White Collar Crime Prof Blog

DOJ Announces Updated USAM - Now Called the Justice Manual

Earlier today, the Department of Justice announced the issuance of an updated United States Attorneys' Manual.  The new manual, now called the Justice Manual, represents the "first comprehensive review and overhaul of the Manual in more than 20 years."  From the DOJ press release:

“This was truly a Department-wide effort, involving hundreds of employees collaborating from many different Department components,” said Deputy Attorney General Rod Rosenstein. “To mark this significant undertaking, and to emphasize that the Manual applies beyond the United States Attorneys’ Offices, we have renamed it the Justice Manual. Though the name has changed, the Manual will continue as a valuable means of improving efficiency, promoting consistency, and ensuring that applicable Department policies remain readily available to all employees as they carry out the Department’s vital mission.”

By 2017, many provisions of the Manual no longer reflected current law and Department practice. This diminished the Manual’s effectiveness as an internal Department resource, and reduced its value as a source of transparency and accountability for the public. To bring the Manual up to date, employees from around the country, primarily career attorneys, undertook a yearlong, top-to-bottom review. The Department’s goals were to identify redundancies, clarify ambiguities, eliminate surplus language, and update the Manual to reflect current law and practice.

Some specific changes include expanding the Principles of Federal Prosecution to incorporate current charging and sentencing policies, and adding new policies on religious liberty litigation, third-party settlement payments, and disclosure of foreign influence operations.

The Justice Manual may be accessed here. 

(LED)

Manafort: The Fall of a Domino Can Trigger Others to Fall

As noted here, the Special Counsel's Office filed an information, which immediately indicated that either the accused waived a Grand Jury Indictment or an Agreement had been reached (which typically includes the waiving of the indictment).  In this case it was the latter, as seen in the entering of a plea agreement (see here) by Paul Manafort. The plea is to two counts of a sec. 371 conspiracy, with the first count having multiple objects of the conspiracy (money laundering, tax fraud, false statements, etc.) and the second count being limited to a conspiracy to obstruct justice under sec. 1512. Accompanying the plea we find the Statement of the Offense (here) and Exhibits (here). So here are some thoughts on the plea:

1. The government and defense used specific objects of the conspiracy as opposed to just saying it is a conspiracy to the defraud the government, although on afterthought it does appear to be a conspiracy to defraud. It provides a roadmap to a vast array of alleged underlying criminal conduct.
2. The Agreement makes clear that no additional charges will be brought against Manafort for his "disclosed participation in criminal activity including money laundering, false statements, personal and corporate tax and FBAR offenses, bank fraud, Foreign Agents Registration Act violations for his work in the Ukraine, and obstruction of justice."
3. The Advisory Guidelines range is 210-262 months imprisonment, but each side left some room for argument here.  And sentencing in this DC case, as well as the prior Virginia case will be delayed pending Manafort's cooperation.  But of key importance is that the government will file a 5K1.1 if Manafort provides substantial assistance, which could bring down his sentence.
4. Cooperation is a component of the agreement, including providing testimony in court proceedings. But the essence of that cooperation is obviously omitted here.
5. The Plea contains the typical trial, appellate, and post-appellate waivers often found in plea agreements. But, noteworthy, is that Manafort is waiving his right to counsel during his cooperation with the government.  This will save him attorney fees, but it also will mean that anything he says will be between him and the government.
6. The forfeiture of both money and property is significant, and this plays well against any claims that this special counsel investigation was overly costly.  Special Counsel Mueller is doing a good job here at trying to get money to cover the costs of this investigation.

   And some thoughts on the Statement of the Offenses and Other Acts -

1. It looks like the theme is how to disseminate misinformation.   One has to wonder if this is a preview to the 2016 U.S. presidential campaign.
2. Several individuals and companies are named only by letter in the Statement (A, B, D1, and D2) - did they previously provide information to the Special Counsel or have we now moved closer to these dominos.  And if there are future cases here, will the Special Counsel's office handle these or refer them to other US Attorneys. I hope someone is watching the statute of limitations here.
3.  #35 is intriguing - Manafort initially told the DOJ "that he [did] not [have] relevant documents."  But the statement here is that Manafort did in fact have "numerous incriminating documents in his possession, ..."  The implication is clear that the government now has these documents. So, what other documents did Manafort have?  

