Shell Oil and Shell International (collectively “Shell”) have been named in a defamation action by a former employee which relates to a criminal investigation. The employee claimed that Shell made defamatory statements in its report to the Department of Justice of an internal investigation about possible FCPA violations at the company. The case made its way to the Texas Supreme Court, and the company won.
The issue in Writt v. Shell Oil Company was whether Shell’s statements in the report are privileged. Privilege is an affirmative defense to a defamation claim and there are certain narrowly-defined absolute privileges (for example, statements made by a witness in court) and qualified/conditional privileges (for example, the fair reporting privilege for journalists).
The lower court had held that the statements were conditionally privileged. The Texas Supreme Court went one step further and held that the statements were absolutely privileged as a result of their intimate relationship to the ongoing DOJ investigation. In doing so, the court recognized the continued expansion of FCPA prosecutions and bolstered the incentive for large corporate defendants to cooperate with enforcement bodies by naming its executives as wrongdoers.
The Department of Justice has never lacked for confidence in its ability to prosecute people. It investigates supposed FCPA violations overseas, identifying some minor link to the United States.
Unfortunately, courts rarely limit DOJ’s reach in these types of cases.
However, in a recent case from the Northern District of California, the court dismissed all of the charges of conspiracy, bribery, and honest services fraud against three defendants. The alleged wrongdoing took place overseas and the defendants were not U.S. citizens or residents.
The judge not only dismissed the case, but he ridiculed the government for bringing the case at all and invited the government’s attorneys to appeal his ruling that the charges violated the well-settled presumption against the extraterritorial reach of U.S. laws.
Seeking revenge against political opponents is a time-honored American tradition. Why is the Department of Justice contending that it is a crime?
Three former high-ranking officials in the Port Authority of New York and New Jersey have been implicated in a political scandal involving Governor Chris Christie. On May 1, 2015, the government filed the guilty plea of David Wildstein, former Port Authority director of interstate capital projects.
William Baroni Jr. (former deputy executive director of the Port Authority) and Bridget Kelly (former deputy chief of staff in the governor’s office in charge of intergovernmental affairs) have also been named in a separate criminal information.
Mr. Wildstein pleaded guilty to conspiracy to mishandle port authority property in violation of 18 U.S.C. § 666(a)(1)(A) and conspiracy against civil rights in violation of 18 U.S.C. § 241. Mr. Baroni and Ms. Kelly were also charged with conspiracy to commit wire fraud under 18 U.S.C. § 1349.
Seriously, “conspiracy to mishandle port authority property”? Is this a real thing?
Yes, it is.
Brady v. Maryland requires a prosecutor to disclose evidence that is favorable to the defense. Yet many critics have correctly pointed out that unless there exists a way to discipline prosecutors who willfully violate this obligation, it is an abstract right without a concrete remedy.
The D.C. Court of Appeals, however, recently offered one method to enforce these obligations—the ethics rules.
In In re: Andrew J. Kline, the court resolved an uncertainty in the required disclosures under Brady and Rule 3.8 of the District of Columbia Rules of Professional Conduct.
Mr. Kline, a federal prosecutor, failed to disclose a piece of evidence to the defense. He argued that the two standards were coextensive. Although Brady may not have mandated disclosure, the court held that Rule 3.8 did.
Ultimately, the court decided not to impose sanctions on Mr. Kline. The court’s ruling, however, is a step towards rational enforcement of a prosecutor’s Brady obligations.
There’s no question that corporate executives enjoy certain perks. They come with the job, right?
The government can’t outlaw corporate perks, but the SEC has cracked down on the proper disclosure of them. It recently sued the former CEO of video-conferencing company Polycom, Inc. for his failure to disclose approximately $190,000 of perks that he used to pay for clothes, gifts, luxury travel and lavish entertainment packages over several years. He charged them as business expenses.
