Category: Prosecutions

Seymour Lazar Asks, “Did Anybody Get Screwed?”

January 19th, 2006

Seymour Lazar is a lawyer in Southern California indicted last year (along with another lawyer) for allegedly taking secret payments from prominent plaintiff class action firm Milberg Weiss to serve as the representative plaintiff in various securities fraud and consumer cases. A front-page article in the Wall Street Journal (here) includes an interview of Lazar in which he discusses his case, a step that is usually a risky proposition but one we’ve seen lately in white collar crime cases (see post here). Lazar disputes doing anything wrong, although he does not deny receiving the payments. He calls them "referral fees" and notes that lawyers pay them all the time in cases. Lazar asks, "Did I hurt anybody? Who did I cheat? Did anybody get screwed?"

The problem for Lazar is that the standard is not simply did he "cheat" or "screw" anybody. The representative plaintiff in a class action usually has to certify that he/she is not receiving anything more than other class members will receive, and class representatives have been disqualified for being affiliated with counsel for the class without any direct payment or other remuneration. To take a payment from the lead attorney is more than just the appearance of a conflict, it is a violation of the fiduciary obligation of the representative. The question for the fiduciary is not whether anyone was "screwed" but whether the representative plaintiff fulfilled the duties of being the named party in the action charged with the responsibility of acting to protect the interests of the class. Lazar’s interview may be an effort to generate sympathy, and it succeeds by noting that at 78 years old, he recently had a triple bypass and is receiving treatment for cancer. And he certainly is a colorful character, having played a minor role in the Melvin Dummar/Howard Hughes will contest in the 1970s. Whether his standard for what is proper for a class representative will fly is another question. (ph)
‘Tis the Season for Embezzlement

January 18th, 2006

Earlier posts (here and here) discussed recent embezzlement prosecutions in Washington, D.C., and Maryland involving large amounts of money transferred by the defendants to fund rather lavish personal spending. Another case in the District of Columbia seems to be the topper, at least for the victim missing a rather obvious sign that trouble could be looming. Anna Anderson entered a guilty plea to wire fraud charges related to embezzling almost $900,000 from a lobbying firm. Anderson wired funds from the firm’s bank account into an account she opened at a Virginia bank, and then moved some of the money into her fiance’s account. A press release (here) issued by the U.S. Attorney’s Office details Anderson’s accounting of how she spent the money:

[Anderson] acknowledged wrongfully taking between $500,000 and $600,000 from Global. She estimated that she had spent the money over in the following manner on goods and services for her own use: $40,000 on travel; $20,000 on clothes; $10,000 on purses; $10,000 on a Christmas party; $30,000 on decorations; $20,000 on down payments on cars; $5,000 on a sprinkler system; $6,000 on a gutter system; $9,000 on landscaping; $10,000 on a deck; $15,000 on general bills; $50,000 on past due bills and collections; $80,000 on jewelry; $18,000 on divorce proceedings; $22,000 on daycare; $130,000 on an upcoming wedding; $30,000 on an engagement party; $6,000 on a play set; $30,000 on furniture; and $8,000 on an intercom system.

During this same period, the defendant and her fiancé made the following specific purchases, among others, using the illegally obtained funds: (1) a 2002 Mercedes Benz S430, for $40,466.61; (2) a Suzuki Hayabusa motorcycle and accessories for approximately $25,000; (3) a 1995 BMW 740, with approximately $14,800 being paid on the vehicle; and (4) a 2.01 carat diamond engagement ring set in platinum, with an appraised value of $33,296.55.

What makes this different from the other embezzlements? To start with, Anderson was convicted in Virginia just one year before she started working for the firm in 2004 for — you guessed it — embezzlement. She was placed on six years probation for that offense, and of course was still on probation when the lobbying firm hired her as its bookkeeper. I wonder who was responsible for checking her background before putting her into a position in which she was able to siphon hundreds of thousands of dollars without anyone noticing that nice Mercedes or 2 carat diamond engagement ring. At least her taste is better than the defendant who used the embezzled money to buy a mink jacket with fox trim. (ph)
Grand Jury Abuse by Prosecutors

January 15th, 2006

Grand Jury Abuse has been the subject of much concern. (See Commission Report to Reform the Grand Jury Process here). So it is not surprising to see this issue arising in the white collar case against Lynchburg Mayor Carl Hutcherson, who faces charges of "mail fraud, Social Security fraud, lying to federal officials and obstruction of justice." Conor Reilly of the News Advance has a wonderful article here detailing the allegations of grand jury abuse being alleged in this particular case. The article quotes Professor Darryl Brown at Washington & Lee on the incredible prosecutorial discretion provided to prosecutors in presenting items in a grand jury. Every time I teach the case of United States v. Williams, 504 U.S. 36 (1992) I am reminded of the incredible unchecked power that prosecutors have in the grand jury process. It is important to stress to students that even though abuses in the grand jury may be overlooked on review, it does not mean that they should be tolerated. One would hope that the Office of Professional Responsibility of the Attorney General would monitor the abuses that occur.

