For the first — and most likely the last — time, this blog has an item related to the Michael Jackson trial. The mother of the teenager who accused Jackson of molesting him asserted her Fifth Amendment privilege and refused to answer questions about an alleged welfare fraud. Judge Melville permitted her to testify anyway, rejecting defense objections that the her acceptance of welfare payments that she was not entitled to receive goes to her credibility, on the ground that other evidence can be used to impeach her credibility. That ruling seems to be a bit unusual because the alleged welfare fraud goes to her truthfulness, but then little about the trial and its surrounding circumstances comes across as normal. An AP story here discusses the ruling and the mother’s testimony. (ph)
Category: Prosecutions
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No one is above the law? That sounds like what the government is trying to say in its latest indictment, an indictment against "a Special Agent and Chief Division Counsel for the Charlotte Division of the Federal Bureau of Investigation (FBI)." "[A] federal grand jury sitting in the Western District of North Carolina in Charlotte, North Carolina, returned a one-count indictment charging" this agent "with making a false statement," a 1001 violation. According to a government press release here, the indictment alleged that the accused:
"accepted benefits worth thousands of dollars from [ ], a former cooperating witness for the FBI under [the accused’s] supervision. According to the indictment, the FBI squad that [the accused] was then charged with supervising was conducting a preliminary investigation of bank fraud and money laundering allegations against [the cooperating witness]. The indictment alleges that specifically, in April and August 2000, [the accused] traveled to Las Vegas, Nevada with [this witness], at [the witness’] invitation. [The witness] was responsible for all of the expenses associated with [accused’s] trips to Las Vegas, and [the accused] allegedly did not pay [the witness] for those costs. [The accused] was required by the Ethics in Government Act to report his receipt of those benefits on an Executive Branch Confidential Financial Disclosure Report. "
According to the press release, the accused is alleged to have failed to properly report the gift and travel expenses on the report and therefore violated section 1001 of title 18.
(esp)
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Yesterday fifteen specialists were indicted. (here) The SEC also "instituted administrative and cease-and-desist proceedings against 20 former New York Stock Exchange specialists for fraudulent and other improper trading practices." (here)
Interestingly the alleged improper trades were to enrich their firms. And also of interest is that most are no longer with the firms. Many of the individuals indicted are middle-level career people (they range in ages from 36-57). The government will probably try to show profits to these individuals premised on increased bonuses or perks they received from the companies they were employed with. (see more here and here)
But why so many? Yes, the question is why are so many facing these charges? Was this just a way of practice in the industry that the government is finally enforcing? Was the firm pressure to perform so intense that these individuals were forced to engage in this conduct? If it were 1 or 2 individuals being indicted it is easy to call it rogue employees not following the firm directives. But when you have so many engaged in this alleged misconduct, one has to wonder the sociological environment surrounding this alleged conduct.
(esp)
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David Kelley, United States Attorney for the Southern District of New York, announced today nine indictments against 15 different specialists who worked for five different firms. The Wall Street Journal has a video of Kelley explaining the indictments (including a chart and description of the acts involved) here. More later, for now, here are the stories in CNN, NYTImes, and Jurist.
(esp)
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The corruption prosecution of former Philadelphia City Treasurer Corey Kemp, two Commerce Bank executives, and two other defendants ended suddenly on Monday when each defendant rested without calling any witnesses. Defense counsel argued that the government failed to turn over exculpatory (Brady) reports in a timely fashion, a point one prosecutor conceded. Amazingly, Assistant U.S. Attorney Robert Zauzmer said in court, "Mistakes were made . . . I apologize for it." The defense strategy would appear to be to emphasize the prejudice from that failure if the jury convicts on any of the counts rather than mount a defense and open up the harmless error avenue for upholding the verdict. Indeed, the government is already describing the undisclosed exculpatory evidence as "six little items out of a sea of evidence." (See Philadelphia Inquirer story here). The defendants may also have determined that the government’s case is so weak that the risk of conviction is not great, and therefore the Brady argument, if needed, will be easier to establish. Reports are that the government’s case has not gone well, with strong wiretap evidence against Ronald White — who died after being indicted — and not much direct evidence against the other defendants. It looks to be a conspiracy with the hub missing, so the empty chair (or "blame the dead guy") defense works in the defendants’ favor. Moreover, by maintaining a unified front, the defendants do not have to worry about pointing fingers at one another. Closing arguments are set to begin Thursday. (ph)
UPDATE (4/6): An interested observer of the trial sent the following information regarding my statement that there is not much direct evidence connecting the defendants to the corruption. With permission, I pass along the following useful observations about the government’s case:
There has been evidence of improper or questionable benefits going to Corey Kemp; however, the evidence also showed (a) Kemp did not have the power to give anyone bond deals; the most he could do was put people on a recommended list, and the recommendations then had to approved by (and were often changed by) his boss (Janice Davis, city finance director), her boss (George Burrell), and ultimately Mayor Street; (b) Street made it clear to Janice Davis and others than people recommended by Ron White should be favored; (c) it is therefore questionable that the benefits to Kemp deprived the city of Kemp’s honest services, because he presumably would have followed Street’s directions and favored White’s people even if he had not received those benefits. I agree that there is not much direct evidence of criminal conduct by the other defendants.
