It's not every day that a federal district judge accuses the government of misleading the Court and demands corrective action. But it's happening in the Urbana Division of the Central District of Illinois. I posted here in March regarding the federal case against former Congressman Aaron Schock. Among other items of alleged government misconduct, the defense maintained that prosecutors improperly commented to grand jurors on Schock's failure to testify, in violation of his Fifth Amendment Privilege Against Self-Incrimination. The defense relied in part on an affidavit by a dismissed grand juror. After unequivocally denying the grand juror's allegation, the government clarified the record, more than six months later, admitting that government counsel "commented on or addressed Mr. Schock's testifying or decision not to testify before the grand jury" on eleven occasions. U.S. District Judge Colin Bruce was not amused, and ordered the government to review each of its previous filings "to ensure that no more false or misleading claims were made." Judge Bruce also gave the government 14 days to file a memo "detailing any further misrepresentations or misleading statements." Here is Judge Bruce's Order Requiring Government Memorandum re Misrepresentations. The government responded yesterday, denying that it had misrepresented anything to the Court, asking the Court to reconsider its finding regarding misrepresentation, and representing further that it had not intentionally made any materially misleading statements in its prior filings. Here is the Government's Compliance with the Court's October 3 Order and Motion to Reconsider. Schock, represented by George Terwillliger, Bob Bittman, Benjamin Hatch, Nicholas Lewis, and Christina Egan of McGuire Woods in DC and Chicago and by Jeffrey Lang of Lane & Waterman in Davenport, Iowa, wasted no time, not even a day, in firing back. Here is Schock's Motion to Strike or in the Alternative Leave to File a Response. Here as well is Schock's Proposed Response to Government's Compliance. In a future post, I will examine the nature of the government's comments to the grand jurors.
Category: Investigations
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According to Reuters, Deputy Attorney General Rod Rosenstein said on Thursday that there may be changes to the Yates Memo "in the near future." As discussed at length on this blog (see here, here, here, and here; see also here for an article on the Principles of Prosecution and the Yates Memo), the Yates Memo was released by the DOJ in 2015 in response to criticism that the government had failed to prosecute individuals, particularly on Wall Street, related to the financial crisis of the late 2000s. The Yates Memo responded by focussing federal prosecutors on targeting individuals and requiring that corporations provide significant information on employee conduct to receive credit for cooperating with the government. The Yates Memo states, "[t]o be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct."
According to reports, Rosenstein said, "It is under review, and I anticipate that there may be some changes to the policy on corporate prosecutions." It is unclear how far the review extends or whether possible changes extend beyond the Yates Memo and include revisions to the larger Principles of Federal Prosecution of Business Organizations contained in the U.S.A.M. Whatever changes are made, it is unlikely that the focus on individuals will diminish. Attorney General Sessions has publicly commented on his commitment to holding individuals accountable for corporate misconduct. We will have to wait, therefore, to see whether significant changes or mere reiterations of current policy priorities are on the horizon.
(LED)
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I imagine we will know more about Rod Rosenstein's Memo, and its timing in connection with FBI Director Comey's firing, later this week. Based on the publicly available information, it appears that that when Rosenstein met with the President last Monday he was asked for his views on Saint Jim. Rosenstein no doubt articulated his disapproval of Director Comey's appallingly improper conduct during the 2016 election, a disapproval shared by legions of current and former DOJ prosecutors and FBI Special Agents. He was asked to memorialize his thoughts in a memo, and given a quick turnaround time. If this is how it played out, there was nothing wrong with the President's question, nothing wrong with Rosenstein's answer, nothing wrong with the President's request for a memo, nothing wrong with Rosenstein's decision to obey the request, and nothing wrong with the resulting memo itself. Nothing at all. Comey's conduct, as Rosenstein's Memo makes clear, was a gross deviation from standard DOJ practices, a clear overstepping of authority, and an improper smearing of an American citizen who just happened to be a major political candidate. As devoted readers of this Blog no doubt remember, I detailed Director Comey's myriad shortcomings here just after the election. To make matters worse, Director Comey refused to acknowledge his mistakes and improprieties and continued to publicly justify his shocking behavior in increasingly bizarre fashion. Some have suggested that Rosenstein's Memo "reads like an op-ed" or is "deeply troubling." I expect this kind of nonsense from the political opposition and the resisters, but when I see it from former colleagues of Rosenstein it makes we want to puke. The President is Rosenstein's superior. He asked for Rosenstein's opinion. He asked for Rosenstein to memorialize his thoughts in writing on a fast timetable. Each of these was a reasonable request. Should Rosenstein have refused the request, protesting that he needed more time to prepare a memo? He didn't need more time to detail Comey's indiscretions. Any schoolboy or schoolgirl reasonably competent in Civics could have done so.
