A Kenosha, Wisconsin, businessman who worked for a trucking company entered a guilty plea to charges that he used a $250,000 fund for illegal campaign contributions by reimbursing individuals for making the donations to campaigns. Over twenty state and federal candidates from both parties received the money, and it was directed to candidates who supported Indian gaming and changes to the trucking laws that would favor the defendant’s employer. A Milwaukee Journal-Sentinel story (here) and U.S. Attorney’s Office release (here) discuss the guilty plea. (ph)
Category: Prosecutions
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What looked like a potentially unprecedented prosecution of corporate directors for not stopping the company’s illegal overseas payments after it disclosed the conduct to the Department of Justice ended with a decision not to pursue charges against any individuals. Chiquita Brands International, Inc. had been paying a Columbian paramilitary group protection money for a number of years to ensure the smooth operation of its subsidiary in the country, even after the delcaration that the organization was a global terrorist. After Chiquita reported the payments — and its improper accounting for them under the FCPA — to the Department of Justice, there was concern on the board that it could not simply stop paying the money without risking the safety of its employees, so for nearly a year it continued the transfers. While the company was allowed to plead guilty to one count of engaging in transactions with a specially-desiganted global terrorist, the district court refused to sentence Chiquita until the Department of Justice decided whether it would charge any of the directors who allowed the payments to continue after the initial disclosure. While there was "serious consideration" given to filing charges, according to the government’s sentencing memorandum (available below), "In the exercise of its prosecutorial discretion, the United States has decided not to do so." The government and Chiquita agreed to a $25 million fine and five years probation for the violation, and no individuals will be charged in the case. Sentencing is scheduled for September 17. (ph)
Download us_v_chiquita_brands_government_sentencing_memorandum_sept_11_2007.pdf
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When Richard Scrushy was indicted in 2005 on corruption charges, he was just coming off an acquittal on conspiracy and securities fraud charges related to accounting fraud at HealthSouth when he was CEO. Many viewed Scrushy as the primary player in the case, which also included former Alabama Governor Don Siegelman and two of his aides. It now seems that Scrushy was just along for the ride, and Siegelman was the primary focus of the government’s investigation that is being viewed quite differently now that allegations of political motivations have surfaced. According to an affidavit (here), the White House, in the person of Karl Rove, targeted Siegelman, and the case would be handled by two U.S. Attorney’s in Alabama, described as the "girls" in the affidavit that sets out purported conversations about Siegelman after he narrowly lost re-election in 2002. Unfortunately, the affidavit recounts hearsay on hearsay, and the other participants deny the conversations ever took play. The allegations may not be much of a basis to attack Siegelman’s convictions on corruption charges related to $500,000 of payments made by Scrushy. Even if politics tainted the investigation and prosecution of Siegelman, it’s not clear what effect that would have on Scrushy’s conviction because he does not appear to have been the direct target of the investigation, but only more of a bit player.
Not that Scrushy has receded completely into the background. He is currently in the FCI in Beaumont, Texas, after receiving an 82-month prison term. He has filed for bail pending his appeal of the convictions, and a brief filed by the government on September 10 (available below) argues that he is a flight risk, citing his excursion from Orlando to South Florida while he was awaiting sentencing as a factor in denying bail. With Congress looking into the decision to prosecute Siegelman — a letter (here) from House Judiciary Committee Chairman John Conyers to the Department of Justice decries its refusal to turn over documents related to the Siegelman case and two other prosecutions — and the Eleventh Circuit considering the bail motion and the appeal, the case will not end any time soon. (ph)
Download us_v_scrushy_bond_on_appeal_goverment_brief_sept_10_2007.pdf
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Adam Nossiter of the NYTimes has a fascinating article that tells of forthcoming scrutiny of the prosecutor’s decision to proceed on the case of former Governor Don Siegelman. The article raises interesting questions concerning prosecutorial discretion, and it looks like Karl Rove may have some questions to answer.
Prosecutors clearly have enormous prosecutorial discretion in their charging process. The discretion often becomes heightened by the fact that many federal statutes have enormous breadth. This provides more power to the decisionmaker in his or her determination of whether to charge a crime. With recent DOJ happenings and political appointments and dismissals, it is clearly necessary to scrutinize high-level decisions that might have improperly been influenced by the political system.
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Louisiana Representative William Jefferson filed a number of motions challenging the corruption charges filed against him in the Eastern District of Virginia in June 2007. The fifteen motions include requests to dismiss the counts, to suppress evidence, to change the venue in the case to Washington D.C., discovery requests, and to strike surplusage from the indictment. The venue motion, available below, seeks to dismiss certain counts, including the RICO charge, because venue is improper in Virginia, and to change venue for the remaining counts to the District of Columbia on equal protection grounds because of the racial makeup of the Eastern District. The motion states: "The government’s purposeful actions in creating and seeking venue in Virginia raise equal protection concerns similar to those addressed by the Supreme Court in Batson v. Kentucky, 476 U.S. 79 (1986). Just as prosecutors may not employ their peremptory challenges to exclude members of the defendant’s race from the jury, they should not be permitted to exercise their discretion to select the forum to accomplish the same result." Representative Jefferson has also requested discovery on the government’s venue decision and an evidentiary hearing on the issue. Discovery of the government’s decision-making process is difficult to obtain, and the claim of an equal protection violation in the selection of the venue may well be one of first impression.
