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.

 


Lessons From An Ex-Congressional Lawyer

Almost two decades ago, I learned several lessons as a Congressional lawyer, some more useful than others.  Here is a 59-second summary of the better lessons.

Let’s go over a few more lessons that might be useful, should you or your client be summoned to appear before a House or Senate Committee.

The Lessons of Congressional Peculiarities

A document request or interview demand from Congressional investigatory staff could be a one-time, narrowly-focused inquiry or part of a complex investigatory broadside – involving simultaneous civil, criminal and congressional investigations into a company (or its employees) or even an entire industry.  Examples in recent times include antitrust, food-and-drug, environmental, financial and corporate-governance investigations, as well as executive-branch oversight hearings such as Benghazi.  Counsel should be aware of their evidentiary impact.  In particular, he or she must move aggressively to limit the adverse impact of discovery produced in one forum on other proceedings.  Given the scope of Congressional investigatory power, however, this task can be difficult.[1]

Where the only two competing interests are simultaneous civil and criminal proceedings, of course, it is not uncommon for defendants to seek a stay of the civil proceedings – often with the express or implied agreement of the government – until resolution of the criminal action.

Where the third competing investigatory interest is Congress, however, the picture becomes less clear.  Although not without limits, legitimate Congressional investigatory authority reaches any matter on which Congress can legislate.  For separation-of-powers reasons, courts are reluctant to address claims of Congressional investigatory overreaching, at least absent a clear due process problem.  Thus, counsel will not be able to enjoin a Congressional subpoena, for example, or impose upon the committee a protective order for his or her documents.[2]   Counsel’s greater chance of success lies in persuading committee counsel or staff that the scope of document requests or subpoenas can be narrowed such that the client’s interest is protected while still allowing the committee to carry out its function.  Counsel should also seek alternative discovery mechanisms, such as allowing committee staff to review documents first, without actually taking possession of them.

 

Congress and Privileges

Although the Congress respects constitutional privileges (e.g., the Fifth Amendment privilege against self-incrimination), it does not officially recognize common-law protections such as the attorney-client privilege or the work-product doctrine.  Rather, many committees will often take the position that recognition of such privileges is discretionary with the committee.  As a practical matter, however, committee counsel and staff will often accept a well-grounded privilege claim.  See generally Note, The Attorney-Client Privilege in Congressional Investigations, 88 Col. L. Rev. 145 (1988).  Companies that are the target of major parallel investigations will often waive common-law privilege, either to show good faith and cooperation, or as part of a settlement with the government.

Very '90s.

Very ’90s.

Unlike a criminal defendant, a witness before a Congressional committee cannot refuse to testify altogether, but  must rather invoke the privilege in response to specific questions.

 

Alien Environment

For most civil or criminal litigators, a Congressional investigation is an alien environment.  Although there are House rulesHouse committee rules, Senate rules and Senate committee rules, there are no reassuring guideposts, no analogs to the Federal Rules of Evidence or of Criminal or Civil Procedure.  From a litigator’s perspective, rule number one is that there are few rules.  The issue is one of control: unlike the civil litigation context, the congressional forum is one in which you are likely to be buffeted by forces that are largely beyond your control.

Done before lunch.

Done before lunch.

The fact that there appear to be no rules in a congressional investigation underscores perhaps the primary fact that counsel should bear in mind: the committee’s investigation takes place in a political environment, not a litigation environment.  Although the investigatory process appears legalistic, it always unfolds in a political environment in which the actors have political goals that may or may not have anything to do with your client.

The political environment will demand several things of counsel, some of them inconsistent.

 

The Personal and the Political

Congressional investigations are not monolithic.  They are often highly personalized between Members; between the majority and minority parties; between staffs; and between committees with potentially overlapping jurisdictions.  Counsel should therefore remember that he or she is dealing with individual people rather than the institution of “Congress.”

