The Myth of Club Fed

All included.

All included.

For those who refer in cavalier fashion to white-collar convicts and “Club Fed,” consider this New York Times article on Raj Gupta’s federal prison experience: Onetime Allies on Wall Street Have Uneasy Prison Reunion After Insider Trading Trials.  In particular:

In their heyday, Raj Rajaratnam and Rajat K. Gupta were business partners who lent each other a helping hand.

The two men were very different. Mr. Rajaratnam was a high-rolling hedge fund manager who loved to take risks, while Mr. Gupta was a consultant educated at Harvard Business School who worked all his life at one firm, McKinsey & Company.

Years after their closely watched insider trading trials and two of the biggest victories for prosecutors in the government’s crackdown on insider trading on Wall Street, the men find themselves under the same roof: In a new development, both are now at the main prison at the Federal Medical Center Devens in Ayer, Mass., northwest of Boston, with 1,000 other inmates.

Stroll around the grounds until you feel at home.

Stroll around the grounds until you feel at home.

In theory, “federal medical centers” (or “FMCs”) are at the more civilized end of the Bureau of Prisons structure.  The BOP website for FMC Devens refers to it as “an administrative security federal medical center with an adjacent minimum security satellite camp.”  Sounds nice enough.  Like a tough post office, perhaps.

The reality is different:

Though Mr. Gupta earned inmates’ respect, prison conditions can seem harsh to those accustomed to civilian life. White-collar convicts are typically treated better than murderers, but the main prison in Devens houses inmates of all security levels; until recently, it was home to Dzhokhar Tsarnaev, the Boston Marathon bomber.

When Mr. Gupta arrived in June 2014, he was assigned to Devens’s minimum security camp, which houses 135 inmates. But in April, Mr. Gupta was sent for six weeks to the Special Housing Unit, or SHU (pronounced “shoe,” as fans of the Netflix series “Orange Is the New Black” know), as punishment. His infraction was having an unauthorized item: an extra pillow.

Inmates often grab the pillows of departing prisoners. Mr. Gupta hoped an extra pillow would help with a bad back.

* * * *

It was the second time that Mr. Gupta was sent to “the hole,” as the SHU is sometimes called. Last summer, Mr. Gupta was dispatched to the unit for sitting during the inmate count.

“He was actually tying his shoe,” Mr. Morgan said.

Inmates in the unit are kept in near solitary conditions. They are allowed out of their cells only for one hour of exercise a day, said Michael Santos, a former federal prisoner who is now a consultant. A light is on 24 hours a day for observation.

When inmates are moved for a visit, they must wear orange jumpsuits and are restrained in an elaborate procedure. “There is a cutout door within the cell door,” Mr. Santos said, through which inmates are also fed. “The inmate is told to back step to the door, squat down, and then he will be told to put his arms behind his back, and through that slot, the guard will put handcuffs on him,” he said.

The guard opens the door only when the inmate has been cuffed.

At a disciplinary hearing in May, Mr. Gupta’s privileges such as visiting rights were revoked, people briefed on the situation said. When Mr. Gupta’s elder sister traveled from India to see him, he offered to serve more time if she could visit, these people said. His requests were denied. She returned to India without seeing her brother.

The shoe is on the white-collar foot.

The shoe is on the white-collar foot.

Securities fraud is unlawful and merits punishment, but we should bear in mind that no Bureau of Prisons facility is a resort.

Not only is prison no respite for the convicted, the entire criminal-justice process is life-destroying for the white-collar defendant from the git-go, even if the person or company is not charged or, if charged, ultimately acquitted.  Here are a few thoughts in one minute and 52 seconds:

 

 

 

 

 

 


FIFA Indictments, Corporate Compliance, Alfred Kinsey and Robert Lee

Shaving too close.

Shaving too close.

Law360’s Zachary Zagger has a nice piece on the FIFA prosecution and quotes, among others, Jack Sharman:

“Given this many defendants and the fact that there is going to be at least some who are going to cooperate, it would not surprise me if there wasn’t a second wave of charges or people coming out of the woodwork, people you have not heard of yet,” said Jackson R. Sharman III, a white collar criminal defense attorney with Lightfoot Franklin & White LLC.

“If it is going to survive, it is going to have to have a more rigorous compliance structure than some of the items that have come across thus far,” Sharman said suggesting that it may need to create something like a corporate board of directors or an inspector general-type official to address compliance issues directly.

Here is a link to the full article:  3 Things To Watch Out For In The FIFA Corruption Case

Compliance drill.

Compliance drill.

We have spoken with the Wall Street Journal previously about the FIFA case: FIFA Indictments and the Notion of Global Compliance:

Jackson Sharman, a white collar specialist at Lightfoot, Franklin & White LLC, says that the case shows that the notion of a swelling, global compliance culture may be exaggerated. Attorneys and compliance professionals often make the mistake of believing their concerns about bribery are representative of the organizations where they work, he said. “It’s dangerous to assume that a legal regime is being internalized by everybody, because clearly it’s not,” Mr. Sharman said. “Assuming that others think the same way as you think can be fatal.”

Setting others aside, it can also be fatal to your enterprise if you fail to understand how you going about thinking through compliance questions.

Robert Edward Lee

Robert Edward Lee

Much has been made recently of Confederate images and names.  On the compliance front, I invoked Robert E. Lee last year in a post about McKinsey, General Lee and the Culture of Compliance:

Except perhaps for “paradigm” and “silo,” the word “culture” is one of the most abused in the vocabulary of compliance, ethics and consultants.  (I once heard a consultant say that he needed “a high hover over the silos.”  I thought it an ironic mash-up about drones and agriculture; it was not).  Yet, “culture” has a meaning in the broader world; in commerce; and in compliance.  “Culture” represents a gear-shift in compliance and ethics, and can be smooth or bone-rattling.

 

Not Robert Edward Lee.

Not Robert Edward Lee.

(For the careless reader, note that the title refers to McKinsey, the consulting firm, not to Alfred Kinsey, the sex researcher).

 

 

Global or domestic, “compliance” comes in three flavors — criminal, civil and regulatory.  Sometimes, you get a mouthful of all three at once.

Why is that?  And, what to do about it?

A few thoughts here: