Two recent articles discuss lawyers who find themselves on the wrong side of the case in federal prosecutions. In Baltimore, Christopher Linas, a former part-time assistant prosecutor, was charged with one count of conspiracy to distribute and possession with intent to distribute cocaine (including crack cocaine) and heroin. An article in Ocean City Today (here) discusses the charges. Brent Wood, an attorney in Raleigh, North Carolina, did not lose his license despite pleading guilty to a misdemeanor failure to file a tax return charge, but he goes on trial in January 2006 on fraud charges related to an alleged ponzi scheme that cost investors approximately $15 million. A Raleigh News & Observer story (here) discusses the charges. It sounds like both lawyers may have gotten caught up with their clients, a dangerous proposition. (ph)
Category: Legal Ethics
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A Los Angeles Times story (here) about the government’s ongoing investigation of possible kickbacks paid by plaintiff securities class action firm Milberg Weiss to lead plaintiffs in class action cases notes that leading partners Melvyn Weiss and David Bershad, along with now-former partner William Lerach, are targets of the investigation. The Times story discusses a 1995 class action, filed right before the PSLRA became effective, that may involve kickbacks to the lead plaintiffs, and that some participants in the case have been granted immunity, reportedly including Alan Schulman, a former Milberg Weiss partner who was lead counsel on the case.
It is not a great surprise that Lerach and Weiss are targets of the investigation because of their leading positions at the firm and heavy involvement in the plaintiffs class action bar. The statute of limitations issue remains a potential roadblock to a successful prosecution, however, because the adoption of the PSLRA in 1995 changed the rules for securities fraud class actions dramatically. The class action case being investigated settled in 1998, and any payments before the end of 2000 would fall outside the limitations period, although a conspiracy charge might be possible if there were overt acts in 2001 or later. The Legal Ethics Forum has an interesting post (here) on the investigation. (ph)
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John Torkelsen worked extensively as an expert witness in class action suits brought by the Milberg Weiss firm, and his recent guilty plea to fraud charges has raised questions whether he will cooperate in the government’s investigation of the firm’s lawyers for making secret payments to named plaintiffs and perhaps others. Torkelsen pled guilty to making a false statement to the Small Business Administration in connection with a loan application, and prosecutors agreed to recommend a 70-month sentence. An article in The Recorder (available on Law.Com here) indicates that there is no specific reference to Torkelsen cooperating in any federal investigations, but that does not necessarily exclude the possibility that he will cooperate in the probe by a Los Angeles grand jury into the conduct of Milberg Weiss and one of its former partners, William Lerach, who split off from the firm in 2004. Torkelsen’s plea hearing before U.S. District Judge Reggie Walton took place right before the arraignment of I. Lewis Libby in the same courtroom.
One indictment has already been returned in the case, naming a former named plaintiff in a number of Milberg Weiss cases who allegedly received undisclosed payments. None of the cases were filed after the mid-1990s, however, when Congress changed the procedures for appointment of the lead plaintiff and primary counsel in federal securities law class actions in the Private Securities Litigation Reform Act. If Torkelsen is cooperating, his contribution will have to come quickly because the statute of limitations is ticking away, unless the government has already obtained an indictment and it has been sealed for some reason. (ph)
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The judge in the Tom DeLay case was removed from the case after a finding that his donations to the Democratic National Committee and other organizations, might not make him the best judge for what is likely to be a case with political issues. (See Dallas Morning News, Houston Chronicle, NYTimes) Dick DeGuerin appeared to make his argument carefully saying that a donation to a political party is not what creates the problem here. It’s that the judge had contributions "that have used Mr. DeLay as a poster boy for raising money and rallying their troops." (Dallas AM News).
So the question is – will they be able to find a judge in Texas, a state with political judges, who will be able to provide a satisfactory level of neutrality that appeases both sides?