Counsel may be proud of his or her “Rambo” litigation style, a style that unfortunately is often successful in a world of uniformly applied rules, broadly-construed discovery standards and tolerant judges.  In the Congressional forum, however, committee counsel and staff usually possess near-plenary authority that they exercise with considerable discretion.  Even when they do not make the rules, they apply them, and they will be rarely overruled by their Chairmen solely on the complaint of a private party.

Looking for the flamethrower?

Looking for the flamethrower?

Thus, counsel should be firm, and be aggressive where necessary, but be polite to committee counsel and staff, both majority and minority.  Brendan Sullivan’s virulent, scorched-earth defense of Oliver North during the televised Iran/Contra hearings is the exception that proves the rule: in addition to the fact that Colonel North as a client offered his lawyers advantages and disadvantages peculiar only to Colonel North, Sullivan made a considered tactical decision that high-profile aggression was the appropriate tack in that particular public theater.  You may reach the same conclusion, but do not do so reflexively.

 

Learn the Context of the Investigation

As soon as you or your client is contacted, attempt to gain as much information as possible about the investigation in general and your client in particular.  The first and most obvious source should be your client and your client’s documents.  In addition, unlike grand jury investigations, Congressional investigations do not remain secret for extended periods.  In additional to national media, Washington specialists such as National JournalRoll Call and The Hill can provide useful background on personal and political dynamics.

 

Be Proactive at the Outset

Be proactive with committee counsel and staff.  Although you may determine later for strategic reasons that it is wiser to lay low (or be recalcitrant), a sound initial approach is to act promptly and to attempt to understand the individuals and issues involved.  Ask lots of questions.  What is the subject of the investigation?  How long has it been going on?  How long might it last?  Are any other committees or subcommittees looking at the same issue?  Is the Executive Branch (the Department of Justice or the regulatory agencies) looking at the same issue?  Is the committee headed towards hearings?  Has a date been set?  Is the investigation a bipartisan inquiry?  Minority only?  Majority and minority, but working separately?

Delete.

Delete.

Such information is valuable in determining if you are facing a full-blown, formal committee investigation or a preliminary (and perhaps unsanctioned) probe by a curious, bored or ideologically-driven staffer.  If the latter, you have an opportunity to slow down or stop the inquiry before it gathers steam.  You may be able to accomplish this goal by direct persuasion, simply convincing the staffer that there is “no there there.”  The political opposition on the committee may have an interest in stopping the investigation, or bending it to their own ends, and it will usually be in your client’s interest to consult with staff or counsel for the other party.  Thus, make every effort to find out the names of the committee lawyers or staffers in charge of the investigation (both majority and minority).  For the same reason, if the executive branch appears to be involved, identify the relevant lawyers from the Department of Justice or the regulatory agencies.

 

Why My Client?

You must then attempt to determine your client’s role in the investigation — or, more precisely, the committee’s perception of your client’s role.  Why is your client involved?  How did his or her name come up?  If the request is for an interview or deposition, ascertain the subject areas to the extent staff is willing to describe them.  What are the ground rules, if any?  Is there a House or Senate resolution concerning the investigation?  You should request a copy of such a resolution, if any, as well as a copy of the committee’s rules.  A committee cannot exercise authority it does not have.  Although committee authority is often broad, resolutions and rules define authority and offer counsel opportunities to exploit.  A careful examination of these materials will yield a better understanding of the procedural and substantive protections available to your client, and thus will help you make strategic decisions (for example, whether you should participate voluntarily or only by subpoena; whether the staff deposition to which your client is being asked to submit is formally authorized; whether or not the committee intends to grant witnesses immunity).[3]

 

Hearings

And the Congressional livin' is easy.

And the Congressional livin’ is easy.

We are in the summer months.  We have written before about  summer hearings:

As a former oversight-and-investigations lawyer for a House committee, I can testify: summer is the high season for O&I hearings.  Nothing is going on legislatively, O&I hearings don’t require lobbyists or constituents, it is hot as hell but most House and Senate hearing rooms have good air-conditioning these days and, if you get some hearings under your belt in June and July, you’ll have plenty as a Member to talk about in your district or state.