(esp) (hat tip to Jack King at NACDL)
Former Mayor Bill Campbell’s Trial Starts Tuesday

January 14th, 2006

The trial of former Mayor Bill Campbell starts this Tuesday with jury selection. Charges against him include racketeering. (see post)

Attorney Jerry Froelich, one of Campbells’ counsel, spoke this past Saturday at a conference of the Georgia Association of Criminal Defense Lawyers (GACDL) Conference on the topic of "Preparing for a Federal Criminal Trial." Although Froelich, a well respected Atlanta criminal defense attorney and member of the American Board of Criminal Lawyers, did not speak about defense strategy in Campbell’s upcoming trial, he did state that the court was using a jury questionnaire with 160 questions. One has to imagine that this will be a very difficult jury to pick as the case is being heard in Atlanta and it might be hard for people not to have heard of the former mayor or have opinions about him.

Perhaps one of the most bothersome aspects of this case is the long investigation prior to an indictment. As previously noted, a key witness for Campbell is now deceased. (see post here)

(esp)
Where Did This Mink Jacket With Fox Trim Come From?

January 11th, 2006

The press blog of the U.S. Attorney’s Office for the District of Maryland describes the indictment of Bryn Phillips for defrauding her employer, Old Mutual Financial Network (OMFN), and a group of banks of over $800,000 in the past three years. The blog (here) recites two schemes allegedly perpetrated by Phillips that leaves me wondering how she could have gotten away with it for so long:

[F]rom approximately October 2, 2002 until December 30, 2004, Phillips caused Wachovia Bank and Municipal Employees Credit Union (MECU) to transfer $708,049.42 in monies, funds, and credits from OMFN corporate accounts into accounts she controlled. The indictment alleges that Phillips falsely represented to Wachovia Bank that OMFN gave her authority to cause the issuance of wires transferring monies from OMFN accounts at Wachovia Bank to Wachovia Bank and MECU accounts controlled by Phillips. She caused checks to be drawn against OMFN’s account at Wachovia Bank that were payable to entities controlled by Phillips, and/or her relatives and associates, and withdrew and wired monies from OMFN accounts which OMFN had intended to be used as payment for OMFN business expenses, to Wachovia accounts under Phillips’s control. Phillips also allegedly used names and passwords of employees under her supervision to execute wire transfers from OMFN corporate accounts into accounts she controlled.

The indictment also alleges a second fraud scheme. OMFN issued Phillips a corporate credit card for business expenses of OMFN. Phillips initially submitted reimbursement requests to other OMFN employees and later reviewed and authorized payments for the corporate credit card herself. The indictment alleges that from September 2003 to January 20, 2005, Phillips made a number of unauthorized purchases and obtained a variety of products, services and trips through the unauthorized use of OMFN corporate credit cards including services and lodging at the Venetian Hotel in Las Vegas, Nevada; personal property including two Louis Vuitton handbags, a $4,095 pink mink jacket with fox trim, and jewelry; home improvements; and professional basketball tickets. She allegedly submitted fake credit card statements to OMFN causing her to obtain more than $150,000 from OMFN in improper reimbursements.

Phillips is 30 years old, and I suspect she is not a senior executive of OMFN, an insurance holding company whose subsidiaries have over $22 billion in assets (website here). I can’t help but wonder if anyone was looking at the credit card receipts and asked whether that mink jacket with fox trim had the company’s logo on it, or maybe why the two Louis Vuitton handbags weren’t in the supply cabinet. Where are the internal auditors when you really need them? (ph)
The Underside of Hollywood

January 11th, 2006

While some claim there is nothing more vicious than faculty politics, in Hollywood they play for keeps by using some less-than-legal means to gather dirt on one another, something that is no doubt in almost endless supply. The U.S. Attorney’s Office for the Central District of California announced two plea agreements in its long-running investigation of private investigator Anthony Pellicano for using illegal wiretaps and accessing law enforcement data bases to gather information for his clients. The case has now spread to the law firm of well-known entertainment lawyer Bert Fields, Greenberg, Glusker, Fields, Claman, Machtinger & Kinsella, which is linked to the misconduct of former Beverly Hills police officer Craig Stevens. According to a press release (here) issued by the USAO:

Craig Stevens, 45, of Oak Park, appeared in federal court Monday afternoon and pleaded guilty to two counts of wire fraud for depriving the citizens of Beverly Hills of his honest services as a sworn police officer. Stevens also pleaded guilty to four counts of unauthorized access of protected computers to commit fraud. In pleading guilty to the unauthorized access counts, Stevens admitted that he used the Beverly Hills Police Department’s computers to obtain information about four individuals from the Department of Motor Vehicles and sold that information to Pellicano and his employees. Stevens also pleaded guilty to lying to the Federal Bureau of Investigation when he denied that he had ever provided information to, or received payments from, Pellicano, when in fact he had repeatedly sold information to Pellicano.

