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

Westar Energy, the largest electrical utility in the State of Kansas, announced last week that it will pay former Chief Executive Officer, President and Chairman of the Board, David Wittig $36 million as an arbitration settlement relating to Wittig's compensation contract, as well as $3.1 million in attorney's fees and $2.7 million in stock compensation, according to the Topeka Capital-Journal. Westar's settlement with Wittig follows its settlement in the Spring with its former Vice President of Corporate Strategy, Douglas Lake for $21 million in unpaid compensation and $5.3 million in legal fees. Wittig and Lake claimed Westar violated their employment contracts by terminating them prematurely.

Image source: aggregateresearch.com

The compensation for legal fees was for Wittig's and Lake's defense of a criminal prosecution. In 2003, the men were charged in the U.S. District Court for the District of Kansas with conspiracy, circumventing internal accounting controls and falsifying books and records, honest services fraud, wire fraud, submitting false statements and engaging in monetary transactions derived from an unlawful activity. Their first trial ended in a mistrial in 2004 after the jury could not reach a verdict. They were convicted at their second trial in 2005, but the Eighth Circuit Court of Appeals reversed their convictions last year following the U.S. Supreme Court's decision regarding honest services fraud in U.S. v. Skilling.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In 2001, Pennsylvania tax attorney Nicholas Panarella, Jr., pled guilty to charges of honest services fraud. Mr. Panarella was alleged to have paid former Pennsylvania State Senator F. Joseph Loeper more than $330,000 as "consulting fees" to take actions which benefitted Mr. Panarella's tax-collection firm.

However, as a result of the Supreme Court's decision in U.S. v. Skilling relating to honest services fraud, the U.S. District Court for the Eastern District of Pennsylvania this week ruled that Mr. Panarella's actions were no longer criminal and that he was entitled to have his conviction reversed by means of a writ of coram nobis (Latin for "the error before us"), according to Philly.com.

Mr. Panarella was disbarred following his 2001 plea. Prior to his conviction, he assisted former Mayor of Philadelphia in recovering $51.9 million in back taxes. Joseph Loeper served 20 months in prison for obstructing a tax investigation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The U.S. Supreme Court yesterday denied the petition for certiorari by former international media mogul, Canadian citizen and British Lord, Conrad Moffat Black, as reported in the Washington Post.

Mr. Black was the CEO of Hollinger International, Inc., which owned newspapers worldwide. He was indicted (in an indictment made available by FindLaw which may be viewed here) with other officers and employees of Hollinger in the Northern District of Illinois in November of 2005 on 11 counts, in an original indictment which charged mail fraud conspiracy, wire fraud conspiracy and substantive counts of mail and wire fraud. The counts all referenced the "honest services" fraud statute, 18 United States Code section 1346. Testifying to the vigorousness of his defense, on July of 2007, a jury acquitted Mr. Black on 9 counts but convicted him on three others.

Mr. Black then challenged his convictions on appeal. In June of last year, the Supreme Court handed down its three "honest services" decisions, Skilling v. U.S., Black v. U.S., and Weyrauch v. U.S. In Skilling, the main decision involving former Enron President Jeffrey Skilling, the Court rejected the old "intangible right" to an employee's honest services theory and held that, in order to avoid being unconstitutionally vague, section 1346 applies to bribery or kickback schemes, and not to mere self-dealing by an employee. In Mr. Black's case, the Court unanimously held that the jury had not been properly instructed on honest services fraud at trial, and vacated his convictions and remanded. Then in October of last year, the Seventh Circuit Court of Appeals, in an opinion authored by distinguished Judge Richard Posner, struck two of the three remaining counts against Mr. Black, leaving him convicted on a single fraud count and a count for obstruction of justice. Mr. Black again appealed these two remaining convictions to the Seventh Circuit, which upheld them last December, and then to the Supreme Court, which has now declined to review them. Mr. Black is scheduled to be resentenced on June 24.

