The Freedom of Little Joe Cartwright: Tax Crime, Edgar Allan Poe, Noir Film and Lacrosse

Notes for the week.

Prosecuting Individuals

Federal criminal tax lawyer Jack Townsend blogs at Federal Tax Crimes.  Here is his note on Prosecuting Corporate Employees, particularly in the tax context:

I have previously blogged on Professor Brandon Garrett (UVA Law) who have carved out an academic niche on how the Government deals with corporate crime, particularly large corporate crime (the too big to jail group). See e.g., Judge Jed Rakoff Reviews Brandon Garrett’s Book on Too Big to Jail: How Prosecutors Compromise with Corporations (Federal Tax Crimes Blog 2/10/15), here. At the risk of oversimplifying his arguments, I summarize them in part relevant to this blog entry: When the Government goes after corporate misconduct, it too often focuses only on the corporation in terms of criminal sanctions and not the individuals, particularly those higher up the chain, who committed the underlying conduct. Corporations cannot go to jail; individuals can. Prosecuting and convicting individuals in addition to corporations could, he thinks, provide more front-end incentive for individuals to forego illegal conduct within the corporations. However, as fans of tax crimes know at least anecdotally, it is hard to convict higher level corporate officers for conduct that their underlings actually commit. The poster child example is the acquittal of Raoul Weil, a high-level UBS banker who “remoted” himself from the dirty work of actually servicing U.S. taxpayers seeking to evade U.S. tax. See e.g., Raoul Weil Found Not Guilty (Federal Tax Crimes 11/3/14; 11/6/14).

Mr. Townsend goes on to discuss the DOJ’s Yates Memorandum and new work by University of Virginia law professor Brandon Garrett.  Professor Garrett’s website (Federal Organizational Prosecution Agreements) is the best compendium of deferred-prosecution and non-prosecution agreements.

Michael Landon ("Little Joe Cartwright") being served with a subpoena (1968)

Michael Landon (“Little Joe Cartwright”) being served with a subpoena (1968)

Another useful Townsend post addresses a common issue — the Government’s attempt to muzzle the recipients of subpoenas:

In United States v. Gigliotti, 2015 U.S. Dist. LEXIS _____ (ED NY 12/23/15), here, Judge Dearie denied a motion to suppress evidence obtained pursuant to grand jury subpoena that unlawfully contained the following:
YOU ARE HEREBY DIRECTED NOT TO DISCLOSE THE EXISTENCE OF THIS SUBPOENA, AS IT MAY IMPEDE AN ONGOING INVESTIGATION.

Sound familiar?  Read the entire piece at Judge Criticizes Prosecutor’s Use of Language Directing Secrecy for Receipt of Grand Jury Subpoena.  We have written about the grand jury previously herehere and here.  If you are to young (or too old) to remember Bonanza on TV, here is a refresher.  Here is an episode from 1960 entitled — appropriately, for White Collar Wire readers — “Desert Justice”:

Head-on-a-platter and all that.

Head-on-a-platter and all that.

Or Not Prosecuting Individuals?

White Collar Wire should have sent a Christmas goose to Senator Elizabeth Warren (D-MA), who wants more white-collar types to get indicted: 2015 Spurred Billions in Bank Fines, But Not Enough for Warren.  In particular:

In a 10-page report titled “Rigged Justice: 2016,” the U.S. Senator’s staff cited 20 cases in which they say prosecutors showed “timidity” by not pursuing individuals for civil or criminal misdeeds. No executives at Citigroup Inc., JPMorgan Chase & Co., or Deutsche Bank AG were accused of wrongdoing in cases alleging rigged currency markets and the misleading of investors, her office wrote in the document released Friday. The investigations led to their companies paying billions of dollars in penalties.

Senator Warren will have none of the Yates Memo, thank you:

The report even dismisses a recent U.S. Justice Department announcement, known as the Yates memo, in which Deputy Attorney General Sally Quillian Yates heralded a new direction by telling prosecutors to embark on investigations by focusing on people, not companies. “Both before and after this DOJ announcement, accountability for corporate crimes has been shockingly weak,” Warren’s office wrote.

“Shocking to whom” is a good question, but it’s all good for the white-collar bar.  Here is her report.

Good Practices and Bad

A miscalculated penalty, perhaps.

A miscalculated penalty, perhaps.

From the Harvard Law School Forum on Corporate Governance and Financial Regulation and Jon Eisenberg, a partner in the Government Enforcement practice at K&L Gates LLP, here is a useful article (with cases and charts) about the SEC’s use of civil monetary penalties.  Tellingly, and sadly, the authors point out that “these decisions might not survive appellate scrutiny . . .  but very few respondents appeal their sanctions all the way to the D.C. Circuit.”

