DC has its share of outstanding white collar practitioners, but some of the very best of them don't often make it into the news. Why? Because they are quietly busy, around the clock and the globe, protecting the reputations, pocket-books, and other interests of their clients. They do this by conducting internal investigations, defending against government inquiries, creating state of the art compliance programs, and offering sound strategic advice. The whole point is to keep your clients out of the news. Two of the very best of these trusted white collar counselors are former Deputy AG George J. Terwilliger III and my old friend Bob Bittman, who are moving this Thursday from White & Case to Morgan Lewis. Terwilliger and Bittman will be Partners in the White Collar Litigation & Government Investigations Group. George and Bob are moving over with experienced white collar hands (and fomer AUSAs) Dan Levin and Matt Miner. Here is the Morgan Lewis Press Release. Congratulations to George, Bob, Dan, and Matt.
Category: News
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On September 13th Assistant Attorney General Lanny A. Breuer spoke to the New York City Bar extolling the virtues of DOJ's strategy for corporate prosecutions (see here). Former co-blogger Peter Henning here, also authored an article which focuses on the use of deferred prosecution agreements by the government.
One clearly has to credit the government with raising the bar in the corporate world to comply with legal mandates. Corporations throughout the world now have strong compliance programs and conduct internal investigations when questionable activities are reported to them. Likewise, post-Arthur Andersen, LLP, corporations are shy to go to trial – although there are some who have done so successfully (e.g. Lindsey Manufacturing- see here).
When the government first started using deferred and non-prosecution agreements, in a prior administration, there were government practices that were questionable. For example, allowing for huge sums to money to go to a former attorney general as a monitor, giving a chair to a law school that happened to be the same school the US Attorney graduated from, and negotiating for continuing work with the government as part of the agreement. (see Zierdt & Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing–here) Without doubt there were terms within the agreements that needed revision. Some terms that give complete control to prosecutors in deciding who can determine breaches of agreements present problems. But many of the questionable practices are not seen in recent deferred prosecution agreements, and this is good.
Agreements that still provide an imbalance between corporate misbehavior and individual miscoduct is creates an imbalance, but much of this is created by the fact that corporations have greater resources and can control the discussion with DOJ, to the detriment of the individual. Clearly there needs to be a better recognition of corporate constituents during the internal investigations, the subject of a forthcoming article that I author with Professor Bruce Green (Fordham) titled, Unregulated Internal Investigations: Achieving Fairness for Corporate Constituents. But this issue may not be one strictly for DOJ to resolve.
What is particularly impressive about the DOJ use of deferred prosecution agreements today is that it uses an educative model to reform corporate misconduct. One can't put a corporation in prison, so with fines as the best alternative it is important to focus on motivating good conduct. Corporate deferred and non-prosecution agreements are an important step in achieving this positive result. So, it is important to credit today's DOJ with how it is tackling the problem of corporate misbehavior.
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With corporate internal investigations as a multi-million dollar business, it is not surprising to see this new alliance – see here.
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Jane Meinhardt, Tampa Bay Business Jrl, Weinberg awarded for work in prosecuting, defending
DOJ Press Release, Eight Individuals and a Corporation Convicted at Trial in Florida in $50 Million Medicare Fraud
King & Spalding Press Release, Former WellCare Executive
Rejoins King & SpaldingJean Eaglesham & Joe Palazzolo, WSJ, Ex-UBS Traders Offered Deal by U.S. in Rate Probe
Rosa M. Abrantes-Metz & D. Daniel Sokol, Harvard Business Law Review, The Lessons from Libor for Detection and Deterrence of Cartel Wrongdoing
James E. Felman is the recipient of the FBA's Earl W. Kintner Award for Distinguished Service of the Tampa Bay Chapter of the Federal Bar Association
Sue Reisinger, Corporate Counsel, SEC Hands Out First Whistleblower Payment, Hints at More
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Sergey Aleynikov, a former Goldman Sachs programmer whose federal conviction for stealing source code from the firm's computers had been vacated by the Second Circuit on the grounds that the statutes under which he was prosecuted did not cover his conduct, has been charged by Manhattan District Attorney Cyrus Vance with state charges relating to the same activities.