General Thoughts -

1. Mueller's team plays a tough game as so many have folded to protect their family, or for the sake of their family.
2. The Plea, the Statement and the Accompanying Exhibits make one wonder how pervasive phony media campaigns, such as this, have occurred.
3. What is really important is not what is here in these documents, but rather what is not here. Mueller has been careful not to show his hand as he climbs the ladder of indictments and pleas that have individuals charged and convicted of federal crimes. And he certainly has done an impressive job in accumulating these. And from each plea he obtains additional evidence that implicates the next person.
4. So who will be the next domino?

See also, Jack Townsend, Federal Tax Crimes - here.

(esp)   

Superseding Criminal Information - Manafort Case

A superseding criminal information was filed in the case against Paul J. Manafort, Jr.  (see Download Manafort DC_Superseding Criminal Information).  Commentary to follow later today.  

(esp)

The Magic Number Is Eight - And is the Clock Ticking?

Yesterday was a crucial day for Special Counsel Mueller's Investigation in that Paul Manafort was convicted on eight counts. The fact that the remaining counts were "hung" is inconsequential as the sting of these eight convictions sends a strong message and a possible heavy sentence.  To make matters worse for Manafort, he still has an upcoming trial in DC on other charges.  One could argue that there is always the possibility of success on appeal or a presidential pardon.  But one has to wonder whether Manafort's time in negotiating a plea with the Special Counsel may be running out.  And is there now competition in who will get the best cooperation agreement or favorable statement at sentencing from the government.

Further north, it was an important day in that within the same hour as Manafort's conviction, Attorney Michael Cohen entered a guilty plea to eight counts.  Many in the media are noting that in the plea hearing Cohen said that his actions were "at the direction of a candidate for federal office."  Was Michael Cohen sending a message to Mueller's team that he is ready to talk?

These two cases are not currently connected --two different prosecutors, two different offices, two different courts, two different matters. 

But how many cooperators does Mueller need, and will Manafort (if he decides to cooperate) be up against Cohen's desire to offer evidence, assuming that he might have an interest in cooperation.

It may be a stretch to say that the clock is ticking for potential cooperators.  It may also be that Mueller is someone who says "the more the better."   Bottom line we just don't know. But yesterday's count of 8 will go down as a memorable day, not because of the matching 8s, but because of what is happening to individuals who had been associated with the President.

(esp)

NACDL Trial Penalty Report and White Collar Crime

The NACDL recently released an important report detailing the impact of the trial penalty, which is the difference between the sentence a defendant receives in return for pleading guilty and the often much larger sentence he or she receives in return for exercising his or her constitutional right to trial. 

From the NACDL press release:

The ‘trial penalty’ refers to the substantial difference between the sentence offered in a plea offer prior to trial versus the sentence a defendant receives after trial. This penalty is now so severe and pervasive that it has virtually eliminated the constitutional right to a trial. To avoid the penalty, accused persons must surrender many other fundamental rights which are essential to a fair justice system

This report is the product of more than two years of careful research and deliberation. In it, NACDL examines sentencing and other data underlying the fact that, after a 50 year decline, fewer than 3% of federal criminal cases result in a trial. With more than 97% of criminal cases being resolved by plea in a constitutional system predicated upon the Sixth Amendment right to a trial, the fact of imbalance and injustice in the system is self-evident. The report identifies and exposes the underlying causes of the decline of the federal criminal trial and puts forth meaningful, achievable principles and recommendations to address this crisis. With its release, NACDL intends to launch a sustained effort to rein in the abuse of the trial penalty throughout federal and state criminal justice systems. The Trial Penalty report, and the principles and recommendations it puts forward, seeks to save the right to a trial from extinction.

The entire report is well worth reading.  For those in the white collar field, I'll note that the report contains a specific section on economic crimes.  This portion of the report focuses on Section 2B1.1 of the Federal Sentencing Guidelines.  The report discusses the role of 2B1.1 and loss calculations in creating incentives for defendants to plead guilty.  You can access the entire NACDL report here.

I found the NACDL report particularly interesting as I've engaged in much research on the issue of plea bargaining and sentencing differentials, including the impact of such incentives on innocent defendants.  In one study, we found that 56% of innocent participants were willing to falsely confess guilt and "plead guilty" in return for a bargain.  You can read more about those findings and the issue of plea bargaining's innocence issue here. 