The problems arose with what happened next. When Rosenstein learned that the White House was disseminating a false version of events to the effect that Comey's firing was solely the result of Rosenstein's Memo, he is reported to have quickly complained to the White House Counsel that he did not want the facts massaged and would not be comfortable staying in an Administration where this was happening. Translation: "Tell the President's people to quit lying. Stop the phony stories now." And the phony stories stopped. Then the President, in his typical foot-in-mouth way, admitted that Comey's handling of, and public comments about, the Russia investigation played a part in the firing. Think about that for a moment. Because of Rosenstein's status and sterling reputation, a reputation much ballyhooed by the Trumpistas, the President's people were forced to instantly and embarrassingly change their false narrative, and the President stumbled into another unforced error. That would not have been possible if the DAG had been a hack or mere factotum. Of course, Rosenstein could have decided to resign. Instead he demanded the truth and got it. It is a judgment call and I don't blame him at all for making the call he did, two weeks into the job.
Make no mistake, there is going to be a thorough investigation of Russian Collusion, either within Main Justice or by a Special Counsel. There are many good reasons for keeping the investigation in-house, as Rosenstein should know having served (along with me) in an Independent Counsel's Office. There are great inefficiencies and delays involved in setting up and running a Special Counsel operation. In disputes between such an office and an uncooperative Executive Branch, who would you rather see the President opposing? A Special Counsel, who he can demonize, or his own DAG, who he has already praised as a man of impeccable integrity? The scarier President Trump gets, the more I need the people around him to be sound, sane, and steady professionals. I want to see people like McMaster, Mattis, and Rosenstein at their stations.
As a matter of public relations, the President's unforced error will make it more difficult for Rosenstein to resist the calls for a Special Counsel. If President Trump's inappropriate comments about the investigation pile up, more and more citizens will be prone to see any declination by the DAG as a whitewash or a cover-up. So keep talking Mr. President. The more you complain about the Russia Investigation, the likelier you are to get a Special Counsel for all of your efforts. Meanwhile, were I Rosenstein, I would react to every Presidential criticism of the investigation with a renewed determination to leave no stone unturned. Hunker down Rod. Your country needs you.
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As many readers know, I am heavily involved in planning international white collar crime conferences with the American Bar Association Criminal Justice Section. These have become wonderful learning and networking opportunities for those with an interest in the many issues in the field that transcend national boundaries.
I’m excited to announce the next international conference offering will occur on April 5, 2017 in Hong Kong. The event will focus on Global Investigations and Compliance: From Regulatory Trends to Leveraging Innovation and Technology. I expect this conference to be a wonderful compliment to the successful Global White Collar Crime Institute the American Bar Association held in Shanghai in 2015. If you attended the Shanghai event, I hope you will join us again and reconnect with the many colleagues and contacts you established at that earlier conference. If you were not in attendance in Shanghai, I hope you will join us in Hong Kong and be introduced to the growing network of international professionals making these American Bar Association white collar conferences an important part of their network.