(esp)
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When I teach Professional Responsibility, one of the topics I don’t cover is forging the signature of a judge, on the supposition that students know that’s not proper. Despite the obvious stupidity of even thinking about trying such a thing, John Eleazarian, an attorney in Fresno, California, was charged by the U.S. Attorney’s Office for the Eastern District of California with forging the judge’s signature to help a client get back her car that was wrongly repossessed when she was in bankruptcy. According to the USAO press release (here):
ELEAZARIAN was representing a bankruptcy client whose car had been improperly repossessed by the creditor. Despite repeated requests by the debtor to get her car back, the defendant failed to act for over seven months. In response to the repeated requests, the defendant provided the debtor with a forged order, purportedly signed by United States Bankruptcy Judge W. Richard Lee, stating that the creditor had improperly taken the debtor’s vehicle, and that the debtor was entitled to sanctions in the amount of $20,000.
Maybe I should adjust my syllabus next semester to include this topic. (ph)
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According to the NYTimes here, Lynn Stewart, an attorney who was convicted for allegedly aiding a terrorist has been denied a new trial. Her case arises from her representation of Shiekh Omar Abdel Rahman. (see here) The claim for a new trial was premised on problems related to the jury. (see here). For details on Lynn Stewart’s claims, see the Lynn Stewart Defense Committee website at http://www.lynnestewart.org/
In addition to rejecting Lynn Stewart’s motion for a new trial, the NYTimes states that the judge also expressed that the two lawyers representing Stewart "had engaged in legal ‘misconduct’ by meeting with one of the jurors after the trial without notifying him or the prosecutors."
(esp)
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Robert D. McCallum, Jr., Acting Deputy AG, issued a "Memorandum" to "Heads of Department Components and United States Attorneys" concerning the statement in the Thompson Memo that speaks to the waiver of the attorney-client privilege. The Memorandum notes that "[o]ne of the nine factors [listed in the Thompson Memo] is ‘the corporation’s timely and voluntary disclosure or wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of corporate attorney-client and work product protection.’" McCallum’s memo does not find this practice improper, nor does it reject a prosecutor’s asking for the waiver of the attorney-client privilege when dealing with a corporation or business. This new memo merely directs that "consistent with" the practice used by some US Attorneys’ Offices, each individual office should "establish a written waiver review process for [their] district or component."
Ironically, in contrast to the position taken by DOJ with respect to sentencing matters, this memo states that "[s]uch waiver review processes may vary from district to district (or component to component), so that each United States Attorney or component head retains the prosecutorial discretion necessary, consistent with their circumstances, to seek timely, complete, and accurate information from business organizations."
Is this supposed to placate those who have been criticizing the government’s requests for a waiver of attorney-client privilege in dealing with corporations and businesses?
The Memo is here – Download AttorneyClientWaiverMemo.pdf
(esp)
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How do you support yourself when the government has charged you with a crime? That can be a significant issue for defendants in white collar cases who do not have employment agreements with companies that provide for payment of attorney’s fees and maybe even permit the executive to be on paid leave while the charges are pending. The Department of Justice takes a dim view of such arrangements in its Thompson Memo, and for those defendants with no safety net, the need to continue working to pay for the legal defense is paramount. A short item in the New York Times (here) notes that R.J. Ruble, the only non-KPMG partner indicted for sales of abusive tax shelters by the firm (he is alleged to have provided the legal opinions supporting the sales — indictment here), has a tax consulting business. His website, www.rjrtax.com, is a fairly bare-bones affair, with some short tax notes he has written and a little bit of his background. The "Background" page states that Ruble has 30 years experience in tax matters, and that he is "a federal income tax generalist; if there can be such a thing in this day and age." No mention is made of any specific law firm experience or types of transactions on which he worked.