(LED)

Soliciting Contributions From a Foreign National: It's Against the Law. But is it a Crime?

Can we talk about the law here? Title 52 U.S.C. §30121, subsection (a), makes it unlawful, among other things, for "(1) a foreign national, directly or indirectly, to make...(A) a contribution or donation of money or other thing of value, or to make an express or implied promise to make a contribution or donation, in connection with a Federal, State, or local election." Section 30121 also makes it unlawful for a person to solicit, accept, or receive a contribution or donation described in subparagraph (A)...of paragraph (1) from a foreign national." If something is unlawful, it is against the law.

Clearly, if Donald John Trump, Donald Trump Jr. or anyone else associated with the Trump campaign knowingly solicited, accepted, or received money or a thing of value from a Russian national, that person has violated this provision of the Federal Election Campaign Act, as amended. And the same is true for Hillary Rodham Clinton and persons associated with her campaign.

But not every violation of law is a crime. To be guilty of criminally violating Section 30121 a person must do so knowingly and willfully. See 52 U.S.C. § 30109. In the context of the Federal Election Campaign Act, this means that an individual, to be guilty, must know that he is acting in violation of the law. In other words, here, as in certain other federal criminal statutes, ignorance of the law is an excuse.

In legally examining what we know about the infamous Trump Tower meeting of 2016, we should keep these realities in mind. I am speaking here of the meeting, and what led up to it, alone, and not what may or may not have later transpired. Based on what we currently know it seems extremely unlikely that any reasonable prosecutor could make a criminal case under the Federal Election Campaign Act against Donald Trump Jr. And that includes a case alleging any a conspiracy or attempt to willfully violate the statute. There just isn't enough.

Here are the statutes in question.  52 U.S. Code Section 30121,  52 U.S. Code Section 30109.

(wisenberg)

U.S. v. Manafort: Judge Ellis Rules on Prosecution and Defense Motions in Limine

For all of you Manafort junkies out there, here is Judge T.S. Ellis, III's July 24 2018 Order, resolving most of the outstanding prosecution and defense motions in limine in U.S. v. Manafort, due to be tried next week in Alexandria.

It is abundantly clear, based on these rulings and the charges in the EDVA Superseding Indictment, that this case will be presented to the jury by the government, as much as possible, as a relatively straightforward bank fraud, concocted by the defendant in order to hide the amount and source of improperly derived offshore income. Manafort and Rick Gates (now a cooperating witness) allegedly created phony loans from offshore nominee entities in order to conceal lobbying income derived from their work as unregistered agents on behalf of, among others, the Government of Ukraine and former Ukrainian President Victor Yanukovych. Later, when Yanukovych lost power and the money source dried up, Manafort and Gates allegedly inflated the value of Manafort's real estate holdings (and/or lied about the nature and use of said real estate) in order to obtain new loans and maintain a lavish lifestyle. The jury will hear and see evidence regarding Manafort's lavish lifestyle, his failure to register as a foreign agent, and his failure to disclose foreign bank accounts that he controlled. But the jury will not see or hear anything pertaining to the Trump campaign's purported collusion or interaction with Russia.

It is becoming fairly obvious to me that Mueller has no criminal collusion case to bring against the President or anyone in the President's entourage absent: 1) bombshell disclosures from Michael Cohen; 2) Manafort flipping after conviction; or 3) Manafort testifying through a post-conviction compelled immunity order issued by a federal court pursuant to 18 U.S.C. §§ 6002 and 6003. The Manafort case was never about Manafort. It was always about Trump. The law unquestionably allows Mueller to operate in this manner. It is what it is.

(wisenberg)

Security Clearances: A Timely Concurrence?

