White Collar Crime Prof Blog

NACDL’s Aug. 19, 2009, White Collar Crime CLE – “Testimonial Traps: Defense Strategies for Invoking the 5th Amendment in Civil Cases, Investigations & Other Proceedings”

Guest Blogger: Cynthia Hujar Orr, President of the National Association of Criminal Defense Lawyers (NACDL)

Shana-Tara Regon, NACDL’s White Collar Crime Project Director, put together this evening’s two-hour continuing legal education (CLE) program covering the critically important Fifth Amendment issues that practitioners often face. Tomorrow’s second installment of NACDL’s White Collar summer CLE series is a panel assembled by NACDL’s White Collar Crime Policy Counsel Tiffany Joslyn exploring the topic “Litigating Pre-Trial Restraint of Assets in Criminal Cases.” There is still space at NACDL’s Washington, D.C. headquarters for tomorrow evening’s program and wine & cheese reception, just RSVP and register here.

Shana explained the purpose of tonight’s Fifth Amendment-related program, “As clients in criminal cases are often involved in civil cases and other investigations and proceedings, what they say in these contexts can and will be held against them. This program provided practical guidance on the often tricky issues that arise when considering whether and how a client may remain silent.”

Tonight’s program featured leading practitioners with vast government and private practice experience and perspective: moderator Ross H. Garber, a partner in the Hartford, Conn. office of Shipman & Goodwin LLP and panelists Benjamin D. Brown, partner in the Washington, D.C. office of Cohen Milstein; Pamela J. Marple, partner in the Washington, D.C. office of McDermott, Will & Emery; and Steven M. Salky, partner in the Washington, D.C. office of Zuckerman Spaeder LLP. Click here to read more about the program, panelists and to reach a link to purchase a recording of the program.

The first order of business in tonight’s program was a brief discussion of the history and purpose of the Fifth Amendment. Ross Garber set the stage. He quoted language from the 2001 U.S. Supreme Court decision in Ohio v. Reiner, “One of the Fifth Amendment’s basic functions . . . is to protect innocent men . . . who otherwise might be ensnared by ambiguous circumstances.” Garber then added his own commentary, explaining that while the Fifth Amendment “seems pretty straightforward, as we all know in this room, Fifth Amendment issues can get really tricky.” There was no disagreement there. In fact, the ensuing discussion served as Exhibit A in support of that assertion.

The program quickly moved from the history and purpose of the Fifth Amendment to a detailed exploration of the practical issues involved in its assertion, but not via a theoretical or academic discussion. Instead, it did so by confronting a hypothetical, and to many people an entirely familiar, scenario. The panelists launched right into an examination of various aspects of the multiple parallel proceedings in which someone might find himself as a mortgage broker who was engaged in the business at the height of the housing boom.

The two-hour discussion covered a set of legal circumstances and litigation tracks that unfolded as moderator Ross Garber confronted the panelists with the complex decisions that must be made as a variety of parallel proceedings emerged and moved forward. The developing challenges for the defendant/target/suspect/putative congressional witness, as well as the company at which he had been employed, included state and federal regulatory investigations, state attorney general and U.S. Department of Justice investigations, a private class action civil lawsuit, as well as a Congressional investigation. As Pamela Marple and Steven Salky covered the perspective of defense counsel in both the civil and criminal contexts, Ben Brown was there at every turn explaining the myriad ways in which plaintiff’s counsel in a parallel civil suit can and do make the most of the defendant’s assertion of his Fifth Amendment rights. As he put it, “the plaintiff’s lawyer wants to get the defendant pleading the Fifth, on tape preferably, as early as possible,” adding that plaintiff’s lawyers want it not just generally but in response to numerous fact-based questions as they build their case on the negative inferences they can seek to have drawn from the same.

There was a careful examination of a variety of issues that counsel must sort through in the context of parallel proceedings, including what type of entities can avail themselves of the Fifth Amendment privilege, when an individual should assert it, and how an individual should assert the privilege when he does. As to how to assert the Fifth Amendment privilege, Steven Salky explained that the defendant has to say enough so that the judge knows that you are asserting the Fifth Amendment, but “he doesn’t have to use the words ‘incriminate’ or ‘self-incrimination.’”

When Congress calls your client as a witness in the midst of all of these parallel proceedings, Pamela Marple, whose experience includes five years as a trial attorney at the DOJ as well as service as counsel to the Senate Judiciary Committee and Deputy Chief Counsel to the Minority on the Permanent Subcommittee on Investigations, had plain and clear advice, “There has to be a reason to testify to Congress” in response to a Congressional subpoena.

