Giving Thanks

Blawg100WebBadgeI have a lot to be thankful for: a wonderful husband, two great kids, a job I love.

These are tumultuous times, no doubt. There are terrorist attacks in Paris. Presidential candidates lump innocent Syrian refugees with religious radicals. Political rhetoric has turned, at times, into outright demagoguery.

So, it was nice this past week to have a day devoted to giving thanks. Life is not perfect. It is not all roses. But taking a few moments to express gratitude can work wonders. Try it.

I wanted to thank all of you for reading this blog. Grand Jury Target started about two and a half years ago in April 2013, a few months after I started my own firm. The first few months it was easy to post, because I didn’t have that much paying work.

But as my practice has grown, time for posting has been harder to find. I still love this little blog, though. Unlike my billable work, I get to pick the issues, and I get to express my unfiltered opinions.

I’m grateful for the opportunity to write this blog and especially thankful that a few folks actually read it (hi mom! hi big brother!).

Some of you nominated Grand Jury Target for the ABA Journal’s LawBlawg 100 list. And, we made the list this year!

Thank you, thank you, thank you.

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Eleventh Circuit Affirms Acquittal of Defendant in Federal Program Bribery Case

In United States v. McLean, the Eleventh Circuit narrowed the government’s ability to convict defendants who are accused of public bribery under 18 U.S.C. § 666. This statute covers bribery related to programs that receive federal funds.

After his conviction at trial under § 666, defendant David McLean filed a motion for judgment of acquittal on the basis that the government failed to prove that the entity for which Mr. McLean was an agent received the necessary federal benefits. The district court granted the motion, and the Eleventh Circuit affirmed.

In short, the court of appeals held that there must be some nexus between the federal funds received and their ultimate use to satisfy this statute. It is not enough simply to find some indirect federal funding.

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What Is Grand Jury Secrecy?

Thomas KlebestreifenPublic access to criminal trials is a fundamental principle of our justice system. As the Supreme Court articulated in 1980:

[Supreme Court precedent] recognized that open trials are bulwarks of our free and democratic government: public access to court proceedings is one of the numerous “checks and balances” of our system, because “contemporaneous review in the forum of public opinion is an effective restraint on possible abuse of judicial power.”

Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 592 (1980).

But when it comes to grand juries, that principle falls away. Grand juries are secret.

This secrecy can lead to confusion for witnesses who are called to testify before a grand jury. This post will outline the basics of grand jury secrecy and explore its limits.

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Reports of the Death of Asset Forfeiture Were Greatly Exaggerated

business concept. money with handAsset forfeiture was supposed to be in decline.

The Washington Post published a series of troubling stories about the rising use of asset forfeiture–without warrants or criminal charges–to the tune of $2.5 billion dollars since 2001. Former Attorney General Eric Holder limited its use by state and local law enforcement officers as part of DOJ’s Equitable Sharing Program.

Has forfeiture slowed down? Not really.

DOJ still publicly touts its asset forfeiture numbers. For example, here’s DOJ’s chart (showing over $4.4 billion in assets seized). DOJ is certainly proud of its “accomplishments.”

The Supreme Court heard arguments just this week in Luis v.  United States, a case that addresses whether the government can seize “untainted” assets from a criminal defendant. Untainted assets are those that are unconnected to the alleged crime; tainted assets are those that are connected to the alleged crime. Seizing untainted assets may prevent a defendant from hiring counsel of his choice.

The government, not surprisingly, argued to the Supreme Court that because money is fungible, if the defendant has spent the tainted assets, then the government should be permitted to seize the untainted ones. The justices seemed sympathetic to the government’s argument.

I guess the Sixth Amendment, like the Fourth Amendment, continues to die a long, slow death. (It’s death is not exaggerated.)

Randy Balko (who always writes thoughtful pieces) wrote a short piece today about a recent report issued by the Institute for Justice. The IJ report makes findings that are even more troubling than the Post investigation:

Nationwide, forfeiture revenue has exploded. Since 2001, annual federal forfeiture revenue has increased from less than $500 million to more than $5 billion in 2014—a tenfold increase in just 14 years. And available data show forfeiture revenue across 14 states more than doubling from 2002 to 2013.

And prosecutors are turning to civil forfeiture to overcome the procedural and evidentiary hurdles of criminal forfeiture. According to the IJ report:

The study also finds that when police and prosecutors take property, they overwhelmingly prefer civil forfeiture to its criminal counterpart. Civil forfeiture is easier for law enforcement because it does not require a conviction, while criminal forfeiture does. Data obtained by IJ reveal that the Department of Justice took advantage of easier civil procedures in 87 percent of forfeiture cases from 1997 to 2013.

If the Supreme Court rules in Luis that the government can seize untainted assets as freely as it can seize “tainted” assets, then life is about to get harder for a criminal defendant.

The government will likely seek to seize the assets of every white-collar criminal defendant in a complex case. If the government can effectively force a white-collar defendant to use an overworked public defender rather than a private law firm, why wouldn’t it?

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The Impossible Standard to Change Venue–The Massey Mine Case Is Still in West Virginia

I’ve posted before about the upcoming criminal trial of Don Blankenship’s involvement in the Massey Mine disaster. The trial started on October 1 and is still going. It’s going to be a long one.

Back in February, Mr. Blankenship filed a motion to change the venue of his trial, which is set in the Southern District of West Virginia. The mine disaster happened in that district. Mr. Blankenship argued that there is a general public sentiment (unique to this district) that he is on trial for causing the mine explosion and the death of his employees.