It is a cautionary tale for any corporate executive as well as those involved in drafting compensation disclosure statements for public companies. The company also faced a small penalty for filing incorrect disclosures.
This is a fairly minor case, yet the SEC sought penalties against the company for weak internal controls and is seeking fairly substantial penalties against the executive, including an officer and director bar, disgorgement and civil penalties. Add to those suggested penalties the public shaming element of filing a complaint, and it strikes me as overkill.
The SEC, I’m sure, would view the case as “making a point.” Indeed, Enforcement Director Andrew Ceresney said:
CEOs are stewards of corporate assets and must be held to the highest standard of honesty and integrity. We will not hesitate to charge executives with fraud when they allegedly use a public company as a personal expense account and hide it from investors.
Whistleblowers are a problem for corporations and a boon for the SEC.
The SEC relies in part on whistleblowers to identify possible wrongdoing within publicly-traded companies. From the agency’s perspective, the employees and officers of a company are in the perfect position to report on their company’s securities violations.
KBR recently learned the hard way that any perceived effort to restrict employees from participating in the SEC’s whistleblower program will not be well received. Luckily for KBR, the penalty was slight: $130,000 fine and a mandated revision of its employee confidentiality policy.
The federal government’s aggressive approach to criminal forfeiture unquestionably targets innocent bystanders to crime. In fact, the law makes it easy—and profitable—for the government to do so. A recent high-profile insider trading case in New York is a prime example of the need to challenge the government’s forfeiture approach.
In February 2014, Mathew Martoma, a hedge fund trader who worked for an affiliate of SAC Capital Advisors, was convicted of insider trading. He was sentenced to nine years in prison. In September 2014, the court entered a Preliminary Order of Forfeiture for approximately $9.4 million. The order stated that the $9.4 million
represent[ed] the amount of proceeds obtained as a result of the offenses charged in Counts One through Three of the Indictment.
Basically the government contended that the forfeiture amount arose from an SAC-related bonus received by Mr. Martoma that resulted from his insider trading activity.
The problem for the government is that the assets that were ordered forfeited are arguably jointly owned by Mr. Martoma’s wife, Dr. Rosemary Martoma. She is challenging their forfeiture.
The conviction and sentence of a man in California were recently vacated when it was discovered that the government had improperly withheld exculpatory material from his defense team at trial. We read a lot of stories about the failures of Brady v. Maryland and the seeming inability — or lack of desire — of courts to free defendants or to sanction prosecutors who flagrantly violate the law. It is nice to report a win for a defendant as a change of pace–not to mention a win for an “unpopular” defendant who was accused of conspiracy to bomb federal property.
In Brady, the Supreme Court held that due process requires prosecutors to disclose to defendants any exculpatory evidence (evidence that is “favorable to the accused”) that could affect a conviction or sentence.
This seems like a simple rule. In reality, it is not. Continue reading
I have been writing about the stupendously overbroad gag order imposed sua sponte by the judge in the criminal trial of Donald Blankenship, former CEO of Massey Mine. Judge Irene Berger imposed it, several media organizations intervened to challenge it, she decided to keep it mostly in place, they petitioned for mandamus to the Fourth Circuit.
The Fourth Circuit agreed to hear the case on an expedited basis. It heard argument on March 2. Three days later, the decision was in—petition granted.
Translation: free speech wins.
In a white-collar case, the prosecutors have the FBI on their side. A private lawyer can’t call on armed agents to investigate a case. Hiring a good private investigator, then, can make all the difference. A skillful and diligent investigator can chase leads, discover key facts, find witnesses and gather the information necessary to build a case. But there is a risk if your investigator crosses the line into illegal conduct.
Earlier this month, charges were filed against Eric Saldarriaga. He is an investigator whose clients apparently include 20 New York City law firms. He pleaded guilty to conspiracy to hack into private email accounts to help his clients. (So far, no law firm has been charged.) These charges are a cautionary tale for every lawyer who hires an investigator.