Fraud

December 17, 2009

Supreme Court Update: Honest Services Fraud Cases

Last Tuesday, the United States Supreme Court heard oral arguments in Black v. U.S. and Weyhrauch v. U.S., two of the three federal honest services fraud cases currently before the Court. On Friday, lawyers for Jeffrey Skilling submitted their brief in the third, Skilling v. U.S. This Monday, the Court set oral arguments for Skilling for March 1, 2010, at least three weeks before it would normally be heard. We have previously discussed these cases here, here, here, and here.

Background

For many years, federal prosecutors successfully argued that the mail fraud and wire fraud laws covered schemes to defraud the people of the “intangible right” to have affairs conducted honestly. Now referred to as “pre-McNally caselaw” this body of law was not uniform; the circuits disagreed on exactly what conduct constituted the illegal conduct at the boundaries of the law. In McNally v. U.S. in 1987, the Supreme Court held:

October 16, 2009

Skilling Added to the Mix of Honest Services Fraud Cases to Be Heard by the Supreme Court

by Kish Law

Earlier this week, the Supreme Court granted certiorari in another honest services fraud case: Skilling v. United States. Jeffrey Skilling, of Enron notoriety, is challenging his conviction for honest services fraud and the venue of his trial.

The honest services fraud statute, 18 U.S.C. § 1346, expands the definition of a scheme or artifice to defraud under the mail and wire fraud statutes to encompass schemes that “deprive another of the intangible right of honest services.” This federal criminal case will address whether the statute requires the government to prove that the defendant’s conduct was intended to achieve “private gain” rather than to advance the employer’s interests, and, if not, whether the statute is unconstitutionally vague. A second issue in the case involves when a presumption of jury prejudice arises.

We have previously discussed two other honest services fraud cases, Black v. United States and Weyhrauch v. United States, that the Court will also hear this term. Our discussion of Black is here and of Weyhrauch is here.

June 2, 2009

Black Requests Bail Pending a Decision on Federal Honest Services Fraud Case

by Kish Law

As we discussed in this post, the Supreme Court of the United States agreed to hear media mogul Conrad Black’s appeal regarding whether the honest services fraud statute applies in a purely private setting where the defendant’s conduct risks no foreseeable harm to the putative victims. We are very interested in the outcome of this case because it has the potential to change the law in the Eleventh Circuit (the court that hears federal criminal appeals from Georgia, Florida, and Alabama.) Unfortunately, we will have to wait a while. The appeal will not be heard until after the beginning of the Court’s new term this fall, likely as late as November or December.

As reported over at the SCOTUS Blog, Black has requested bail during the time his appeal is pending. He has served 15 months of a 78-month prison sentence and, if bail is denied, will have served about two years before the Justices decide his case. If his conviction is reversed, those are several months he cannot get back. His lawyers also argue that he should be released from prison in the meantime because his co-defendant, John Boultbee, has been released on a $500,000 bond and allowed to return to Canada to await the Supreme Court’s decision.

You can read Black’s application here.

May 29, 2009

Federal Criminal “Honest Services” Fraud Law Applicable Here in Atlanta to be Reviewed by Supreme Court

by Kish Law

Eleventh Circuit case law, the controlling federal law here in Georgia, is at risk of changing next fall, when the Supreme Court will likely decide a criminal case and resolve a split among the circuit courts of appeals.

The mail fraud and wire fraud laws are the bread and butter for federal prosecutors bringing white collar cases. Each of these laws requires a scheme to defraud another person out of “money or property.” For many years, federal prosecutors successfully argued that the word “property” included the right to “honest services” from public employees (such as elected officials). In 1988, the Supreme Court ruled that the word “property” does not include “honest services,” but several months later Congress amended these statutes so as to include the concept of “honest services” within the universe of cases that can be prosecuted under the federal mail and wire fraud statutes. Specifically, Section 1346 of the Federal Criminal Code expands the definition of a “scheme or artifice to defraud” under the mail and wire fraud statutes to encompass schemes that “deprive another of the intangible right of honest services.”

Despite the background of this type of fraud, the concept of “honest services” has now been extended by federal prosecutors beyond situations where a public official may have engaged in fraud. Recently, federal prosecutors are bringing more and more cases against people who work for private companies, arguing that the employee breached his or her duty of rendering “honest services” to the employer.

May 28, 2009

Fraud Enforcement and Recovery Act of 2009 Expands Fraud and Money Laundering Statutes

by Kish Law

In a previous post we discussed the federal statutes on money laundering, why they can prove complicated for criminal defense lawyers in defending cases, and how much broader they are than most people think, affecting even white collar cases. Last week President Obama signed the Fraud Enforcement and Recovery Act of 2009 (FERA) into law, expanding the money laundering statutes (and many fraud statutes) even further.

In our post linked above, we mentioned that used car dealerships are “financial institutions” under the federal criminal code’s definition, even though most people would never consider them to qualify as such. FERA expands the definition even further, including even businesses that are not directly regulated or insured by the federal government.

