Articles Posted in White Collar Crime

This happened recently to someone in Atlanta, but it also takes place everywhere else in Georgia, Florida, Alabama, North Carolina and all over the country.  The FBI or some other federal criminal investigation unit shows up at someone’s front door, wanting to ask questions and possibly to get the person’s cooperation.  What did that person do?  He was polite, he got the agent’s contact information, he provided some general information demonstrating a willingness to cooperate without admitting to anything criminal, and then, most importantly, he called me.

Nobody really wants to have a criminal defense lawyer, but sometimes, people need us. This incident was similar to what my family members in the health care field do when medical emergencies happens.  They jump into action, just as I did the other night

This man called me at 8:30 pm on a weeknight.  I already had a long day, was doing some chores before a little relaxation time, and then his call came.  I spent the next several hours on the phone with the client, with the FBI Agent, emailed back and forth with the prosecutor, did Internet research about the specific situation, and made arrangements to meet the client at my office the next morning.  The client and I then spoke in the morning at my office for several hours, and like medical personnel when someone comes into the emergency room, I then needed to do a quick evaluation and set out a strategy even though I only had several hours’ worth of information.  I told the client my evaluation, and we then embarked on the strategy I recommended.

With apologies to the late great Kenny Rogers (who had a house not far from mine in Atlanta) ,  part of the federal criminal defense lawyer’s job is to decide whether or not he should turn over “good” defense evidence to a prosecutor BEFORE an indictment is issued in the hopes that no charges will be brought.  On the other hand, if the prosecutor is going to bring charges anyway, sometimes the criminal defense attorney can get more bang for his or her buck by holding off on revealing the “good” stuff and using the element of surprise during the lead-up to trial.  As old Kenny sang “ya gotta know when to hold ’em, know when to fold ’em.”  Here are some of the considerations that go into this part of being a criminal defense attorney who specializes in federal criminal matters and white collar crimes and appeals.

Many federal prosecutors will tell a Defendant that the Government is on the path toward getting an indictment.  In this scenario, the prosecutor will send what we call a “Target Letter” to the prospective Defendant.  The letter basically says that charges are likely, gives a brief outline of the charges, and tells the person that he or she might want to consider getting a lawyer to talk it over BEFORE the charges are brought.  As a general rule, prosecutors will offer some slight benefit to a person who agrees to plead guilty shortly after getting one of these Target Letters.  Prosecutors also use these Target Letters to get potential Defendants to cooperate against more involved or culpable people, or higher-ups in an organization.

Like many federal criminal defense attorneys, it is very common for clients to come to me after they get one of these Target Letters.  Like many lawyers, I usually will reach out to the prosecutor who wrote the letter to get a somewhat more detailed sense of what the Government is looking at, the client’s potential exposure, the stage of the investigation, whether other people have been charged and/or sentenced, and any other pertinent details.  I then meet the client to get his or her side of the situation.  Here is where it starts to get tricky.

Another day here in steamy Atlanta, and another federal criminal case I am starting to work on after being retained by my client. This particular case is in federal court in Texas, but I want to provide some observations that apply no matter where the federal criminal case might be pending.

Readers will recall that the “discovery” materials are those items that the prosecutor is obligated hand over to the defense attorney.  There are various sources of this obligation, found in some statutes, in court rules, and also within our wonderful Constitution’s promise of “due process.”  However, today I want to talk about practical aspects of looking through the “discovery” materials. Continue reading

As a criminal defense lawyer who handles matters in Atlanta and elsewhere, from time to time I represent individuals and companies who are investigated, or sometimes even prosecuted, for the very esoteric crime of “securities fraud.”  Reduced to the basics, the securities laws and regulations are well-intentioned rules designed to protect those fortunate to have extra money to put into the stock market or other investments.  “Securities fraud” is when some person involved in the securities field engages in conduct prohibited by that the Securities and Exchange Commission (the “SEC”)  or Congress.  So, the key to defending against an allegation of securities fraud is to deeply dive into the words that describe what conduct is, or is not, illegal in the securities field.  Yesterday, our friends in the United States Supreme Court issued the decision in Lorenzo v. SEC.  The case turned in part on the meaning of the law that makes it a crime for a person to “…make any untrue statement of a material fact” in connection with a securities sale or purchase.  So, what does it mean to “make” a statement?  That is one of the questions the High Court answered yesterday.

