges (criminal information here) related to secret agreements to pay Rep. Jefferson for his assistance in brokering a deal in Nigeria involving a U.S. company. Pfeffer left Rep. Jefferson’s office in 1998, but stayed in touch with the Congressman as he worked as a consultant. In 2004, Pfeffer worked with the president of an investment company who later began secretly cooperating in the government’s investigation. Rep. Jefferson, who is referred to as "Representative A" in the court documents, approached Pfeffer about providing assistance in putting together a deal with the investment company and a Kentucky company which was developing technology to deliver the internet through copper wires that would be sold in Nigeria.
According to the Statement of Facts (here), Rep. Jefferson demanded that a relative’s law firm be used for the deal, that another relative be placed on the payroll of a Nigerian company formed as part of the deal, and that the Congressman receive 5-7% of the value of the transaction for his role in facilitating it. In August 2005, Rep. Jefferson’s home was searched and, according to an AP story (here), agents removed cash that had been stored in a freezer. In addition, the home of Vice President Atiku Abubakar of Nigeria was also search in connection with the investigation of the transaction.
Rep. Jefferson is the second Congressman to be cited anonymously in plea documents recently, the other being Ohio Rep. Bob Ney in connection with the Abramoff investigation. In addition, former Rep. Randy ("Duke") Cunningham resigned his position after pleading guilty to bribery and tax evasion charges. According to the Irish tradition, bad news comes in threes, but the way things are going on Capitol Hill these days, it may come in multiples of three. (ph)
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While some claim there is nothing more vicious than faculty politics, in Hollywood they play for keeps by using some less-than-legal means to gather dirt on one another, something that is no doubt in almost endless supply. The U.S. Attorney’s Office for the Central District of California announced two plea agreements in its long-running investigation of private investigator Anthony Pellicano for using illegal wiretaps and accessing law enforcement data bases to gather information for his clients. The case has now spread to the law firm of well-known entertainment lawyer Bert Fields, Greenberg, Glusker, Fields, Claman, Machtinger & Kinsella, which is linked to the misconduct of former Beverly Hills police officer Craig Stevens. According to a press release (here) issued by the USAO:
Craig Stevens, 45, of Oak Park, appeared in federal court Monday afternoon and pleaded guilty to two counts of wire fraud for depriving the citizens of Beverly Hills of his honest services as a sworn police officer. Stevens also pleaded guilty to four counts of unauthorized access of protected computers to commit fraud. In pleading guilty to the unauthorized access counts, Stevens admitted that he used the Beverly Hills Police Department’s computers to obtain information about four individuals from the Department of Motor Vehicles and sold that information to Pellicano and his employees. Stevens also pleaded guilty to lying to the Federal Bureau of Investigation when he denied that he had ever provided information to, or received payments from, Pellicano, when in fact he had repeatedly sold information to Pellicano.
The second case involves Sandra Carradine, former wife of actor Keith Carradine: " [A] former client of Pellicano, Sandra Will Carradine, a 58-year-old Carpenteria resident, pleaded guilty on Friday to two counts of perjury. Carradine, who hired Pellicano in relation to her divorce proceedings, admitted that during a grand jury appearance in October 2004 she lied when she denied having any knowledge that Pellicano had wiretapped her ex-husband’s phone."
The law firm represented clients in the underlying litigation involved in the Stevens prosecution, and Fields is being represented by well-known white collar defense attorney John Keker, who denies that Fields or his firm had any knowledge of the wrongdoing by Pellicano or the other defendants. Pellicano is currently serving a 30-month sentence in the Taft (Calif.) Correctional Institution (a private prison that houses federal prisoners) after pleading guilty to possession of dangerous materials after a search of his office in 2002 turned up, among other things, the plastic explosive C-4. As the "PI to the Stars" — not to be confused with those helpful maps sold along Sunset Blvd. — Pellicano cultivated an image of knowing the underside of Hollywood. He may be spending more time in an FCI in the near future, and could cause Bert Fields substantial problems in the process. An L.A. Times story (here) discusses the plea agreements and investigation. (ph)
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