In sum, tonight’s program was a far-reaching and intensely practical dissection of the complexities involved in the invocation of the Fifth Amendment in the panoply of contexts in which we often find our clients sought for testimony.

I am looking forward to tomorrow evening’s program at NACDL, “Litigating Pre-Trial Restraint of Assets in Criminal Cases

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Gay Collars - Perhaps An Investigation Is Needed

Watching a part of NBC's Today Show of the interview with Richard Hatch (Survivor) (for background see here) and then hearing that he is arrested shortly thereafter, certainly has a chilling effect.  Hatch, on house arrest, did an interview with the media.  Listening to Hatch, the media, and his attorney, it sounds like permissions had been granted to do this interview (see here) but I have no information to confirm whether it was or was not. And why shouldn't an interview be allowed - after all even those in prison should be entitled to some First Amendment rights.  Is this related to prison security? And if so, does it make a difference that he is no longer in prison? Or was this one of the conditions of this house arrest? And if he violated one of the conditions of his house arrest, why would he chance this now?

Shortly after the interview, the media reports that he was taken from his home back to prison. What is problematic here is that during the interview he not only proclaims his innocence but also claims that anti-gay bias drove this prosecution.  

This latter claim needs to be investigated, and an investigation that occurs apart from DOJ individuals associated with the past administration. When someone is on the back end of their prison time (doing house arrest), the last thing they would want to do is jeopardize their ability to return to society. Someone needs to look at whether different treatment is being given to gay collars.

See Today MSNBC.com, ‘Survivor’ Richard Hatch is back behind bars -Mere hours after TODAY interview, reality show star taken into custody; see also Matt Caputo, Daily News, 'Survivor's' Richard Hatch arrested after Today Show with Matt Lauer; says anti-gay bias drove feds

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In the News & Around the Blogosphere

Tom Kirkendall, Houston's ClearThinkers, The Stanford D&O Policy

Joanne Silberner, NPR, Medical Fraud Carries A Staggering Price Tag (w/ a hat tip to Ted Gest)

Shane Anthony & Joel Currier, St. Louis Post-Dispatch, St. Peters woman accused of cyber bullying (w/ a hat tip to Ted Gest)

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Reyes Conviction Overturned By Ninth Circuit

Former CEO of Brocade Communications Systems, Gregory Reyes, had his convictions overturned by the the Ninth Circuit Court of Appeals.  The court reversed Reyes' conviction "because of prosecutorial misconduct in making a false assertion of material fact to the jury in closing argument."  Reyes had argued that he "signed off on the backdated options without intent to deceive."  He also argued that "he relied in good faith on the accuracy of the Finance Department's documentation when he signed off on false financial statements."  In reversing, the court states that "[t]he prosecutor asserted as fact a proposition that he knew was contradicted by evidence not presented to the jury." The court does not, however, conclude that "the prosecutor's conduct was so egregious as to require dismissal of the prosecution" and remands the case for a new trial. 

The court does not give this same relief to the former vice-president of the Human Resources Department of Brocade Communications Systems Inc. The court affirmed her conviction, but vacated the sentence and remanded the case for resentencing without an enhancement for alleged obstruction of justice.

Materiality was a key issue that Reyes raised and he had requested a directed verdict upon this issue.  There is a certain irony here in the court finding that the prosecutor's comments were not harmless error and that "the prosecution argued to the jury material facts that the prosecution knew were false, or at the least had strong reason to doubt."

Opinion - here

See also Mercury News.com here, NYTimes here, WSJ Blog here.

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In the News & Around the Blogosphere

Brett Barrouquere, law.com (AP), Attorneys Convicted Over Diet-Drug Settlement Sentenced to Jail, Ordered to Pay $127 Million

Miles Moffeit, Denver Post, Alleged Ponzi schemer likely to plead guilty to fraud charges

Breaking News 24/7, Federal Gov't Won't Appeal Shorter Sentence for Ex-Qwest CEO Joe Nacchio; Reuters, U.S. government won't fight Nacchio sentence ruling

Press Release, Office of the Attorney General Andrew M. Cuomo, Attorney General Cuomo Brings Martin Act Fraud Case Against Charles Schwab & Co, for [Alleged] Fraudulent Sales of Auction Rate Securities

DOJ Press Release, Chair [ ] and CEO of Mayfair Capital Group, LLC Arrested on Securities Fraud and Wire Fraud Charges

DOJ Press Release, Consortium of 49 Massachusetts Law Enforcement Agencies to Pay U.S. $200,000 for Alleged False Claims

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CrimProf Back

Just wanted to welcome back the crimprof blog here and wish the new editors the very best in blogosphere. 