Arguably, the Fifth Amendment double jeopardy clause does not apply here because the United States and the State of New York are separate "sovereignties." That "dual sovereignties" exception to the double jeopardy clause has been occasionally questioned but generally remains in force. One possible exception that may apply here since presumably the D.A.'s case will rely on the federal investigation and prosecution (the federal case agent signed the affidavit supporting the state complaint) is when the two governments are acting in concert.
Although there may be no federal constitutional bar because of the "dual sovereignties," New York statutory law does in some circumstances preclude a state prosecution after a trial for the same or similar offenses in another jurisdiction. See New York Criminal Procedure Law Article 40. Additionally, there is always the possibility that eventually the New York Court of Appeals, which recently has dusted off the New York State Constitution's equivalent of the Bill of Rights (Article 1, Section 6) in Fourth Amendment Cases, may apply the state's constitutional double jeopardy bar more broadly than federal courts have applied the federal constitutional bar.
A New York Times article (see here) about the case quotes Joshua Dressler, an Ohio State University law professor, as saying that this case provides "an exceptionally justifiable reason for the state prosecutor to use a state law to bring a prosecution." I disagree. Mr. Aleynikov has already undergone the trauma and expense and disruption of life that a criminal trial entails. He has already served almost one year in prison for a crime he did not commit. Even if convicted on state charges, I predict he will never serve an additional day in jail.
Thus, in some ways Mr. Aleynikov is a poster boy for application of the double jeopardy clause. This case does not involve a situation in which a dismissal or acquittal in the initial proceeding was tainted by misconduct or was so bizarre that it seems viscerally unjust. Rather, Mr. Aleynikov's case was reversed by a highly-respected court because a highly-respected prosecutorial office charged and convicted him and sent him to prison under statutes that did not apply. This is not the kind of case that justifies a prosecutorial end-run around the Constitution.
The Department of Justice's "Petite Policy" concerning federal prosecutions after state trials, as it has been applied, militates against a second prosecution after an unsuccessful prosecution in another jurisdiction when the first prosecution was generally fair. Apparently, the New York County District Attorney has no such policy.
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AP, Washington Post, Former Ohio county commissioner in federal corruption case gets 28-year prison sentence
Benjamin Weiser, NYTimes, Bronx Councilman Is Convicted of Fraud and Loses Seat
Basil Katz, Reuters, Key cooperator in Galleon insider cases gets probation
Sophia Tareen, Boston.com, Ex-Ill. Gov. Ryan contests corruption convictions
DOJ Press Release, Pfizer H.C.P. Corp. Agrees to Pay $15 Million Penalty to Resolve Foreign Bribery Investigation SEC and Companies Agree to Civil Disgorgement of $45 Million
DOJ Press Release,Gibson Guitar Corp. Agrees to Resolve Investigation into Lacey Act Violations
DOJ Press Release, Former Alabama Governor Don Siegelman Re-Sentenced on Bribery, Conspiracy, Fraud and Obstruction of Justice Charges
Ryan McConnell, Daniel Trujillo, and Katelyn Richardson, Corporate Counsel, Playing Moneyball in the Compliance Department
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Don't overlook the Supreme Court's Alvarez decision today when reading about another important decision issued by the Court today – the one that upholds the Affordable Care Act. The Court's finding the Stolen Valor Act unconstitutional opens up some First Amendment arguments in the criminal sphere.
The test provided by the plurality decision is that "there must be a direct causal link between the restriction imposed and the injury to be prevented."
