Collateral Damage: FCPA-Related Non-Prosecution Agreement for Hewlett-Packard Leads to Civil RICO Lawsuit

hp logoA non-prosecution agreement is a wonderful thing. But it may not mean the end of the woes for a company under government investigation.

Hewlett-Packard (HP), the California-based technology firm, and its Mexican subsidiary, HP Mexico, entered into an NPA with the Department of Justice in April 2014. The NPA arose out of allegations of HP’s foreign bribery in Mexico.

The NPA included a fairly lengthy statement of facts to which HP agreed. The facts in the NPA relate to Mexico but the NPA also references

related agreements between the Department and HP Co. or its subsidiaries concerning FCPA violations in Russia and Poland.
Eight months later, that statement of facts is the basis of a civil RICO lawsuit. In an interesting turn of events, the plaintiffs are the companies that received the “influencer fee” paid by HP.

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“We Live in Coal Country”: A Questionable Rationale to Maintain a Broad Gag Order in Massey Mine Prosecution

Massey A few weeks ago, I wrote about the overly broad gag order imposed by a district court judge in West Virginia in the criminal case against former Massey CEO Don Blankenship.

After furious motion practice, including efforts by various media organizations to contest the order, Judge Irene Berger kept it in place. She limited its scope (somewhat) but maintains nearly complete control over whether key documents will be available to the public. She is effectively keeping this important case under wraps without good reason.

This is the wrong decision.

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Where Are They Now? An Update on Past Posts

Several of the cases I’ve featured in my posts over the last year have had significant developments or come to a close. It’s always interesting—and moderately depressing—to see how things turned out. Continue reading

Posted in Bribery, FCPA, Insider Trading, Plea Agreement, Sentencing, Uncategorized | Tagged | Leave a comment

Public Service Announcement: NACDL Needs Examples of “Trial Penalty” Cases

I promise a real post later this week (isn’t the anticipation killing you?), but, meanwhile, NACDL is looking for examples of cases involving a “trial penalty.”

For those of you who are unfamiliar with the term, a “trial penalty” is the price our clients pay for choosing to fight charges against them rather than immediately capitulate in a plea deal. For exercising their constitutional rights–and forcing the government to meet its burden of proof at trial–our clients routinely pay the price of a longer sentence in prison if they are found guilty.

In December 2013, Human Rights Watch issued a report about this topic in relation to drug cases. I can’t vouch for the numbers, but the report concludes that

Federal drug offenders convicted after trial receive sentences on average three times as long as those who accept a plea bargain

Scott Greenfield has written about it. Matt Kaiser too.

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Judge Jed Rakoff Is Never Boring

There have been a lot of reasons to find SDNY Judge Jed S. Rakoff interesting.

But the most recent one–involving his resignation from a federal commission over forensic science discovery rules–is in the top 10. (Be sure to read the update below–he rejoined the commission the next day.)

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Will I Be Free on Bail Pending Appeal? For Governor McDonnell, the Answer Is Yes

When you lose at trial in a white-collar case (read: most of the time), one of your client’s first questions will be, “will I stay out of prison while we appeal?”

This is one time when a white-collar defendant usually has a big advantage over a defendant in a drug or gun case. Former Governor Robert McDonnell is a good example.

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6 Problems With Marketing White-Collar Defense Work

Sunday, January 25, is the two-year anniversary of my solo practice.

Two years ago, I was a partner at a big firm. I was pretty happy, very well compensated—and looking for more. So I left. Some said it was great. Others probably thought I was crazy but were nice enough not to tell me that (to my face at least–thanks, guys).

I’m in a contemplative mood because (1) it’s the new year, and (2) I have a bet with a friend to do four hours of goal-setting by the end of tomorrow or buy him lunch.

I’ve been pondering how hard it can be to market a white-collar defense practice in the traditional ways.

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A Tragic Update–Prosecution Ends With the Defendant’s Suicide

A few months ago, I wrote about the indictment of Alfred Villalobos and Federico Buenrostro. Mr. Villalobos had allegedly been part of a massive pay-for-play investment fraud involving CalPERS. Mr. Buenrostro (the former CEO of CalPERS) pleaded guilty in July 2014.

Mr. Villalobos’ trial was scheduled to start on February 23, 2015.  On January 13, 2015, Mr. Villalobos was found dead of an apparent suicide.

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The Guidelines Are “Ridiculous”: Governor McDonnell’s Two-Year Sentence

Bob_McDonnell_by_Gage_Skidmore

Photo by Gage Skidmore

Former Governor Robert McDonnell was sentenced today to two years in prison for public corruption. Given that the government asked for a sentence in the 10-12 year range, a two-year sentence is a remarkable outcome. In criminal defense work, sometimes what sounds like a stiff penalty is actually an incredible result.