Because most people are familiar with Congressional investigations only through television, they assume that if they are caught up in an investigation they will be summoned to testify before a committee like John Dean or Oliver North, with cameras clicking amid vigorous partisan drama.  Although your client may indeed be called to testify in a public hearing — and you should prepare as though your client will be called — it is more likely that constraints of time, the demands of the media, and political pressure and compromise having little to do with your client will result in your client never being called.  If your client testifies, remember that in many instances the committee members’ “questions” are not actually designed to elicit information from the witness.  Rather, questioning is often more like speech-making designed to maximize camera time on the questioner or to score political points against the opposition.

This practice is particularly prevalent in the House, where Members must usually follow the “five-minute” rule, which limits an individual Member’s questioning to that period of time.  Your client should expect frequent interruptions; indeed, it is a somewhat rare occasion under the five-minute rule when a witness is actually able to complete an answer.  There is no judge present to whom the witness can appeal, nor should you expect the chairman to step in.  In the face of such grandstanding, a witness’s only remedies are his or her opening statement, and potential softball questions from friendly Members.

Whether or not your client’s interests are best served by testifying, you should consider what steps you need to take (1) if he is called and (2) if he is not called.  For example, many committees require several hundred copies of a witness’s prepared or opening statement, and they must be delivered usually 24 hours in advance of the witness’s appearance.  What do you want to put into the opening statement?  What are other witnesses saying in their opening statements?  If your client is not called, is the opening statement something you can provide to the press as a release?  Do you have a media package ready, whether or not your client testifies?  Have you confirmed with staff where you can sit during the hearing?[4]   These are all questions you should consider carefully well in advance of the hearing day.

 

Clean Up and Post-Mortem

Whether or not your client is involved in high drama, do not forget the details at the end.  Your client should review and correct testimony where permissible.  If you have reached any sort of confidentiality agreements with counsel and staff (e.g., redacting personal information out of documents or deposition transcripts prior to their publication), you should confirm your understandings in writing.  You must also look ahead.  Will there be additional investigations, perhaps by other committees or in the other legislative chamber?  Has this investigation had an effect on any civil or criminal proceedings against your client?  Have you been made aware of new sources of documentary or testimonial discovery that can help or hurt your client?  Careful planning and professional flexibility at the end of the congressional investigatory process are just as important as they are at the beginning, and will serve your client well.

 



[1]Congressional investigatory power is “as penetrating and far-reaching as the potential to enact and appropriate under the Constitution.”  Barenblatt v. United States, 360 U.S. 109, 11 (1959).  Congress can enforce its investigatory will through, among other means, the contempt power.  The congressional contempt provision, 2 U.S.C. Section § 192, provides that

 

[e]very person who having been summoned as a witness by the authority of either House of Congress . . . to produce papers upon any matter under inquiry before either House . . . willfully makes default . . . shall be deemed guilty of a misdemeanor, punishable by a fine of not more than $1,000 and imprisonment in a common jail for not less than one month nor more than twelve months.

 

Under this provision, “willfulness” refers to intentional conduct, United States v. Bryan, 339 U.S. 323 (1950), not bad faith or moral turpitude.  Braden v. United States, 365 U.S. 431, 437 (1961).  Neither mistake of law nor advice of counsel excuses a violation of the statute.  See Sinclair v. United States, 279 U.S. 263, 299 (1929) (advice of counsel); Watkins v. United States, 354 U.S. 178, 208 (1957) (mistake of law).

For an exhaustive bibliography of Congressional investigations, look here.

    [2]A witness who believes that a subpoena is defective (for example, that it was issued beyond the committee’s authority, or that it violates the witness’s constitutional rights) has limited avenues of recourse.  Essentially, the witness must refuse to comply; be cited for contempt; and raise the objection as a defense in the contempt proceeding.  See Eastland v. United States Servicemen’s Fund, 421 U.S. 491, 503-07 (1975) (the Speech or Debate Clause raises “an absolute bar to judicial interference” with a Congressional subpoena).