Today in Palmieri v. United States, the United States Court of Appeals for the D.C. Circuit upheld the dismissal of Matthew Palmieri's lawsuit challenging the revocation of his security clearance. It was a unanimous decision in a routine case. The lawsuit was ludicrous, claiming violations of practically every constitutional provision except the Third Amendment. Moreover, it is extremely difficult to challenge security clearance revocations under the Supreme Court's decisions in Department of the Navy v. Egan and Webster v. Doe. Nevertheless, the concurrence of Judge Gregory Katsas, a Trump appointee, is intriguing and timely, given President Trump's threats to revoke the security clearances of certain former intelligence chiefs. Judge Katsas seems to think it is an open question "whether Egan bars non-frivolous constitutional challenges to the denial or revocation of a security clearance." He did not believe that Palmieri's case was the proper vehicle to resolve the question, however, since there were abundant alternative grounds for upholding the district court's opinion. So, the resolution of this question will have to wait until another day, which could be quite soon if the President acts on his threats. Hat Tip to Paul Rosenzweig at Lawfare for noting the concurrence. See also Bradley Moss's outstanding Monday piece in the same publication, discussing the issue at length.

(wisenberg)

Government's Exhibit List in U.S. v. Manafort

For all of you Manafort trial junkies, here is the Government Exhibit List, recently filed in U.S. v. Paul J. Manafort, Jr., set to start soon in U.S. District Judge T.S. Ellis, III's Alexandria courtroom.

Here also is Judge Ellis's Order Denying Paul Manafort's Motion for Change of Venue.  Judge Ellis ruled last week that Manafort is not entitled to a presumption that any Alexandria federal trial jury would be partial to the government. If Manafort can establish actual prejudicial partiality through voir dire, a herculean task under current federal criminal law, Judge Ellis will revisit the issue.

(wisenberg)

Point of Personal Privilege: Politico Pens a Hit Piece on Kavanaugh

Not surprisingly, Politico's Josh Gerstein has authored a hit piece on Supreme Court nominee Brett Kavanaugh, with the catchy title "'Brett Was Involved': Inside Supreme Court nominee's work for Bill Clinton."  In fact, the article tells very little about the breadth of Kavanaugh's work for the OIC, instead focusing on unsupported suggestions from partisan journalists (and Clinton sycophants) Jonathan Alter and Steve Brill that Kavanaugh (while working for Starr) may have violated Federal Rule of Criminal Procedure 6(e), which prohibits unauthorized disclosure of grand jury materials. That Gerstein would write such a piece of hack work is not surprising, given his history of shaping stories and quotes to fit a pre-conceived ideological spin.

A case in point is this May 2017 Gerstein hatchet job on Rod Rosenstein's three page memo--the memo used by the Trump Administration to justify the Jim Comey firing. (The May 2017 Gerstein piece was written before Rosenstein became the darling of the Morning Joe crowd by appointing Robert Mueller as Special Counsel.) Literally every person quoted in the May 2017 Gerstein article criticized Rosenstein's memo. No one defended it. Yet Gerstein had called me while he was working on the story and we spoke at length. I vigorously defended the reasoning and propriety of Rosenstein's memo, as well as Comey's firing. But you won't find any of those quotes in Gerstein's story. I'm confident that I was not the only source who defended Rosenstein's memo, the reasoning of which was vindicated by DOJ Inspector General Michael Horowitz's subsequent Report. As I pointed out here, four days after Gerstein's piece on Rosenstein, "legions of current and former DOJ prosecutors and FBI Special Agents" were appalled at Comey's public statements during the 2016 election. But Gerstein couldn't seem to locate or quote any of them.

With respect to the Alter-Brill suggestion/insinuation that Kavanaugh leaked grand jury information (and the typical call for a "thorough investigation"), it is pure, unadulterated hogwash. First, although Starr's OIC (where I served as Deputy Independent Counsel) was regularly accused of leaking grand jury information, a Special Master's investigation ordered by U.S. District Judge Norma Holloway Johnson, no fan of our office, cleared the OIC (and by implication all of our employees) of those charges. More importantly, to my knowledge, Kavanaugh himself was never in any way pegged as one of the supposed grand jury leakers. Kavanaugh did occasionally meet with members of the media, as he has always acknowledged, but there is nothing wrong with that per se. Special Prosecutor Archibald Cox regularly gave briefings on background to members of the press and both Cox and Special Prosecutor Leon Jaworski employed a press officer, Jim Doyle, who did the same. It was part of his job. Nobody has ever credibly suggested that Cox, Jaworski, or Doyle acted improperly in giving background briefings on non-privileged matters to the press. In addition, Kavanaugh, when running the Vince Foster investigation, apparently met with certain media figures who claimed to have evidence and information to impart about Foster's death. Kavanaugh would have been remiss in his duties, and accused of a cover-up, had he refused to meet with such sources.

