White Collar Crime Prof Blog

Skilling Hearing - Sounds Like it Wasn't a Hot Bench

Reading the reports from those who were there, it sounds like the Skilling bench was a quiet one. But then again - a lot of the argument dealt with "honest services" under the mail fraud statute. 

The mail fraud statute is an 1872 statute that was a section in a revision of the Postal Act.  In the 1970's prosecutors extended mail fraud to prosecute cases involving "intangible rights."  In the case of McNally v. United States, the Supreme Court shot this doctrine down finding that "money or property" was required.  Congress came back with a new statute 18 U.S.C. 1346 that allowed prosecutions premised on a right to "honest services."  But the statute has been problematic in both its breadth and in the government's attempt to extend it in new ways.  The courts as seen in the Brown case, have provided limits to what might appear as a limitless statute.  But the bottom line is that this statute has numerous problems, both in its wording and in its application. And because mail fraud is difficult to understand, it is not surprising that a hearing related to this crime might prove dry.

Amit Efrati, U.S. Judges Hint at Little in  Skilling Appeals Session

Loren Steffy - Houston Chronicle Business Blog - Skilling's Appeal Opens With a Bang, Ends With a Whimper

(Houston Chronicle) AP Court Hears Appeal of Enron's Skilling

Nola.com Skilling Hearing Concludes With Smaller Audience Than Expected

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Attorney General Firings - Not Merely Politics?

Ari Shapiro at NPR's All Things Considered has a story "Justice Probes Lawyer's Dismissal Amid Gay Rumor." Discrimination is appalling, but discrimination by the DOJ is frightening.  After all this is the office that administers the Civil Rights Division.

What is stated on the job announcements for DOJ? Looking through job description notices at DOJ today, one finds the following on some notices:

" The U.S. Department of Justice is an Equal Opportunity/Reasonable Accommodation Employer Except where otherwise provided by law, there will be no discrimination based on sex, sexual orientation, color, race, religion, national origin, politics, marital status, disability, age, status as a parent, membership or nonmembership in an employee organization, or personal favoritism."

Did DOJ include "sexual orientation" under the AG Gonzalez regime, and if they did was this violated? And what happened to President Clinton's Executive Order 13087 that prohibited discrimination based upon sexual orientation?  And is AG Mukasey doing any training in his department now to make certain that discrimination of all types does not exist?

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Continue reading "Attorney General Firings - Not Merely Politics? "

They're Expecting A Crowd for Skilling

The Fifth Circuit Court of Appeals has special instructions on its website about the Skilling oral argument set for today. For example, it states "[n]o one will be allowed to enter any of the courtrooms prior to 1:00 p.m., April 2, 2008, to allow court staff to set up additional chairs in the East Court room, and prepare other courtrooms for overflow spectators."

The case will be heard by three judges: Hon. Jerry E. Smith (Yale law grad, Reagan appointee), Edward C. Prado (Texas law grad, George W. Bush appointee), and Alia Moses Ludlum (Texas law grad, George W. Bush appointee) (see Times Picayune here).   

Some of the key issues before the court are:

• Whether there was a Brady violation in the failure of the prosecution to provide the Fastow Notes and full discovery pre-trial.
• Whether there is any reason not to follow the court's precedent in the Brown case with the prosecution's use of  the "honest services" theory.
• Whether there was error in instructions given to the jury with respect to deliberate ignorance.
• Whether it was improper to refuse instructions on materiality, reliance, and "oral side deals."
• Whether the accused was deprived of a fair trial as a result of the venue of this trial.
• Whether the accused was provided sufficient voir dire.
• Whether errors with respect to the honest services doctrine spillover to other aspects of the case.
• Whether there were sentencing errors.

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Wednesday Is Jeffrey Skilling Day

This Wednesday is the day that the Fifth Circuit will listen to arguments in the case of United States v. Skilling.  Although the briefs are filled with many arguments, the ones focused upon in the oral argument will likely be fewer in number.  That's typical, as you can't hit everything in a time-tight oral argument. 

As one looks at all of the original legal arguments and the new issues from the release of the Fastow notes, it is clear that the court will have a good bit to consider. And perhaps one item that might be lingering in some minds, is the continuing question as to  why the government didn't object to Fastow's argument for a sentence below the agreed upon terms of the plea agreement. Tom Kirkendall at Houston ClearThinkers (see here) pointed out one segment from the Skilling trial when Fastow was on redirect examination and he answered questions as follows:

Q. And what is the minimum amount of time that that plea agreement calls for?

A. It calls for a 10-year sentence.

Q. So after January 14th, can your cooperation lower that 10 years?

A. My understanding is that I will be sentenced to 10 years. The Judge ultimately has a discretion; but in my plea agreement, I agreed to the 10-year sentence."

