Two Former Georgia Department of Family and Children Services Employees Sentenced for EBT Fraud

The Atlanta Crime Examiner reports that Gene Tell and Kristy Nicole Williams were sentenced last Thursday in the U.S. District Court for the Northern District of Georgia. Tell and Williams, employees of the DeKalb County office of the Georgia Department of Family and Children Services (DFCS), were charged with defrauding the U.S. Department of Agriculture of nearly $600,000. The defendants took the funds through DFCS' electronic benefits transaction (EBT) system.

Georgia Resident and DOD Employee Charged with Bribery

As reported by Reuters, Desi Deandre Wade, of Climax, Georgia, was a chief of fire and emergency services for U.S. Department of Defense, based in Kabul, Afghanistan. Wade has been charged with allegedly accepting a $95,000 bribe from a contractor in exchange for providing the contractor with quotes from competing bidders.

Wade was arrested last week in Atlanta while attending a Fire Rescue International Conference.

Marietta Executive Pleads Guilty in Rhode Island In Navy Kickback Scheme

The Washington Post reports today that Patrick Nagle, of Marietta, Georgia, pled guilty last week in the U.S. District Court for the District of Rhode Island to conspiracy to commit bribery. Nagle was formerly the Chief Executive Officer of Advanced Solutions for Tomorrow (AST), which was awarded contracts by the U.S. Navy. The prosecution alleged that Nagle paid inflated invoices by two subcontractors who were given work on Navy contracts by AST. The charges against Nagle allege that the kickback scheme cost the Navy between $7 and $20 million.

Image source: coloradoright.wordpress.com

Former CEO of Kansas Utility Westar Energy Receives $36 Million Settlement, Plus $3.1 Million in Legal Fees for Dismissed Criminal Prosecution

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.

Former PA Attorney Nicholas Panarella Has Honest Services Fraud Conviction Reversed After 10 Years

 

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.

 

Harris County, Texas, Commissioner Faces Second Trial on Bribery and Other Charges Following Mistrial

Jerry Eversole, a Harris County (Houston), Texas, Commissioner, was charged in the U.S. District Court for the Southern District of Texas with conspiracy, accepting bribes and filing false income tax returns in 2003 and 2004. Eversole was alleged to have accepted $100,000 in gifts from a developer, Michael Surface, in exchange for being awarded County contracts.

Eversole was tried on the charges back in March. The defense put up no evidence of its own at trial. Nevertheless, the jury, during deliberations, raised questions about Eversole's friendship with Surface and the line between friendship and criminal conspiracy. On March 30, 2011, the Court declared a mistrial after jurors deadlocked on the charges. Eversole has spent $1.1 million on his defense. His second trial is scheduled to commence on October 24. He has just $51,000 remaining in legal defense funds.

Image source: examiner.com

Supreme Court Declines to Hear Conrad Black's Appeal of His Two Remaining Convictions

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

Kentucky v. King, or The Police Know Exigent Circumstances When They Hear Them

 

Police officers set up a controlled buy of crack cocaine at an apartment complex in Kentucky and observed the deal take place. The officers then moved to intercept the suspect before he re-entered his apartment. The officers heard a door shut and detected an alleged strong odor of marijuana outside of two apartment doors, although they did not know which door the suspect had entered. The officers banged on the door of the apartment to the left and announced themselves. The officers then allegedly heard the sound of items being moved in the apartment. The officers announced that they were going to enter the apartment and kicked the door in, where they found Hollis King, his girlfriend and a guest who was smoking marijuana. The officers conducted a protective sweep of the apartment, discovering marijuana and powder cocaine in plain view. In a subsequent search, the officers discovered crack cocaine.

The police later entered the apartment to the right, which was the actual apartment which the suspect had entered.

King was charged with trafficking controlled substances and filed a motion to suppress the evidence obtained from the search of his apartment without a warrant. The Kentucky Circuit Court denied the motion and King entered a guilty plea and was sentenced to 11 years’ imprisonment. King appealed, and the Kentucky Court of Appeals affirmed the Circuit Court’s denial of his motion to suppress, holding that the officers’ warrantless entry into the apartment was justified based upon “exigent circumstances” because the officers believed that evidence would be destroyed. However, the Kentucky Supreme Court reversed, questioning whether the mere sound of people moving inside an apartment was sufficient to support a conclusion that evidence was being destroyed. It then held that the search was not justified by exigent circumstances because it was reasonably foreseeable that the occupants of the apartment would destroy evidence when the police knocked on the door and announced themselves. The Commonwealth of Kentucky then took its turn to appeal, and the U.S. Supreme Court granted certiorari.