Source: McLean's.ca

• Email This
• Print
• Comments
• Trackbacks
• Share Link

New York Senator Joseph L. Bruno was indicted in January of 2009 on eight counts of fraud. A jury in the U.S. District Court for the Northern District of New York acquitted Bruno, who is now 81 years old and the former Republican Majority Leader of the New York State Senate, on five of the remaining charges and deadlocked on the sixth in December of 2009. The charges were based on allegations that Bruno allegedly took approximately $3 million in kickbacks from businesses seeking to do business in New York, as well as labor unions. In particular, Bruno s alleged to have accepted $280,000 in "consulting fees" from companies associated with Loudonville, New York, businessman Jared Abbruzzese. Bruno was sentenced to two years' imprisonment last May, but has remained free pending his appeal in the U.S. Court of Appeals for the Second Circuit.

Now the U.S. Attorney's Office has filed a brief with the Court of Appeals requesting that the dismiss the charges against Bruno and remand his case for a new trial, as reported in the Saratogan. The prosecution argued that Bruno's convictions under 18 United States Code Section 346--the honest services fraud statute--cannot stand following the U.S. Supreme Court's decision in U.S. v. Skilling, the case against former Enron executive Jeffrey Skilling, as the Blog has noted here. However, it maintains that it can obtain another indictment of Bruno under the statute, as amended by Skilling. The government contends that it will be able to prove a quid pro quo if Bruno is ordered retried. Bruno and his counsel have filed a brief with the Court of Appeals arguing that any retrial of Bruno would violate double jeopardy.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On June 24, the United States Supreme Court rendered its decision in the case of former Enron executive Jeffrey Skilling. The majority in U.S. v. Skilling, No. 08-2349, in an opinion authored by Justice Ruth Bader Ginsberg (which may be read in its 114 page entirety here), held that the "honest services" mail fraud statute, 18 U.S.C. §1346, applies to bribery and kickback schemes, and not to mere "undisclosed self-dealing by a public official or private employee," alone. The majority held that Skilling did not violate §1346 since, although the Government charged Skilling with conspiring to de-fraud Enron’s shareholders by misrepresenting the company’s financial health and therefore profiting, the government never alleged that Skilling solicited or accepted any payments from third parties in exchange for making the misrepresentations.

The recent Skilling decision is already having an impact on federal prosecutions. As reported by Law.com, this week, Judge Ellen Segal Huvelle of the U.S. District Court for the District of Columbia told the parties in the prosecution of Kevin Ring, a former associate of convicted lobbyist Jack Abramoff, that the Court would grant Ring more time to file a motion for judgment of acquittal in light of Skilling. Ring was charged with bribery and tried last year, however the trial ended in a hung jury. The Court intentionally delayed Ring's retrial to await the Supreme Court's decision in Skilling and the cases of Black v. U.S. and Weyhrauch v. U.S. The prosecution has announced its intent to push forward with a second trial of Ring.

In Georgia news, attorney M. Dewey Bain, of Sugar Hill, Georgia, was sentenced to 5 years and 3 months imprisonment today in the U.S. District Court for the Northern District of Georgia for defrauding clients--including a 97 year-old woman--out of $4.3 million, as reported by the Atlanta Journal-Constitution. Bain entered into trust agreements with clients in which Bain falsely promised he would invest their monies in safe accounts, but instead fraudulently diverted the monies to his own personal use.

In Southeastern news, Snamprogetti Netherlands B.V.--yes, that Snamprogetti Netherlands B.V.--has agreed to pay $240 million in penalties to the government for alleged violations of the Foreign Corrupt Practices Act (FCPA) for allegedly bribing officials in Nigeria to obtain engineering, procurement and construction (EPC) contracts to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, according to an FBI press release. Snamprogetti is a Dutch corporation and a wholly owned subsidiary of Snamprogetti S.p.A., an Italian corporation. Snamprogetti was alleged, along with Kellogg Brown & Root Inc. (KBR), Technip S.A. (Technip), and a Japanese engineering and construction company to have engaged in a joint venture that was awarded four EPC contracts by Nigeria LNG Ltd. (NLNG), between 1995 and 2004 to build LNG facilities on Bonny Island. Snamprogetti allegedly caused the venture to hire two agents, Jeffrey Tesler and a Japanese trading company, to pay approximately $172 million in bribes to Nigerian officials. The deferred prosecution agreement was filed today in the U.S. District Court for the Southern District of Texas. Snamprogetti also reached a settlement of a related civil action by the SEC.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

