What is an FBI 302? The Problematic Nature of FBI Agents’ Interview Memos

Posted on May 18, 2017 by

Writing correspondenceFormer FBI Director James Comey apparently wrote a memo summarizing his meeting with President Trump. The memo purportedly recounts the president’s statement saying he “hoped” that Comey would drop the investigation into the ties between his campaign and the Russians.

There’s nothing surprising about an FBI agent formalizing notes of a conversation. It’s SOP. In any white-collar criminal investigation, FBI agents’ notes of conversations with witnesses are often key evidence of a possible crime.

Let’s take a closer look at how a witness interview gets memorialized into an interview memo or, in white-collar parlance, a “302.”

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Posted in Criminal Investigation, DOJ policy and practice, FBI policy and practice | Leave a comment

Government’s “Big” Case Against Compliance Officer Ends Up Kind of Small

Posted on May 9, 2017 by

Failing gradeThe Treasury Department and former MoneyGram Chief Compliance Officer Thomas Haider have settled their civil claims. This was the first-ever case against a compliance officer for failing to implement an appropriate anti-money laundering (AML) program at a company.

For all the hoopla surrounding it, the case went out with a whimper.

As I talked about in an earlier post, MoneyGram entered into a deferred prosecution agreement a few years ago, agreeing to pay $100 million for its compliance failures. Mr. Haider, to his credit, chose to fight.

The government’s complaint against him sought a $1 million penalty and an injunction preventing him from working in a compliance function. In the end, Mr. Haider agreed only to pay $250,000 and was enjoined “from performing a compliance function for any ‘money transmitter’ (as that term is used in the Bank Secrecy Act and its implementing regulations)  . . . for a period of three years.”

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Posted in civil case, Compliance | Leave a comment

Fifth Circuit Takes a Goldilocks Approach to False Claims Act Standard for Imputing Knowledge to Corporation

Posted on April 25, 2017 by

Under-the-table transactions...The Department of Justice is always busy prosecuting fraud related to government contracts. The two obvious reasons why this is a DOJ priority are (1) a lot of public money is spent through government contracts, and (2) the size and complexity of the contracts no doubt leads to  opportunities for mischief.

In these criminal cases, the government will often proceed with a parallel civil False Claims Act (FCA) case. So, many of my cases over the years have included a civil element. Even if you want to practice all white-collar defense work, you need to understand the civil side of things and how your clients face that liability as well.

The Fifth Circuit recently decided an interesting case addressing when a company can be held liable under the FCA for wrongdoing committed by its employees. In United States ex rel. Vavra v. Kellogg Brown & Root, Inc., 848 F.3d 366 (5th Cir. 2017), the court of appeals split the baby—choosing a standard in between those proposed by the government and by Kellogg Brown & Root.

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Posted in Appeal, civil case, False Claims Act, Government contracting fraud, Kickbacks | Leave a comment

“Restitution for a Reckless Bank? A Dubious Remedy Indeed” – Judge Posner’s Bank of America Smackdown

Posted on April 13, 2017 by

business concept. money with handJudge Richard Posner of the Seventh Circuit—love him or hate him—just wrote a(nother) scathing opinion. He remanded a criminal restitution order, concluding that Bank of America was not entitled to any restitution for fraudulent mortgage loans because of the bank’s “deliberate indifference” in investigating the fraud.

The language of United States v. Litos is . . . harsh.

The scheme was not complicated. The defendants gave some home buyers the money to make down payments on homes. Then the buyers included on their loan applications to Bank of America certain “false claims of creditworthiness.” Bank of America loaned them the money anyway. The defendants walked away from the transaction with the purchase price of each property minus the down payment amount, which they had provided to the buyer in the first place.

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Posted in Appeal, Restitution, Sentencing | Leave a comment

Bingo! A Defense Win Limits Broad Use of Mail Fraud Statute

Posted on April 5, 2017 by

Bingo GameThe only thing I like better than seeing a defense lawyer win is seeing a friend who is a defense lawyer win.

A friend of mine, Jay Nanavati, led a case to victory in the Northern District of West Virginia, persuading the judge to dismiss all 53 counts of the indictment against his client.

It’s a win for Jay and his client—and the other co-defendants—but since the court’s opinion limits the government’s broad use of the mail fraud statue, it’s a win for all of us too.

The case is about bingo in West Virginia, so you know it’s going to be good.

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Posted in Dismissal of charges in indictment, Mail Fraud, Money Laundering | 2 Comments

Upjohn Warnings from Both Sides of the Table

Posted on March 30, 2017 by

danger thin iceI recently participated on a panel at the excellent NACDL White Collar Defense College with Ellen Brotman, Preston Pugh, Brian Bieber and Cynthia Orr. The College aims to teach lawyers how to handle white-collar cases from start to finish. We were tasked with presenting about the ethics of handling an internal investigation.

As in years past, our discussion about Upjohn warnings led to the most questions and engendered a little controversy. The main issue was whether the company’s lawyers should tell interviewed employees that the company will disclose what the employee says to the government.

I have different views on this issue based on where I’m sitting: on the company’s side of the table or on the employee’s side of the table.

But let’s back up to the basics.