Francis Lorenzo was the head of investment banking at an SEC-registered firm.  He regularly sent out emails to potential investors, suggesting various stocks or other investments.  Now, here’s the key.  The information that Mr. Lorenzo put into the emails to possible clients came from Lorenzo’s boss.  In one set of emails, Mr. L. told investors that a company had over $10 million in assets, and therefore was a good place to invest.  However, Mr. L. knew for a fact that his boss was telling a plain old lie when saying that this company had $10 million.  Lorenzo knew that the company had recently disclosed that its total assets were more in the $400,000 range.  That is a big difference, meaning that if the statement was “untrue” it was also “material.”  The question from yesterday’s case was whether Mr. Lorenzo was the person to “make” the statement when he merely passed along or republished a false claim from his boss. Continue reading

I have often enjoy re-telling the old joke about how there are three kinds of lies: 1) Lies, 2) Damn Lies, and 3) Statistics.  Many of my federal criminal cases here in Atlanta and elsewhere involve one or more of these three types of “incorrect” information.  Some government witnesses tell little lies, while others tell big whoppers that are flat-out lies designed to help the liar and hurt my client.  On some other day I will pontificate about how the system of rewarding “cooperating witnesses” is a perversion of our justice system that leads to some its greatest failures.  But today, I want to talk about how statistics and their analysis and manipulation can sometimes be the greatest lie of all.

Now remember, most lawyers are not “numbers people.”  That’s the reason we went to law school, because some teacher or school just flat-out insisted that we needed to learn calculus. For the most part, attorneys are not at their strongest when dealing with mathematic or scientific issues.  While most good trial lawyers are bright and can quickly pick up new concepts, this is not our main area of expertise.

So, we have a system where most of the main participants are not all that great with numbers or science, and then we have cases that are chock full of both types of information. Here is what usually happens.  A prosecutor hears about a new type of evidence, such as DNA analysis and comparisons to see if the person on trial had some connection with the victim or crime scene.  It’s only been 30 years since this evidence was first accepted into court, and in the early years virtually all prosecutors and defense lawyers simply deferred to whatever the “experts” claimed.  Then as time progressed, more and more lawyers got comfortable with the basic science behind DNA analysis, and began poking holes in the claims, leading to the far too many cases where DNA analysis has actually exonerated previously convicted Defendants.

I just finished the Atlanta federal criminal securities fraud case that I have been working on for the past three and a half years.  After a two-day sentencing hearing, my client was given a sentence of 10 years in custody, along with being required to pay back around $1.4 million dollars to some investors.

The case generated some publicity.  Some readers know how I like to pontificate about how the press more and more simply repeat any “press release” issued by some prosecutor’s office.  For example, compare the prosecution’s press release about this case with the story in the local paper, the Atlanta Journal Constitution (usually called “the AJC” by folks hereabouts).  Note that the AJC simply rephrases and rehashes the press release with absolutely no mention of anything from the defense side.  Next, compare the AJC’s story with two other stories in publications devoted to the legal industry, Law.com and Law360.  Each of these latter stories give a far more nuanced and complete story from the sentencing hearing, and include portions of the defense arguments or statements by me.

I’ve already written about how cases with some publicity add an additional level of stress for the criminal defense lawyer.  The other day I posted about the difficulty of doing a federal criminal sentencing hearing when the Probation Officer seems to recommend every potentially applicable sentencing enhancement to the federal Sentencing Guidelines, and how hard it is to get a “good” sentence when the lawyer spends so much energy showing the Judge the probation officer’s errors that the Judge is kind of tired of ruling for the defense when it comes to the final sentence.  Instead of those topics, today, I want to briefly talk about long-term relationships in criminal cases.

I’m working on a case with a very talented Atlanta-based criminal defense lawyer.  Our clients were accused of and later convicted for fraud involving several businesses.  These are a somewhat different type of white collar offense, for some of the crimes are what we call “securities fraud”, meaning fraudulent conduct relating to the offering or sale of what most people call “stocks”.  However, our clients are going to be sentenced soon, and we are preparing for the upcoming sentencing hearing.  This other attorney and I are running headlong into the extraordinarily unfair sentencing guidelines in these type of federal cases.  Although the Guidelines are extremely unfair, we discovered that a lot of federal judges have been extremely critical of these Guidelines and have extensively criticized this approach over approximately the past decade.

First, a little history (those who know me remember that I majored in history and often try and place issues into historical context for better understanding).  The Guidelines came into effect in 1987, and were supposed to iron out differences between the sentences issued by different judges.  Then, we had the big corporate meltdowns in the early 2000’s, Enron, Worldcom, Arthur Anderson, etc.  Congress responded with what is usually called “Sarbanes/Oxley“, a series of laws designed to prevent such corporate high-level shenanigans.  All fine and good, from my viewpoint.  However, (and here’s the “unfair sentencing guidelines part” coming back), as part of this Sarbanes/Oxley law Congress also told the United States Sentencing Commission to greatly ratchet up the sentences imposed on high-level corporate fraudsters, the kind who led to Enron, Worldcom, Arthur Andersen, etc.  Again, fine and good.