Seating is limited for this event, and I hope you will register today to reserve your spot (click here to register). I look forward to seeing many of you in April.
Official ABA Event Description
PwC Hong Kong and the American Bar Association are hosting a full day seminar with four robust panel discussions followed by a networking reception. The panel sessions will focus on a number of pertinent topics, such as exploring regulatory updates, international investigations, navigating cross-jurisdictional issues in Southeast Asia, and the future of blockchain technology in compliance programs. The content for these panels will be delivered by leading experts, including prominent attorneys in the US and Asia, US regulators, consulting professionals, corporate executives, professors, and others. The target attendees for this event are international and Hong Kong/China based legal and corporate professionals focused on white collar crime and compliance.
Topics include:
- Regulatory Update: Recent Trends in Enforcement
- Current State of International Investigations
- Navigating Cross-Jurisdictional Issues in the South Asian Market
- Block-chain Technology: What does it mean for the Future of Compliance Programs?
More information here.
(LED)
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An important issue to watch this year is the ongoing battle over access to data collected by companies and stored overseas. This issue heated up last year when Microsoft won its Second Circuit challenge of a 2013 warrant for emails housed in an Irish data center. In the Second Circuit decision from July 2016, the court determined that U.S. law did not allow the enforcement of warrants for customer email content housed overseas, even though Microsoft is a U.S. service provider.
Last week, the Second Circuit denied rehearing the Ireland case by a divided 4-4 vote. The decision contains a number of interesting arguments from the judges and is worth a read for those involved in cases with international data issues.
The Second Circuit decision now sets the case up for a possible Supreme Court challenge by the government. According to Orin Kerr, writing in the Washington Post, however, Senator Sessions indicated during his confirmation hearings that he might seek a legislative remedy to address the Microsoft issue. Either way, this topic is one to keep an eye on in 2017.
(LED)
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28 CFR § 600.1 Grounds for appointing a Special Counsel.
The Attorney General, or in cases in which the Attorney General is recused, the Acting Attorney General, will appoint a Special Counsel when he or she determines that criminal investigation of a person or matter is warranted and –
(a) That investigation or prosecution of that person or matter by a United States Attorney's Office or litigating Division of the Department of Justice would present a conflict of interest for the Department or other extraordinary circumstances; and
(b) That under the circumstances, it would be in the public interest to appoint an outside Special Counsel to assume responsibility for the matter.
FBI Director James Comey:
- F for failure to resign in protest when Attorney General Lynch kept the email investigation within the confines of DOJ. If there was ever a case justifiying the appointment of a Special Counsel, this was it. You appointed a Special Counsel to investigate the Plame Email leak when you were Acting Attorney General in the Bush Administration. You should have insisted on the same course of conduct here on threat of resignation. You had the standing and reputation to pull it off. You didn't. You blew it, and later apparently tried to make up for it through your inappropriate prejudicial public pronouncements.
- F for letting Attorney General Lynch off the hook and effectively announcing the non-prosecution recommendation. Prosecutive decisions belong to prosecutors, not FBI agents or FBI officials.
- F for publicly smearing Ms. Clinton while announcing that no charges would be brought against her. If you don't indict, you don't smear, unless you are under a statutory duty to file a report.
- F for answering too many questions about the investigation when appearing before the House Judiciary Committee.
- F for releasing confidential FBI investigative reports to the House.
- F for failure to resign in protest given the kid gloves treatment afforded to Ms. Clinton and her aides during the investigation.
- F for your public announcement 11 days before the election.
Attorney General Loretta Lynch:
- F for failure to appoint a Special Counsel.
- F for your tarmac meeting with former President Bill Clinton.
- F for handing over the prosecutive decision to FBI Director Comey. If you needed to recuse, the final call, at that point in time, should have been made by your Deputy AG Sally Yates.
- A for your four line statement announcing the declination. It is the one thing you got right.
President Barack Obama:
- F for failing to insist that AG Lynch appoint a Special Counsel.
