Well, DOJ didn't admit it in those exact words. The tone and content were more Ziegleresque: "[T]he announcement overstated the number of defendants that should have been included as part of the Distressed Homeowner Initiative, as well as the corresponding estimated loss amount and number of victims." The original press release and press conference in October 2012 touted "the results of the Distressed Homeowner Initiative, the first-ever nationwide effort to target fraud schemes that prey upon suffering homeowners. The yearlong initiative, launched by the FBI, a co-chair of the Financial Fraud Enforcement Task Force’s Mortgage Fraud Working Group, resulted in 107 criminal defendants charged in U.S. District Courts across the country. These cases involved more than 17,185 homeowner victims and total losses by those victims estimated by law enforcement at more than $95 million." It turns out the numbers given for people arrested, victims affected, and losses incurred were grossly inflated. Jonathan Weil's blistering Bloomberg.com column discussing the rigged numbers is here. The original press release and Newspeak retraction are here. No doubt DOJ is working up a Section 1001 case right now against the folks who gave out these numbers. I don't usually quote socialists, but I.F. Stone's favorite saying now comes to mind: "All governments are run by liars." Hat Tip to Professor William Black for bringing this story to my attention.
Category: Prosecutors
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I posted here last October on Guts and the DC Bar Counsel: The Case of Andrew J. Klineand asked:
"What is the solution to the persistent blight of jaw-droppingly obvious Brady/Giglio violations? One solution is to bring ethical complaints against purportedly miscreant prosecutors in appropriate instances. Which brings us to the case of former DC AUSA Andrew J. Kline, currently making its way through the bar disciplinary process . . . DC Bar Counsel wants Kline censured for an alleged Brady/Giglio violation that also runs afoul, according to Bar Counsel, of the arguably broader Rule 3.8(e) of the DC Rules of Professional Conduct . Rule 3.8(e) states in pertinent part that: 'The prosecutor in a criminal case shall not . . . intentionally fail to disclose to the defense, upon request and at a time when use by the defense is reasonably feasible, any evidence or information that the prosecutor knows or reasonably should know tends to negate the guilt of the accused . . . .'
The defense bar often talks about using various state versions of Rule 3.8(e) in tandem with Brady/Giglio, in part to get around the Brady/Giglio materiality problem. Here is a Bar Counsel actually doing something about it. Kline vigorously denies that the withheld information was material or that he intentionally engaged in any wrongdoing.
What information did Kline actually withhold? He was prosecuting Arnell Shelton for the shooting of Christopher Boyd. Shelton had filed an alibi notice and 'the reliability of the government's identification witnesses' was the principal issue at the 2002 trial, according to the Report and Recommendation of Hearing Committee Number Nine ("Report and Recommendation"). Kline spoke with Metropolitan Police Department Officer Edward Woodward in preparation for trial. Kline took contemporaneous notes. Woodward was the first officer at the scene of the crime and spoke to victim Boyd at the hospital shortly after the shooting.
According to the Report and Recommendation, Kline's notes of his conversation with Woodward were, in pertinent part, as follows: 'Boyd told officer at hospital that he did not know who shot him–appeared maybe to not want to cooperate at the time. He was in pain and this officer had arrested him for possession of a machine gun …'
At trial Boyd identified Shelton as the shooter. According to Bar Counsel, Kline never disclosed Boyd's hospital statement to the defense despite a specific Brady/Giglio request for impeachment material. The other identification witnesses were weak and/or impeachable.
The case ended in a hung jury mistrial and the alleged Brady material (that is, Boyd's hospital statement to Woodward) was not revealed to the defense until literally the eve of the second trial, even though DC-OUSA prosecutors and supervisors had known about it for some time. When the trial court found out about the hospital statement and that it had not been disclosed before the first trial because Kline did not consider it exculpatory, the court was thunderstruck: 'I don’t see how any prosecutor could take that position. . . I don’t see how any prosecutor anywhere in any state in the country, could say I don’t have to turn that over because I think I know why he said that.' See DC Bar Counsel's corrected Brief at 8.
The court offered defense counsel a continuance, but she elected to go to trial as her client was then in jail. The second trial ended in Shelton's conviction.
Kline's position now is that the hospital statement was not material, hence not Brady, because Boyd was in pain and being treated for a gunshot wound at the time and because Shelton was ultimately convicted upon retrial.
Bar Counsel's position is that the withheld hospital statement was material and exculpatory and therefore Brady material, but that even if it was not Brady material, the failure to turn it over violated Rule 3.8(e). Bar Counsel seeks a public censure of Mr. Kline."
That was back in October 2012. At the time of the original post, Kline was in the process of contesting Hearing Committee Number Nine's Report and Recommendation to the District of Columbia Court of Appeals Board on Professional Responsibility (Board). The Board issued its own Report and Recommendation on July 31, 2013, upholding the Hearing Committee, but changing the recommended sanction from public censure to 30 days suspension.