(ph)
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When the grand jury indicted Ken Lay, Jeff Skilling, and Richard Causey last year in connection with the collapse of Enron, it also included separate charges against Lay for bank fraud and making false statements to banks related to personal lines of credit he obtained from the banks (indictment here). In February, U.S. District Judge Sim Lake severed the bank charges because they are unrelated to the conspiracy and securities fraud charges involving the other two defendants. Now, the prosecutors are seeking a quick trial on the bank charges, asking the judge to order a trial on them to begin in May or June. Lay had asked for a separate trial after the larger conspiracy trial, set to begin in January 2006. To bolster its position, prosecutors have reprised Lay’s requests, at the time of the indictment, that the trial begin as soon as possible. For example, a transcript of a statement (here) by Lay given the day after the indictment states, "Although my lawyers and I believe I should not have been indicted, now that I have been, I have instructed my legal team that I want a speedy trial and I hope it will begin by early September this year. Not only are we ready to go to trial but we are anxious to prove my innocence." (See Lay’s website at www.kenlayinfo.com for additional information).
Lay’s attorney, Mike Ramsey, has not taken a position yet on the government’s request, and I suspect he will oppose the motion; a conviction would enhance the negative perception of Lay. Moreoever, it would be hard to call Lay as a witness in the conspiracy trial to advance his "honest-but-ignorant CEO" defense if he’s been convicted of fraud and false statement charges. The benefit to the government of a quick trial is that if Lay is convicted, it will increase significantly the pressure on him to cooperate on the conspiracy charges. The bank fraud charge carries a 30-year maximum sentence — a legacy of the S&L collapses of the early 1990s — and even though the actual sentence would be much less, there is a good chance he would be sent to jail prior to the start of the main event, which would also hinder his trial preparation. The government’s downside is not all that significant, in that the bank charges are more of a sideshow, and a not guilty verdict will not cause that much damage to the larger conspiracy case. A Houston Chronicle story (here) discusses the government’s motion for a prompt trial date. (ph)
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A recent Sixth Circuit decision in United States v. Madden (here) discusses a federal prosecution for vote-buying, in violation of 42 U.S.C. Sec. 1973(c)(i) (here). The defendant paid three people to vote for a candidate in a local primary election, and in that same election there were candidates for federal office on the ballot. The defendant did not pay the people to vote for (or against) anyone running for federal office. The vote-buying/false registration provision has an important limitation on federal jurisdiction:
Provided, however, That this provision shall be applicable only to general, special, or primary elections held solely or in part for the purpose of selecting or electing any candidate for the office of President, Vice President, presidential elector, Member of the United States Senate, Member of the United States House of Representatives, Delegate from the District of Columbia, Guam, or the Virgin Islands, or Resident Commissioner of the Commonwealth of Puerto Rico.
Unfortunately for Madden, his plea agreement waived any right to appeal his plea or sentence, and his after-the-fact motion to vacate the plea by challenging the federal prosecution of this crime could not be heard because the Sixth Circuit did not have jurisdiction over the case.
Despite his counsel’s apparent failure to challenge federal jurisdiction, which could have been done by entering a conditional plea, the case raises an interesting federalism issue regarding the power of the federal government to prosecute conduct that does not involve the election of a federal official. While the Supreme Court has been quite forgiving in its approach to federal jurisdiction in corruption cases (e.g. Sabri), elections may be different, although I am out of my league on the constitutional issues related to elections. I think a decent argument can be made that the jurisdictional provision limiting prosecutions to elections "for the purpose" of electing federal officials would only cover payments (or other acts specified in the statute) related to those offices. The counter-argument would be that, similar to the federal funds requirement for Section 666 prosecutions or use of the mails for Sec. 1341 cases, the presence of the federal office is a "hook" for jurisdiction, and any corruption in connection with the election — even if it only relates directly to a local election — will have some effect on the federal election, and therefore the federal government has an interest in protecting the integrity of elections involving federal officials. (ph)
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It was another prosecution witness yesterday in the trial of Dennis Kozlowski and Mark Swartz. This time it’s the outside auditor who is refuting evidence that was brought out in the prior trial. It sounds like the defense may have some questions to ask when it comes time for cross examination. For example, if the bonuses were in some way improper then why wasn’t the board told about it as part of the outside audit? Stay tuned. See more in the Wall Street Jrl. here.
(esp)
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As Tyco’s former chief executive’s trial continues, one can only imagine the increasing attorney fee bill. At least one headache is off of Dennis Kozlowski’s mind, although perhaps not permanently, in that a New York Supreme Court Appellate Court ruled 5-0 that an insurance company had to foot the attorney fee bill. Reimbursement may be possible down the road for "the legal costs of defending noncovered claims." For more, check out the Wall Street Jrl’s article here. And for more details on the continuing trial, see here.
(esp)
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When a judge says, "NO," it may be wise the listen. Going to another country and doing the same thing you were doing before, and the same thing a judge told you not to do, may make matters worse. It sounds simple, but sometimes is isn’t. At least not for the individual who "pleaded guilty [yesterday] to conspiracy to commit securities fraud, two counts of securities fraud, obstruction of justice and one count of money laundering." The case here involves a $250 million Ponzi scheme. (see LATimes for more)
A press release of the US Attorney’s Office for the Central District of California reports that:
"In 2002, the United States Securities and Exchange Commission filed a civil lawsuit alleging that Wallenbrock was part of an illegal securities fraud. The SEC obtained a preliminary injunction that barred Osaki and others from running the companies. A federal judge in Los Angeles also appointed a receiver to oversee Wallenbrock. In 2003, the injunction became permanent. However, contrary to the injunction issued by the federal court, Osaki, with the help of co-conspirators, relocated operations to Canada, Belize and elsewhere. With the help of his co-conspirators, Osaki formed a new company off-shore, Village Capital Trust, that offered the same bogus accounts receivable investments as Wallenbrock, and it continued to operate as a Ponzi scheme."
So far three people have plead guilty in activities related to this Ponzi scheme and a 4th is awaiting extradition to the United States.
(esp)
MattBray.net 