From Professor Peter J. Henning, more on the “why” of white-collar offenses: When Good People Do Bad Things:
That is the conundrum of many white-collar crime cases: successful business people act in ways that put careers and personal fortunes at risk for seemingly modest gains, and sometimes the misconduct benefits their company but themselves only indirectly.
(See our earlier post: Why’d He Do It?)
This theme runs through many white-collar situations: employees, officers and vendors rarely see themselves as “criminals,” and often act when they are at the end of a rope (their own or someone else’s). Before you protest that taking “motive” or “context” is being soft on business crime, remember two things:
First, such considerations are relevant to guilt or innocence only to the extent that a business crime usually turns on intent (in other words, the act may be lawful or unlawful — it simply depends on what the actor meant to do or understood that what he was doing was wrongful).
Second, in sentencing, “motive” in white-collar cases can not only affect the benefit-received analysis, it also touches on the non-likelihood of recidivism.
The week of Thanksgiving, the Bay Psalm Book is auctioned for $14 million:
The little volume of psalms, one of only 11 known to exist out of roughly 1,700 printed by 17th-century Puritans in Massachusetts, went for $14,165,000 at auction on Tuesday.
The Bay Psalm Book was published in 1640, more than a century and a half after the first Gutenberg Bibles and 20 years after the Pilgrims had landed at Plymouth. It was the first book turned out by a printing press that had been shipped over from England. The press operator was a locksmith who was apparently learning as he went along: some of the pages were bound in the wrong order. At the bottom of one, someone wrote, “Turn back a leaf.”
Thinking of the Psalms and New England, one is put in mind of Jonathan Edwards (1703-1758), the Puritan preacher and one of the great minds in American intellectual history. His Farewell Sermon, given on July 1, 1750 after being fired as pastor of First Church is long but powerful:
The improvement I would make of the subject is to lead the people here present, who have been under my pastoral care, to some reflections, and give them some advice suitable to our present circumstances, relating to what has been lately done in order to our being separated, but expecting to meet each other before the great tribunal at the day of judgment.
The deep and serious consideration of our future most solemn meeting, is certainly most suitable at such a time as this. There having so lately been that done, which, in all probability, will (as to the relation we have heretofore stood in) be followed with an everlasting separation.
How often have we met together in the house of God in this relation! How often have I spoke to you, instructed, counseled, warned, directed, and fed you, and administered ordinances among you, as the people which were committed to my care, and of whose precious souls I had the charge! But in all probability this never will be again.
Here’s a note from Professor Ellen Podgor about an article on Sentencing the Why of White Collar Crime by Todd Haugh (Illinois Institute of Technology – Chicago-Kent College of Law) in the Fordham Law Review. From the abstract:
“So why did Mr. Gupta do it?” That question was at the heart of Judge Jed Rakoff’s recent sentencing of Rajat Gupta, a former Wall Street titan and the most high-profile insider trading defendant of the past 30 years. The answer, which the court actively sought by inquiring into Gupta’s psychological motivations, resulted in a two-year sentence, eight years less than the government requested. What was it that Judge Rakoff found in Gupta that warranted such a modest sentence? While it was ultimately unclear to the court exactly what motivated Gupta to commit such a “terrible breach of trust,” it is exceedingly clear that Judge Rakoff’s search for those motivations impacted the sentence imposed.
This search by judges sentencing white collar defendants — the search to understand the “why” motivating defendants’ actions — is what this article explores.
“Motive,” of course, is much more popular in detective fiction than in sentencing law, but motive in business-crime cases is more nuanced than in street-crime cases. A better understanding of “why” not only yields better sentencing but would also yield greater public understanding of white-collar sentencing.
Here’s the recipe for a Mai Tai.
A Mai Tai is not really a Thanksgiving cocktail, but it reminds me of something I’ve always wanted to ask an interviewing law student.
Long ago, when I was junior at Washington & Lee, a history course (the “History of Venice,” I believe) taught by Professor Jefferson Davis Futch III required “permission of the instructor” before one could enroll. I went to the Department of History, knocked at Professor Futch’s door and was given leave to enter.
I said that I was here for permission to take the course
He considered me for a moment, said “Let’s see,” leaned back in his chair — the office was so full of books you could hardly move — and asked: “How does one make a Mai Tai?”
I fumbled through the recipe. “Close enough,” he said. “You can take the course.”
This interview season, I think I will ask that question. Especially of the students who say they want to do white-collar work.
Here’s a useful article on the Third-Party Doctrine. That doctrine, first articulated by the Supreme Court in Smith v. Maryland, has been the principle behind the notion that what people give to third parties — a phone number, for example — is not “private,” at least for constitutional purposes. A “pen register,” of course, is a crude, weak device for data collection compared to the tools available to the intelligence and law enforcement communities today. (A pen register is an electronic device that records all numbers called from a particular telephone line).