The Board accepted the Hearing Committee's factual and legal conclusions and found that: 1) the withheld statement was material; and 2) even if it had not been material, Rule 3.8(e) required its disclosure, because Rule 3.8(e) does not contain a materiality element. The Board also agreed that: 1) Kline knew or should have known that the information tended to negate the guilt of the accused; 2) the defense requested the exculpatory information at a time when its use was reasonably feasible; and 3) the failure to turn over the statement was intentional.
BLT has a story here, stating that the matter is likely headed to the DC Court of Appeals. Here is the Board's opinion, styled In the Matter of Andrew J. Kline.
The DOJ, which says it cares so much about respecting the constitutional rule announced 50 years ago in Brady v. Maryland, came in with an amicus brief arguing that the withheld statement was not material. How appalling.
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1. Barring a miracle, the government will win.
2. The law on corporate criminal liability may be unfair, but it has been around since 1909.
3. The government has to prove that: a) at least one SAC employee committed securities/wire fraud (several have already pled guilty); b) the employee was acting within the actual or apparent scope of his/her authority/employment at the time; and c) the employee intended, even in part, to benefit the corporation.
4. If the government can prove the above elements it will win, even if the employees who engaged in securities fraud/insider trading violated SAC's insider trading compliance policies or Steven Cohen's direct orders.
5. Give credit where credit is due. This is a well-crafted speaking indictment. Preet Bharara alleged more than he will technically need to prove at trial. He charged that SAC created an atmosphere in which insider trading was bound to flourish. Why did he do this? First, to make his case in the court of public opinion. Second, to help prevent jury nullification. Third, to rebut a defense that the guilty employees were acting against the interests of the company. Here is the SAC Indictment.
6. The attempt to obtain all of SAC's profits through criminal forfeiture allegations is, to put it mildly, a stretch. Significantly, the government did not try to seize funds through civil forfeiture in conjunction with the indictment. This was only partly to protect innocent third parties. The government also did not want to see its resources diverted, give up unnecessary discovery, or embarrass itself.
7. Like John Dowd in the Rajaratnam case, Ted Wells is in the catbird seat. No one in the criminal defense bar expects him to win. If he loses it will in no way dim his reputation. If he wins, he achieves true legendary status. Conversely, no AUSA worth his/her salt can afford to lose this case.
8. How to defend this case? By arguing that all the employees who pled guilty were greedy sorts who were in it 100% for themselves. They could not have intended to benefit the company, because the company made it so clear, time and again, that insider trading actually was bad for the company. Hence the key importance of the indictment's allegations that SAC's compliance policy was essentially a sham.
9. Insider trading law may be stupid, but, contrary to popular myth, is not for the most part vague or confusing to the professionals who have spent their careers in the securities industry.
10. When an employee vocalizes his reluctance to say more over the telephone, concomitantly referencing his "compliance" training, it's a pretty safe bet he knows insider trading is illegal.
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Yet another story from NPR, with the obligatory quotes from Bill Black and Neil Barofsky, about DOJ's abject failure to properly investigate and prosecute high-ranking corporate insiders for fraud-related activity in connection with the financial crisis. This is the major criminal justice story, and scandal, of the Obama-Holder Administration. From the standpoint of elite corporate fraudsters, the Republicans could not have fashioned a better Dream Team at DOJ. The glaring exception here appears to be Preet Bharera. But it's easier to go after insider trading than control fraud.
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In what should be a surprise to no one, the Wall Street Journal editorial page today launched an attack on James Comey, President Obama's nominee to be the next FBI Director. The primary offenses? Comey's objection to the Bush Administration's illegal warrantless wiretapping and Comey's appointment of Patrick Fitzgerald as Special Counsel to investigate the Valerie Plame leak. The editorial is here. More commentary on this in the next few days.
Coming soon: Professor Podgor's analysis of the Second Circuit's opinion afffirming Raj Rajaratnam's conviction for insider trading violations.
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Despite all the promises and policy iterations we continue to see blatant DOJ Brady violations. These are violations that first year criminal procedure students would know not to commit. The latest to come to light is from the Eastern District of Tennessee.