Andy Fastow, however, received a sentence of six (6) years. This was despite a provision in the plea agreement that stated:

"The parties agree that Defendant's sentence under the Sentencing Guidelines shall include 120 months in the custody of the Bureau of Prisons.  Defendant agrees that he will not move for a downward departure from the offense level or the guideline range calculated by the Court and that no grounds for a downward departure exist."

And the government did not object.  Why?

The following are links to key posts from this blog that relate to the forthcoming argument, and the briefs that have been filed.

Government Responds to Skilling Supplemental Brief

The Skilling Discovery Problem - Part II of Commentary

The Falling of the Enron Case House of Cards

Skilling and the Fastow Notes

The Skilling Case - Stay Tuned

The Fastow Notes

Commentary on Skillings Reply Brief

Skilling's Reply Brief Arrives, Just in Time for the Holidays

The Government Weighs in on Skilling

Skilling's Fifth Circuit Brief Arrives

Also check out Larry Ribstein's Ideoblog here

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Congressperson's Office Covered By "Speech & Debate Clause"

The Supreme Court refused to re-examine a D.C. Circuit court opinion regarding an issue that arose following a search of Louisiana Representative William Jefferson's office. The D.C. Circuit had ruled that the search was improper as it violated the U.S. Constitution's Speech or Debate Clause.  The Court of Appeals held that "[t]he search of Congressman Jefferson’s office must have resulted in the disclosure of legislative materials to agents of the Executive. Indeed, the application accompanying the warrant contemplated it." (see decision)  In letting stand the D.C. Circuit Court opinion, despite a government appeal (see here and here), the Supreme Court was not willing to wrestle with the contours of what is included within the Constitution's Speech and Debate Clause. 

The DOJ is not pleased with this decision (see here).  But in many ways this is an important decision.  Although the government may feel it will make their investigations/prosecutions more difficult, it is a crucial position in light of the political happenings seen not too long ago in DOJ hiring and firing.  In order for there to be a proper balancing of power, it is critical that the executive branch cannot be invading the turf of the legislature.   The Supreme Court's decision not to re-examine the lower court ruling does not open the door as a license to do criminal business in legislative offices.  Rather it lifts the possibility of political retaliation in our government.

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In the News

Still No Verdict in the Wecht Case - See Pittsburgh Tribune-Review - 'Hung Jury' Question Suggests Holdouts in Wecht Trial;  Tom Withers, Wecht Trial Jury Deliberations at the Federal Criminal Defense Blog (discussing the deliberation process in this case)

Detroit Mayor - Who Will Judge -Detroit News - Prosecutor to Oppose Judge Picked for Detroit Mayor's Hearing

The Judge & Scruggs - ABA Law Jrl.com - Ethics Committee Recommends Suspension for Miss. Judge Tied to Scruggs

Former Alabama Governor Released on Bond - Washington Post - Ex-Governor Leaves Prison on Bond

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Guilty Plea - Defense Department Official

A DOJ Press Release tells of the plea entered by a defense department official in an espionage case related to China.  Pleading to a "one-count criminal information charging him with conspiracy to disclose national defense information to persons not entitled to receive it, in violation of 18 U.S.C., Sections 793(d)," the press release states that "the criminal conduct spanned the time period of March 2007 to February 2008." The individual, "a Weapons Systems Policy Analyst at the Arlington, Va.-based Defense Security Cooperation Agency, an agency within the Department of Defense -- provided national defense information on numerous occasions to [   ] , a New Orleans businessman."

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Should Fraudulent Billing By Attorneys Be Mail Fraud

The Wall Street Jrl (here) reports on an attorney from a major U.S. law firm pleading to a one count Information to the crime of mail fraud, 18 U.S.C. s 1341 for engaging "in a fraudulent scheme to charge the Firm and its clients hundreds of thousands of dollars for personal and non-existent business expenses."  Although the Wall Street Journal mentions the name of the firm, the Information they link to does not (see here). Some interesting observations here:

