White Collar Crime Prof Blog

In the News & Around the Blogosphere

Alexandra Clough, Palm Beach Post, Ex-WorldCom exec out of prison, back in area (Scott Sullivan)

Reuters, Massachusetts attorney general targets economic crime

(esp) (blogging from Palm Beach)

Overcriminalization: An Area That Needs Attention

Several groups were on the hill this past week for a hearing on “Over-criminalization of Conduct and Over-Federalization of Criminal Law” before the U.S. House of Representatives Crime, Terrorism, and Homeland Security Subcommittee.  The coalition includes an odd mix of groups from the ABA, ACLU and NACDL to the Heritage Foundation, Washington Legal Foundation and Federalist Society. The very fact that such a wide array of groups are agreeing that change is needed, is important.  To give a flavor of the arguments, here is the  NACDL statement and testimony.  An overhaul of the federal criminal justice system is needed, and one of the deficiencies of the existing system is that there is overcriminalization and overfederalization. Lets hope the strong showing by so many different constituencies moves this issue forward.

(esp)

Commentary on Nacchio

As noted here, the 10th Circuit issued an opinion in the Nacchio case that reverses and remands the sentencing aspect of the case. I agree with Talkleft here that this is a very technical opinion pertaining to how to determine loss in insider trading cases. The court opts for a disgorgement approach as opposed to the district court's net-profit approach. And in that regard, I wholeheartedly agree with Professor Doug Berman here, that this is a major decision.  The court holds that:

We conclude that the district court's net-profit sentencing approach does not square with the plain language of the relevant guideline,  § 2F1.2; therefore we reject it.  We further determine that district courts must undertake "thorough analysis grounded in economic reality," Olis, 429 F.3d at 547, when sentencing defendants in insider trading cases and deem it appropriate to look to the civil sphere for guidance regarding the proper approach.  We conclude that the civil disgorgement remedy provides an appropriate guidepost for sentencing insider trading cases.

What concerns me is the level of economic and mathematical skills needed by counsel and the courts to handle these cases. Clearly experts exist who understand the figures being presented, and have the ability to offer their schooled explanations to the court. But counsel and the court still need more than a basic understanding of economics to properly represent and sentence someone accused of insider trading.

(esp) (M.B.A. - U.of Chicago)

Addendum - Christine Hurt, Conglomerate Blog here

Reversal of Nacchio Sentencing Order

Opinion here. Check out Doug Berman, Sentencing Law & Policy here.  Commentary to follow.

(esp)

In the News & Around the Blogosphere

DOJ Press Release, Virginia Resident Pleads Guilty to Participating in Scheme to Steal Fuel from U.S. Army in Iraq

Houston Chronicle, DA who indicted DeLay--mulling a run for statewide office

Times Picayune,Jury ends first day of deliberations in William Jefferson trial

Huffington Post, Michael Moore And Tom Ford Films Top Bill For Venice Film Festival ("Soderbergh, director of 'Ocean's Eleven' and its two sequels, is showing 'The Informant' out of competition.") w/ a hat tip to Mark Johnson

DOJ Press Release, Helmerich & Payne Agrees to Pay $1 Million Penalty to Resolve Allegations of Foreign Bribery in South America

Alison Frankel, AmLaw Litigation Daily, With Blogosphere in Uproar over Second Circuit Ruling on Computer Hacking and Insider Trading, Dorozhko Lawyer Weighs Appeal

John Pacenti, Daily Business Review, law.com, UBS Attorney Says Settlement Is Near in Massive Tax Dispute, but IRS Not Convinced

John Snell, The Oregonian, Beaverton woman accused of $1 million Ponzi scheme

Eric Lipton, NYTimes, How Firms Wooed a U.S. Agency With Billions to Invest

John Pacenti, Daily Business Review, law.com, Feds in Bank Fraud Case Drop All Charges Against Former Greenberg Partner

Joel Stashenko, NYLaw Jrl, law.com, Court Refuses to Dismiss Indictment Against Former Judge

DOJ Press Release, UBS Client Pleads Guilty to Filing False Tax Return, Hid $8 Million in Secret Swiss Bank Accounts -New York Toy Manufacturer Representative Used Nominee Entities, Offshore Credit Cards, Sham Loans

DOJ Press Release, Former Armenian Diplomat, Beverly Hills Attorney Are Among Five Charged ub Scheme to Allow Illegal Immigrants to Stay in United States

Jeremy Wallace, HeraldTribune.com, Flipping fraud: an issue avoided in the campaign?