- F for your repeated public statements effectively proclaiming Ms. Clinton's innocence. You interfered with a pending investigation and potentially poisoned the jury pool.
DOJ Prosecutors:
- F for handing out use derivative immunity deals like they were candy and reaping no indictments in return.
- F for allowing Cheryl Mills to attend Ms. Clinton's final interview as one of her attorneys.
- F for not recording Ms. Clinton's interview.
These are preliminary grades, subject to revision as more facts are revealed.
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It is common in white collar cases for investigations to span over many years. Being essentially document cases, one sees white collar crime investigations lasting the length of a grand jury or sometimes the span of a few grand juries. It is rare that one sees the investigated party receiving a letter at the end saying that we tried to find something in this investigation against you, but we failed. And having a press conference to announce it, is going even further.
Yet, surprisingly that essentially occurred when FBI Director James Comey investigated Secretary of State Hillary Clinton. As I previously noted, I gave an "A" to Attorney General Loretta Lynch for her 3 1/2 line statement closing the investigation (see here), a contrast to FBI Director James Comey's statement that insinuated wrongdoing while also saying a prosecution was not warranted here because "we cannot find a case that would support bringing criminal charges on these facts." (see here). Case closed.
Now enter the current political climate, a climate that has been contentious, exhausting, and embarrassing to our nation. And on the near eve of the final voting we see the FBI Director re-examining his prior decision and as opposed to keeping his investigation secret, as is typically done, he announces to the world that he is re-examining his case. FBI Director Comey states in a letter updating his prior congressional testimony that the F.B.I. was taking "steps designed to allow investigators to review these emails to determine whether they contain classified information, as well as to assess their importance to our investigation." FBI Director Comey is also saying that he "cannot predict how long this would take. . ." (see NYTimes copy of letter here).
Double jeopardy does not apply here, and an investigation can be re-opened. But why is he telling us this? And why is he stating this just 11 days before the election? The most likely answer is that he had no choice given his prior decision earlier this year to go against the typical process of keeping investigations secret. When evidence is given to the DOJ and then presented to a grand jury, Federal Rule 6(e) of the Federal Rules of Criminal Procedure insures that secrecy.
Now just 11 days before Election Day, we are now seeing the ramifications of FBI Director Comey's initial misstep in commenting on an investigation — how deep those ramifications are won't be known until the final votes are in. If even then.
Checkout Lanny Davis: Comey’s actions improper, irresponsible and possibly illegal
Also Jamie Gorelick and Larry Thompson, James Comey is Damaging Our Democracy
(esp)
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In this second post from the Fifth Annual ABA Criminal Justice Section London White Collar Crime Institute, I will discuss some of the lessons learned and issues discussed during this morning’s panel on international internal investigations.
The panel emphasized that one of the first issues for consideration after the discovery of potential misconduct by a corporate employee is disclosure obligations. One of the issues discussed in this context was the tension the exists when a corporation wants time to develop the facts, but mandatory disclosure requirements restrict the time frame during which this can occur. This is an issue made even more complex in the international context, where the disclosure obligations might vary significantly from one jurisdiction to another. Further, along with mandatory disclosure obligations, there are permissive disclosure considerations. One of the most important, of course, is the decision whether and when to disclosure the issues discovered to the government in an effort to demonstrate cooperation and voluntary disclosure.
The panel also considered the importance of seeking to preserve evidence immediately. As readers know, failure to protect evidence from destruction can both jeopardize the ability of counsel to conduct an effective internal investigation and, potentially, lead to charges of obstruction of justice.