In Kentucky v. King, which may be read here, in an opinion authored by Justice Samuel Alito, the majority noted the long-established exception to the Fourth Amendment’s requirement that searches and seizures without a warrant are presumptively unreasonable where “the exigencies of the situation make the needs of law enforcement so compelling that [a] warrantless search is objectively reasonable under the Fourth Amendment.” (citing Mincey v. Arizona, 437 U.S. 385, 394 (1978)). “Exigent circumstances” can arise where there is a need to prevent the “imminent destruction of evidence.”

However, the Court also recognized that an exception to the exception had developed—the police cannot rely on the need to prevent the destruction of evidence where the exigent circumstances were created or manufactured by the police themselves. (Citing United States v. Chambers, 395 F.3d 563, 566 (6th Cir. 2005); United States v. Gould, 364 F.3d 578, 590 (5th Cir. 2004)). The majority held that this exception unreasonably shrinks the exigent circumstances exception to the warrant requirement, since the presence of law enforcement always “create” exigent circumstances where persons are engaged in illegal conduct.

The Court then ruled that where the conduct of the police is reasonable and they do not violate the Fourth Amendment prior to the exigent circumstances arising, a warrantless entry to prevent the destruction of evidence is allowed. The majority noted that “When law enforcement officers who are not armed with a warrant knock on a door, they do no more than any private citizen might do. And whether the person who knocks on the door and requests the opportunity to speak is a police officer or a private citizen, the occupant has no obligation to open the door or to speak.” (Citing Florida v. Royer, 460 U.S. 491, 497-98 (1983)). The Court proceeded to reversed the decision of the Kentucky Supreme Court.

The Court’s actual holding in King, which has been discussed on NPR, is actually understandable—police do not “create” or “manufacture” exigent circumstances where they act reasonably, which understandably includes knocking on a door to in pursuit of a fleeing suspect. However, the concerns over the implications of King are also understandable. The decision suggests that sufficient exigent circumstances exist to search a premises where they knock and announce their presence, although hopefully lower courts will require something more when applying the decision.

The particular facts of the case itself are also troubling. The police in King searched the wrong apartment. In addition, is the mere sound of things being moved in an apartment sufficient to support a conclusion that evidence is allegedly being destroyed and to create exigent circumstances to search, especially where police are not certain who the occupants of the apartment are?

 

Associate of Former Arizona Representative Rick Renzi Sentenced to 3 Years' Probation for Conspiracy and Embezzlement; Follows Acquittal of Mr. Andrew Beardall on All Charges

Yesterday, Dwayne Lequire, a former accountant at an insurance firm run by former Republican U.S. Representative for Arizona Rick Renzi was sentenced to three years probation in the U.S. District Court for the District of Arizona, according to KTAR.com.

Representative Renzi represented Arizona's 1st Congressional District until declining to seek re-election in 2008. He is alleged to have siphoned off approximately $400,000 from his family insurance business based in Sierra Vista, Arizona, to finance his Congressional campaign. He was indicted in a 47 count indictment relating to the insurance conduct and to a land swap which was unsealed in February of 2008. Last year, the trial court suppressed the wiretap evidence gathered against Representative Renzi, holding that Federal Bureau of Investigation agents and federal prosecutors ``conducted an unreasonable wholesale interception of calls they knew to be attorney-client communications.'' Representative Renzi has challenged the indictment in the Ninth Circuit Court of Appeals, and the criminal proceedings are on hold pending the appeal.

Lequire was convicted in July on eight counts of embezzlement. He was alleged to have diverted customers' insurance premiums to Representative Renzi. Lequire did not benefit from the activity, however.

Another associate of Representative Renzi, Andrew Beardall of Rockville, Maryland, was charged with conspiracy and two counts of insurance fraud for allegedly helping Representative Renzi cover up the transfer, however Mr. Beardall was subsequently acquitted on all charges.

(Postscript: It is the Blog's understanding that Mr. Beardall has filed a Hyde Amendment petition following his acquittal and we wish him and his counsel success in their pursuit).

Investigations and Numerous Potential Challenges Grow Out of Case Against Former Judge Jack Camp

Many are familiar with the case of former Senior United States District Judge Jack T. Camp, who entered a plea of guilty on November 19, 2010, to  one count of aiding and abetting a felon's possession of cocaine, a painkiller and marijuana, as noted in an article in today's Atlanta Journal-Constitution. The charges arose from conduct involving an exotic dancer, cocaine,  marijuana and prescription narcotics.

U.S. Attorney for the Northern District of Georgia Sally Quillian Yates announced yesterday that the government is investigating cases Judge Camp presided over to determine whether or not the cases could have been influenced by drug use or an alleged bias against African Americans. Former Judge Camp has admitted to drug use, but has denied that his use interfered with court business. Ms. Yates stated that the government will not oppose requests by defendants for resentencing if the defendants were sentenced during the five month period in which former Judge Camp admitted to using drugs. Camp presided over 16 sentencings and one trial during this period.

