Prosecutorial Misconduct in the Grand Jury But No Dismissal of Charges, Says Ninth Circuit

Under-the-table transactions...Prosecutors who engage in misconduct are rarely subjected to ethics charges. In a recent case out of the Ninth Circuit, the prosecutor engaged in wrongdoing, the court suggests that he should be referred to the bar, yet there is no indication in the opinion that the judges themselves do so. Why not?

In United States v. Harmon, decided August 18, 2016, by the Ninth Circuit, the defendant was a lawyer. Her client ran a business that sold stolen computer equipment. During the representation, she apparently helped him obtain money that should have been maintained in frozen bank accounts.

According to the Ninth Circuit’s opinion, her client delivered two checks to Ms. Harmon for $127,550. She deposited them into her client trust account. She then wrote several checks back to her client and his wife that totaled about $100,000. She wrote those checks within six months of receiving two checks from her client.

Not smart, right?

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Posted in Appeal, Money Laundering, Prosecutorial misconduct, Uncategorized | 4 Comments

Only in Texas: Civil Securities Fraud Claims Dismissed but Criminal Charges Head to Trial

Chief executive officer

Warren “Ken” Paxton, Jr. is the attorney general of Texas. He’s had some ups and downs this week, to be sure.

On Friday, October 7, 2016, the Eastern District of Texas dismissed all of the securities charges filed by the SEC against him.

On Wednesday, October 12, the Texas Court of Criminal Appeals refused to hear a last-ditch appeal by him to dismiss criminal charges for the same conduct.

It doesn’t take a legal genius to spot this anomaly. Criminal charges are tougher to prove; civil claims are easier. So why were the civil claims dismissed but the criminal charges still standing?

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The Coolest Investigation – Is a Failed Kickstarter Campaign a Crime?

coolest-sizedAbout two years ago, I saw a video on Facebook about a Kickstarter campaign for the Coolest cooler. I thought it was a joke. It was a cooler with a blender and a Bluetooth speaker, plus giant wheels, built in bottle opener and USB charger.

My older son plays travel baseball, and we spent a ridiculous amount of time watching games. Music and blended drinks seemed to be a way to pass the time. So we ponied up our 185 bucks and watched to see what would happen.

The Coolest Kickstarter campaign raised a record-breaking $13 million but hit a lot of snags in production, including factory strikes overseas and shipping problems.

After much complaining, we finally received our Coolest a few months ago. It weighs about 100 lbs. but it’s pretty cool.

About 40% of the Coolest backers were not so lucky, and apparently some of them called the Department of Justice to lodge a complaint.

The question: if a Kickstarter campaign fails and you don’t get the product (or a refund), is that fraud?

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The SEC’s Right to a Jury Trial

We usually think about the right to a jury as one for a defendant facing charges. But it’s worth remembering that agencies are people too. Well, at least when it comes to the right to a jury trial in a civil case.

In a recent Ninth Circuit opinion, the court reversed the judgment in favor of the defendants because the district court refused to allow a trial by jury when the SEC requested it.

In U.S. Securities & Exchange Commission v. Jensen, the SEC went after former CEO Peter Jensen and former CFO Thomas Tekulve of the “now-defunct” Basin Water, Inc.

The SEC filed suit against Defendants in 2011 alleging that they had participated in a scheme to defraud Basin investors by reporting millions of dollars in revenue that were never realized.

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Posted in Appeal, Securities fraud | Leave a comment

The FCPA Institute Is Coming to Washington

Fellow blogger and professor Mike Koehler is bringing his famed “FCPA Institute” to Washington, DC on September 19 and 20. If you’ve always wanted to handle FCPA cases, or already handle them but want to learn more, go to this event.

Here’s more detail from Prof. Koehler’s website. I just wish I were in town those days so I could go myself.

The FCPA Institute is different from other FCPA conferences as information is presented in an integrated and cohesive manner by an expert instructor with FCPA practice and teaching experience. Moreover, the FCPA Institute promotes actual engagement and active learning by participants through issue-spotting videos, skills exercises, small-group discussions, and the sharing of real-world practices and experiences. To best facilitate the unique learning experience that the FCPA Institute represents, attendance at each FCPA Institute is capped at 30 participants.

In short, the FCPA Institute is offered as a refreshing and cost-effective alternative to a typical FCPA conference and is designed to elevate the FCPA learning experience for a diverse group of professionals such as in-house and outside counsel; other compliance professionals; finance, accounting, and auditing professionals; business executives and others seeking sophisticated FCPA knowledge and practical skills.

This link contains more information about the FCPA Institute (including a sampling of what prior FCPA Institute “graduates” have said about their experience).

At the end of the FCPA Institute, participants can elect to have their knowledge assessed and can earn a certificate of completion upon passing a written assessment tool. In this way, successful completion of the FCPA Institute represents a value-added credential for professional development. The FCPA Institute – DC has been approved for 12 CLE credits in Virginia and attorneys seeking CLE in other states will receive a Uniform Certificate of Attendance that can be used for attorney self-submission in other states. In addition, previous FCPA Institute participants have successfully obtained continuing education units from the Society of Corporate Compliance and Ethics for attending the FCPA Institute.