DOJ Press Release, Used Motor Vehicle Dealers Indicted by Federal Grand Jury in Casper, Wyoming for Odometer Tampering

NYTimes, Dealbook, White-Collar Crime Prosecutor Joins Fried & Frank

(esp)

Brief Filed in Conrad Black Case

The defense filed a 57 page Brief in the Conrad Black (Boultbee and Kipnis) case pending in the U.S. Supreme Court.  Cert was granted to examine two questions, one of which involves section 1346's honest services provision. (see here) At issue is whether the statute applies "to the conduct of a private individual whose alleged 'scheme to defraud' did not contemplate economic or other property harm to the private party to whom honest services were owed."  As anticipated, Appellant's Brief references Justice Scalia's words from his dissent of a denial for certiorari in the case of Sorich v. United States - "nothing more than an invitation for federal courts to develop a common-law crime of unethical conduct." A key focus of the petitioner-appellant is that economic harm is needed.

As stated in the Brief, "in enacting Section 1346, Congress did not make a federal crime out of any arguable failure to render 'honest services,' but sought to target such conduct only as part of a broadened understanding of 'scheme to defraud.' It did not remotely license federal prosecutors, as here, to pursue their own untethered understanding of 'honesty' apart from any conventional understanding of 'fraud.'”

Appellants also note the due process fair notice violation that occurs when you have a statute that "reaches any 'dishonest' conduct in the private sector..."  The Rule of Lenity is mentioned, especially since interpreting the mail fraud statute can trigger a money laundering charge. 

20 days following the oral argument in this case, the 7th circuit ruled with Hon. Posner authoring the opinion that affirmed the conviction. Irrespsective or whether one agrees or disagrees with the use of honest services fraud in the private context without economic harm, it is good see that more time is being spent examining this important question.

Brief - Download Black et al v United States merits brief filed 7-30-2009

(esp)(w/ a hat tip to Peter Goldberger)

Hot off the Internet - Rove

Carrie Johnson, Washington Post, Rove Had Heavier Hand in Prosecutor Firings Than Previously Known

For background on political hirings and firings see here, here, here, and here.

(esp)(w/ a hat tip to Mark Johnson)

William Jefferson's Case In the Hands of the Jury

The press (e.g., Washington Post here; NOLA.com here; BLT Blog here) is reporting that the jury will receive ex-congressman's William Jefferson's case tomorrow. The Indictment  included counts related to bribery, RICO, money laundering, Foreign Corrupt Practices Act, and Obstruction of Justice. 

From these press reports, it sounds like one interesting question that the jury will be examining is whether his activities meet the definition of an "official act" for purposes of the bribery statute. The government is required to prove that the accused acted corruptly to influence an official act.  The statute defines "official act" as "any decision or action on any question, matter, cause, suit, proceeding or controversy, which may by law be brought before any public official, in such official's official capacity, or in such official's place of trust or profit." The definition has been the subject of prior court controversy.  For example, in the case of U.S. v. Muntain(DC Cir. 1979) the defendant argued "that his actions were not 'official acts'  in that they did not involve matters that would be brought before him in his official capacity. The District of Columbia Circuit Court of Appeals accepted this argument, finding that the promotion of group automobile insurance was not a matter that would be brought before Muntain in his capacity as the Secretary of Labor Relations at HUD." See Podgor & Israel, White Collar Crime in a Nutshell 4th 115 (2009).

(esp) 

Federal Forfeiture- One Strike and You May Be Out

Guest Blogger Todd Foster, Esq. (Cohen, Foster & Romine, P.A.) writes:

I was recently hired to do something different in a federal criminal case, represent a third party claimant in a criminal forfeiture proceeding.  After the defendants pled guilty in a large fraud case, items of their real property were criminally forfeited to the government. As you may know, federal forfeiture statutes attempt to protect innocent lien holders (claimants) in these circumstances, but in doing so, impose strict requirements. A very recent Eleventh Circuit Opinion, U.S. v. Marion, required full compliance with the statute as a condition of a claimant obtaining relief.

In my case, we determined that certain institutional claimants failed to comply with the statute's technical requirements. Rather than wait for the government to seek dismissal of these deficient claims, I filed a third party motion to dismiss those petitions under Marion. My reasoning was that the fewer claimants left standing, the more equity available to satisfy "qualified" claims (including ours). I have put together a brief paper on Marion, soon to be published, which I think you may find helpful. (see here)

Bottom line: Federal statutes setting forth time or technical requirements must be fully reviewed and complied with before any claim thereunder is filed. In 2007, the U.S. Supreme Court in Bowles v. Russell dismissed an appeal in a death case because the petition was three days late. Marion follows that trend. Potential serious consequences loom for those who do not understand and comply with the dictates of these laws.

(TF)

Madoff Should Teach an SEC Class

Reading Jay Price's superb article in the News & Observer titled Behind bars in Butner, Madoff shares secrets of scam, one has to wonder if Bernie Madoff should be instructing the SEC so that they can learn the tricks of a convicted felon who managed to escape scrutiny for a significant period of time. Perhaps Congress also needs to be apprised of how Madoff managed to keep this quiet for as long as he did. Instead of adding a greater sentence to existing crimes or creating new crimes, time and money may be better spent improving the present regulatory process and adding funds to enhance enforcement.