The problem, of course, is that the Sentencing Commission created new and extremely punitive Guidelines that are more of a “one-size-fits-all” set of enhancements for most corporate offenders if a case involves securities or stocks.  As a respected Senior Judge in New York wrote in the opening lines of his decision in United States v. Parris:  “I have sentenced Lennox and Lester Parris today to a term of incarceration of 60 months in the face of an advisory guidelines range of 360 to life. This case represents another example where the guidelines in a securities-fraud prosecution “have so run amok that they are patently absurd on their face,” United States v. Adelson, 441 F. Supp. 2d 506, 515 (S.D.N.Y. 2006), due to the “kind of `piling-on’ of points for which the guidelines have frequently been criticized.” Id. at 510.”

One version of “white collar crime” that often winds in federal court is called “honest services fraud”.  The basic version of the crime is when someone (usually a person who works either for some large organization, like a business or government) engages in a “scheme to defraud” that is intended to deceive or cheat another and to obtain money or property or cause the potential loss of money or property to another by means of materially false or fraudulent pretenses, representations or promises, or to deprive another of the intangible rights to honest services.  In 2010, the Supreme Court limited the words “intangible rights to honest services” to mean this law only applies to situations involving either a bribery or a kickback.   As a general rule, prosecutors need to prove an exchange, or “quid pro quo”, and must prove that the Defendant did, or refrained from doing, an “official act”, in exchange for money or something else of value.  However, there have been questions as to the type of “official act” which forms the basis of this crime.  Last Friday, the United States Supreme Court agreed to review the case of former Virginia Governor Robert McDonnell which could provide some answers in this area.

As noted above, honest services bribery or kickback requires an exchange of an official act for money or property. Some earlier decisions rejected efforts by prosecutors to expand the phrase “official acts” to include actions that are “customary” in the performance of many jobs. One court reversed the conviction of a state official who offered, for a fee, to introduce an architectural firm to high-ranking officials who could then secure contracts for the firm. The Defendant there promised to make introductions, but no evidence established that he promised to use his official position to influence those to whom the architectural firm was introduced. That court recognized a distinction between affording access versus actions that influence a decision.

Another federal court of appeals seems to take the same position. That Court said a legislator could not be convicted for taking money from a hospital in return for lobbying mayors to comply with state law in a way that benefited the hospital. That case also seemed to distinguish between actions that use or threaten the use of official powers versus actions that merely trade on reputation or access that accompanies the holding of a certain office.  Yet one more federal appellate court said that “official acts” are limited to those that influence an actual decision about real policies. That case involved a policeman who took payments in exchange for using an official police database to perform license plate and outstanding warrant searches. While accessing the database was part of the officer’s duties, he did not perform an “official act” in return for the money, in that the officer did not exercise any inappropriate influence on decisions made by the organization for which he worked.

Politics impacts many of our criminal cases here in Atlanta, throughout Georgia, Florida and Alabama, and in federal cases we do throughout the country. The intersection of politics and criminal prosecutions is especially prevalent in public corruption investigations. Prosecutors often have a political motive in “going after” a particular defendant, and many a prosecutor has made a name for him or herself by bagging a politician. These principles were on full display in the case against Tom Delay, the former Majority Leader of the United States House of Representatives. Last week, the Texas Court of Appeals reversed Delay’s convictions, ruling that he had not committed any crime. The ruling is here.

Delay was known as a hard-charging Republican advocate, whose nickname of “the Hammer” demonstrated his supposedly ruthless tactics. In 2002, Delay wanted to have the Texas Legislature turn solidly Republican, which it did. To accomplish, he asked for a series of corporate political contributions to a campaign committee. Afterwards, that solidly Republican legislature allegedly jiggered the voting districts so that the Texas federal delegation was far more likely to elect Republicans to the U.S. Congress. All well and good, hard nosed politics.
Continue reading

I recently posted about how we convinced the United States Court of Appeals for the Eleventh Circuit here in Atlanta to reverse the federal criminal case against our radiologist client because the trial judge prevented us from using important “peer review” testimony from another doctor who would have told the jury that he reached the same conclusions as did our client. Recently, another federal court did something similar, reversing a federal criminal conviction because the trial judge would not allow the defense to present certain evidence to the jury. That case was decided by the Seventh Circuit, which was sitting in what we lawyers call an en banc session, meaning all of the judges on that entire court participated. The case is U.S. v. Lacey Phillips and Erin Hall, and can be viewed here.

The basic story is familiar. Back in 2006, the defendants, an unmarried couple (they’ve since married) were looking for a house to buy. She had good credit, he did not. She applied for the loan, and the application asked for the “borrower’s income.” The defendants wanted to tell the jury that the mortgage broker had told them that “borrower’s income” was really a term of art, and meant the total amount of money that would be used for paying the mortgage, whether or not it was money earned by the person signing the mortgage. So, like many couples, they combined her income and his income on the loan application. They also sort of dressed up her job title, making it look as if she had the sort of employment that would generate the overall joint income of the couple.
Continue reading