So what is the evidence offered by Brill and Alter that Kavanaugh leaked grand jury information?  According to Brill, “If what he did was not improper, why didn’t he do it on the record? The point is they all knew it violated rule 6(e). Brett was involved.” Really and truly, this is what Brill told Politico--this is his proof. Did Brill talk to Politico from a padded room? Keep in mind that Rule 6(e) violations are a crime. Where is your evidence, Mr. Brill? Put up or shut up.

What is Mr. Alter's proof? “Twenty years ago, I had indications that Kavanaugh was in contact with reporters and because it involves potential violation of federal law, those contacts need to be thoroughly explored in the confirmation process." Is an "indication" anything like a penumbra? Alter had "indications" 20 years ago that Kavanaugh had contact with reporters. Why does contact with reporters involve a potential violation of federal law? After all, it is a potential violation of federal law every time I file a tax return or fill out a government form. What is your proof, Mr. Alter? What precise "indication" did you have that anything Kavanaugh may have said or done constituted a violation of federal law or was improper in any way? Put up or shut up. 

There are other problems with Gerstein's hit piece. For example, he writes that "Starr infamously took an expansive view of permissible contact with the media, allowing discussions about issues related to the ongoing investigation — disclosures that other prosecutors view as improper or ill-advised." How about some details Mr. Gerstein? What exactly are you talking about? Starr's position that prosecutors were allowed to publicly comment on the investigation in order to rebut false accusations by investigatory targets was part of the U.S. Attorney's manual at the time and had been endorsed in the past by then Deputy Attorney General Eric Holder. Starr's view of what constitutes 6(e) material was later confirmed by the U.S. Court of Appeals for the D.C. Circuit in a 1999 opinion (In Re Sealed Case).

Of course, it is perfectly proper to question Judge Kavanaugh on this topic, and his detailed response to the Senate Judiciary Committee's questionnaire already touches upon his contacts over the years with members of the press. The Senate is free to have at it. But these particular accusations are a joke, and Gerstein's attempt to turn them into a news story is absurd. Politico should be embarrassed.

(wisenberg)

 

The 400 lb hacker?

Special Counsel Robert Mueller's Office has clearly been working to get to the bottom of the alleged Russian interference with U.S. elections.  Today a D.C. federal grand jury handed down an Indictment against  "12 Russian nationals for their alleged roles in computer hacking conspiracies aimed at interfering in the 2016 U.S. elections."  The special counsel's website notes that "the indictment charges 11 of the defendants with conspiracy to commit computer crimes, eight counts of aggravated identity theft, and conspiracy to launder money. Two defendants are charged with a separate conspiracy to commit computer crimes."  The Indictment is here. 

There are some interesting lines in the Indictment including: "The Conspirators, posing as Guccifer 2.0, also shared stolen documents with certain individuals."  It states,

"On or about August 15, 2016, the Conspirators, posing as Guccifer 2.0, received a request for stolen documents from a candidate for the U.S. Congress. The Conspirators responded using the Guccifer 2.0 persona and sent the candidate stolen documents related to the candidate's opponent."

The indictment speaks about how "[t]he conspirators, posing as Guccifer 2.0, also communicated with U.S. persons about the release of stolen documents."  It notes how the conspirators "wrote to a person who was in regular contact with senior members of the presidential campaign of Donald J. Trump ..."

The Indictment states that "[i]n order to expand their interference in the 2016 U.S. presidential election, the Conspirators transferred many of the documents they stole from the DNC and the chairman of the Clinton Campaign to Organization 1."

One thing is clear in reading this indictment - Mueller is running a legitimate and important investigation and it needs to continue.

(esp)

Supreme Court's Upcoming Term- So Far Quiet for White Collar Cases

All is quiet on the white collar crime front for the 2018 Supreme Court Term.  But there are likely a good many more grants to come. And of course one never knows when a civil case will have implications in the criminal sphere. Global Tech (2011), a patent infringement case, ended up being at the forefront of many white collar cases as it examined the concept of willful blindness. Lorenzo v. Securities and Exchange Commission may have some implications in the white collar world as the Court examines "whether a misstatement claim that does not meet the elements set for in Janus Capital Group, Inc. v. First Derivative Traders can be repackaged and pursued as a fraudulent-scheme claim.." (see Scotus Blog here).