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Nacdl Hosting Summer Series

National Association of Criminal Defense Attorneys (NACDL) is hosting two panels as part of its summer CLE series. First, on August 19th, is “Testimonial Traps: Defense Strategies for Invoking the Fifth Amendment in Civil Cases, Investigations & Other Proceedings.” Then, on August 20th, is “Litigating Pre-Trial Restraint of Assets in Criminal Cases.” For more information see here.

Hacking Indictment - How Many Times Can You Indict The Same Person

DOJ issued a press release concerning an indictment of an individual charged with "conspiring to hack into computer networks supporting major American retail and financial organizations, and [allegedly] stealing data relating to more than 130 million credit and debit cards."  The indictment is for the crimes of conspiracy and wire fraud conspiracy. He is accused of using a "sophisticated hacking technique" "which seeks to exploit computer networks by finding a way around the network’s firewall to steal credit and debit card information."  Several corporations are said to be the victims. The press release tells that this individual has pending charges from the US Attorney's Office in the Eastern District of NY and the District of Massachusetts.  The present indictment is from the US Attorneys Office for the District of New Jersey.  Three different U.S. Attorneys Office against one person - well maybe more since it is a conspiracy being charged.  It is good to see action being taken in identity theft and computer related cases, but I am wondering why three US Attorneys Office are needed here. Even if there are victims in three different districts, won't one or two prosecutions be enough?

See also Tampa Tribune (AP), Prosecutors: Man tapped into 130 million credit accounts

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Former Credit Suisse Broker Convicted

Following a three week trial, a former Credit Suisse broker was convicted of conspiracy and securities fraud. The DOJ press release from the Eastern District of New York tells how "the scheme was discovered when the market for the mortgage-backed CDOs purchased by the companies collapsed and various auctions for CDO-ARS began to fail." Many frauds are coming to light as a result of the financial downturn.

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"The Tip of the Iceberg" - A Plea in the UBS Swiss Accounts

UBS entered into a deferred prosecution agreement with the government (see here).  The agreement included that UBS would provide the U.S. government "with the identities of, and account information for, certain United States customers of UBS’s cross-border business." Things initially moved slowly as an agreement needed to be reached regarding the release of information in light of privacy laws (see here). But with these two steps apparently settled according to press reports, it is not surprising to see an individual reaching a plea agreement with the government for failure to disclose UBS Swiss bank accounts to the IRS. A DOJ Press Release reports that this individual "admitted that he failed to pay at least $200,000 in federal income taxes and that he now owes the government interest and penalties."

One has to wonder if the government action of proceeding against individuals with Swiss accounts that were not properly reported to the IRS, will assist the US economy. Eileen C. Mayer, Chief of IRS-Criminal Investigation, called this prosecution "the tip of the iceberg."

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In the News & Around the Blogosphere

Ben Levishon, Business Week, A Top Madoff Aide Shatters the Silence -In pleading guilty, CFO Frank DiPascali has opened the door to a wider investigation of Bernard Madoff's deeds

Jeff Carlton, Seattlepi.com (AP), Runaway receiver at odds with SEC in Stanford case

DOJ Press Release, Former Tamimi Global Executive Convicted of Witness Tampering Following Reinstatement of Charges

William L. Anderson, LewRockwell.com, The Ultimate Prosecutorial Weapon: Honest Services Fraud

Greg Poe, Former Partner with Robbins, Russell, Opens New Practice

Amanda Bronstad, National LJ, Government: Ex-Broadcom executive knew statements weren't confidential

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In the News & Around the Blogosphere

R. Robin McDonald, law.com, Prosecutor Faces New Ethical Questions in Case Against Defense Attorney

Steven M. Ellis, Metropolitan News-Enterprise, U.S. Attorney O'Brien [Central District of California] Confirms Move to Paul Hastings; Debra Cassens Weiss, ABA Journal, US Attorney Known for Aggressive Theories to Join Paul Hastings

John Carney, Business Insider, Will Sending DiPascali To Jail Cripple The Madoff Investigation?

DOJ Press Release, Two Defendants Plead Guilty in Counterfeit Pipe Coupling Scheme

Tom Lyons, HeraldTribune.com, Lyons: Felon's attitude flies in face of reality

Stephen Ohlemacher, law.com (AP), Newly Released Documents Detail Rove's Involvement in U.S. Attorney Ouster

DOJ Press Release, Business Owner Sentenced to 100 Years for His Role in Scheme to Defraud Clients of Funds Allegedly Held in Trust

DOJ Press Release, Five Companies Agree to $21 Million Settlement for Environmental Damages in Pennsylvania

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Is the US/Swiss Agreement the Fall of Tax Havens?