• The government seems to always mention the innocent affiliations, and clearly this is justified in RICO cases where they need to identify the innocent enterprises. So why in this Information do they call it - "a major United States law firm (the 'Firm')" and omit the law firm's name?  Are they giving special treatment to a law firm as opposed to another form of business when the firm or business name is lumped into the Information or Indictment, even though the firm or business has no criminal culpability and may have been the source of notifying the authorities of wrong-doing?  Mind you, I am not criticizing the removal of the name here as this is a good move by the U.S. Attorney.  My question is - why isn't this done more often?
• But where was the "The Firm" in this scenario?  The Information filed by the US Attorney's Office says that this "fraudulent scheme" was "[f]rom in or about 1993 through in or about 2005." Why was this not discovered sooner?  Was there no oversight? Did the "the firm" have a corporate compliance program?
• Should mischaracterizing billing or even fraudulent billing by an attorney constitute mail fraud? This issue came up in the case of United States v. D'Amato, 39 F.3d 1249 (2d Cir. 1994), although that case was different as noted by the Second Circuit in vacating the conviction.  The court stated, "[t]he mail fraud statute does not criminalize the charging of an allegedly excessive fee, where, as here, a corporate agent with at least apparent authority to do so agreed to the fee, received no personal benefit from the fee, and was not deceived by the payee." But then note in United States v.Myerson, 18 F.3d 153 (2d Cir. 1994) the court allowed a conviction to stand were the "fraud was based on ..... submitting a legal fee that overbilled his clients by millions of dollars and by his fraudulent claims that personal charges were legitimate business expenses." (Myerson was not, however, convicted of defrauding the law firm)
• Clearly overbilling and fraudulent billing by an attorney is unethical conduct and clearly it should be something subject to disciplinary action.  But should the federal government be needing to intervene with criminal actions under the mail fraud statute?

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Mortgage Fraud/Subprime Lending - Will Mukasey Appoint A Task Force

Will AG Mukasey appoint a task force to investigate and prosecute cases related to subprime and mortgage fraud? For right now it looks like Attorney General Mukasey has not made up his mind. (see Bloomberg here)

On one hand you see the practices used by foreclosure mills (NYTimes here) and you also see some mortgage fraud cases being brought throughout the United States. (see, e.g., here, here, and here).  And the Wall Street Jrl has an article today titled, HUD Secretary Expected to Resign. One has to wonder if this change might influence DOJ to create a task force.

Shouldn't there be a Mortgage Fraud Task Force?  After all, when the corporate scandals hit the news, we saw the Corporate Fraud Task Force, and when there was fraud after Hurricane Katrina there was the formation of the Katrina Fraud Task Force, and just this week Mukasey announced the formation of a "Safe Streets Task Force to combat gang violence in communities north of Los Angeles." (see here)  Individual jurisdictions are reacting to the mortgage crisis.(See Cleveland PlainDealer describing mortgage fraud task force in Cleveland here; Miami-Dade Mortgage Fraud Task Force; US Attorneys Office in the Western District of Pennsylvania here).  And the FBI is already in the loop (See FBI Launches Mortgage Fraud Task Force in the Nation's Capital)

So will we be seeing a DOJ Mortgage Fraud Task Force pretty soon?

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Wecht Jury - When Do You Call A Jury Hung? And Who Wins?

It doesn't look like the Wecht jury is to the point of being declared hung. See Jason Cato, Wecht Jurors Won't Be Rushed, Pittsburgh Tribune Review.  A hung jury is not always a plus for either side.  For both the prosecution and defense it can mean a retrial. Each side often believes that they can do better if given a second chance.  But with evidence on the table, there can be fewer surprises in a retrial. Perhaps the most significant drawback for the defense is the cost of retrial.  Having to pay attorneys fees for a new trial can deplete a good bit of assets of the accused. But maybe this will not be an issue in the Wecht trial - maybe this week will bring a verdict.

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White Collar Offenders in Prison

With the increased sentences being given to non-violent white collar offenders, more and more are finding themselves being housed near or with those who commit violent acts.  Is it really necessary to spend the extra funds of a higher level security facility on those who are non-violent white collar offenders? It is also interesting to note that those who do not risk a trial and take a plea, are not only avoiding the risk of a higher sentence, but also the risk of being placed in a more restrictive environment. A perfect example here is Jamie Olis.  Olis initially went to a very secure facility because of the exhorbitant sentence given to him.  When his sentence was reduced he was sent to a less restrictive facility.  But even then - it is prison.  And as seen this past week, it was the facility near Olis where there was a prison riot and death. (see here)

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Hollywood Producer & Former T.V. Company CEO Indicted

A press release of the Central District of California tells of "[a] Hollywood producer, who founded and was the chief executive officer of a publicly-traded television production and distribution company," being "indicted .... by a federal grand jury for allegedly orchestrating a fraud scam designed to artificially inflate the company's revenue and stock price."  It was a 13 count indictment that charged the founder of Team Communications Group, Inc., "with conspiracy, falsifying Team's books and records, making false statements in Team's annual and quarterly reports filed with the Securities and Exchange Commission, making false statements to Team's outside auditors, and giving false testimony to the SEC in a deposition." 