Yesterday, the U.S. Court of Appeals for the Sixth Circuit reversed Abel Tavera's conviction for conspiracy to distribute meth and possession with intent to distribute meth. Tavera was the passenger in a truck involved in an undercover drug deal. He plausibly claimed no knowledge of the drug transaction, testifying that he thought he was heading to a roofing job. Some of the physical evidence tended to corroborate Tavera's story. The evidence against Tavera was almost entirely bottomed on the testimony of co-defendant Granado. Non-testifying co-defendant Mendoza debriefed. He first told the government that Tavera had no knowledge of the drug transaction. Later the same day Mendoza told the government that Tavera only gained knowledge of the drug transaction upon entering the truck on the day of the transaction. Mendoza also denied that Tavera came along to count money and provide security, and consistently stated that one of the purposes of the truck ride was to work on a roofing job. All of this was contradictory to Granado's ultimate testimony. Mendoza later pled guilty. Mendoza's written plea agreement stated: "Tavera knew that they were transporting methamphetamine from North Carolina to be delivered to another person in Tennessee and agreed to accompany [Mendoza]. Since they were transporting methamphetamine, Tavera told [Mendoza] that they needed to be careful." The prosecutor, AUSA Donald Taylor, failed to disclose Mendoza's earlier debriefing statements to the defense.
Judge Merritt, speaking for the majority, decided to send a message:
"This particular case is not close. Prosecutor Taylor's failure to disclose Mendoza's statements resulted in a due process violation. We therefore vacate Tavera's conviction and remand for a new trial. In addition, we recommend that the U.S. Attorney's office for the Eastern District of Tennessee conduct an investigation of why the prosecutorial error occurred and make sure that such Brady violations do not continue."
Tavera's attorney never tried to interview Mendoza. The government argued that no Brady violation occurred, under Sixth Circuit precedent. because Mendoza was equally available to both sides. The majority disagreed with this contention,and further found it foreclosed by the U.S. Supreme Court's ruling in Banks v. Dretke, 540 U.S. 668 (2004). Judge Clay accepted the government's position regarding Sixth Circuit precedent and dissented.
The statements were plainly material and exculpatory. So the question remains, why is such conduct continuing to occur and what is the DOJ doing about it when it comes to light? Here, what one branch of the DOJ did was to argue that Brady wasn't violated.
These constitutional violations directly affect the fairness of federal criminal trials. They will never stop, absent legislation with teeth and/or a federal criminal defense bar willing to be fanatical in its intolerance of Brady violations.
Here is the decision in United States v. Tavera.
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FBI Special Agent Reginald Reyes' affidavit supporting DOJ's search warrant application for Fox News Reporter James Rosen's Google email account was ordered unsealed in November 2011. But it wasn't actually unsealed by the DC U.S. District Court's staff until late May of 2013. In other words, the affidavit was only unsealed several days after AG Holder testified that, "[w]ith regard to potential prosecution of the press for the disclosure of material, that is not something that I have ever been involved in, heard of, or would think would be a wise policy." Once the affidavit and search warrant application were unsealed, it became clear that Holder's testimony was inacurrate, as he had personally authorized the search warrant application. See here for yesterday's post on this issue.
DC Chief Judge Royce Lamberth is not happy about his staff's failure to unseal the affidavit and related documents. Here is Chief Judge Royce Lamberth's 5-23-2013 Order expressing his unhappiness.
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“Well, I would say this. With regard to potential prosecution of the press for the disclosure of material, that is not something that I have ever been involved in, heard of, or would think would be a wise policy.” Attorney General Eric Holder testifying under oath before the House Judiciary Committee on May 15, 2013.
"For the reasons set forth below, I believe there is probable cause to conclude that the contents of the wire and electronic communications pertaining to SUBJECT ACCOUNT, are evidence, fruits and instrumentalities of criminal violations of 18 U.S.C. [Section] 793 (Unauthorized Disclosure of National Defense Information), and that there is probable cause to believe that the Reporter has committed or is committing a violation of section 793(d), as an aider and abettor and/or co-conspirator to which the materials relate." FBI Special Agent Reginald B. Reyes' May 28, 2010, Affidavit in Support of Search Warrant Application for Fox News Chief Washington Correspondent James Rosen's Google email account. The warrant was authorized by Attorney General Holder.
Note than in addition to identifying "the Reporter" as a probable aider, abettor and/or criminal co-conspirator, the affidavit explains that the Department of Justice is not bound by the Privacy Protection Act, otherwise prohibiting warrants for First Amendment work product, precisely because "the Reporter" was "suspected of committing the crime [18 U.S.C. Section 793(d)] under investigation."
There is no doubt that AG Holder gave false testimony to House Members under oath. He is an idiot if he did so intentionally, and he isn't an idiot. What should Holder have done to fix this mess? Corrected the record, of course. In the immortal words of Richard Nixon, "that would have been the easy thing to do."
Holder should have said: "Dear Representatives Goodlatte and Sensenbrenner. I screwed up. My testimony to you is now inoperative. I forgot that I authorized this affidavit, which clearly identifies a 'Reporter' as somebody under investigation for a crime. I did not intentionally try to deceive you. My statement was careless and overbroad. Please accept my apologies."