The allegations of racial bias come from former Judge Camp's girlfriend, Sherry Ann Ramos, and Ramos' landlord. His attorney, Bill Morrison of Jones Morrison & Womack, has stated that former Judge Camp has assisted the government to the fullest extent possible, and acted free from alleged racial bias.

Investigators have found evidence that former Judge Camp sentenced women in certain cases well below their recommended sentencing ranges. Judge Camp's alleged biases could call into question cases dating back to 1988, when he was appointed to the bench.

Camp is scheduled to be sentenced on March 4, 2011, by Senior U.S. District Judge Thomas Hogan, a Washington judge assigned to the case by U.S. Supreme Court Chief Justice John Roberts. He faces a maximum sentence of four years in prison. Attorney Craig A. Gillen of Gillen Withers & Lake LLC observed that Mr. Morrison did a fantastic job in negotiating on behalf of Judge Camp. Mr. Gillen also noted that the deal was not negotiated with the U.S. Attorney's Office for the Northern District of Georgia, but directly with Washington.

The Acquittal of Army Col. Robert Morris and the Debate Over the Hyde Amendment

In 1999, United States Army Colonel Robert Morris, then a Lieutenant Colonel, was targeted by the State Department and the Department of Justice over his charitable non-profit organization, Partners International, as Tod Robberson of the Dallas Morning News informed readers in a Monday editorial. At the time, according to Robberson, Federal investigators were investigating whether alleged charitable organizations participating in a program under which the organizations could obtain supplies from decomissioned military bases were, in turn, illegally selling the supplies for profit. According to Colonel Morris' impressive biography, Partners International's projects "included support to an eye clinic in Zimbabwe, providing medical supplies to a women and children’s hospital in Grenada, Human Rights training for international military officers, and support to homeless shelters, battered women’s shelters, Native American programs and the disabled."

Proving that no good deed goes unpunished, as Robberson writes, Colonel Morris was subsequently indicted in the Northern District of Texas, despite a two year investigation by the Army which concluded that Colonel Morris had not engaged in any wrongdoing. The government moved the case to Georgia, where the jury acquitted Colonel Morris following trial after deliberating for only 45 minutes.

Unfortunately, Colonel Morris accumulated close to $300,000 in legal and other expenses as a result of the investigation and prosecution. His elderly parents cashed in their insurance policies and took additional mortgages on their home to help fund his defense. Colonel Morris would not have been able to afford his defense at all if former presidential candidate and president of EDS H. Ross Perot had not donated to his defense. Colonel Morris happily received a promotion to full Colonel from the Army following his acquittal, but his ordeal later caused him to retire and to end a model career which could have led to his promotion to Brigadier General.

Robberson laments the very lamentable fact that Colonel Morris has not received a dime to compensate him for the exhorbitant and ruinous expenses caused by the government's ill-conceived prosecution, and cites a USA Today article discussing Colonel Morris' travails and the Hyde Amendment, an act designed with the intent to award wrongfully prosecuted and exonerated defendants their attorney's fees and legal expenses. As the article notes, the Hyde Amendment, while well-intentioned, is practically toothless, since the standards for granting relief are exceptionally high. It notes the infrequency of Hyde Amendment awards since the Amendment was passed in 1997.

Six Indicted for Alleged Medicare Fraud in South Georgia; Augusta Man Indicted for Alleged Fraud from Federally-Funded Meals for Children Program

Federal criminal activity has been brisk in the Southern District of Georgia. First, six defendants were charged with conspiracy to defraud Medicare and money laundering, according to a press release from the U.S. Attorney's Office. The charges were the result of a nationwide investigation which included the Federal Bureau of Investigation (FBI), the Department of Health and Human Services, Office of the Inspector General (HHS-OIG), and Immigration and Customs Enforcement (ICE) which has resulted in the arrests of more than 35 defendants across the country.

The government has alleged that, beginning in 2006, the defendants allegedly opened five sham medical clinics in Savannah, Macon and Brunswick, and allegedly stole the identities of physicians and Medicare beneficiaries. The defendants are alleged to have submitted over $4 million in false claims to Medicare for services which were allegedly never provided. Nationwide, the scheme is alleged to have cost Medicare $163 million. The Georgia defendants are also charged with allegedly laundering the proceeds through various shell corporations.

Later in the week, an Augusta man was indicted for allegedly defrauding a program which provided meals to low income children in the Savannah River area under the Federal Head Start program of tens of thousands of dollars.

 

Federal Prosecutors Observe "No Touch" Ruling on Possible Retrial of San Diego Councilman for Alleged Honest Services Fraud; Former Alaska Chief of Staff to Have Honest Services Conviction Dismissed

Last week was a good one for public officials charged with Federal crimes. First, the U.S. Attorney's Office for the Southern District of California announced that it would not seek a second trial of former San Diego Councilman Michael Zucchet on alleged honest services fraud charges pursuant to 18 U.S.C. 1346, relating to political contributions from the owner of a strip club, as reported by the Los Angeles Times. Mr. Zucchet was indicted with two other City Council members and an aide in 2003. The government alleged that the Council members had a meeting with a lobbyist for the strip club owner for the alleged purpose of changing the City's "no touch" ordinances relating to strip clubs. The Council members, however, argued that they reported the contributions on their financial disclosure forms. The government's decision was prompted by the U.S. Supreme Court's recent decision in U.S. v. Skilling, No. 08-2349, in which, as we have noted,  the Court 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.