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Upcoming Conferences

New York City Bar - Criminal Justice Retreat

The New York City Bar will be holding a Criminal Justice Retreat on Saturday, April 12, 2008.  The title is, "A Summit on the Prosecution Function."  For more information see here - Download retreat_invitation.pdf

ABA Section on Litigation Program -

Crossing the Line: Responding to Prosecutorial Misconduct -April 17, 2008 from 10:30 a.m. to 11:45 a.m.; Hyatt Regency Capitol Hill, Washington, DC

Congressional Investigations – Avoiding Pitfalls in This Forum -April 17, 2008 from 1:45 p.m. to 3:15 p.m.; Hyatt Regency Capitol Hill, Washington, DC

For more information see here

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AG Mukasey Takes on Intellectual Property Crime

One of the hardest criminal activities to investigate and prosecute are cybercrimes and other activities that may be occurring via the WorldWideWeb.  The identity of the perpetrator can be difficult to discern.  Some of these crimes involve Intellectual Property. In 2007, the DOJ filed 217 Intellectual Property cases.  This fact was brought out by AG Mukasey would gave a speech this past week, in California, emphasizing that intellectual property crimes will be a major focus in the DOJ. Mukasey stated:

"To put it simply, the continuing worldwide escalation of counterfeiting and piracy poses a threat to both our economy and public safety. Since that threat comes from so many different directions, our response has to proceed on several fronts. We need strong and coordinated law enforcement efforts, both at home and abroad; we need robust intellectual property laws; and we need adequate resources devoted to IP law enforcement."

The DOJ has moved beyond its role as prosecutors to become teachers, as Mukasey states:

It's imperative that countries work together on cases like these to ensure strong enforcement worldwide. To enhance that kind of cooperation, Justice Department lawyers have provided training and technical assistance to thousands of foreign prosecutors, investigators, and judges in more than a hundred countries.

Hopefully, there has been or will be comparable training to those who will be defending individuals charged with these crimes.

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In the News

Carol Elder Bruce joins Bracewell & Giuliani’s White Collar Criminal Defense and Special Investigations practice group in DC.

Tampa Bay Biz Journal - Title Agent Sentenced in Fraud Case

Wall Street Journal - Lehman May Be Victim of Fraud

Wall Street Journal Blog - DOJ Meets Setbacks in Case Against Former Bistol Exec

Christopher J. Gunther & Robert M. Pollack, National L. J. - Scrutiny of Corporate Monitors is on the Rise

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Former Alabama Governor Siegelman Released Pending Appeal

Gov. Don Siegelman was ordered released from prison on bail pending appeal. This is in sharp contrast to his being taken immediately to prison as opposed to other white collar and not-likely-to-flee offenders.  The court did not give the same relief to Richard Scrushy. Birmingham News here.

There was no question - Siegelman was not a flight risk - so the first prong of the test for bail pending appeal was easy.  The second prong was also met as the court held that he "specifically met his burden of showing that his appeal raises substantial questions of law or fact."   The court did not provide explicit language as to what the substantial questions were.

Interestingly, this all happened around the same time as the judiciary committee wanted Siegelman released to testify before Congress. See here. There is no doubt that this will be a hearing to watch.  Key issues likely to be discussed will be whether politics ruled this prosecution, why was the former governor prosecuted while others were not, and was this prosecution in some way related to the "attorney firings."

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Governor of Puerto Rico Indicted

Aníbal Acevedo Vilá, Governor of Puerto Rico, along with 12 other individuals, were indicted.  The charges pertain to campaign financing. (see here)  Carrie Johnson and Matthew Mosk at the Washington Post report on the corruption charges brought against the governor and it appears to be "conspiracy, fraud, false-statements and tax charges." (see here).  But many (commenter's on Huffington Post here) seemed to be more concerned about his endorsement of Senator Obama as a super-delegate.

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DOJ Press Release states in part:

"According to the indictment, the defendants conspired to defraud the United States and violate various Federal Election Campaign Act provisions by having Puerto Rico businessmen make illegal and unreported contributions to pay off large and unreported debts stemming from Acevedo Vilá’s 1999-2000 and 2001-2002 campaigns for Resident Commissioner of the Commonwealth of Puerto Rico. Payments were made principally to the public relations and media company for the campaigns. The illegal actions continued into 2003, due to the significant debt accumulated by the campaigns, some of which was also concealed from the FEC and the public."