 

 

Hall monitor?

Hall monitor?

Deferred-prosecution agreements often impose corporate monitors.  Should the reports of such monitors be kept confidential?  A federal judge ordered the release of the HSBC monitor’s report, over the object of both HSBC and DOJ:

A federal judge has ordered the release of a report detailing how well HSBC Holdings Plc has complied with anti-money laundering requirements imposed by U.S. regulators when the British bank was fined $1.92 billion three years ago.

Thursday’s order by U.S. District Judge John Gleeson in Brooklyn is a defeat for HSBC and the U.S. Department of Justice, which complained the release could make it easier to launder money, including for terrorism, and discourage cooperation with law enforcement.

“This case implicates matters of great public concern and is therefore one which the public has an interest in overseeing,” Gleeson wrote, citing the public’s constitutional right of access under the First Amendment.

I cannot speak to the terrorism angle, but cooperation (and thus, monitoring) both work best when company employees have some comfort that what they say and do will be held in confidence, at least within reasonable parameters.  The public’s oversight interest is real, but surely an organization that has paid billions in fines and is living with a monitor is being “overseen” to a reasonable extent, especially when that oversight requires continued cooperation to be effective.

Read the entire article here: HSBC money laundering report must be made public.  To read our earlier posts about DPAs and monitors, go herehere, and here.

Crime Fiction

Digital content, quoth the raven.

Digital content, quoth the raven.

From the good folks at The Rap Sheet, a piece on the nominees for the 2016 Edgar Awards.  Here is the complete list from the Mystery Writers of America.

Thomas Hardy (1840-1928)

Thomas Hardy (1840-1928)

It is not a raven, but there is a bird in  Thomas Hardy’s poem “The Darkling Thrush”:

I leant upon a coppice gate
When Frost was spectre-grey,
And Winter’s dregs made desolate
The weakening eye of day.
The tangled bine-stems scored the sky
Like strings of broken lyres,
And all mankind that haunted nigh
Had sought their household fires.

The land’s sharp features seemed to be
The Century’s corpse outleant,
His crypt the cloudy canopy,
The wind his death-lament.
The ancient pulse of germ and birth
Was shrunken hard and dry,
And every spirit upon earth
Seemed fervourless as I.

At once a voice arose among
The bleak twigs overhead
In a full-hearted evensong
Of joy illimited;
An aged thrush, frail, gaunt, and small,
In blast-beruffled plume,
Had chosen thus to fling his soul
Upon the growing gloom.

So little cause for carolings
Of such ecstatic sound
Was written on terrestrial things
Afar or nigh around,
That I could think there trembled through
His happy good-night air
Some blessed Hope, whereof he knew
And I was unaware.

Crime Noir and Miles Davis

It's Miles. It's cool.

It’s Miles. It’s cool.

On the subject of crime, Apple Music must have intuited that I like noir-ish fiction and cool jazz.  It directed to me a set of Miles Davis that included “Ascenseur pour l’echafaud” (1958), a French crime film by Louis Malle released in the States as Elevator To The Scaffold (or Lift To The Scaffold in the U.K.)  Davis’s horn on the title track is as evocative as it gets, as seen here:

 

ESPN's 30-for-30

ESPN’s 30-for-30

Wishing It Were Fiction: Duke Lacrosse and Due Process

On Sunday, March 13, at 9 p.m. ET, ESPN’s acclaimed “30 for 30” film series will present Fantastic Lies, a film about the the Duke lacrosse case.  Here is an interview with the producer, Marina Zenovich.

Damage done.

Damage done.

We have written about the Duke lacrosse case before, here and here.

 

Depends on how we sell it.

Depends on how we sell it.

In opening statements and closing arguments, the genuine is good.  The cornball or the obscure, on the other hand, are bad.  The same is true of our written work.  As noted by Philip Corbett, master of the After Deadline blog in the New York Times:

[A]n overreliance on anecdotal openings — especially the classic “stranger in the lead” approach — can make our prose feel shopworn rather than vivid. This is particularly true when readers encounter unfamiliar names at the top of two or more adjacent stories, whether in print or online.

 

Read the entire piece: Here’s Someone You Never Heard of. Read On.

 


Barry Bonds, Ramblin’ Man

The federal appeals court in San Francisco recently reversed baseball player Barry Bonds’s conviction for obstruction of justice.

Grand jury slugfest.

Grand jury slugfest.

The criminal charge and conviction arose out of testimony that Bonds gave to a grand jury investigating the illegal provision and use of steroids in major league baseball.  As the Ninth Circuit Court of Appeals summarized it:

During a grand jury proceeding, defendant gave a rambling, nonresponsive answer to a simple question.  Because there is insufficient evidence that Statement C was material, defendant’s conviction for obstruction of justice in violation of 18 U.S.C. 1503 is not supported by the record. Whatever section 1503’s scope may be in other circumstances, defendant’s conviction here must be reversed.