Councilman Charles Lewis died before trial. Mr. Zucchet and Councilman Ralph Inzunza were convicted by a jury following trial in July of 2005. However, U.S. District Judge Jeffrey Miller dismissed the jury's guilty verdict on seven counts against Mr. Zucchet. The Judge permitted the government to retry Mr. Zucchet on the two remaining counts. The Ninth Circuit Court of Appeals upheld the district court's ruling on appeal. Mr. Inzunza has also appealed his convictions. Mr. Zucchet resigned from the Council soon after his conviction, and is currently General Manager of the San Diego Municipal Employees Association.

Then, according to the Achorage Daily News, the U.S. Attorney's Office for the District of Alaska announced that it would agree to the dismissal of the honest services fraud conviction of Jim Clark. Mr. Clark was the former Chief of Staff to Alaska Governor Frank Murkowski, a lobbyist and attorney, and was once viewed as the most powerful unelected official in Alaska. The U.S. Attorney's Office announced that Mr. Clark's 2008 guilty plea was to a felony that no longer exists, pursuant to the Supreme Court's Skilling decision. Mr. Clark pled guilty to alleged conspiring with former officials of the defunct oil-field services company Veco Corp. to channel $68,550 in illegal contributions to Governor Murkowski's political campaign -- without the Governor's knowledge. He is expected to be a witness for the government in a possible upcoming trial of State Representative Bruce Weyhrauch on bribery, extortion and conspiracy charges. Mr. Clark's law license, which was suspended following his guilty plea, is expected to be reinstated by the Alaska Supreme Court.

High Crimes, Shrimp and Vodka: The Senate Trial of Judge Thomas Porteous

Very balanced pre-trial coverage and background of the U.S. Senate trial of Federal Judge Thomas Porteous can be found on Newsy.com, courtesy of a reader.

As reported at NOLA.com, during Judge Porteous' trial last week, the 12 member Senate committee heard testimony regarding allegations that a bonding company, Bail Bonds Unlimited, provided free vehicle repairs, buckets of shrimp and bottles of vodka to Judge Porteous while he was a State judge in Jefferson Parish Louisiana. Judge Porteous is alleged to have performed favors for the bonding company in return. Members of the House of Representatives serving as prosecutors also presented evidence that Judge Porteous allegedly omitted assets and gambling debts from bankruptcy filings, and used the false name "G.T. Ortous" in the filing.

There was also testimony that Judge Porteous asked Jefferson Parish attorney Jacob Amato in 1999 to help defray part of the cost of Judge Porteous' son's wedding at the same time that Judge Porteous was presiding over a multi-million dollar legal dispute between Lifemark Hospitals and Liljeberg Enterprises, in which Amato represented Liljeberg. Amato was alleged to have put $2,000 in an envelope for Judge Porteous' secretary.

Judge Porteous' attorneys argued that the bankruptcy false name was intended to prevent embarrassing publicity, and presented expert testimony that the omissions from the filings were not unusual. They also presented a Loyola University Law School Professor, who testified that, until last year, Louisiana's rules on gifts and meals for judges were fairly vague, and that State judges regularly received lunches and holiday gifts from lawyers practicing before them. Evidence was also presented that Lifemark retained attorney Donald Gardner in its dispute with Liljeberg for $100,000 solely based on Gardner's familiarity with the Judge. Gardner kicked back $30,000 of the fee to the attorney who recruited him. Judge Porteous' counsel argued to the committee that the allegations against Judge Porteous are not the sort of conduct which the Founding Fathers intended impeachment for--treason and high crimes and misdemeanors. Counsel emphasized that Judge Porteous was never charged with any crime relating to the alleged conduct, and that most of the conduct occurred before he was appointed to the Federal Bench.

The committee consists of six Democrats and six Republicans. The full Senate will determine whether Judge Porteous will be impeached during its lame duck session in November. If the Senate votes in favor of impeachment, Judge Porteous will become the eighth Federal judge to be removed from office in U.S. history.

Rascos Give Up the Fight; U.S. Senate Assumes Role of a Court for Impeachment Trial of Louisiana District Judge G. Thomas Porteous, Jr.

We have commented on the case of Alfredo and Niurka Rasco of South Georgia, who were charged in a $6.5 million Medicare fraud scheme. Well, despite a heated and well-founded defense against the charges based upon illegal use of immunized evidence by the government, Mr. Rasco and his wife pled guilty to the charges against them last week during their trial, according to a press release by the U.S. Attorney's Office for the Southern District of Georgia. Mr. and Mrs. Rasco face maximum terms of imprisonment of 12 years and 6 months respectively.