Justice Kennedy (joined by Roberts, Ginsburg, and Sotomayor) found that the respondent who lied about receiving a Congressional Medal of Honor, in direct contravention of a federal criminal statute – the Stolen Valor Act of 2005 (18 U.S.C. s 704) had a first amendment protection. The decision reminds us that there are certain content-based restrictions that are permitted –
"Among these categories are advocacy intended, and likely, to incite imminent lawless action, obscenity, defamation, speech integral to criminal conduct; so-called 'fighting words'; child pornography; fraud; true threats; and speech presenting some grave and imminent threat the government has the power to prevent" (citations and parentheticals from the decision omitted here)
This opinion states that "[t]hese categories have a historical foundation in the Court’s free speech tradition. The vast realm of free speech and thought always protected in our tradition can still thrive, and even be furthered, by adherence to those categories and rules." But the Court also notes that there is no "general exception to the First Amendment for false statements." And specifically when considering defamation it says "that falsity alone may not suffice to bring the speech outside the First Amendment. The statement must be a knowing or reckless falsehood."
That said, this opinion distinguishes statutes such as the false statement statute (s 1001); perjury (s 1623) and false representing that one is speaking on behalf of the Government (s 912).
Although this opinion stresses the importance of the military medals – as it should, it questions whether the "government's chosen restriction on the speech at issue [is] 'actually necessary ' to achieve its interest."
The key test used here – "There must be a direct causal link between the restriction imposed and the injury to be prevented."
The opinion ends by stating:
The Nation well knows that one of the costs of the First Amendment is that it protects the speech we detest as well as the speech we embrace. Though few might find respondent’s statements anything but contemptible, his right to make those statements is protected by the Constitution’s guarantee of freedom of speech and expression. The Stolen Valor Act infringes upon speech protected by the First Amendment."
Justices Breyer and Kagan offer a concurrence that stresses that there is a less restrictive way to achieve the government's goal. They suggest using "intermediate scrutiny" here in evaluating this case, but also hold that "[t]he Government has provided no convincing explanation as to why a more finely tailored statute would not work."
Dissenting are Justices Alito, Scalia, and Thomas. They note that the statute is limited in several different ways. They argue that "false statements of fact merit no First Amendment protection in their own right" and that it is a narrow law.
Commentary to follow.
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Katherine Frey, Wash Post, Judge who had ‘no passion for punishment’ retires after 31 years (with a hat tip to Donna Elm and Mark O'Brian)
T. Markus Funk, Law360, Exposing Online Service Providers to Criminal Liability
T. Markus Funk, Bloomberg BNA, Marketing Opportunity to Business Imperative: How yesterday's 'Dolphin-Safe' Tuna Became Today's Child, Human Trafficking, and Slave Labor-Free Product
DOJ Press Release, Veteran D.C. Defense Attorney Charles F. Daum and Two Investigators Found Guilty of Obstruction of Justice Charges
DOJ Press Release, Data Systems & Solutions LLC Resolves Foreign Corrupt Practices Act Violations and Agrees to Pay $8.82 Million Criminal Penalty
DOJ Press Release, Former Arizona State Representative Sentenced to 27 Months in Prison for Wire Fraud and Tax Evasion Related to the Misuse of More Than $140,000 in Charity Funds
Joe Nocera, NYTimes, Suspense Is Over in Madoff Case
Dan Strumpf, Chad Bray, Ashby Jones, Fox Business (Dow Jones), Former Executives Agree to Fines in AIG Transaction Case; David Voreacos, Bloomberg-Business Week, Gen Re, AIG Defendants May Win Dismissal of Fraud Cases
Mike Tolson, Houston Chronicle, Clemens' acquittal just latest in string of federal court flops
Associated Press, NYTimes,Two LulzSec Hackers Plead Guilty in Britain (with a hat tip to Ivan Dominguez)
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Peter Lattman & Azam Ahmed, NYTimes, Rajat Gupta Convicted of Insider Trading
Patricia Hurtado & David Glovin, Bloomberg, Ex-Goldman Director Rajat Gupta Convicted of Insider Trading
AP, Ex Goldman Sachs director Rajat Gupta convicted
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MattBray.net 