I am pleased to announce that Solomon L. Wisenberg of Barnes & Thornburg LLP will be joining the white collar crime prof blog as a contributing editor. You can read more about his extensive background here.
(esp)
Tag: white collar crime
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The tension between whether corporate counsel is representing an individual employee or the corporation has proved problematic in several cases. The issue can arise when there is a claim of attorney-client privilege. In United States v. Graf, the Ninth Circuit Court of Appeals considered this issue as corporate counsel was "called to testify in opposition to the [the employee] during a criminal trial against the corporation's former officers." The court stated that:
"Graf was indicted for his involvement in the fraudulent operation of Employers Mutual. The district court held an evidentiary hearing on Graf’s motion in limine to exclude the attorneys’ testimony and, after evaluating the briefing, written declarations, and oral testimony presented, issued an order allowing several attorneys who had represented Employers Mutual to testify against Graf at his criminal trial. The court found as fact that the attorneys represented only Employers Mutual and that Graf had no individual attorney-client relationship to establish a privilege that would be violated by the proffered testimony."
Graf argued on appeal that he was "an independent consultant to Employers Mutual." The Ninth Circuit applied the Bevill test and held that Graf did not hold a "personal attorney-client privilege with respect to his communications with the subject attorneys."
(esp) (w/ a hat tip from Linda Friedman Ramirez)
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In a post-Skilling entry, the question is raised on this blog as to whether "[i]n adopting a position expressed by a law professor in an amicus brief, is the Court saying that law professors should focus on writing amici briefs and not law review articles?" (see here) Tony Mauro, in a Brief of The Week: Weyrauch v. U.S., National Law Journal, discusses why Professor Albert Alschuler chose to write an amicus brief in Weyrauch v. United States, as opposed to expressing his position in a law review article.
But the question raised on this blog continues to be one of importance for several reasons: 1) law review articles traditionally involve an exposition of legal theory that captures all facets of an argument; 2) law review articles may advocate for a particular position, but most often this occurs after a consideration of arguments in opposition to the position being taken; 3) some law professors disregard 1 and 2 above and believe that law review articles are best when pieces of advocacy; 4) amicus briefs are written to advocate a particular position,even when it is being written by a neutral party.
Clearly Professor Alschuler's brief assists in changing the legal landscape – a criteria often used in reviewing a legal work for purposes of tenure. So, should amicus briefs be more accepted in the tenure process?
(esp)
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In a highly unusual move, DOJ issued a letter vindicating an individual who had suffered as a result of a side agreement that had been entered with a 2007 Deferred Prosecution Agreement with American Express. Sergio Masvidal, former American Express Bank International Chair filed a suit charging that his constitutional rights had been violated when the court approved a settlement without knowledge that DOJ had a separate agreement to not employ Masvidal upon a sale of the bank or at the end of the one-year deferred prosecution agreement. He claimed that the result was a loss of "his job, reputation and prospects in the banking industry." DOJ filed a Motion to Dismiss this action, but Hon. William P. Dimitrouleas of the S.D. of Florida issued an opinion denying the government's motion finding "that the DOJ has not shown its entitlement to dismissal of the due process claim on the ground of privilege." (see 2010 WL 1956734)
The DOJ has now issued a letter acknowledging that it had "entered into a separate letter agreement, which prohibited Mr. Masvidal from being employed by any entity that purchased AEBI, or from continued employment with AEBI if no purchaser were found, unless the Department of Justice consented in advance to such employment." Additionally, they acknowledged that this agreement "was not presented to the District Court that was considering the DPA." The clearing letter being issued now tells that its investigation "did not reveal any evidence that Mr. Masvidal had committed any criminal offenses or violated any banking regulations" and that it was terminating the letter agreement's restrictions. Masvidal was represented by Attorney Joseph DeMaria.
Letter – Download Final Letter (Executed)
Commentary - It is good to see DOJ issuing this letter, but this is another indication of why terms within DPAs need to be disclosed, and why courts need to monitor the agreements. More importantly, government interference with third party contract and employment rights needs to be prohibited. Finally, seeing DOJ move to dismiss this complaint on January 11, 2010 is troubling in light of their recent admission that "[s]uch undisclosed letter agreements are not part of the Criminal Division's practice."
(esp)
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It was a Thanksgiving Day turkey carving by the Court, and they left a lot more meat on the bones then many imagined.
Will We See More Government Stretching? The Court says, "[a]s to arbitrary prosecutions, we perceive no significant risk that the honest-services statute, as we interpret it today, will be stretched out of shape." Gosh I hope they are correct. Based upon the DOJ's track record, that has not been the case. They started the ball rolling with intangible rights well before the Supreme Court knocked it out in 1987. And even when raised as an issue in these three cases, the government argued for more to be included in the statute's sphere.
Should Congress Rewrite the Statute? The Court said – ""The 'vast majority' of the honest-services cases involved offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes." - This should be a statement Congress should look at when and if the government takes up the Court's second invitation to rewrite the statute.
What happens now? We saw that after the McNally case crushed the government's intangible rights theory, many cases required interpretation to see if they deserved to be tossed, or whether they could survive the holding. In the next few weeks and months, we are likely to see a good number of these type of arguments being made.
Will DOJ learn from this? They have bribery, they have mail fraud and wire fraud with money or property, and they have section 666 for the state/local officials. The government has plenty of tools to prosecute crime. The question is whether they will be happy with what they have, or instead decide that they want to try for more.