In other news, the U.S. Senate will convene next week to hold an impeachment trial of U.S. District Judge G. Thomas Porteous, Jr., of the Eastern District of Louisiana according to the National Law Journal. Judge Porteous is charged with corruption. Specifically, Judge Porteous is charged with accepting meals, trips and other gifts from bail bondsman Louis Marcotte III and his sister Lori Marcotte in return for giving the Marcottes and their clients special treatment while he was a state court judge. Judge Porteous is also alleged to have made false statements to the Senate and to the FBI in 1994 regarding his past.

Judge Porteous' attorneys are vigorously defending him, however, pointing out that much of the conduct charged against Judge Porteous occurred prior to his appointment to the bench. Furthermore, a federal grand jury had investigated Judge Porteous as part of wide-ranging probe into Louisiana corruption, however no charges resulted. The U.S. Department of Justice also decided to drop the case against Judge Porteous. Judge Porteous' attorneys have denied any wrongdoing by Porteous, and state that he has done nothing to justify his removal from office.  The defense also contends that the FBI and the Senate were aware of the allegations against Judge Porteous prior to voting to confirm his appointment.

A fascinating fact is that Congress is also the nation's least used court. The trial of Judge Porteous will be the Senate's first since the impeachment trial of President William Jefferson Clinton (who appointed Judge Porteous to the bench) in 1999, and the first of a federal judge since 1989. The U.S. House of Representatives has considered bringing impeachment proceedings against federal judges in the interim, but the judges had resigned before the proceedings could be brought. Judge Porteous was referred to the Senate for impeachment by the Judicial Conference of the United States, led by Supreme Court Chief Justice John Roberts Jr., in June of 2008. A committee of 12 senators will serve as both judges and jurors at his trial. Members of the House will serve as prosecutors, or "managers." The Senators will vote on whether to convict Judge Porteous, with a two-thirds majority required to convict. Any of the Senators may question witnesses following examination and cross-examination by counsel. The Senate Committee will first gather evidence for consideration by the full Senate. Each side will have 20 hours to put on evidence. The Senate can only vote to impeach Judge Porteous, and cannot impose any sentence of imprisonment or fine. The trial will take place in the same chamber the Senate uses for confirmation hearings.

Acquittals in Ponzi Prosecution Across the Pond: Jury Acquits Imperial Consolidated Execs Fraser and Brook

UK citizens Lincoln Julian Fraser and Jared Bentley Brook, former executives with the Imperial Consolidated Group (ICG) were acquitted today at the Old Bailey at the conclusion of a nearly nine month trial, according to the Guardian and the Telegraph. The jury acquitted Mr. Fraser and Mr. Brook of one count of conspiracy to defraud, and deadlocked over another conspiracy charge and a fraudulent trading charge. 

The fraud charged against Mr. Fraser, Mr. Brook, ICG (headquartered on a Royal Air Force base in Lincolnshire, England, with offices in Europe, Australia and the Caribbean) and others, involved offshore investments in South American mining operations and havens such as the British Virgin Islands and Greneda, in what has been alleged to be Britain's largest Ponzi scheme. From 1998 through 2002, approximately 3,000 investors around the world invested nearly £253 with ICG on the promise of high-yield returns of up to 36 percent and "total asset protection." The loss to investors is alleged to be £150 million. One investor alone, Yuichi Yoshida of Japan, invested £16.7 million. The defendants were also alleged to have provided false information to investors, including falsely inflating the alleged value of mining interests in South America, and publishing false or misleading performance figures in the Financial Times. The defendants allegedly used investment monies to cover overhead and expenses, and for investments in failed mining interests in Argentina.

ICG's business declined precipitously when a Spanish newspaper article allegedly linked ICG to Osama bin Laden in 2001. The company failed in 2002.

The British Department of Trade and Industry disqualified Mr. Fraser and Mr. Brook from acting as directors of ICG for alleged unfit conduct relating to a failed hotel business in Morecambe, Lancashire, England. 

The Crown has attempted to prosecute Mr. Fraser and Mr. Brook three times over eight years. The first trial of Mr. Fraser and Mr. Brook two years ago ended in stalemate, forcing the judge to discharge the jury. The second trial was abandoned by the Serious Fraud Office (SFO) as a result of legal errors. The SFO has seven days in which to choose to seek a retrial, but has announced that it will cease its efforts to prosecute Mr. Fraser and Mr. Brook, the investigation and prosecution of whom has cost British taxpayers approximately £10 to £20 million.

A co-defendant, Bill Godley, pled guilty to a charge of conspiracy to defraud in 2007. Godley claimed to have posed as a dynamic entrepreneur and to have transformed ICG into an international business empire. Godley is expected to receive approximately three years in gaol.