But the Attorney General apparently cannot not bring himself to do anything as straightforward as that. Instead he spends days sending out spinmeisters, most recently, and regrettably, Deputy Assistant AG Peter Kadzik, as reported here by Sari Horwitz in today's Washington Post.
How sad. Can you imagine anything like this happending under Attorney General Griffin Bell? Bell, a genuine protector of our civil liberties, most likely would have nixed the supboena in the first place. But if Bell had authorized it, he never would have shied away from the ensuing controversy or hidden behind his DOJ underlings.
Mr. Holder has received his fair share of undeserved, demagogic criticism from the kooky right. He deserves what he's getting now.
Here is a copy of the Reyes Affidavit.
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Prosecutors who have committed Brady violations, even those which have been later demonstrated to have resulted in wrongful convictions and lengthy terms of imprisonment for persons later proven innocent, are rarely prosecuted. Courts tend to find Brady violations inconsequential, prosecutor's offices generally defend or at the least refuse to acknowledge them, disciplinary committees overlook them, and defense lawyers, out of timidity and self-interest, rarely press for sanctions. One notable exception to this general disregard by institutions and the bar is DOJ's commendable effort, at the moment thwarted by a questionable administrative law decision, to sanction prosecutors in the Senator Ted Stevens trial (see here and here).
The State of Texas, whose criminal justice system is often disparaged by commentators and defense lawyers, recently took a giant step in holding prosecutors sanctionable for egregious Brady violations. A Texas judge, acting as a court of inquiry, under Texas law, after a hearing ordered the arrest of a current Texas state court judge, Ken Anderson, for contempt and withholding evidence from the court and defense attorneys when Anderson was a District Attorney prosecuting Michael Morton, who was recently demonstrated to be actually innocent for the murder of his wife for which he served 25 years of a life sentence. See here.
The inquiry judge, District Judge Louis Sturns, found probable cause to believe that Anderson had concealed two crucial pieces of evidence: a statement by Morton's three-year old son that Morton was not home at the time of the crime and a police report which revealed that an unknown suspicious man had been seen on several occasions stalking the Morton house.
For denying to the trial judge that there was exculpatory evidence and for failing to provide a full copy of a police report demanded by the judge, Anderson was charged with tampering with evidence, tampering with a government document, and contempt. The most serious charge, evidence tampering, carries a maximum prison term of ten years, far short of the 25 years Morton served.
Criminal prosecution of prosecutors for Brady violations has been to my knowledge totally or almost totally nonexistent. Thirty-five years ago I drafted a proposed New York State statute criminalizing intentional and knowing Brady violations. As expected, the proposal went nowhere. The statute, as I wrote it, had such strict scienter requirements that the crime was virtually unprovable. It was written more to stress to prosecutors the seriousness of such misconduct than to lead to actual prosecutions. The Anderson prosecution, if it occurs, may fill that function.
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An administrative judge for the Merit Systems Protection Board has overturned the DOJ internal decision finding reckless misconduct for violating Brady obligations by two prosecutors of Senator Ted Stevens, Joseph Bottini and James Goeke, and ordering their suspensions. See here.
The administrative judge ruled that DOJ had violated its own disciplinary procedures which require a rank-and-file DOJ attorney in the Professional Misconduct Review Unit to review OPR findings and determine whether misconduct had occurred. The career attorney who reviewed the OPR findings, Terrence Berg (now a federal district judge in Michigan), decided in favor of the prosecutors, but his ruling was reviewed and reversed by his superiors, who found that misconduct had occurred and suspensions were appropriate. Review and reversal by the superiors, said the administrative judge, was improper procedurally, and the rank-and file attorney's decision was non-reviewable and final.
I lack sufficient familiarity with administrative law to opine whether this decision is wrong (although Prof. Bennett L. Gershman has made a strong case that it is). See here. I recognize that prosecutors, like those they prosecute, are entitled to due process. However, procedural infirmities aside, the actions of the prosecutors were clear enough and serious enough to warrant on the merits a finding of misconduct and a suspension. See here.
I find it ironic that DOJ's finding of misconduct was (according to the administrative judge) based on DOJ's own procedural misconduct. More seriously, however, I find extremely troubling the notion that a DOJ prosecutor's misconduct should be finally determined by a fellow career DOJ prosecutor. Defense lawyers, for instance, are not entitled to have their alleged misconduct weighed by a fellow defense lawyer.
A prosecutor's alleged misconduct ideally should be determined by the appropriate state bar disciplinary committee, not a fellow prosecutor (or fellow prosecutors). Of course, bar disciplinary committees, as several commentators have pointed out, have been extraordinarily hesitant to discipline prosecutors, especially with respect to Brady violations.
DOJ has the right to appeal to the three-judge Merit Systems Protection Board. It will be interesting to see if it does.
MattBray.net 