The second case involves Sandra Carradine, former wife of actor Keith Carradine: " [A] former client of Pellicano, Sandra Will Carradine, a 58-year-old Carpenteria resident, pleaded guilty on Friday to two counts of perjury. Carradine, who hired Pellicano in relation to her divorce proceedings, admitted that during a grand jury appearance in October 2004 she lied when she denied having any knowledge that Pellicano had wiretapped her ex-husband’s phone."

The law firm represented clients in the underlying litigation involved in the Stevens prosecution, and Fields is being represented by well-known white collar defense attorney John Keker, who denies that Fields or his firm had any knowledge of the wrongdoing by Pellicano or the other defendants. Pellicano is currently serving a 30-month sentence in the Taft (Calif.) Correctional Institution (a private prison that houses federal prisoners) after pleading guilty to possession of dangerous materials after a search of his office in 2002 turned up, among other things, the plastic explosive C-4. As the "PI to the Stars" — not to be confused with those helpful maps sold along Sunset Blvd. — Pellicano cultivated an image of knowing the underside of Hollywood. He may be spending more time in an FCI in the near future, and could cause Bert Fields substantial problems in the process. An L.A. Times story (here) discusses the plea agreements and investigation. (ph)
Lobbyists Sure Can Be A Problem for Politicians

January 11th, 2006

The jury in the case of former Governor Ryan of Illinois, on trial for charges of racketeering and fraud, heard from a former "girlfriend" of a lobbyist. The Chicago Tribune reports here that the lobbyist’s girlfriend was recipient of the lavish expeditures of lobbyist Arthur "Ron" Swanson, but she did not know if the former governor was also receiving this lavish treatment. The article’s account of the gifts given to Ryan included an "expensive porcelain figurine" for their anniversary, "a three-foot cloth Santa Claus" "as a Christmas gift," a golf game and dinner at the Ritz. Is this what Congress envisoned when they passed the RICO statute in 1970?

(esp)
Supreme Court Rejects “Honest Services” Case

January 9th, 2006

The United States Supreme Court denied certiorari in a racketeering case involving mail fraud’s honest services provision. (See Chicago Tribune here).

Betty Loren-Maltese was the President of the Town of Cicero, Illinois, appointed upon the death of husband, who died from cancer. She was charged with RICO conspiracy and five counts of mail and wire fraud. Despite the fact that the government failed to show any money going to her, she was convicted of these crimes. One of the arguments she made in her Petition for Certiorari was that the Court needed "to decide whether the ‘honest services’ statute is unconstitutionally vague and to resolve a conflict in the circuits over how to interpret the statute so that it complies with due process."

This is not the first time that the Supreme Court has denied certiorari on a claim involving 18 U.S.C. sec. 1346, the section that allows for mail and wire fraud to be premised on a "right to honest services." This denial reminds one of the many cases that had a similar argument rejected prior to the Supreme Court’s acceptance of the case of McNally v. United States, a case that reversed the government’s use of an "intangible rights" doctrine and destroyed many of the convictions that had been obtained by the government.

Will it take a long line of cases being denied cert. before the Supreme Court eventually takes a case to resolve whether a statute premised on the clause "honest services" is too vague to be constitutionally sound?

(esp)
Arrest in Oil-for-Food Program

January 8th, 2006

CNN reports here of an arrest in Houston of an individual charged with accepting two (2) million dollars in the Oil-for-Food Program. This individual is part of a group facing charges in New York as part of this humanitarian program. (see here) An inquiry into the Oil-for -Food Program produced a report that demonstrated many problems (see here).

The most recent arrest is of Tongsun Park, who CNN describes as an "unregistered lobbyist for Iraq beginning in the early 1990s."

(esp)
Collateral Consequences of an Indictment – DeLay

January 8th, 2006

Indictments are mere charges against a person, and the person is presumed to be innocent. But the consequences of such charges can ruin a person.

In the case of poorer individuals, it often means that they have no counsel and can remain in jail until such time as they appear in court and counsel is appointed. (Professor Doug Colbert spoke on the problems of not having counsel at bail hearings at a conference this past week in DC held by the Association of American Law Schools.) In addition to the inherent issues of remaining in jail, the collateral consequences here can include the loss of a job when they don’t show up to work, not being able to provide for a family, and not being available to handle everyday business. Despite the claim of a person being innocent until proven guilty, those accused of crimes can suffer immediate consequences.

Although the white collar offender often has representation, there can still be collateral consequences pre-trial. Rep Tom DeLay is getting a lesson on collateral consequences as a result of the charges levied against him. Reported in CNN here, Tom DeLay, who is under indictment in Texas, has decided not to run for the majority leader, although he says he will be back for the general election for the position he presently holds in Congress.

What caused his present announcement? Could it be a resulting from pressure by "some House Republicans, who circulated a petition officially calling for new leadership elections in the wake of a series of ethics scandals?" (CNN) Do these individuals not recognize that people are innocent until proven guilty? Or do collateral consequences of an indictment or possible association with individuals charged with crimes suggest that people accused of crimes really are not innocent in the eyes of the public. A collateral consequence of being charged with a crime in the political world is that people want to distance themselves from the accused.

(esp)