Mr. Fraser's and Mr. Brook's former solicitor, Michael John Harvey, was struck off by the British Law Society in a disciplinary proceeding for alleged involvement in Mr. Fraser's and Mr. Brook's dealings.

The Government Goes After Wall Street Over the Financial Crisis, Morgan Stanley Now Under Investigation for "Dead President" Deals

 As reported in the Wall Street Journal and virtually everywhere else, Morgan Stanley has joined Goldman Sachs as the latest target of the federal government's criminal investigation of financial firms relating to the financial crisis which began in 2007, under the government's theory of criminality of failing to disclose to investors that the firms were "betting" on the failure of certain collateralized debt obligations, or CDOs. According to Federal prosecutors, Morgan Stanley designed CDOs, while at the same time Morgan Stanley's trading desk allegedly placed bets that their value would decrease. Similar to the government's investigation of Goldman Sachs, the investigation, headed by the U.S. Attorney's Office for the Southern District of New York, is focusing on whether Morgan Stanley made proper representations to investors about its role.

The investigation has focused in particular on two investments created in 2006, named after former U.S. Presidents James Buchanan and Andrew Jackson, known as the "Dead Presidents" deals by traders. Each deal issued approximately $200 million in bonds. Morgan Stanley did not market the deals to customers--the Jackson deal was underwritten and marketed by Citigroup and the Buchanan deal was underwritten and marketed by UBS AG. Citigroup has stated that it is cooperating with the government in the investigation.

However, as in the investigation of Goldman, prosecutors face an uphill climb against numerous obstacles and defenses. Morgan Stanley did make money on its "Dead Presidents" deals, however it lost $9 billion overall on mortgage-backed securities in 2007. Morgan Stanley has informed the media that it did not mislead investors, and that it has examined the "Dead Presidents" transactions and that it does not believe that the investigation has any substance. The allegations are based on documents which Morgan Stanley voluntarily provided to the U.S. Securities and Exchange Commission in response to a subpoena. 

Both the Goldman and Morgan Stanley criminal investigations were the result of a civil fraud investigation of a dozen Wall Street firms begun by the SEC in 2009. Analysts have stated that all Wall Street investment banks have been receiving subpoenas about CDOs and CDO marketing. The SEC has been inquiring with firms regarding whether any of their clients were betting against CDOs.

Justice John Paul Stevens on Criminal Law

Supreme Court Justice John Paul Stevens, who notified President Barack Obama last week that he will be stepping down from the Court when its current term is over in June or July, has written nearly 400 opinions over his nearly 35 year tenure on the Court. Justice Stevens has weighed in on many occasions on criminal law issues over the past three and a half decades. Contrary to the label commonly applied to Justice Stevens as a "liberal," like all Supreme Court Justices, he has sided with the government in criminal cases more often than not. However, Justice Stevens has been the originator of many opinions which have upheld and furthered the rights of the individual in criminal cases, some of the more notable of which are outlined below.

On sentencing issues, Justice Stevens authored the opinion in Apprendi v. New Jersey, 530 U.S. 466 (2000), the forerunner of the Court's landmark decisions in Blakely v. Washington, 542 U.S. 295 (2004) andUnited States v. Booker, 543 U.S. 220 (2005), in which the Court first famously held, in regard to New Jersey's "hate crimes" statute, that "[t]he Constitution requires that any fact that increases the penalty for a crime beyond the prescribed statutory maximum, other than the fact of a prior conviction, must be submitted to a jury and proved beyond a reasonable doubt."

Justice Stevens also issued the Court's opinion in Gall v. U.S., 552 U.S. 38 (2007), which sets forth the definitive current process for federal criminal sentencing. The Court in Gall held that district courts cannot consider the ranges recommended by the  U.S. Sentencing Guidelines as presumptively reasonable, must consider the extent of any departure or variance from the sentencing range recommended by the Guidelines, and must explain the appropriateness of any unusual variance, and that appellate courts review all sentences imposed by a district court under a deferential abuse-of-discretion standard, reviewing for any significant procedural errors and for substantive reasonableness of the sentence. To calculate a defendant's sentence, a district court must first correctly calculate the applicable Guidelines range, then should consider all of the factors under 18 U.S.C. § 3553(a), and if the court determines to sentence the defendant outside the advisory Guidelines range, it must consider the extent of the deviation and adequately explain the sentence.
 
In regard to searches under the Fourth Amendment, Justice Stevens held that a search of a vehicle incident to a defendant's arrest could not be justified under circumstances where the defendant no longer had access to the vehicle in In Arizona v. Gant, 129 S.Ct. 1710 (2009). And while he upheld the police search in Maryland v. Garrison, 480 U.S. 79, 107 S.Ct. 1013 (1987), Justice Stevens wrote legal dicta which has formed the basis for many challenges to the scope of a search of areas which are not specified in a search warrant. In Payton v. New York, 445 U.S. 573 (1980), the Court affirmed that a man's home is truly his castle, and that the police may not make a warrantless, nonconsensual entry into a suspect's home in order to effectuate an arrest.