(esp) (w/ a hat tip to Ted Gest)

Healthcare Fraud Strike Force Strikes Again - This Time Houston

Healthcare Strike Force agents hit South Florida in 2007, Los Angeles in 2008, and Detroit in 2009. The DOJ press release tells that they have "obtained indictments of more than 293 individuals and organizations that collectively have billed the Medicare program for more than $674 million."  The new addition to the list of charges against doctors and health care executives takes place in Houston, with 32 doctors and health care executives charged.  Some of the individuals were arrested in places outside Houston, such as New York and Boston. The press release states:

According to the indictments, the defendants charged today participated in schemes to submit claims to Medicare for products that were in fact medically unnecessary and oftentimes, never provided. In some cases, indictments allege that beneficiaries were deceased at the time they allegedly received the items. Collectively, the physicians, company owners and executives charged in the indictments are accused of conspiring to submit more than $16 million in false claims to the Medicare program.

See also James Pinkerton, Mark Babineck, & Mary Flood, Houston Chronicle, Agents conduct medical fraud raids across Houston -Warrants served at 12 locations related to 32 indictments; see also Stop Medicare Fraud - US Dept of Health & Human Services & DOJ here.

(esp)

Two Interesting Discussions on the Web

Over at PointofLaw.com, Professor Mike Seigel (Florida) and Professor John Hasnas (Georgetown Business) are part of a Manhattan Institute exchange  on "Criminalizing Corporate Conduct: How Far Is Too Far?" It is a fascinating discussion with two very divergent views.  But I  find it particularly interesting to see both professors focusing on whether there should be corporate criminal liability and the value or lack of value that it serves. As usual the word "punishment" is under consideration. This is an important discussion, but it also needs to be considered from another angle.  Wouldn't it be a more positive approach for the government to expend more resources on "educating compliance" then on a reactive model that punishes misconduct. My next essay will explain more in this regard.

Over at ProfessorBainbridge.com, Professor Stephen Bainbridge takes on Professor Henning's Wall St Jrl blog entry regarding the SEC v. Mark Cuban opinion.  The WallSt Jrl blog does post a correction on one point.  But I guess I am still fascinated at how computerization raises new legal considerations.  In this regard I am speaking about the second case Professor Henning discusses - SEC v. Dorozhko.

(esp)

Ninth Circuit Grants Bail Pending Appeal for Former Orange County Sheriff

The Ninth Circuit Court of Appeals granted former Orange County Sheriff Michael S. Carona's motion for bail finding that "[t]he parties agree that appellant is not likely to flee or to pose a danger to the safety of any other person or the community if released."  The Ninth Circuit found that Appellant met the second test for bail - his appeal "raises a 'substantial question' of law or fact that is likely to result in reversal, an order for a new trial, or a sentence that does not include a term of imprisonment, on all counts on which imprisonment has been imposed."  The Ninth Circuit sent the bail issue back to the trial court to set "appropriate conditions of release."  The former sheriff had been convicted on one count and acquitted on five counts (see LA Times here)

Ninth Circuit's Bail Order - Download O.C. Sheriff - 9th circuit grants bond pending appeal

(esp)

Federal Sentences Increase

An interesting statistic is reported by TRAC (Transactional Records Access Clearinghouse) (here)-

"In 2004, there were 10,056 individuals who were sent to prison as a result of an FBI investigation and the median or typical sentence — half got more, half got less — was 30 months. In  FY 2008, while the number sent to prison decreased to 9,789, the typical sentence rose to 41 months."

Although this number is not exclusive to white collar crime, it does demonstrate the increased level of incarceration in the United States.

(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

Enron the Show

Enron the show has hit London, and perhaps it will cross the pond to the U.S.  In the interim check out Loren Steffy's note (and link to Michael Billington's Guardian Review) in the Houston Chronicle here.

(esp) (w/ a hat tip to Bill Olis)

In the News & Around the Blogosphere

DOJ Press Release, Georgia Temp Company and its Owner/President Agree to Plead Guilty to Making a False Statement to the U.S. Small Business Administration

Doug Berman, Sentencing Law & Policy Blog, Another big federal fraud sentencing dealing with Madoff echoes

DOJ Press Release, Two Cincinnati Dentists Charged with Conspiracy, Tax Crimes

Austin Wright, The Chronicle of Higher Education, 2 Florida Men Plead Guilty to Getting Unauthorized Access to Student Data

DOJ Press Release, Suburban Business Charged with Allegedly Swindling More than 450 Investors in $77 Million Ponzi- Scheme

Michael Cieply, NYTimes, Haim Saban Is Sued Over Tax Shelter (w/ a hat tip to M. Johnson)

(esp)

Are the New Jersey Charges Another Abscam?

