Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

Sir Robert Allen Stanford is scheduled to be arraigned today on conspiracy, mail and wire fraud, money laundering and obstruction charges in Houston in the U.S. District Court for the Southern District of Texas. Stanford is represented by attorneys Dick DeGuerin and Sean Ryan Buckley, of the Houston firm of DeGuerin and Dickson.

According to the docket for the case, the Government obtained its 21-count indictment, which can be viewed here, last Thursday and promptly moved to seal (i.e. prevent public access to) it, and then unsealed it on Friday shortly before Stanford’s arrest.

The Court will likely revisit the issue of whether Stanford is entitled to release before trial. On Friday, the Court ordered co-defendants Mark Kuhrt and Gilberto Lopez released on a $100,000 unsecured bond. However, given Stanford’s considerable wealth and ties abroad, any amount of bond imposed in his case will undoubtedly be far higher, if Stanford is granted pre-trial release at all, that is. The U.S. District Court for the Eastern District of Virginia determined that Stanford posed a high risk of flight, and denied bond.

The case will be tried before U.S. District Judge David Hitter, a brief description of whom can be found here.

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The writers of Federal Criminal Defense Blog have been busy writing on other matter and apologize for the brief hiatus. Much has happened in the sphere of white collar crime even during our short absence, most notably developments in the two largest Ponzi schemes in U.S. history, and we have some catching up to do.

We’ll start with the second largest—an indictment indictment against billionaire Texas financier Sir Robert Allen Stanford, 59, was unsealed in the U.S. District Court for the Eastern District of Virginia on Friday according to the Associated Press  and the BBC. The 50-page indictment alleges that Stanford and six other defendants with allegedly perpetrated a $7 billion Ponzi-style fraud. It charges Stanford and the other defendants with 21 counts, including 7 counts of wire fraud, 10 counts of mail fraud, conspiracy to obstruct an investigation for the Securities and Exchange Commission, obstruction of an investigation by the SEC and conspiracy to commit money laundering. Defendants Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt are executives of Stanford Financial Group. Defendant Leroy King, a former bank regulator for the Caribbean island nation of Antigua and Barbuda, allegedly accepted more than $100,000 in bribes from the other defendants in order to allow the alleged scheme to continue.

The indictment alleges that the defendants sold certificates of deposit issued by Stanford International Bank, based in Antigua, to investors, promising large returns. The defendants allegedly made false claims to investors regarding the growth of Stanford Financial Group’s assets.

The scheme had approximately 30,000 investors. Stanford is alleged to have diverted more than $1.6 billion in investment funds in personal loans to himself. More than $1 billion in investment money is allegedly unaccounted for. Stanford is also charged in the indictment with allegedly conspiring to obstruct an SEC proceeding. Stanford Financial Group’s finance chief, James M. Davis, is cooperating with investigators. Davis has been charged with fraud and obstruction in a separate indictment.

Stanford was the owner of a newspaper, two restaurants, and a development company in Antigua, and was a cricket enthusiast and owner of the Stanford cricket grounds in Antigua. In 2008, Stanford staged a $20 million, winner-takes-all, match between a West Indian XI and England at the grounds. In 2006, Stanford became the first American to be knighted by Antigua and Barbuda.

Stanford is represented by attorney Dick DeGuerin, who has issued a statement to the press that Stanford is innocent of the charges. Stanford has made repeated statements as to his innocence and has alleged that no money was lost.

Stanford surrendered to the FBI on Thursday and had his initial appearance on Friday. U.S. Magistrate Judge Hannah Lauck determined that Stanford posed a flight risk and ordered him to remain in custody pending a future detention hearing in Houston. Several governments have frozen his assets. Stanford faces as much as 250 years in prison if convicted.