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Posted in Attorney client privilege, internal investigation, Obstruction | 2 Comments

Update on the Hedge Fund Founder David Ganek’s Lawsuit Against Preet Bharara

Posted on March 27, 2017 by

A few weeks ago, I wrote about the lawsuit filed by Level Global founder David Ganek. Mr. Ganek sued Preet Bharara, the former U.S. Attorney for the Southern District of New York, as well as other prosecutors and agents, claiming that they had harmed him by obtaining and executing a search warrant based on false information.

The district court had allowed most of the complaint to proceed, denying the defendants’ motion to dismiss. The case had then headed to the Second Circuit.

Law360 (sub.) reported on the argument yesterday:

During appellate arguments Friday, the circuit panel asked questions of both sides but gave few clues about how it might come out.

Judge Raggi, for example, seemed to dislike the government’s assertion that the affidavit contained no false information. But Judge Chin observed, contrary to Judge Pauley’s finding, that Ganek’s allegations against top prosecutors appeared to be conclusory.

That left Ganek’s lawyer, retired Harvard Law professor Nancy Gertner, and prosecutor Sarah S. Normand seeking to sway the panel based, among other things, upon the potential consequences of a dismissal — or of a trial.

“This is about accountability,” Gertner said. Her filings reminded the circuit of Ganek’s accusation that the investigation destroyed his business. She warned that others will see their belongings rifled through if such cases are not allowed a full airing.

But Normand said it would be bad precedent and an “enormous burden” on the government to force prosecutors into court to defend their practices in cases where a corrected affidavit would have led a judge to authorize the same search.

“[S]uch allegations could be made against supervisors in almost any context, and amount to an impermissible” theory of employer liability, the government’s briefs said.
The court will no doubt take a few months to decide this case, but I’m hopeful we’ll see something by the end of the summer. (Most judges like to finish opinions in important cases before their law clerks switch over in August.)
At a minimum, it sounds like the panel was not completely hostile to the claims. That alone is a win. Also, Preet Bharara–no longer a government employee–has a little more cash to settle the case, should he decide to do so.
Posted in Appeal, civil case, DOJ policy and practice, Fourth Amendment | Leave a comment

Like DOJ, the SEC Has Trouble with Misleading Press Releases

Posted on March 6, 2017 by

unfair to fair on white paperI’ve written before about the fundamental unfairness of the Department of Justice’s practice of issuing press releases touting indictments but not issuing press releases when the charges are dismissed or the defendant acquitted.

It looks like the SEC has the same problem.

On April 11, 2016, the SEC announced a complaint it filed against the Texas Attorney General Ken Paxton, among others. I wrote about the basics of the civil and criminal cases against Mr. Paxton a few months ago.

The SEC’s press release opened, in big bold letters:

SEC: Company Misled Investors About Energy-Efficient Technology

It went to explain:

The Securities and Exchange Commission today announced fraud charges against a Texas-based technology company and its founder accused of boosting stock sales with false claims about a supposedly revolutionary computer server and big-name customers purportedly placing orders to buy it.

Also charged in the SEC’s complaint is Texas Attorney General Ken Paxton and a former member of the company’s board of directors for allegedly recruiting investors while hiding they were being compensated to promote the company’s stock.

***

While serving in the Texas House of Representatives, Paxton allegedly reached an agreement with Mapp to promote Servergy to prospective investors in return for shares of Servergy stock.  According to the SEC’s complaint, Paxton raised $840,000 in investor funds for Servergy and received 100,000 shares of stock in return, but never disclosed his commissions to prospective investors while recruiting them.

Pretty salacious stuff against a sitting state attorney general. The press release also includes a link to the PDF complaint in the case.

That press release is still proudly sitting on the SEC’s website.

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Posted in SEC policy and practice, Securities fraud | Leave a comment

OIG Investigations – Why Lawyers and Clients Should Both Worry

Posted on February 28, 2017 by

Virus searchOn first glance, investigations by a federal agency’s Office of Inspector General, or OIG, may seem like no big deal. An inspector general has no criminal authority. He can’t charge you with a crime or throw you in jail. He can’t even arrest you. Maybe he can fine you or get you fired if you are a federal employee.

But I’ve seen OIG investigations ruin people’s decades-long careers and lead to criminal investigations and False Claims Act cases. The upshot is that you should worry about an OIG investigation if you are the target of the investigation.

You should also worry if you are the target’s lawyer, because defending someone in these investigations is complicated. It’s never easy to defend a client when the deck is stacked against you, and when you may be actively prevented from advocating for your client.

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Posted in OIG investigations | 2 Comments

Why Won’t the Witness Talk to Me?

Posted on February 18, 2017 by

Thomas KlebestreifenWhen I’m representing a white-collar criminal defendant pre-indictment, one of my key tasks is to try to contact potential witnesses.

But when? The timing is a tightrope.

Contact a witness before you know anything about the case and your risk not asking the right questions in what may be your one shot to talk. Contact a witness too late and you risk losing the chance to ask any questions at all.

Why would you lose your chance? Because if a government agent gets in touch with the witness first, there’s a very good chance that the witness won’t talk to you at all. It’s maddening and frustrating. It happens much too often to be a coincidence.

It seems that some government agents feel the need to subtly—or not to subtly—discourage witnesses from talking to defense counsel. Now, I’m not talking about drug or violent cases where there’s a true risk of physical retribution against witnesses. Let’s just say that “snitches get stitches” doesn’t apply in my cases.

Every prosecutor will deny that he discourages witnesses from talking to defense counsel. Every agent will deny that it too. And you probably can’t prove that it happened.

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Posted in Trial preparation | Leave a comment