Justice Stevens has been an ardent opponent of capital punishment throughout most of his term on the Court and has been the author of numerous opinions limiting the application of the death penalty. In Atkins v. Virginia, 536 U.S. 304 (2002), the Court held that execution of "mentally retarded" offenders constituted cruel and unusual punishment, and in Thompson v. Oklahoma, 487 U.S. 815 (1988), ruled that juveniles under the age of 16 cannot possess the requisite culpability for imposition of the death penalty. And in Beck v. Alabama, 447 U.S. 625 (1980) the court mandated that, in capital cases, the jury must be instructed on, and permitted to consider, a verdict of guilt on a lesser included offense.

 In other cases, Justice Steven held in Johnson v. California, 545 U.S. 162 (2005), that a State could not impose the burden on a defendant claiming a racially discriminatory striking of a juror pursuant to Batson v. Kentucky, 476 U.S. 79, to show that the striking was "more likely than not" the product of purposeful discrimination. He also held, in Hubbard v. U.S., 514 U.S. 695 (1995), that a federal court is not a department or agency of the United States for the purposes of making false statements in a matter within the jurisdiction of the United States pursuant to 18 U.S.C. § 1001.

 The Blog wishes Justice Stevens a happy retirement and looks forward to the appointment of his successor.

British Aviation Firm Pleads Guilty in U.S. Court to Exporting Boeing 747 Aircraft to Iran

Balli Aviation Ltd., a subsidiary of United Kingdom-based Balli Group, PLC, pled guilty on Friday in the U.S. District Court for the District of Columbia to charges of illegally exporting Boeing 747 aircraft from the United States to Iran. Balli Aviation had agreed in a plea agreement to pay a $2 million fine and to be placed on corporate probation for five years, as reported on the PM Newswire. The information against the company alleged that, from 2005 through 2008, the company conspired to export three Boeing 747 aircraft to Iran without obtaining the required export licenses from the U.S. Bureau of Industry and Security (BIS), or required permission from the U.S. Office of Foreign Assets Control (OFAC). Balli Aviation was charged with purchasing the aircraft through a subsidiary, Blue Sky Companies, with financing from a private Iranian airline, Mahan Air, and with entering into a lease agreement with Mahan Air.

Balli Aviation and Balli Group announced on Friday that they have also reached a $15 million settlement of a parallel civil action with BIS and OFAC. Balli Aviation and Balli Group also had their export privileges revoked for five years, however this condition was suspended on the condition of the companies' payment of the civil penalty and refraining from committing any further violation of export laws. The companies must also submit to independent audits of their export compliance program for five years with the results being reviewed by BIS and OFAC. Former Chancellor of Britain, Lord Lamont, is a non-executive director for Balli Group.

Businesses considering engaging in trade abroad in countries which may be subject to sanctions or restrictions by the U.S. should examine both BIS' export control rules and requirements and OFAC's information on sanctions programs and also consult with counsel.

DOJ Issues New Discovery Guidelines for Prosecutors

 

 

As set forth in the official DOJ Blog yesterday, Deputy Attorney General David W. Ogden issued three Memorandum to DOJ prosecutors no doubt intended to remedy some of the setbacks the Department suffered last year as a result of discovery violations. The subject of one of the Memos is “Guidance for Prosecutors Regarding Criminal Discovery.” The second Memo reference is “Issuance of Guidance and Summary of Actions Taken in Response to the Report of the Department of Justice Criminal Discovery and Case Management Working Group.” Finally, a separate Memo is address to all DOJ litigating components and all U.S. Attorneys.

Taking the "Memo to the U.S. Attorneys and DOJ Components" first, Odgen summarizes that he had convened a working group to address DOJ policies and practices regarding criminal discovery issues. Odgen references that he is sending to all DOJ trial attorneys and AUSAs a memo containing Guidance For Prosecutors Regarding Criminal Discovery that prosecutors should follow to ensure that discovery obligations are met in all future cases. Interestingly, Odgen directs that each U.S. Attorney’s Office develop a discovery policy consistent with the law and local rules and practices. That policy must be in place by March 31, 2010.

The “Guidance For Prosecutors Regarding Criminal Discovery” Memo sets out detailed steps prosecutors are to follow regarding discovery. The six page Memo first advises that the prosecutors must determine who is a member of the “Prosecution Team” for the purpose of determining what documents must be reviewed for disclosure.