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As set forth in a detailed article in the National Law Journal, the Fourth Circuit and Ninth Circuit Court of Appeals have recently affirmed decisions upholding warrantless, suspicionless searches of laptop computers at international airports. See United States v. Arnold, 523 F.3d 941 (9th Cir. 2008), petition for reh'g en banc filed, No. 06-50581 (9th Cir. June 2, 2008); United States v. Ickes, 393 F.3d 501 (4th Cir. 2005). Courts have compared warrantless searches of laptops in customs inspections at a border or international airport to warrantless searches of luggage, suitcases, briefcases, pockets, papers and filmsat such locations.The government's power to conduct border searches is plenary, and does not require a warrant, probable cause or reasonable suspicion. See United States v. Montoya de Hernandez, 478 U.S. 531, 538 (1985). The United States Supreme Court has suggested that only some types of searches of persons, or searches carried out in a particularly "offensive" manner, might be unconstitutional. See Montoya,at 538-40; United States v. Ramsay , 431 U.S. 606, 618 n.13 (1977). No district court has yet ruled on whether the government must possess reasonable suspicion to search electronic data at the border, since all cases thus far in which the issue has arisen have held that reasonable suspicion to search existed (all have so far involved child pornography). See United States v. Irving, 434 F.3d 401 (2d Cir. 2005); United States v. Bunty, No. 07-641, 2008 WL 2371211, at *3 (E.D. Pa. June 10, 2008); United States v. McAuley, No. DR-07-CR-786(1), 2008 WL 2387979, at *4-*6 (W.D. Texas June 6, 2008). Defendants have attempted to distinguish computers from other personal property because of the massive amounts of data they can hold, invoking the First Amendment for expressive material, so far to no avail.

Other countries including the United Kingdom, Canada, Australia and China have conducted similar searches. All these cases have caused companies growing concern about how to protect their confidential information from the prying eyes of government agents. Several are putting policies in place to limit the electronic information officers and employees may take with them when they travel.

Congress may be preparing to take action, however. In June the Senate Judiciary Committee's Subcommittee on the Constitution held a hearing on border laptop searches entitled "Laptop Searches and Other Violations of Privacy Faced by Americans Returning from Overseas Travel." Subcommittee Chairman Senator Russ Feingold of Wisconsin expressed the view that the border-search exception to the warrant requirement should be limited. Witnesses before the Subcommittee recommended legislation requiring reasonable suspicion for laptop searches and probable cause for seizure of data, limits on the duration and location of such searches, and more express policies regarding searches and seizures by  United States Customs and Border Patrol.

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In an Opinion (available here) dated March 20, 2008, but released on Monday, May 12, the Eleventh Circuit affirmed the convictions and sentences of Joya Williams, a former Coca Cola employee, and one of her conspirators, Ibrahim Dimson.

After a lengthy factual recitation regarding this case which was prosecuted by the U.S. Attorneys Office in Atlanta and which involved the attempted sale of trade secrets by Williams and others to Pepsi, the Court found no error in the curtailed cross-examination of Williams’ co-conspirator since the cross-examination conducted extensively challenged the co-conspirator’s credibility.

In a more interesting challenge, and one that always seems to get the ear of the appellate courts, the defense contended that the district court improperly instructed the jury on the meaning of reasonable doubt by using an example “which had to do with open-heart surgery the judge had previously undergone.” Although the Eleventh Circuit doesn’t tell us more, the defense contended that the example amounted to unconstitutional burden shifting. When the example was given by the district court, he apparently informed the jury, following objection, to disregard his example, and gave the pattern reasonable doubt charge, which the jury is presumed to follow.

Finally, both Williams and Dimson challenged their sentences contending that the district court placed undue emphasis on one factor, the seriousness of the harm, and less weight on the other 3553 factors. In affirming the above-guideline sentences imposed, the Eleventh Circuit noted that, although U.S. v. Pugh, discussed at an earlier post here, provides that an unjustified reliance on a single 3553 factor might be a “symptom” of an unreasonable sentence, here the trial judge discussed several 3553 factors and the individual weight to be given to any one factor is within the trial judge’s discretion.

Both defendants challenged their sentences, 96 and 60 months respectively, based on the alleged unwarranted disparity with their cooperating co-defendant who received 24 months. The Eleventh Circuit cited the cooperation as a factor that plainly accounted for the different sentence and affirmed.

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