FERA also expands the money laundering statutes by reacting to a significant Supreme Court case that was decided last year. In United States v. Santos, the Court held that the word “proceeds” in the money laundering statutes referred only to profits obtained from illegal activity, rather than all money brought in, or the “gross receipts.” FERA overrules that part of the Court’s decision by defining “proceeds” as “any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity.”

November 17, 2008

Prosecutors Unhappy in Federal White Collar Cases: Supreme Court to Decide Whether There Can Be Second Trial for Defendant When First Jury Acquitted But Hung on Some Counts

by Kish Law

Some prosecutors are a little like complaining children, they are never satisfied unless they get their way, and they will continue to whine for a long time until they do. This past Friday, in an appeal involving a white collar federal criminal prosecution the Supreme Court took a case to answer whether federal prosecutors can get a second bite at the apple when at the first trial the defendant was acquitted of the major counts, the jury hung on other counts, and in finding the defendant not guilty the jury must have resolved the facts in the defendant’s favor. (Defendant’s Petition here)

The defendant was involved in the Enron mess. He was charged with conspiracy, mail and wire fraud, securities violations, insider trading and for laundering the money related to the insider trading. The jury found him not guilty of everything except the insider trading and money laundering, and on these charges, they were unable to reach a verdict. The prosecutors tried to crank up a new set of charges based on the areas where the jury did not reach a verdict. The defendant pointed to the Double Jeopardy protection which includes what we call “collateral estoppel”. This is the issue the Supreme Court will address in the case.

The collateral estoppel question is both a technical legal issue, along with being a common-sense concept that the average man or woman on the street can figure out (think “Joe the Plumber” gets prosecuted a second time when the first jury found him innocent on basically everything charged). Here’s the technical description. Under the rule of collateral estoppel, when a first jury necessarily decides a certain fact against a party, that same party is prevented (or what as we lawyers say, is “estopped”) from again trying to litigate that same fact at a later trial. However, what happens when a first jury rules for the defendant, but the jury for some reason is unable to reach a verdict on other charges that have the same basic factual underpinnings? Some of the federal courts say that the hung counts prevent the courts from being certain that the facts underlying the acquitted counts were necessarily found in the defendant’s favor. Other federal courts rule in the complete opposite direction: saying that it makes no sense to even consider the charges where the jury was unable to reach a verdict when deciding whether certain facts were necessarily found in the defendant’s favor. These inconsistent rulings were likely the major reason the Supreme Court agreed to take the case involving the Enron defendant.

November 14, 2008

White Collar Crime Prosecutions: Why do some cases simply wither away?

by Kish Law

The Office of the Inspector General for the U.S. Department of Justice issued a massive report earlier this week concerning how the various federal prosecutors around the country are doing (or not doing) their jobs. While there’s a lot of truth to the old saying about “lies, damn lies and statistics”, the numbers in this report give some clues about why certain federal white collar criminal investigations simply wither away over time.

The Department of Justice is the mother ship for all of the various lawyers who work for the federal government. When it comes to prosecuting federal criminal cases, the 94 U.S. Attorneys offices around the country have front-line responsibility. The U.S. Attorney him or herself is a person appointed by the President to head up one of these 94 offices. However, the day-to-day operations usually are handled by prosecutors who have generally made a career of or have spent a long time as an Assistant U.S. Attorney (AUSA). The statistics in this new report show that there can be great variations between the 94 offices when it comes to how AUSA’s handle white collar federal criminal cases.

Some of the statistics in this report are set out in Appendix XIV. This Appendix details how federal prosecutors have handled white collar criminal investigations over the past 5 years. The Appendix goes through each of the 94 U.S. Attorneys offices, and details how many such cases were referred to the prosecutors, provides numbers on how many were actually prosecuted, gives figures on how many were refused for prosecution, and sets out how many are still just hanging around with no decision.

August 22, 2008

Sentencing Issues for Federal White Collar Crime Cases

by Kish Law

The United States Court of Appeals for the Tenth Circuit recently issued a very lengthy opinion that covers a variety of sentencing issues we see quite often in federal white collar cases. Although this case came out of the appellate court that covers Denver, we see similar issues in cases here in Atlanta, the rest of Georgia, as well as in Alabama and Florida.

The case out in Denver involved charges of fraud against some bankers. They were convicted, and on appeal both the defendants and the prosecutors argued that the trial judge made mistakes when imposing the sentences.

The main sentencing issue on appeal involved the question of “loss” under the Federal Sentencing Guidelines. I have written at length on the Guidelines in other posts. The “loss” calculation is especially tricky. The defendants in the Denver case, through their very able lawyers, made the rather sensical argument that what they got out of the crime is the same as the “loss.” Unfortunately, a lot of lawyers who do not get into federal court all that often mistakenly believe that this is the law. It is not. The concept of “loss” under the Sentencing Guidelines is far greater than what a person gets. It also covers “intended loss”, along with losses caused by other people who did the same thing.