To put it gently, Mr. Blankenship is not a popular fellow in the district.

In June 2015, the district court sided with the government and refused to move the trial to another district. It did rule that the trial would be in the Charleston Division of the Southern District of West Virginia, rather than the Beckley Division.

Undeterred, Mr. Blankenship obtained some new evidence about the potential jury pool in the Charleston Division, hired a new expert, and filed a second motion to change venue in September. Just before trial, and before the government even filed an opposition, the court denied the motion.

This case is a good example of how difficult it is to move a trial, even in a district where emotions run high about the alleged wrongdoing and even when your client is highly unpopular.

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An Appeals Court Finally Takes a Practical Approach to Sentencing in Government Contracting Case (and an Interesting 4th Amendment Issue)

Loss calculation drives sentencing decisions in many white-collar cases. The higher the loss amount, the longer the sentence.Courts usually take an expansive view of what counts as a “loss” for sentencing.

In a recent Third Circuit case, however, the court rejected the government’s argument for heightened loss amounts in a contracting fraud case, instead adopting an eminently practical approach to loss calculation.

In short, the Third Circuit held that the loss amount in a government contracting case is not the overall value of the contract that was illegally obtained but must include a “credit” for the work actually performed by the defendant.

The case separately limits Fourth Amendment challenges made by executives of closely held family corporations. (You can’t win them all, right?)

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Yates Memo Watch – The First Casualty

Counting blackboardThe Department of Justice today unsealed the indictment of the former president of Warner Chilcott plc, a pharmaceutical manufacturer. A subsidiary of Warner Chilcott pleaded guilty to a single felony charge of health care fraud related to illegal marketing of certain drugs. The company also agreed to pay $125 million to resolve its criminal and civil liability. (H/T Law360.)

The executive’s indictment can be found here.

DOJ touts this indictment as part of its new policy contained in the Yates Memo. You can read about the Yates Memo here. According to DOJ’s press release about the executive’s indictment:

“The Justice Department is committed to protecting the integrity of physician prescribing decisions and ensuring that financial arrangements in the healthcare marketplace comply with the law,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department will continue to hold companies and responsible individuals accountable when they use improper incentives, like those alleged here, to promote their products.”

“Doctors’ medical judgment should be based on what is best for the patient, and not clouded by expensive meals and other pharmaceutical company kickbacks,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “Pharmaceutical company executives and employees should not be involved with treatment decisions or submissions to a patient’s insurance company.  Today’s enforcement actions demonstrate that the government will seek not only to hold companies accountable, but will identify and charge corporate officials responsible for the fraud.

I have no idea if I’ll be able to keep up with the trend, but I’ll try to track the individual prosecutions of corporate executives that appear to fall within the Yates Memo. Of course, it’s hard to tell from an indictment whether the information in it came from the company or from the FBI’s independent investigation. Feel free to send me any indictments that fit into this category.

That said, it seems a safe bet that when (1) a company pays a large fine, averts criminal prosecution entirely or pleads to a single count, and then (2) DOJ charges an executive at the company, that executive has fallen victim to the Yates Memo.

[Note that a subsidiary of Warner Chilcott actually pleaded guilty. That may be because the sub is the true wrongdoer, or it may be because companies can often work out a deal to have a sub take the hit rather than the parent company. This can be helpful in many contexts. But in health care fraud–where exclusion from Medicare is a real concern–it can be a lifesaver.]

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RICO and White Collar Prosecutions

Young corrupted businessman behind the prison barsProsecutors sometimes threaten to charge defendants with RICO, even in white-collar cases. This threat often comes when the prosecutor wants to force a plea deal.

The Racketeering Influenced and Corrupt Organizations law allows prosecutors to group a wide array of offenses by many different people and entities into a single charge. RICO is advantageous for prosecutors because the whole enterprise’s wrongdoing can be used to calculate the loss amount for each individual member, kind of like a conspiracy.

Given that loss amounts drive sentences, a RICO charge is a serious matter.

That said, white-collar RICO cases are rare. Why is that?

There are two primary reasons. First, it’s not easy to prove a RICO violation. There are a lot of elements and some of them are complicated. Second, DOJ’s Criminal Division is surprisingly strict on when the statute can be used.

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The SEC Finally Surrenders in Insider Trading Case

3D red dice with win text on all sides

The SEC finally gave up the ship in its insider trading case against former hedge fund managers Anthony Chiasson and Todd Newman.

After the Second Circuit reversed their convictions and the Supreme Court denied cert, the SEC decided not to pursue its civil suit against the two men.

Took it long enough.

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SDNY Limits a Corporate Executive’s Ability to Use the Advice-of-Counsel Defense

Thomas KlebestreifenThe advice-of-counsel defense is a powerful one. If you did something because your lawyer said it was legal, then you may have a winning defense against many white-collar crimes.

But all good things come with a price. To raise the defense, you must waive the attorney-client privilege. The government gets to see your private communications with your lawyer.

This sounds simple enough, right? To avoid being found guilty, you let the government see what you said to your lawyer. That’s a fair trade-off.

But what if the privilege isn’t yours to waive? What if you work for a company and the advice you received was from the company’s lawyer and the company refuses to waive the privilege?

The Southern District of New York recently held that the employee loses in this situation. Courts will not force the company to waive the privilege, even if that waiver may provide a defense to the employee. It is a civil case, but its holding is equally applicable to a criminal case.

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