Why is this decision relevant to corporations, their employees and their lawyers?

Interview

In interviews by government agents, in grand jury testimony led by prosecutors or in testimony at trial, a witness gets a lot of bad questions and gives a lot of bad answers. “Bad” answers are not necessarily untruthful. They may be vague; or not responsive to the question; or simply an observation made into the air in order to fill the silence.

Even well-prepared witnesses fall victim to this syndrome. Invariably, they fail to (a) listen to the question; (b) answer the question; and (c) stop. If it’s incomprehensible question, they fail to ask for a new question.  If it’s a question they don’t like, they answer some other, unasked question.

This problem is particularly acute with business people. In general, business people are compensated for having answers to questions and solutions to problems. To respond “I just don’t know” or “I don’t get your question” is not well received in commerce. Business people are trying to do a deal and “get to yes.”  “Yes” is not the place that agents, prosecutors and regulators seek. (At least, not that kind of “yes.”)

Sharp haircuts, dull questions.

Sharp haircuts, dull questions.

We have discussed here and here  and here the do’s and don’t’s of interactions with government agents.  In particular, do not fall prey to the Efrem Zimbalist, Jr. syndrome.

That lesson is worth repeating:

“Government Agents,” a Lightfoot140 by Jack Sharman. from LFW on Vimeo.


Representing Witnesses Before The Grand Jury

And you ain't authorized.

And you ain’t authorized.

For businesses and their officers, directors and employees, the grand jury is an increasingly visible complement to the threat of civil litigation and administrative sanction.  (We have discussed the grand jury’s role and power here and here).

Under the auspices of the Alabama State Bar’s White-Collar Crime Committee, Lightfoot hosted a one-hour CLE video on Representing Witnesses Before The Grand Jury.

Representing Witnesses Before the Grand Jury from LFW on Vimeo.

This program offers practical advice for representing witnesses subpoenaed to testify before the grand jury or provide documents. Listen to insights into the decision to testify (or not), preparing your client to provide testimony, securing immunity and special considerations in representing the immunized witness.

Monopoly

Reasonable doubt at a reasonable price.

Hosted by Lightfoot white-collar lawyers Jack Sharman, Tenley Armstrong  and Jeff Doss, the panelists are Richard Jaffe (Jaffe & Drennan, P.C.), David McKnight (Baxley, Dillard, McKnight & James) and Melissa Atwood (U.S. Attorney’s Office, Northern District of Alabama).  (The panelists’ opinions are their own and may or may not reflect the opinions of their firms, their clients or, in Ms. Atwood’s case, the Department of Justice).


A Meditation On Independence Day

Oh, say, Can you still see plea-bargaining reform?

Oh, say, Can you still see plea-bargaining reform?

We all like the Fourth of July; most of us want it to mean something beyond cookouts and fireworks.  When my children were little, I would read aloud to them the entire Declaration of Independence, an oration they found both alarming and distracting. The nation’s Independence Day celebration has changed over time, as has its people (alarmed or distracted) and their culture.

We have an Independence Day in film and in song, works of art that speak to a patriotism grounded in a corporate concept (national independence) and in a citizen concept (individual independence).

Here in the early portion of the 21st-century, it is the domestic liberty of individuals, rather than the specter of foreign domination from across the seas, that is the most fruitful subject for reflection this Independence Day.  At the end, you can decide which is more apt: alarm or distraction.

In the Declaration of Independence, the list of grievances against King George III and his agents is lengthy and detailed, a fact that my young children frequently brought to my attention as I declaimed in our den.

Need to read the fine print.

Need to read the fine print.

In general, however, the revolution that followed the Declaration was a “conservative” revolution, at least compared to successor-revolutions such as the French and the Bolshevik.  In terms of its genesis, the complaints in the Declaration were the complaints of Englishmen who had been denied English rights.

Further, many of the concepts underpinning those rights – for example, the nature of the sovereign and his subservience to God, the more powerful King – arose out of the Protestant Reformation in Europe.  There were many flavors and strains of what we call “Protestant,” but one of several unifying factors was an emphasis on the individual’s direct access to the divine, rather than a requirement that the individual proceed through a priest or a bureaucratic episcopate that could grant or withhold dispensation, including that ultimate dispensation of liberty and property rights — the freedom and freehold of the kingdom of God.  The individual believer could now read a sacred text (the Bible) for himself or herself.  Priest, prince, pope: all potentates were sidelined.