Addendum - Indictment - Download vilaindictment.pdf

(w/ a Stetson hat tip to Whitney Curtis)

In the News - Wecht, Kilpatrick, Prosecutor, University President

Pittsburgh Post Tribune - Wecht Jury at Impasse?

Freep.com - Will Beaty Make a Plea Deal (she is the former chief of staff to Detroit Mayor Kilpatrick).

Martha Neill, ABALaw JrlNewsNow - 20-Year Texas Prosecutor Convicted of Stealing Office Funds

Houston Chronicle - Plea Deal for former Texas Southern University President Priscilla Slade - she will pay the fine and do no time ($127,672.18 fine) here (represented by Mike DeGeurin)

(esp) (w/ a Stetson Hat Tip to Frank Klim on the last)

Government Responds to Skilling Supplemental Brief

Jeffrey Skilling filed a supplemental brief discussing the failure of the government to provide exculpatory material, specifically items now discovered as a result of the release of the Fastow Notes (see here, here, and here).  The government has now responded with an 83-page brief that challenges the defense position. Perhaps the paragraph that sums up the government position best is seen here -

"At trial, the government provided the district court with the rough notes underlying those 302s so that the court could monitor Fastow's testimony and disclose to Skilling any information in the notes that could be used to impeach Fastow.  Now, having obtained those notes while his conviction is on appeal, Skilling argues that they contain undisclosed exculpatory information and show that the government presented false testimony to the jury. As explained in detail below, Skillings' claims rely on isolated snippets culled from  420 pages of handwritten notes and stripped of their context.  Put in its proper context, and divorced from Skilling's hyperbolic rhetoric, each portion of the notes on which Skilling relies contains information that Skilling possessed prior to trial or that would have had minimal value in impeaching Fastow. "

So the government is claiming that the items would have "minimal value."  If that's the case, why didn't they just give them to defense counsel?  Why should we have after-the-fact discussions of whether an item was disclosed and whether it would have made a difference? When an individual is being given a sentence of 24 years, shouldn't the accused be allowed to have everything to properly present a defense to the jury?

Later in the government response they state:

"Finally, if the government had disclosed the information in the February 4, 2004 note, Skilling could not have profitably used it to impeach Fastow.  If Skilling had impeached Fastow with the note, the government would have been entitled to rehabilitate Fastow with the notes showing that on two later occasions he recalled Skilling knew of the quid pro quo."

Should the government be deciding the value of impreachment and rehabilitation evidence?  Isn't that a role we leave to juries?

See WSJ Blog here, Mary Flood's Houston Chronicle Blog here, Kristen Hays - Houston Chronicle here

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Addendum - Government's Brief -

Download usa_v. Skilling Case# 06-20885 USCA, 5th Circuit 3-25-08 Supplemental Brief by Appellee USA .pdf

(w/ a Stetson hat tip to Whitney Curtis)

11th Circuit Pattern Jury Instruction for Mail Fraud Has Problems

The Eleventh Circuit Court of Appeals in United States v. Svete reversed and remanded 5 counts in a case where the defendants were "convicted of conspiracy, mail fraud, money laundering, and interstate transportation of money obtained by fraud, all charges being related to their dealings with viaticals."  Additionally, the court sent the entire case back for resentencing as a result of this holding.  The court stated:

"In this Circuit, mail fraud requires the government to prove that the defendant intended to create a scheme 'reasonably calculated to deceive persons of ordinary prudence and comprehension.' . . .This burden is not reflected in the current Eleventh Circuit pattern jury instruction for mail fraud. Pattern Instruction 50.1 merely states that a 'scheme to defraud' is 'any plan or course of action intended to deceive or cheat someone out of money or property by means of false or fraudulent pretenses, representations, or promises.' Pattern Jury Instructions (Criminal Cases), No. 50.1 (11th Cir. Jud. Council 2003 rev.) (Mail Fraud). Because the definition does not include the reasonable person standard as articulated in Brown, Pattern Instruction 50.1 is deficient. (some citations omitted)."

(esp)(w/ congratulations to Attorney Peter Goldberger)

In the News - Wecht, Kilpatrick, Paulson Talk, Enron

Philly.Com (AP) - Fifth Day of Deliberations End in Wecht Fraud Trial; Pittsburgh Tribune Review - Wecht Deliberations to Resume Thursday

DetroitNews.com - Mayor Kilpatrick to Get Legal Defense Funding;  Attorneys in Scandal to be Probed

ABA Journal - Ninth Circuit Bounces Judge From Case for Favoring Prosecution

Wall Street Journal - Paulson Joins Advocates of Wider Fed Oversight

AP - Citi Settles Enron Suit for $1.66 Billion

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