Part of the hypothetical discussed during the panel involved a number of emails being collected by private counsel as part of the internal investigation. These emails came from various parts of the world, including Hong Kong and Amsterdam. While counsel in the U.S. are comfortable with collecting emails and other corporate documents during an investigation without significant impediment, data privacy laws in other countries introduce a number of complexities. In the European Union, for example, there are many restrictions on the transfer of data out of the country. One related issue explored by the panel was whether U.S. prosecutors understand or appreciate the significance of these data privacy obligations. Based on discussions both today and yesterday at the conference, it appears that one of the reasons tension exists in this area is because of the different approaches to these data privacy obligations taken by corporations during pending investigations.
The panel then discussed issues associated with employee interviews during an internal investigation. Here, the panel examined the ways that local employment, criminal, and civil laws can impact the ability of counsel to conduct such interviews. Once again, while few restrictions exist in the United States, a host of restrictions and requirements related to interacting with employees in this way may apply abroad. Can the interview be recorded? Can the employee’s statements be disclosed to the government? Does the employee need to be given notice or provided with representation prior to the interview? What types of disclosures need to be made to the employee before the interview begins? Are interview notes privileged? How do the answers to these questions impact an internal investigator’s strategy? As these questions illustrate, each step of the investigation on the international stage posses various pitfalls and perils.
As part of this panel, we also heard an interesting discussion of the economics of profit and loss calculations in a bribery case. The presentation reminded us of the complexities of profit and loss calculations and the significant impact these calculations might have on the outcome of the case. It also reminded us of the importance of retaining the right experts in any case, particularly one that crosses borders.
The panel as a whole served as a nice reminder of the importance of considering local laws and rules when engaging in a cross-border investigation.
(LED)
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In white collar cases, prosecutors often stress the signs or "indicia" of fraud inherent in a given defendant's conduct. In the FBI/DOJ investigation of Secretary Clinton we have several signs of incompetence and/or highly irregular conduct on the part of those in charge. The one that stands out most clearly to anyone who practices white collar criminal defense was the decision to allow Cheryl Mills to attend Secretary Clinton's FBI interview. Competent prosecutors do not allow a key witness to participate as an attorney in an FBI interview of the main subject. It just isn't done. It isn't a close question. It is Baby Prosecution 101. Director Comey's attempt to justify this decision during yesterday's House Judiciary Committee Oversight Hearing was disingenuous and disgraceful. According to Comey, the FBI has no power to control which attorney the subject of an investigation chooses to represent her during an interview. This is literally true, but irrelevant and misleading. Prosecutors, not FBI agents, run investigations. Any competent prosecutor faced with the prospect of Ms. Mills's attendance at Secretary Clinton's interview would have informed Clinton's attorneys that this was obviously unacceptable and that, if Clinton insisted on Mills's attendance, the interview would be conducted under the auspices of the federal grand jury. At the grand jury, Secretary Clinton would not have enjoyed the right to her attorney's presence in the grand jury room during questioning. In the event Clinton brought Ms. Mills along to stand outside the grand jury room for purposes of consultation, competent prosecutors would have gone to the federal judge supervising the grand jury and attempted to disqualify Ms. Mills. In all likelihood, such an attempt would have been successful. But of course, it never would have gotten that far, because Secretary Clinton will do anything to avoid a grand jury appearance. So, Director Comey's response was a classic dodge, one of several that he perpetrated during yesterday's hearing. As noted above, the decision to allow Ms. Mills to attend Secretary Clinton's FBI interview was only the clearest example to date of irregular procedures sanctioned by the prosecutors in charge of the Clinton email investigation. More to come on that in a subsequent post.
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The case against Reddy Annappareddy is over. The Government's case has been dismissed with prejudice by U.S. District Court Judge George Russell because of a pattern of government misconduct that shocks the conscience. As soon as I obtain a copy of today's hearing transcript we will post it. Congratulations are in order for Mr. Annappareddy and his Womble Carlyle defense team of Mark Schamel and Josh Greenberg. Greenberg's relentless motions work over the past 11 months has been particularly brilliant. Anybody who does white collar work in the federal courts knows how difficult it is to obtain a result like this, post-trial. This is a magnificent victory.
MattBray.net 