In our pluralistic, post–Christendom culture, what bearing (if any) does this historical, cultural and religious context have this Independence Day?

On this Independence Day, the concept of “independence” is informed by two consistent drumbeats.

First, the national-security state that has grown ever since September 11 shows no sign of abating.

Still got the briefcase, though.

Still got the briefcase, though.

Second, the editorial, social-media and congressional criticism of prosecutorial handling of post-recession financial institutions and white-collar defendants feeds an apparently deep-seated need to assign particular blame for generalized ills.

For a white-collar defense lawyer, he confluence of these two drumbeats is deafening. For business people – indeed, for all citizens – the scales have been tipped further in favor of the state and its investigatory and prosecutorial apparatus.  Substantively, there continues an arguable over- criminalization of undesirable but not, at heart, criminal conduct, a legislative spasm driven by an unseemly result–orientation.

The grand jury has long been unmoored from its original function as a buffer between the sovereign and subject.  Reform of the grand jury and the plea-bargaining system is overdue but unlikely to happen in the near-term.  (On the other hand, Martin Luther thought he was merely trying to reform the church and did not intend, as Winston Churchill said in another context, to set Europe ablaze).

Maybe I needed the microphones.

Maybe I needed the microphones.

In addition, the “presumption of innocence” about which we all learned (or, at least, used to learn) in civics class has been translated into a presumption of guilt.  Most citizens, most of the time, believe that when a person or company is charged with a criminal offense, they are guilty (or perhaps guilty of something pretty close to the charged offense).  (We have discussed presumption problems here and here).

Such impulses and shifts in presumptions do damage due process and, ultimately, the status of a free people.  Citizens in white-collar professions are often the first to clamor for more national security externally and more law-enforcement domestically.  In many circumstances, of course, that clarion call is entirely appropriate, even vital, to our survival as a nation.  On the other hand, the call can only be answered by the raw exercise of sovereign power.  One need not be a Protestant Reformer or a Declaration subscriber to wonder if another call, this one for reflection and vigilance, is not perhaps overdue if we are to maintain those liberties — that “independence” — that we all treasure.

Happy Independence Day.


Of Grand Juries and Ham Sandwiches

Ready for indictment.

Ready for indictment.

It is true: having long ago become unmoored from its origins as a shield between Crown and subject, a grand jury can indict a ham sandwich if the prosecutor desires.  The grand jury’s status as a prosecutor’s tool animates this post from our friends at White Collar Crime Prof Blog: Kaley Opinion, Based on Legal Fiction, Is Harmful to Defendants and Lawyers

In particular:

In Kaley v. United States (12-464, decided February 25, 2014), the Supreme Court by a 6-3 vote extended the rulings of United States v. Monsanto, 491 U.S. 600 (1989) and Caplin & Drysdale v. United States, 491 U.S. 617 (1989) by determining that a grand jury finding of probable cause that a federal defendant committed a crime was conclusive in any effort by that defendant to secure funds out of temporarily restrained assets to hire a private attorney of his choice.  A defendant seeking release of funds may still be able to challenge the grand jury determination that there was probable cause that the assets seized resulted from or were involved in the purported criminal activity, but not that the activity was criminal.

The opinion, written by Justice Kagan, exalts the inviolability of the grand jury and demonstrates a naive misunderstanding of (or lack of concern about) the reality of its role in the determination of probable cause, ignores the presumption of innocence, and denigrates the importance of independent defense counsel in the criminal justice system.  It tilts the playing field of justice in the government’s favor by giving the government, in some cases, the option to deprive the defendant of the counsel he has selected or intends to select.

And you ain't authorized.

And you ain’t authorized.

This subject merits a deeper review in upcoming weeks, but suffice it to note that the combination of (1) the legal fiction of grand jury independence; (2) the grand jury’s power and secrecy; and (3) the fact that businesses and businesspeople often misunderstand or are careless about items (1) and (2) can spell disaster for well-meaning corporate citizens.


Why read White Collar Wire?

This is a blog about business crime. We post stories about news, cases, judicial opinions, practical tips and scholarly work regarding white-collar criminal and civil enforcement, grand jury investigations and regulatory compliance. We want to be useful to businesspeople, internal counsel, defense lawyers in private practice, prosecutors and law-school teachers.

Sometimes, we write about crime fiction, cocktails and theology. As anyone who’s ever been involved in the defense or prosecution of a white-collar case can testify, all three come in handy.

Don’t read us because you’re a criminal. Read us because, some time or other, someone may think you are.

Follow me onTwitter — @WhiteCollarWire — or email me at jsharman@lightfootlaw.com.

If you want more info about me, it’s here: http://lightfootlaw.com/alabama-lawyer/jackson-r-sharman

Jack Sharman