Back in the 1970s and 80s, the FBI ran an undercover operation to stop corruption by government officials.  Convictions included a New Jersey Senator, members of Congress and others.  The government set up a phony business to lure individuals to commit crimes, and despite claims of entrapment and outrageous government conduct, many of the convictions stood.

Fast forward 30 years and we see the government again is using an undercover operation to arrest many politicians and some religious leaders.  The charges are no longer simple bribery or conspiracy charges.  Rather now we see newer statutes, like money laundering, statutes that carry more significant penalties.

An Acting US Attorney is proud to say that he is behind charges against "mayors of Hoboken, Secaucus and Ridgefield, the Jersey City deputy mayor and council president, two state assemblymen, numerous other public officials and political figures," and yes  community religious leaders.  The long list of complaints and press release can be found here. But as one reads these complaints one has to wonder about the "CW" - cooperating witness - that seems to be behind so many of these cases.  One also has to wonder what if any individual gains or profits accrued to each of the individuals charged with the alleged crimes. Finally one has to wonder why the government felt a  "perp walk" was necessary here.  Did they really think these individuals would flee, destroy evidence, or not turn themselves in voluntarily?

See also, Ted Sherman & Joe Ryan, NJ.com, Massive N.J. corruption sting targets mayors, legislators, rabbis

(esp)

Could there be corruption in New Jersey?

See CNN, Mayors, rabbis arrested in corruption probe

NYTimes (AP), 2 Mayors Arrested in Broad N.J. Corruption Sweep

In this same US Attorney's Office, just a couple of days ago, an assemblyman and former mayor had a new charge added to his Indictment alleging that "he participated in a scheme with his former key political advisor to circumvent the contribution limitation and reporting requirements of the Federal Election Campaign Act." (see here).

(esp)

Upcoming Conferences

ABA Presidential Showcase Program: Hot Topics and Recent Developments in Public Corruption Investigations & Government Ethics here

NACDL - Defending White Collar Crimes - October 1-2, NY - here

FCPA - November 17-18, 2009 - Washington, D.C. here

ABA - Criminal Justice Section - White Collar Crime Committee - Town Hall Meeting on the State of White Collar Crime - "One Look Forward, Two Looks Back" - Friday, July 31 4:00-5:30 P.M. - The John Marshall Law School, Room 3E, 315  S. Plymouth Court, Chicago - here

Strafford, Foreign Corrupt Practices Act Investigations and Privacy Protection - Safeguarding Data and Avoiding Violations of U.S. and International Privacy Laws, August 11, CLE Teleconference - here

Economic Crime Institute of Utica College is hosting their 20th Annual Conference in Maryland, October 20 to 22. This year's theme is "Extraordinary Circumstances: Combating Fraud and Corruption in Hard Times." Keynote speakers include Cynthia Cooper (WorldCom Whistleblower) and Martin Biegelman (Director, Financial Integrity Unit, Microsoft) - here

(esp)(blogging from San Antonio)

In the News & Around the Blogosphere

Dionne Searcy & Amir Efrati, WSJ Blog, Sins and Admission: Getting Into the Top Prisons - The Bureau of Prisons Didn't Grant Madoff His First Choice, and Rebuffed a Judge's Recommendation. Why? (w/ a hat tip to Mark Johnson)

DOJ Press Release, Ship Captain and Chief Officer Plead Guilty to Crimes Related to Pollution from Cargo Ship Traveling to New Orleans

Stanley A. Twardy Jr. & Daniel E. Wenner, law.com, One Rogue Worker Can Take an Entire Company Down (for previous discussion on the Ionia case see here and here)

Mark McDonald, NYTimes, Beijing Court Convicts Ex-Sinopec Chief of Bribery

David Glovin, Bloomberg, Madoff Accountant Friehling Waives Indictment, May Plead Guilty

NYTimes (AP),  Ex-Financier Has 2 Years Added to Sentence for Fleeing

Mark Hamblett, NYLJ, law.com, 2nd Circuit Says Adviser's Knowledge of Bayou Hedge Fund Fraud Not Proven (the opinion can be found here)

Zachery A. Goldfarb, Washington Post, SEC Chairman Requests Broad Investigative Power

DOJ Press Release, Former New York City Council Member Pleads Guilty to Federal Fraud and Money Laundering Charges

Office of the Attorney General of NY (Andrew Cuomo), Press Release, Attorney General Cuomo Announces Six Arrests in $47 Million Medicaid Scam - Fraudulent Medicaid Provider Allegedly Developed An Elaborate Financial Web To Steal From Medicaid And Launder The Proceeds 

DOJ Press Release, Former Boeing Engineer Convicted of Economic Espionage in Theft of Space Shuttle Secrets for China 

(esp) (blogging from The Hague, Netherlands)