To register for the FCPA Institute – DC, click here.

Posted in Bribery, Continuing education, FCPA | Leave a comment

An Open Letter Thanking the McDonnell Team (Or, Why We Can’t Give Up)

Dear Governor McDonnell’s Legal Team:

As you probably know, the government decided not to retry Governor Bob McDonnell yesterday. This is big news. It follows his victory in the Supreme Court.

He won. You won.

Was this the best paragraph you’ve ever read?

The United States respectfully moves for this Court to remand this case to the district court for the United States to file a motion to dismiss the indictment with prejudice under Fed. R. Crim. P. 48(a). The defendant does not oppose this motion.

There’s a lot that could be said –and has been said well by others—about the importance of this case to rein in the government’s aggressive prosecution of public officials under an extraordinarily vague statute. Your victory on that front alone is incredible. (Sheldon Silver will likely be sending you his own thank you note.)

I’m not going to talk about that. I’m just going to thank you—from one white collar lawyer to another.

Here’s what struck me about this win. You were, quite simply, relentless. Seriously, you never gave up. You filed motion after motion, preserved error after error, and appealed until the cows came home. I’ll bet the government was annoyed by all of your motions along the way.

I’m not privy to Governor McDonnell’s conversations with you, but I can pretty much guarantee none of you said, “Hey, don’t worry about the convictions. We just need to appeal to the Supreme Court. It will take the case and you will win. It’s a lock.” I’m sure you talked about how it was very possible the Supreme Court wouldn’t take the case, how it was possible you could lose there too.

This case reminds me of the Senator Ted Stevens case. I read Rob Cary’s excellent book about his representation of Senator Stevens. It’s a very interesting book because you get an insider view of how the best lawyers work. (You should write a book.)

The Stevens lawyers, like all of you, never gave up. They too filed motion after motion and kept trying to win even after Stevens has been convicted at trial. And they did win.

On a related note, a friend of mine, Brian Stolarz, wrote a book about getting a client off death row. He too was relentless. It’s a quality of great lawyers.

I wanted to thank you because your representation of Governor McDonnell is a reminder that we cannot give up on winning for our clients, even if it looks like a lost cause.

Let’s face it, both Senator Stevens and Governor McDonnell were represented by some of the best white collar lawyers in the country. They were supported by incredible teams of lawyers.

But just being a good lawyer is not enough. You both lost at trial. (Sorry to point that out.) But you didn’t throw up your hands and cry uncle. Instead, you dug in and looked for a way to win.

I like to think I’m that kind of lawyer—the kind that never gives up. It’s hard when my client doesn’t have the funds to cover every possible motion that I’d like to file. It’s hard, too, when there is enough evidence of wrongdoing by my client that makes the possibility of winning at trial low, and the government offers a very good plea deal.

Hard is what we do for a living. If I wanted easy, I’d have picked another job.

So, thank you. Thanks for winning this case, not only because it resets some precedent that hurt many of our clients but also because it has reminded me why I can’t (and won’t) ever give up on a client.




Posted in Appeal, Public Corruption | Leave a comment

Are Your Client’s Emails Sent From His Work Computer Privileged? A Somewhat Helpful Ninth Circuit Decision

Email concept with laptop ang girl hands

When I meet with a new client, particularly a corporate executive under criminal investigation, we talk about emails.

I tell him that he should use his personal email account to communicate with me, not his work account, since his employer has the right to review emails sent on his work account. But I also caution him that he should try to email me from a device other than one owned by his employer—his personal phone or his home computer. I’m trying to make sure our emails are private and the privilege is secure.

(Sometimes we talk about how easy it is for the government to subpoena a Gmail account, too, and sometimes we use secure messaging systems away from the government’s prying eyes—but that’s a subject for another post.)

But let’s be realistic. Our clients spend a lot of time at work and that’s where they are going to respond to most of our emails.

A recent Ninth Circuit decision about the former governor of Oregon offered a ray of hope that our clients’ emails—even if saved on their employer’s server—are still privileged.

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A Misleading DOJ Press Release

I was surprised to read the headline of a recent DOJ press release: “Former Acclarent, Inc. Executives Convicted of Crimes Related to the Sale of Medical Devices.” I was surprised because I thought I’d read that the case had been a big win for the defense.

So I read the press release.

The first paragraph said that the former CEO and a former VP of Acclarent “were convicted by a federal jury in connection with distributing adulterated and misbranded medical devices.”

The second paragraph named the two defendants and noted that they “were convicted by a jury following a six week trial of 10 counts of introducing adulterated and misbranded medical devices into interstate commerce.”

Wow, ten counts? That sounds like a big win for DOJ.