According to Lyle Denniston at SCOTUSblog,  Ashby Jones at the Wall Street Journal Law Blog, and Professor Ellen S. Podgor of Stetson University College of Law and the White Collar Crime Prof Blog, the U.S. Supreme Court seemed more interested in the jury selection/fair trial issues in yesterday's oral arguments in the case of former Enron CEO Jeffrey Skilling, Skilling v. U.S., Case No. 08-1394 then it did in the constitutionality of 18 U.S.C. 1346, the federal honest services fraud statute. The transcript of the oral argument may be read here. After lengthy questioning regarding the jury selection at Skilling's trial by Justice Stephen G. Breyer and others, Chief Justice John G. Roberts, Jr., raised the question of honest services. Skilling's counsel, Sri Srinivasan, appeared to have adopted the strategy of arguing for a new trial based upon juror bias relating to the Enron scandal rather than a reversal of Skilling's convictions for honest services fraud. Srinivasan argued that the Department of Justice was interpreting the law broadly enough to reach virtually any falsehood told by an employee.

Deputy Solicitor General Michael R. Dreeben argued for the government. Dreeben argued ways in which the Court could interpret the honest services fraud statute in order to avoid holding it unconstitutionally vague. Justice Anthony Kennedy stated to Dreeben that it was Congress' job to rewrite the statute and Justice Antonin Scalia remarked on the excessive scope of the statute.

The Court's decision in the case is expected this spring or summer. The parties' arguments regarding honest services fraud largely mirrored the arguments in the two other challenges to 1346 which the Court had heard this term. Commentators have opined that 1346 may not survive without being sent to Congress for reshaping.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As noted by Ashby Jones at the Wall Street Journal Law Blog, the U.S. Supreme Court will hear oral arguments in the case of U.S. v. Skilling on Monday at 1 p.m., Eastern Time. The central issue to be argued to the Court is whether the federal honest services fraud statute, 18 United States Code 1346, is "unconstitutionally vague." Mr. Jones rounds up commentary from around the blogosphere on the case.

As noted by Mr. Jones, the honest services fraud statute, Section 846, criminalizes the deprivation of another of the "intangible right to honest services." Congress enacted Section 846 22 years ago following the Supreme Court's decision in McNally v. U.S, which had ended prosecution for honest services as a part of mail or wire fraud. The problem is that Section 846 does not define "honest services." The honest services provision is a favorite of prosecutors, especially in cases where deprivation of money or property, as required in traditional mail or wire fraud cases, may be difficult to establish.

Jeff Skilling is the former Chief Executive Officer of Enron Corporation, which crashed into sudden bankruptcy in 2001. Skilling, former CEO Kenneth Lay and others were charged with conspiracy, wire fraud, making false statements to auditors and insider trading. In May of 2006, Skilling was tried in the U.S. District Court for the Southern District of Texas and the jury found him guilty on 19 counts. The District Court sentenced him to 292 months imprisonment and ordered him to pay $45 million in restitution.

Skilling appealed to the U.S. Court of Appeals for the Fifth Circuit, arguing that the government used an invalid theory of "honest services" fraud to convict him. The indictment alleged that Skilling conspired with others to, among other things, deprive Enron and its shareholders of the right to the honest services owed by its employees. The Fifth Circuit affirmed Skilling's honest services fraud conviction, noting that it had created an exception to the honest services fraud statute in the related Enron case of U.S. v. Brown, 459 F.3d 509 (5th Cir.2006) where an employer creates a goal, aligns employees' interests to achieve the goal and higher-level management sanction improper conduct to reach the goal. However, the Fifth Circuit held that Skilling's conduct had not been sanctioned by the corporation.

Skilling has appealed to the Supreme Court, arguing that lower rulings on the honest services fraud statute have been “a hodgepodge of oft-conflicting holdings, statements, and dicta” that “only the most discriminating lawyer or judge” could understand. Attorney Sri Srinivasan of O’Melveny & Myers will argue on Skilling's behalf before the Court.

Another case calling into question the constitutionality of Section 1346 is the case of newspaper magnate Conrad Black. The Court heard oral arguments in Black's case last December.

• Email This
• Print
• Comments
• Trackbacks
• Share Link