(esp)(blogging from Lisbon, Portugal)
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Check out the prior posts of Solomon Wisenberg here, here, and here, that include summary and links to the three decisions. Looking at Skilling specifically, here are some important items to note from the decision-
1. As discussed by Attorney Tim O'Toole in an NACDL press conference – the Court rejects the government's attempt to include a third category beyond bribery and kickbacks, that category being "undisclosed self-dealing by a public official or private employee."
2. The Court states – "The 'vast majority' of the honest-services cases involved offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes."
3. The Court states – "Reading the statute to proscribe a wider range of offensive conduct, we acknowledge, would raise the due process concerns underlying the vagueness doctrine."
4. Is it judicial legislating when the Court states in footnote 43 – "Apprised that a broader reading of §1346 could render the statute impermissibly vague, Congress, we believe, would have drawn the honest-services line, as we do now, at bribery and kickback schemes."
5.Footnote 45 – the Court tells Congress if it really wants to include "self-dealing" there needs to be a whole lot of questions examined first.
6. The Court says, "Its prohibition on bribes and kickbacks draws content not only from the pre-McNally case law, but also from federal statutes proscribing—and defining—similar crimes. See, e.g., 18 U. S. C. §§201(b), 666(a)(2); 41 U. S. C. §52(2)." John D. Cline noted in the NACDL Press Conference how the Court used section (b) of the bribery statute, but did not include (c) which is the gratuities section.
7. The Court says in footnote 46 that "[o]verlap with other federal statutes does not render s1346 superfluous." The Court then notes how section 201 only applies to federal public officials. What about section 666, a section they mentioned previously (see note above)
Concurring opinion of Scalia, Thomas and Kennedy –
1. They say – " in transforming the prohibition of honest services into a prohibition of 'bribery and kickbacks" it is wielding a power we long ago abjured: the power to define new federal crimes."
2. In speaking to the Court's allowing bribery and kickbacks to remain within the statute, the three justices state that "arriving at that conclusion requires not interpretation, but invention." They later remark – "the Court today adds to our functions the prescription of criminal law." They also state "that is a dish the Court cooked up all on its own."
(esp)(blogging from Lisbon, Portugal)
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The Hon. Linda R. Reade issued a sentencing memorandumin the case of Sholom Rubashkin who is scheduled to be sentenced tomorrow. The case arose from a raid of his plant for alleged illegal aliens. The grand jury issued a 163 count Indictment against the defendant that charged him with conspiracy to harbor undocumented aliens for profit, harboring and aiding and abetting the harboring of undocumented aliens for profit, conspiracy to commit document fraud, aiding and abetting document fraud, bank fraud, false statements and reports to a bank, wire fraud, mail fraud, money laundering and willful violation of an order of the secretary of agriculture and aiding and abetting willful violation of an order of the secretary of agriculture.(see here for prior discussion of sentencing), He took the risk of going to trial and the jury returned some not guilty verdicts, but also many guilty ones. Interestingly, in state court he also risked trial and was found not guilty there. (see here) The government moved to dismiss the immigration counts. The court's Sentencing Memo methodically goes through the arithmetic of how the sentence was computed. The court fails to adjust the sentence to account for the defendant's son being "developmentally disabled" saying "such considerations of sympathy and compassion are present in all criminal cases that come before this court."
For those who claim that Booker and its progeny will be the demise of long sentences in white collar cases, they need only read this memorandum to see otherwise.
See also Grant Schulte, Des Moines Register, Rubashkin’s wife to leave Postville; Michael J. Crumb, Baltimore Sun, Judge: Former Iowa kosher slaughterhouse manager will get 27 years in prison, pay $27M; Doug Berman, Sentencing Law & Policy Blog, Kosher plant CEO Sholom Rubashkin sentenced to 27 years imprisonment
(esp)
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The catchy title for this latest government initiative was announced today as a "nationwide takedown" and "the largest collective enforcement effort ever brought to bear in confronting mortgage fraud." (see press release here) The press release states:
"Starting on March 1, to date Operation Stolen Dreams has involved 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses. Additionally, to date the operation has resulted in 191 civil enforcement actions which have resulted in the recovery of more than $147 million."
(esp)
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Many anxiously await the trilogy of cases pending on section 1346. But today will not be the day.
(esp)(back in Gulfport, Florida)
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Sholom Rubashkin, the manager of a kosher meat plant in Iowa, had been unsuccessful in federal court as he was found guilty of bank fraud and related charges resulting from a raid premised on illegal immigration. He awaits sentencing in that case (see background here). But the same result is not seen on the state side in charges that came from the federal case, albeit different allegations. Following a five-week trial (yes – five weeks), he was found not guilty of 67 counts (yes – 67 counts) of child labor. What is particularly noteworthy here is that he was initially charged with 9,311 counts of child labor violations as the state had charged a separate criminal charge for each day of the 31 minors alleged in the case. Prior to trial they reduced this to 67 counts and the judge granted a directed verdict as to 16 of these counts. This was not an easy case for the defense as the court's instructions included a mistake of fact instruction that stated that any mistaken belief in the age of the workers had to "be because of a good faith reasonable belief" and that the defendant "must inquire or determine what is true when to do so would be reasonable under the circumstances." A change of venue had been granted in this case, but it remained in Iowa where jurors may have been aware of the federal case. Despite these obstacles for the defense, the jury returned not guilty verdicts. The defendant was represented by Mark E. Weinhardt and Holly Logan of Belin McCormick, PC (Des Moines, Iowa) and F. Montgomery Brown of Brown Scott, PLC (West Des Moines, Iowa).See also Julia Preston, NYTimes, Former Manager of Iowa Slaughterhouse Is Acquitted of Labor Charges; WCF Courier, Slaughterhouse manager acquitted in kid labor trial(esp) (blogging from Marseille, France)
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