Don’t look for the third-party doctrine to go away anytime soon, but expect it to modified judicially, legislatively, or both.
The Network of Trial Law Firms is an excellent CLE vehicle. Here’s a Sharman White Collar Panel Video of a Network panel about white-collar issues for civil lawyers — me, Jackie Arango of Akerman Senterfit (Miami), Joel Neckers of Wheeler Trigg (Denver) and Gerry Leone of Noxon Peabody (Boston). Here’s the blurb from the Network program:
No one thinks of themselves, their employees or their company as “criminals.” On the other hand, Walter White was once just a chemistry teacher. The lines between what are business-crime problems and what are traditional corporate civil issues — compliance, due diligence, regulatory recordkeeping and permitting, whistleblowers, confidentiality, privilege and indemnification — have become blurred. Listen to an experienced panel highlight the most important events and insights from 2013 and what to expect in 2014.
I know, I know. The video is a bit long to just sit and watch unless you’ve previously gone to the “Cocktails” archive of this blog, but I find the most curious point to arrive at minute 25:22, where I play for the crowd a 140-second video of myself talking about search warrants. A video within video. They loved it.
In general, one should strive to avoid being named the most arrogant law firm four years running: The Most Arrogant Law Firm.
To be fair, though, we note that the same group of General Counsels identified the same firm as providing the best client service.
The first SEC deferred-prosecution agreement for an individual raises a couple of issues. Here is the document itself: SEC DPA With Herckis
First, a reminder. A “deferred prosecution agreement” is what its name implies. It’s an agreement between a company (and now, an individual) that puts off — for good, hopefully — prosecution on the condition that the defendant/respondent complete a certain course of action laid out in the agreement (for example, hiring an independent corporate monitor or auditor who will report to the government).
Second, there is guidance on DPAs in the United States Attorney’s Manual. Review the 2010 Grindler Memorandum, which is an amendment to the 2008 Morford Memorandum. The Morford Memorandum focuses on selection criteria for a corporate monitor. From the introduction:
The Department of Justice’s commitment to deterring and preventing corporate crime remains a high priority. The Principles of Federal Prosecution of Business Organizations set forth guidance to federal prosecutors regarding charges against corporations. A careful consideration of those principles and the facts in a given case may result in a decision to negotiate an agreement to resolve a criminal case against a corporation without a formal conviction—either a deferred prosecution agreement or a non-prosecution agreement. As part of some negotiated corporate agreements, there have been provisions pertaining to an independent corporate monitor. The corporation benefits from expertise in the area of corporate compliance from an independent third party. The corporation, its shareholders, employees and the public at large then benefit from reduced recidivism of corporate crime and the protection of the integrity of the marketplace.
The purpose of this memorandum is to present a series of principles for drafting provisions pertaining to the use of monitors in connection with deferred prosecution and non- prosecution agreements (hereafter referred to collectively as “agreements”) with corporations. Given the varying facts and circumstances of each case—where different industries, corporate size and structure, and other considerations may be at issue—any guidance regarding monitors must be practical and flexible. This guidance is limited to monitors, and does not apply to third parties, whatever their titles, retained to act as receivers, trustees, or perform other functions.
A monitor’s primary responsibility is to assess and monitor a corporation’s compliance with the terms of the agreement specifically designed to address and reduce the risk of recurrence of the corporation’s misconduct, and not to further punitive goals. A monitor should only be used where appropriate given the facts and circumstances of a particular matter. For example, it may be appropriate to use a monitor where a company does not have an effective internal compliance program, or where it needs to establish necessary internal controls. Conversely, in a situation where a company has ceased operations in the area where the criminal misconduct occurred, a monitor may not be necessary.In negotiating agreements with corporations, prosecutors should be mindful of both: (1) the potential benefits that employing a monitor may have for the corporation and the public, and (2) the cost of a monitor and its impact on the operations of a corporation. Prosecutors shall, at a minimum, notify the appropriate United States Attorney or Department Component Head prior to the execution of an agreement that includes a corporate monitor. The appropriate United States Attorney or Department Component Head shall, in turn, provide a copy of the agreement to the Assistant Attorney General for the Criminal Division at a reasonable time after it has been executed. The Assistant Attorney General for the Criminal Division shall maintain a record of all such agreements.
Third, in general, DPAs are workable ( Podgor, Deferred Prosecution Agreements – Definitely A Plus ) but they can be wildly expensive for defendants/respondents because the Government has the whip hand, usually (Washington Legal Foundation, Deferred Prosecution and Non-Prosecution Agreements).
Fourth, it will be fascinating to watch the development (or not) of DPAs for individuals. For the Government, of course, the motherlode in an individual’s DPA will be the value of his or her cooperation (in Herckis’s case, for five years). The Government gets to avoid the risk of trial; locks the individual into an acceptance of responsibility and a statement of facts; and gets his cooperation in “related” proceedings.