The press is reporting that the US has reached an agreement with the Swiss on the release of information that could implicate individuals in the United States. See Wayne Tomkins, Daily Business Review, law.com,  Swiss, U.S. Reach Agreement in UBS Tax Evasion Dispute; CNN,UBS settles secret accounts case with U.S.;Lynnley Browning,U.S. Reports Agreement With UBS in Tax Case.

Previously UBS entered into a deferred prosecution agreement. (see here)  But an issue remained as to whether there was a conflict in Swiss law that could preclude the release of some information to the U.S. After all, what do you do when releasing information to the U.S. in one country might result in a criminal violation of the laws of that country.

Court decisions have previously looked at such conflicts in laws.  For example, in 1998 the U.S. Supreme Court considered a Fifth Amendment issue in the case of U.S. v. Balsys, a case where the witness argued that answering questions pursuant to an OSI (Office of Special Investigations of the Criminal Division of the US Dept. of Justice) subpoena might subject him to criminal prosecution by other countries.  The Court stated that "[s]ince the likely gain to the witness fearing foreign prosecution is thus, uncertain, the countervailing uncertainty about the loss of testimony to the United States cannot be dismissed as comparatively unimportant."  The Court in Balsys held "that although resident aliens are entitled to the same Fifth Amendment protections as citizen 'persons' the risk of their deportation is not sufficient to sustain a self-incrimination privilege intended to apply only to the United States government." Oyez here  

Some pre-Balsys courts used a balancing test to determine whether an Internal Revenue summons, that would subject individuals to criminal liability in another country, should be enforced. See U.S. v. First National Bank of Chicago, 699 F.2d 341 (7th Cir. 1983); U.S. v. Chase Manhattan Bank, 584 F. Supp. 1080 (S.D. N.Y. 1984).

Obviously reaching an agreement will resolve the immediate issue. But it remains to be seen whether this issue will be revived in some form in individual cases against U.S. citizens who may be accused of  using Swiss accounts to avoid U.S. taxation, although I cannot see a way that it could be.  It will also be interesting to see if other countries that may have served as tax havens for U.S. citizens will start to crumble.  In the meantime, there are probably many unhappy individuals in the U.S. who placed money in Swiss accounts years back thinking that the Swiss secrecy that they were noted for, would never be breached.

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In the News & Around the Blogosphere

Mary Flood, Houston Chronicle,Another Enron barge trial set for February

SEC Press Release, SEC Charges Hank Greenberg and Howard Smith for Roles in Alleged AIG Accounting Violations -

"Without admitting or denying the SEC's allegations, Greenberg has consented to a judgment enjoining him from violating the antifraud provisions of the Exchange Act, and from controlling any person who violates the reporting, books and records and internal control provisions of the federal securities laws, and directing him to pay a penalty of $7.5 million and disgorgement of $7.5 million."

Cynthia Hujar Orr Elected President of the National Association of Criminal Defense Lawyers (NACDL) here

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Welcome Home - Jamie Olis

The White Collar Crime Prof Blog sends a welcome home to Jamie Olis and his family.  See also Tom Kirkendall at Houston Clearthinkers here; Laurel Brubaker Calkins, Bloomberg, Ex-Dynegy’s Jamie Olis to Be Released After Five Years in Jail here.

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Madoff's CFO Pleads

Bernie Madoff's Chief Financial Officer entered a plea today to 10 counts that included fraud, money laundering, and other charges.  See Jack Healy, NYTimes, It Was All Fake,’ Madoff Aide Tells Court; David Vorceacos & Thom Weidlich, Bloomberg,  Ex-Madoff Finance Chief Frank DiPascali Pleads Guilty    He also reached a partial settlement with the SEC: 

Without admitting or denying the allegations of the SEC's complaint, DiPascali has consented to a proposed partial judgment, which if entered by the court would impose a permanent injunction against DiPascali and leave the issues of disgorgement and a financial penalty to be decided at a later time.

The SEC Press Release further states that:

According to the SEC's complaint, DiPascali helped Madoff cover his tracks in numerous nefarious ways. For instance, when Madoff grew concerned that showing positive returns every month would be suspicious, he occasionally instructed DiPascali to enter phony trades designed to lose money in order to make their investment strategy and returns more credible. In order to avoid scrutiny by sophisticated financial institutions, they made a practice of closing down accounts of investors who worked at such institutions. Madoff and DiPascali even went so far as to develop a phantom computer trading platform that would appear to reflect real trading. In the event of a surprise visit from outsiders requesting to observe real-time trading activity, one BMIS employee was to enter trades on a computer screen and another employee was to go into an office nearby and play the role of a counterparty trader in Europe.