It is an interesting question whether Ruble should reveal his current situation on the website, which is a means of attracting clients, although such sites are usually not all that successful in that regard. Like any advertising material, so long as it is not false and meets the other requirements of the ethical rules, I don’t think he would have to disclose that he has been charged with a crime — that whole presumption of innocence thing. If a client hires him as an attorney, then I think he would have a fiduciary and professional responsibility to explain his current situation, and perhaps that he was terminated from his law firm (Sidley, Austin) for his involvement in tax shelters. A client has a right to know that the attorney may lose his license to practice law if a criminal conviction results from the charges, at least for a period of time and perhaps permanently. That disclosure may have the effect of driving away potential clients, and the publicity from the indictment could have made it impossible for Ruble to serve as a tax adviser because clients fear his name will attract the attention of the IRS, a prospect few wish to court. Regardless of the outcome of the KPMG-related tax cases, it has likely ended the careers of all the individuals charged as tax practitioners. (ph)
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Reported here was the growing support for re-examination of the attorney-client privilege issue and the government requests for waiver. Prior posts showed that a strong coalition was building including the addition of a resolution by the ABA. (see more here).
As seen here, however, the government did not get the message – at least not completely- as the provisions of the KPMG deferred prosecution agreement require a waiver of the privilege in some instances.
But others are hearing the voices loud and clear. Adding to the list of those concerned about government requests for waiving the attorney-client privilege is the US Sentencing Commission. In 70 Federal Registrar No. 167, Aug. 30, 2005, here, the Sentencing Commission lists its upcoming priorities for the year as follows:
(6) Review, and possible amendment, of commentary in Chapter Eight (Organizations) regarding waiver of the attorney-client privilege and work product protections;
With the increased support, perhaps something will change.
(esp) (with thanks to the ABA for bringing this to the blog’s attention)
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The Wall Street Journal reports (here) that a document-management company, Amici LLC, that did work on behalf of Tyco and Qwest Communications is owned in part by members of the family of lawyer David Boies, whose firm (Boies, Schiller & Flexner) is counsel to the companies. The firm resigned earlier this week as special counsel to Adelphia Communications because Boies did not disclose his family’s ownership interest in Amici, which Adelphia used in its bankruptcy to manage the documents needed in various law suits and investigations. Adelphia paid Amici between $5 and $10 million to store and manage documents on behalf of the company.
Boies disclosed that Amici has done work for six to eight other clients of Boies Schiller, and acknowledged that he should have disclosed the connection between his family, including his children, and the company doing business for his clients. To make matters worse, at least from an appearance point of view, is that one of the founders of Amici is William Duker, a lawyer who pled guilty in 1997 for inflating legal bills submitted to the FDIC and Resolution Trust Corp. as part of litigation against Michael Milken for which the lead counsel was — you probably guess it already — David Boies (who was not implicated in Duker’s misconduct).
Paul McGreal on the Corporate Compliance Prof blog has an interesting post (here) noting the different professional rules Boies (and his firm) may have violated in this matter. Another interesting aspect is that Boies testified at the retrial of former Tyco CEO Dennis Kozlowski and CFO Mark Swartz about his conversations with them. The prosecution of Kozlowski and Swartz centered on their inadequate disclosure of the large sums they received as compensation from the company, and the jury convicted them of grand larceny based, at least in small part, on Boies’ testimony. How does a champion of corporate governance and full disclosure (leaving aside his representation of former AIG CEO Maurice Greenberg) miss such an obvious potential conflict of interest when recommending Amici’s services to Tyco? (ph)
UPDATE: Check out this post by Bruce MacEwen on the Adam Smith, Esq. blog (here), who concludes much more eloquently than I:
Simply another example of "What was he thinking?" That, to be sure, but I recount this for another reason. Boies’ choice not to disclose—and anyone of his intellect and rigor made, at some point, that conscious choice—reveals a hubris that those at the top of their game can fall victim to. At the very least, he acted with "vast carelessness," in F. Scott Fitzgerald’s felicitous phrase (referring to the very rich).
(ph)
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