The investigation of Representative Jefferson involved search warrants, which are uncommon but certainly not unknown in white collar cases, particularly public corruption cases lately involving federal elected officials, such as a Representative from California and Senator from Alaska. The claim regarding the search of the home in Louisiana presents an interesting issue: Can the government make digital photographs of documents that it finds in the search but cannot seize because they are outside the scope of the warrant? (Motion available below) A warrant that allows the seizure of documents would authorize a review of the contents of records found at the location identified, but once the document is determined to fall outside the warrant it’s not clear whether the government can make a record of its contents and use that in its investigation. The items were not illegally seized, at least in a physical sense, because the agents could examine them at the house, and plain view allows at least a cursory review. But photographing them in a way that effectively allows the government to gain the benefit of obtaining a copy of the contents even if the piece of paper remains at the house certainly sounds like a seizure. New technology again confronts the limits of the Fourth Amendment’s protections. The Fourth Amendment challenge does not inlcude the search of Representative Jefferson’s Virginia home, where $90,000 was found in a freezer — perhaps the key physical evidence in the case.
A third motion, also available below, concerns suppression of statements Representative Jefferson made to FBI agents during the search of his Louisiana home. While Miranda rarely comes up in white collar cases, questioning during the execution of a search warrant can trigger an issue about whether it was a custodial interrogation or a voluntary interview. The questioning took place in his home, which makes it less likely he was in custody, but Representative Jefferson alleges that he did not feel free to leave the presence of the agents, and they accompanied him to the bathroom at one point, requiring him to leave the door open. Whether the facts are sufficient to constitute "custody" to trigger the right to receive Miranda warnings remains to be seen. (ph)
Download us_v_jefferson_venue_motion_sept_7_2007.pdf
Download us_v_jefferson_suppress_evidence_motion_sept_7_2007.pdf
Download us_v_jefferson_suppress_statements_motion_sept_7_2007.pdf
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Shades of Abscam, albeit on the much more local scale. The U.S. Attorney’s Office for the District of New Jersey announced that ten elected officials and the chief of staff to the president of the Newark City Council were arrested for taking bribes from an insurance brokerage company that was an FBI front. According to the press release (here), the elected officials are "five members of the same local Atlantic County school board, two state Assemblymen from Passaic and Essex Counties, the mayor of Passaic and one current and one former Passaic city council member . . . ." Considering the disastrous consequences of being accused of accepting bribes, the amounts involved are fairly small, from $1,500 to $17,500, hardly enough to risk one’s entire career. According to the federal prosecutors:
Pleasantville School Board members allegedly took thousands of dollars in bribes from the cooperating witnesses. The circle of corruption widened when certain Pleasantville school board members referred the cooperating witnesses to public officials in northern New Jersey who also took bribes and, in turn, put the cooperating witnesses in touch with still other corrupt public officials, according to the Complaints. The investigation included hundreds of tape-recorded and/or videotaped encounters, during which the officials charged in the complaints openly expressed their desire to enrich themselves using their public positions and influence. The defendants accepted corrupt payments ranging from $1,500 to $17,500 at any one time. In most cases, the defendants sought to establish and perpetuate a corrupt relationship with the cooperating witnesses to continue receiving bribes.
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A former vice president at Morgan Stanley and her husband, a former analyst at a hedge fund, pleaded guilty to conspiracy and insider trading charges. The defendants had been charged earlier this year with making over $600,000 on trading in three companies based on tips from the wife to the husband, who bought the securities through an account in the name of her mother. The defendants agreed not to appeal a sentence between 30 and 36 months, which means they will each be serving a substantial term of imprisonment. A story on CNN.com (here) discusses the guilty pleas. (ph)
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Oscar Wyatt’s trial starts today. The indictment against the 83 year old businessman comes out of an investigation of the U.N. oil-for-food program. Wyatt faces charges claiming that he paid kickbacks to individuals in "Saddam Hussein’s regime to win contracts under the United Nations’ oil-for-food program." (See Houston Chronicle here and here) For background on this case and other matters related to the oil-for-food program see here, here, and here. Tom Kirkendall at Houston Clearthinkers has a copy of the Indictment here and some background here.
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The Wall St.Jr. reports on the financial problems faced by US Attorney offices as a result of scarce resources. In discussing some of the staffing problems the article points out that more than 100 individuals in these offices have gone to Iraq to help out the government there. The article also reports on white collar crime statistics but one has to wonder how they defined this term and what was included. Was it a DOJ definition that includes government corruption, environmental offenses, and OSHA related crimes? Or was it limited to fraud? (see here)
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According to an article by Dan Eggen and Paul Kane of the Washington Post, Inspector General Glenn Fine is investigating Alberto Gonzales as to whether he "gave false or misleading testimony to Congress, including whether he lied under oath about warrantless surveillance and the firings of nine U.S. attorneys." Although it is important to see if wrongdoing occurred here, it is unfortunate that this investigation has been slow.
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MattBray.net 