The Guidance Memo then directs that the discovery review should cover the following: 1) the investigative agency’s files, 2) Confidential Informant/Witness/Source files, 3) Evidence and Information Gathered During the Investigation, 4) Documents or Evidence Gathered by Civil Attorneys and/or Regulatory Agencies in Parallel Civil Investigations, 5) Substantive Case Related Communications, 6) Potential Giglio Information Relating to Law Enforcement Witnesses, 7) Potential Giglio Information Relating to Non-Law Enforcement Witnesses and Fed.R.Evid. 806 Declarants, 8) Information Obtained in Witness Interviews, a) Witness Statement Variations and the Duty to Disclose, b) Trial Preparation Meetings With Witnesses and c) Agent Notes.

The Guidance Memo then directs that although prosecutors may delegate the process of review to others, they “should not delegate the disclosure determination itself.”

The Guidance Memo reminds prosecutors that discovery within DOJ is covered by the U.S. Attorney’s Manual Section 9-5.001, which is broader than what the law requires and that if a prosecutor chooses to follow that broader course, “defense counsel should be reminded that the prosecutor is electing to produce discovery beyond what is required . . .” The Memo then addresses the scope, timing and form of discovery disclosures, but cautions that, “[p]rosecutors should never describe the discovery being provided as ‘open file.’”

Finally, the Guidance Memo counsels that the prosecutor should make a good record regarding the disclosures.

The “Issuance of Guidance and Summary of Actions Taken in Response to the Report of the Department of Justice Criminal Discovery and Case Management Working Group” Memo reminds prosecutors of the words of Justice Sutherland that it is the prosecutor’s duty is “that justice shall be done.” Berger v. United States, 295 U.S. 78, 88 (1935). This Memo informs prosecutors of the establishment of the Guidance Memo set out above and that each U.S. Attorney’s Office shall have a “discovery coordinator.” In addition, DOJ has:
 

• Created an online directory of resources pertaining to discovery issues that will be available to all prosecutors at their desktop;
• Produced a Handbook on Discovery and Case Management similar to the Grand Jury Manual so that prosecutors will have a one-stop resource that addresses various topics relating to discovery obligations;
• Implemented a training curriculum and a mandatory training program for paralegals and law enforcement agents;
• Revitalized the Computer Forensics Working Group to address the problem of properly cataloguing electronically stored information recovered as part of federal investigations;
• Created a pilot case management project to fully explore the available case management software and possible new practices to better catalogue law enforcement investigative files and to ensure that all the information is transmitted in the most useful way to federal prosecutors.
 

No doubt much will be written in coming days and weeks regarding these Memoranda and what I’ve set out here is strictly an overview. Every criminal practitioner in federal court should read, study and be familiar with these Memoranda.

Assistant United States Attorney Sally Quillian Yates Nominated by President Obama to Be United States Attorney for the Northern District of Georgia

Leading the Georgia news today is the nomination of Assistant United States Attorney Sally Quillian Yates by President Barack Obama to be the United States Attorney for the Northern District of Georgia. The President announced Mrs. Yates' nomination in a Christmas Eve press release.

Mrs. Yates has served as the interim head of the U.S. Attorney's Office for the Northern District of Georgia since August, when the former U.S. Attorney, David E. Nahmias, stepped down to become Chief Justice of the Georgia Supreme Court. She has had a distinguished career as a federal prosecutor since joining the U.S. Attorney's Office in 1989. Mrs. Yates became the Chief of the U.S. Attorney's Office's fraud and public corruption unit in 1994, and became a top aide to the U.S. Attorney in 2002. Prior to joining the U.S. Attorney's Office, Mrs. Yates, a double graduate of the University of Georgia, was in private practice with King & Spalding. Notably, Mrs. Yates successfully prosecuted former Atlanta Mayor Bill Campbell and former Georgia State Schools Superintendant Linda Schrenko for corruption, and was an integral part of the investigation into the 1996 Olympic Park bombing in Atlanta. Mrs. Yates is married to J. Comer Yates, an attorney and Executive Director for the Atlanta Speech School, which has served children with speech, hearing, language or learning disabilities since 1938.

Mrs. Yates' nomination has been widely praised, including by the criminal defense bar. The nomination must be approved by the United States Senate. If confirmed, Mrs. Yates will be the first female U.S. Attorney for the Northern District of Georgia. Georgia was one of the 13 original federal districts created by the Judiciary Act of 1789, and was subdivided into the Northern and Southern Districts in 1848, and further subdivided again to include the Middle District in 1926. The Act provided that "there shall be appointed in each district a meet person learned in the law to act as attorney for the United States in such district, who shall be sworn or affirmed to the faithful execution of his office, whose duty it shall be to prosecute in such district all delinquents for crimes and offences, cognizable under the authority of the United States, and all civil actions in which the United States shall be concerned, except before the supreme court in the district in which that court shall be holden." Judiciary Act of 1789, Sec. 35. There are currently 93 U.S. Attorneys in a corresponding number of districts across the nation. The Federal Criminal Defense Blog congratulates Mrs. Yates on her nomination and expected confirmation.