The third paragraph described the counts of conviction in a fair amount of detail:

The jury concluded that Facteau and Fabian caused the unlawful distribution of a medical device known as the Relieva Stratus Microflow Spacer (“Stratus”) for uses not cleared or approved by the U.S. Food and Drug Administration.  Despite the fact that the company had told the FDA that the Stratus was a medical device intended to maintain an opening to a patient’s sinus, Facteau and Fabian launched the product intending it to be used as a steroid delivery device.  The FDA, however, had specifically refused Acclarent’s request to clear the Stratus for marketing as a drug delivery device without further submissions to support that use.

It sure sounds like these two are some bad dudes, right?

The fourth paragraph of the press release described the “evidence at trial” that apparently led to the convictions.

The evidence at trial demonstrated that Facteau and Fabian sought to quickly develop and market products, including the Stratus as a drug delivery device, to create a projected revenue stream that would make Acclarent an attractive business for either an initial public offering or acquisition.

There must have been an overwhelming amount of “evidence at trial” to lead to these very serious convictions. I’m already pondering a possible blog post about this type of health care fraud. Hmmm…CEO of a company…serious convictions…must be facing a lengthy prison sentence given the loss calculation.

Then I read the FIFTH paragraph:

The jury acquitted Facteau and Fabian on 14 felony counts of fraud.  The 10 counts of conviction were misdemeanor counts related to the same conduct.

Wait. What?

After four full paragraphs explaining that these two executives had been “convicted” of “10 counts” and describing the serious charges and “evidence at trial,” DOJ finally says that the two executives were convicted of minor misdemeanors and face a year in jail.


DOJ is a government agency. It’s not a private firm selling its success stories. It’s not hustling for clients.

So why is it using PR strategies to try to “sell” a big loss in a huge health care fraud trial as a win? DOJ did the same thing to Don Blankenship. It put out a press release about how he was convicted of a “federal conspiracy charge” that doesn’t even use the word “misdemeanor” in it.

I’ve always thought that DOJ’s press releases should report DOJ losses as well as wins. Why shouldn’t the public be made equally aware when DOJ loses a case as when it wins?

And given that DOJ (particularly SDNY) loves to put out press releases of indictments–before any evidence has ever been tested in court before a neutral fact-finder–shouldn’t it put out a press release when that indictment wasn’t proven at trial?

Take a look at the press release for the indictments of these two Acclarent executives. It describes very serious potential misconduct.

DOJ press releases about indictments come in high in Google’s search results. So whenever someone searches for those executives’ names, he will find those press releases. The least DOJ could do when it doesn’t obtain in a conviction is put out a press release fully clearing the person’s name.

Maybe the exoneration will show up second in the search results.




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Another Big Win in the White Collar World (This Time in the EDVA, of All Places)

After I wrote my last post, I was reminded about another big win that I should have mentioned before. Greg Poe, Preston Burton and Rachel Li Wai Suen won a complete acquittal for former high-ranking army officer Edwin Livingston. Here’s a short summary of the win:

A federal court on Wednesday exonerated four former high-ranking Army officers accused of orchestrating a large-scale bribery scheme involving under-the-table payments to Pentagon acquisition officials in an attempt to secure lucrative Defense Department contracts for their Virginia-based government contracting firm.

Edwin Livingston III, 67; Ronald Tipa, 68; Thomas Taylor, 66; and Ross DeBlois Sr., 55, were all found not guilty on a total of 32 counts of bribery and fraud, according to a ruling by the U.S. District Court for the Eastern District of Virginia.

Federal prosecutors alleged the four men, all retired colonels in the Army National Guard, used their government contracting company, Military Personnel Services Corporation, or MPCS, to bribe Defense Department officials to steer Pentagon acquisition and services contracts to the Falls Church, Virginia-based firm.

For those of you practice in the white-collar world, one fact here should stand out. They won a complete acquittal in the EASTERN DISTRICT OF VIRGINIA. That’s probably the toughest court to face these kinds of charges. The jury pool is stacked with current and former military folks, defense contractors and other Northern Virginia residents who don’t take kindly to bribery.

The judges there are uniformly tough on defendants, too. It’s not an easy place to try a criminal case, never mind win one.

The other three defendants also had great counsel. These kinds of wins are a huge team effort, so a quick shout-out to the whole group:

Mark MacDougall, Karen Williams, and Connor Mullin (Akin Gump); Bob Trout, Gloria Solomon, and Chris Hatfield (Trout Cacheris); and Barry Pollack and Addy Schmitt (Miller Chevalier).

That’s a rock star-level joint defense group.

Congrats to everyone!

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Celebrating Summer with Recent Wins in the White-Collar World

In the past few months, there have been several big wins for white-collar defendants.  Because we’re in desperate need for some good news as of late, here are highlights of those victories.

As I’ve pointed out before, DOJ doesn’t publicize its losses, so it’s sometimes hard to learn about these wins for the defense bar. Feel free to send your wins my way, and I’m happy to talk about them here.

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Posted in Acquittal After Jury Trial, Dismissal of charges in indictment, Health care fraud | Leave a comment