    [3]In the Whitewater investigation during the 104th Congress, for example, the Senate Special Committee to Investigate Whitewater and Related Matters operated pursuant to a relatively comprehensive Senate resolution that authorized funding for the investigation, including staff; set out the subject matter of the inquiry; and described discovery authorities and procedures.  The House Banking Committee operated pursuant to no special resolution but rather relied on its delegated oversight authority.

    [4]Many committees do not allow lawyers to sit at the witness table or even to speak during the hearing, except to counsel the witness as to his or her constitutional rights.  See, e.g., 108th Congress, Rules of the House of Representatives (January 7, 2002), Rule XI 2(k)(3) (“Witnesses at hearings may be accompanied by their own counsel for the purpose of advising them concerning their constitutional rights.”)  This protocol places a high premium on thorough witness preparation prior to the hearing.


Would You Buy A Subpoena Response From This Man?

Preparing for a FIRREA subpoena.

Preparing for a FIRREA subpoena.

Always pay attention when the Department of Justice becomes enthusiastic about a long-neglected statute.  (The federal False Claims Act was dormant for almost a century).  Here is a sound, short article by Professor Peter J. Henning of Wayne State University Law School on a “new toy” for the Government: U.S. Finds Fresh Use for Seldom-Used Statute in Subprime Cases.  In discussing the Financial Institutions Reform, Recovery, and Enforcement Act (or “FIRREA”), the federal law enacted in response to the savings-and-loan crisis, Professor Henning notes:

Firrea is not just a penalty provision, however, because it also authorizes the Justice Department to pursue civil investigations into potential violations. Rather than just using it as a backstop when evidence might be insufficient to support criminal charges, the subpoenas to G.M. Financial and Santander Consumer indicate that the government is using Firrea as a new means to police the financial markets.

Crimes are typically investigated by a grand jury, which can compel the production of evidence and testimony from witnesses. The civil investigatory power is nearly as broad, with the Justice Department authorized to issue subpoenas to “summon witnesses and require the production of any books” or other evidence from any place in the United States. Unlike a grand jury investigation, in which federal prosecutors generally do not call a subject to testify, a civil inquiry can include requiring someone involved in possible misconduct to appear for questioning. A witness can invoke the Fifth Amendment right against self-incrimination in response to questions, but that can be considered as evidence if a civil case is filed and goes to trial.

Just because the Justice Department issues subpoenas as part of a civil investigation does not necessarily preclude a parallel criminal investigation. Any evidence gathered pursuant to Firrea can be shared with criminal prosecutors, unlike the secrecy rule imposed on any material presented to a grand jury. There is a rule of thumb in white-collar cases that if there is any possibility a case could go criminal, defense counsel should assume that it will and protect the client accordingly. So a Firrea investigation can be fraught with danger.

Indeed.  At a minimum, the receipt of a FIRREA subpoena should be treated just as seriously as the receipt of a grand jury subpoena — and maybe more so.


Subpoenas, Search Warrants and the Dead

Process server.

Process server.

The Grateful Dead were succinct about it:   “Got a tip they’re gonna kick the door in again/I’d like to get some sleep before I travel/But if you got a warrant, I guess you’re gonna come in” (from “Truckin”) (1970).

Here is a piece about subpoenas and search warrants for risk managers.  Short and free. Videos included.  Also free.  No Jerry Garcia, though:

On May 2, Jack Sharman spoke at the Spring Meeting of the Alabama Society for Healthcare Risk Management. As a member of the Firm’s White-Collar Criminal Defense and Corporate Investigations practice, Jack has represented physicians, physician-practices, nurses and other healthcare providers in criminal, civil and administrative investigations. Jack spoke on the background landscape of healthcare fraud today and, in particular, on how to prepare for and handle subpoenas and search warrants.

Here is a brief (140 seconds) Lightfoot 140 talk on search warrants and a longer CLE version.

 

And, if you have not heard it in a while, here’s the song.