It is hard to imagine that this could have gone on for as long as it did without someone realizing that it was just a man behind the Wizard's curtain.

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DOJ Looks for Top Fraud Attorney

Mike Scarcella, over at The National Law Journal reports that DOJ is looking for a "superstar" to lead the Fraud Division.  (see here)  One can imagine that many will be trying for this important position - after all being the top fraud attorney in the aftermath of an economic crisis is an incredible opportunity to serve the government. In looking for this "superstar"  it is hoped that the following qualities will be considered -

• Someone with respect for the judicial process and not someone who labels everyone a criminal prior to conviction
• Someone with believes in a fair fight - which means giving discovery to the defense in a timely manner - but who also recognizes the importance of protecting witnesses
• Someone who understands both the role of a prosecutor and defense attorney and the important role that the judiciary serves
• Someone who believes that prosecutors should be ministers of justice
• Someone who is willing to work long hard hours to bring fraudsters to justice
• Someone who is technologically adept to use the website and technology to empower DOJ and deter future criminality
• Someone who is willing to educate corporations and the less fortunate on applicable laws so that they can comply as opposed to violating the law
• Someone who will listen to the regulators and prosecute cases that need to be prosecuted

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In the News & Around the Blogosphere

DOJ Press Release, Federal Judge Sentences Defendants Who Perpetrated $10.9 Million Medicare Fraud HIV Infusion Scheme

Michael Braga, HeraldTribune.com, Nardelli sentenced to 4 years in prison

DOJ Press Release, Former U.S. Army Contracting Official Pleads Guilty to Accepting Bribes

Elizabeth Benjamin, The Daily Politics, Vance Mails On Madoff

Vesselin Mitev, law.com, NYLJ, Attorney to Plead Not Guilty to Grand Larceny Charges

DOJ Press Release, Second Defendant in Internet Scheme that Defrauded Trucking Companies Sentenced to Federal Prison, (55 months) (co-defendant received 70 months)

Tom Fowler, Houston Chronicle, Stanford gets a new lawyer; Brenda Sapino Jeffreys, Texas Lawyer, Stanford's Lawyers Want Assurance on Pay

DOJ Press Release, Glendale Man Sentenced to Over 7 years in Federal Prison for Running $14 Million Ponzi Scheme

DOJ Press Release, Ten Defendants Indicted in [alleged] $35 Million Tax Fraud Conspiracy; 3,300 False Tax Returns Filed in Names of Federal Prison Inmates

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Upcoming Conferences

NACDL, Testimonial Traps: Defense Strategies for Invoking the 5th Amendment in Civil Cases, Investigations & Other Proceedings (Participating Faculty - Ross Garber (Shipman & Goodwin), Benjamin D. Brown(Cohen Milstein), Pamela J. Marple (McDermott Will Emery LLP), Steven Salky (Zuckerman Spaeder LLP) Wed, August 19th, Washington, DC

Strafford, Foreign Corrupt Practices Act Investigations and Privacy Protection, August 11th here

American Conference Institute, Foreign Corrupt Practices Act - 22nd National Conference, Nov. 17-18 here (speakers and program here) (includes Mark Mendelsohn, Cheryl Scarboro, William B. Jacobson and others)

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In the News & Around the Blogosphere

Miami Herald, UBS, IRS still working out deal; Greg Allen, NPR, UBS Settlement Puts Spotlight On Tax Evasion

Reuters, Court turns down NY Times on Spitzer case wiretaps

Laurel Brubaker Calkins, Bloomberg, Ex-Dynegy’s Jamie Olis to Be Released After Five Years in Jail

Jordan Weissmann, BLT Blog, Obama Nominates Five New Judges, Three U.S. Attorneys

DOJ Press Release, Two Individuals Plead Guilty to Offering to Bribe U.S. Army Contracting Official in Afghanistan

Noeleen G. Walder, law.com,Judge Approves $15 Million in Fees in Madoff Matter

Zach Lowe, The American Lawyer, law.com, AIG's Former CEO, CFO to Pay $16.5 Million to Settle Fraud Charges

Chicago Tribune, Enron's Skilling in prison and on the English stage

AP, law.com, China Executes Two for Defrauding Investors

Barbara Shecter, Financial Post, Drabinsky gets 7 years, Gottlieb 6 for fraud (Ontario Superior Court)

Mark Fass, law.com, NYLaw Jrl, Prominent Attorney Charged With Witness Tampering Faces Heated Cross-Examination

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