I posted before about the verdict. Here are a few early thoughts on the sentence and the sentencing hearing:

Does This Case Mean that the Guidelines Don’t Matter? Early in the sentencing hearing, the judge gave the defense a victory by ruling that the guideline range was 78 to 97 months (6.5 to 8 years). The government and probation office had argued that the guideline range was in the 10 to 12 year range. The difference came in the calculation of loss (the size of the supposed bribes) and the judge’s refusal to conclude that Mr. McDonnell committed perjury when he testified. (See more below.)

Judge Spencer, of course, did not have to follow the guideline range since it is not mandatory. In fact, according to news reports, he said that judges need discretion in sentencing, saying that a 7 or 8 year sentence “would be unfair, it would be ridiculous, under these facts.”

I admit that when I read earlier today that the guideline range was 78-97 months, I thought that the ultimate sentence would be about 4 years. Boy, was I wrong. Every defense lawyer in the EDVA will be clamoring to have her case moved to Richmond.

No Obstruction by Testifying. One of the frustrating parts of sentencing is that if your client testifies at trial and is convicted anyway, the government will seek a sentencing enhancement for perjury. The government will argue that because the jury found your client guilty, your client must have been lying. In fact, official policy in the U.S. Attorney’s Manual states that “If perjury occurs at trial, the government should ask for application of section 3C1.1, the obstruction of justice enhancement, which increases the offense level two levels.”

Luckily for Mr. McDonnell, the court rejected this argument, explaining that “I don’t think it’s appropriate to punish [Mr. McDonnell] for putting on his case.”

It’s always a risk to have your client testify and the Sentencing Guidelines, coupled with DOJ’s view of the world, reinforces that risk. Mr. McDonnell was lucky this judge does not adopt the government’s approach.

Judge Spencer Is a Patient Man. Many judges are somewhat impatient at sentencing hearings and try to limit them. This was a long sentencing—lasting from 10 am until after 2 pm. Eleven witnesses testified for Mr. McDonnell, in addition to the reported 440 letters of support that were sent on his behalf.

Interestingly enough, the government had no “victims” testify. Huh, I guess there weren’t any.

Paying for Good Lawyers Makes a Difference. I would be curious to see the number of drug offenders who have a 78-97 month guideline range and are then sentenced to 24 months. I’m guessing you could count them on one hand.

Granted, this is an unusual case involving a former governor who undoubtedly did much good in his career. It was also a questionable prosecution under a novel interpretation of the law. But still—it’s an amazing outcome to see Judge Spencer go so far below the guideline range in a district not known for leniency in sentencing.

At last count, there were fourteen lawyers who entered appearances for Mr. McDonnell. Mr. McDonnell should be thanking every one of them because they played a huge part in creating the right sentencing story and attacking the government’s sentencing recommendation. Those lawyers were costly, I’m sure, but worth every penny.

How much would you pay to avoid 6 to 10 years in federal prison?

Looks Like Mr. McDonnell Will Be Heading to Jail Pending Appeal. For now, Mr. McDonnell will report to prison on February 9. His lawyers had filed a motion for bond pending appeal. It is not entirely clear from the news reports if that motion was formally denied but the judge said he must report on February 9 (as of the time of this post, there was no order on the docket).

Given that most appeals are long shots, some defendants voluntarily choose to start serving their sentence even if they appeal, figuring that the sooner they report, the sooner they will be released. That said, this case raises novel issues of what is an “official act.” Mr. McDonnell has solid legal grounds for appeal that have a chance of success. His lawyers may seek to have the judge reconsider his ruling on this issue.

What About Mrs. McDonnell? She will be sentenced on February 20th. We don’t yet know what the government will request. This sentencing result may affect their recommendation, since the government cannot expect that the judge will turn around and decide that she deserves 10 years in prison.

In fact, the judge has said today that those who blame Mrs. McDonnell for this wrongdoing are “dangerously delusional.” That seemed to be a primary defense theory. But even if the defense lost at trial, this is a huge victory at sentencing.

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Gag Me With An . . . Order? Massey Mine Case Starts With Broad Gag Order

The federal case against former Massey CEO Donald Blankenship has taken a rather unexpected turn—a sweeping gag and sealing order that effectively prevents anyone from following the case.

I was hoping to cover this case in some detail by analyzing the motions, orders and various parts of the docket over time. But the judge is not making that easy.

I say the “judge” is not making it easy because neither the government nor the defense asked for the order. It was entered sua sponte.

The good news is that news organizations are upset about the order and seeking to have it removed. Fourth Circuit precedent may be on their side.

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