But there is one other case that white collar attorneys may want to follow - Timbs v. Indiana, which looks at "[w]hether the Eighth Amendment's excessive fines clause is incorporated against the states under the Fourteenth Amendment. (see Scotus Blog here).  Although this deals with a state issue and addresses the issue from a drug-related perspective, it does examine whether the excessive fines clause gets incorporated to the states via the 14th Amendment.  The incorporation/selective-incorporation debate has deep roots in Supreme Court jurisprudence with some of the finest jurists debating the extent that Bill of Rights provisions get incorporated to the States.  There are few provisions remaining in the Bill of Rights that have not been incorporated and one is the excessive fines clause.  Maybe this Court will take the few remaining unincorporated provisions (e.g., grand jury presentment) and say lets move ahead and start giving everyone the basic rights provided in the federal system; or perhaps they will just grant this one and wait another few decades to consider the remaining unincorporated provisions.   In the area of excessive fines, the heaviest burden of not incorporating this provision likely lies outside the white collar context, but that may be all the more reason to consider this case.

(esp) 

The Irony Of The FBI. What Did The Bureau Know And When Did The Bureau Know It?

If Congressman Trey Gowdy is to be believed, and I see no reason not to believe him, this should be an interesting week in Washington. According to Gowdy, Speaker Paul Ryan read the riot act to the DOJ and FBI  on Friday night about the Bureau's stonewalling and foot dragging in the face of longstanding subpoenas issued by the House Judiciary and Intelligence Committees. If the subpoenas are not complied with, Gowdy warned that the full constitutional powers of the House will be employed by week's end. It is clear that Gowdy was not just talking about holding people in contempt. Gowdy's comments are significant, because he has been one of the few House Republicans to consistently support the work of Bob Mueller and to give the benefit of the doubt to the Bureau regarding the origins of the Russian investigation. This has often put him on the outs with the many Trump shills on the GOP side. What apparently pushed Gowdy over the edge was the Horowitz Report's revelation of Peter Strzok's text response to Lisa Page that "we'll stop" Trump from being elected President. Astonishingly, it appears that this text had not been provided to the House prior to the release of the Horowitz Report. I suspect as well that Gowdy was enraged to read in the Report that the Bureau, with the active involvement of Deputy Director McCabe, sat on its knowledge of the Weiner laptop materials, even keeping it from the DOJ prosecutors who had been involved in the Clinton email server investigation (dubbed "Midyear Exam"), until alarmed officials in the SDNY U.S. Attorney's Office tipped off an attorney at Main Justice. It is clear that at the time Strzok was leading and ramping up the Russia investigation, he and a large group of DC FBI officials were suppressing the discovery of 347,000 potentially relevant emails on Weiner's laptop. This is why even the rather tame Horowitz Report "did not have confidence that Strzok's decision to prioritize the Russia investigation over following up on the Midyear-related investigative lead discovered on the Weiner laptop was free from bias." But make no mistake about it, Strzok did not act alone. As many as 39 FBI officials were likely to have participated in a September 28, 2016 secure video teleconference (SVTC) in which the discovery of 141,000 emails potentially relevant to Midyear Exam was discussed. (McCabe was informed of the 347,000 figure later that evening.) This was an FBI conspiracy of silence. The irony is that the FBI's attempt to suppress the Weiner emails almost certainly aided Trump's electoral victory. If the emails had been processed in a timely fashion, without publicity, their ultimate irrelevance would have been established prior to the election and Comey would not have needed to make the damaging announcement that he was reopening the Midyear investigation. It will be doubly ironic if there were wholly legitimate reasons to open the Russia investigation, but the FBI's misguided efforts to hide its own mistakes ends up tainting and derailing the entire project. Byron York reports here on the growing House GOP suspicion that the FBI is hiding even bigger bombshells.

(wisenberg)

The Horowitz Report

Here it is. The OIG Report-A Review of Various Actions by the Federal Bureau of Investigation and Department of Justice in Advance of the 2016 Election.

Analysis to follow in a while.

Here also is the Press Release and Executive Summary of OIG Report.

(wisenberg)

OIG Report On Clinton Email Investigation To Be Released At 2:00PM Today

We will post it as soon as we get it.

(wisenberg)

 

A Deep State Story: The James Wolfe Indictment

Here is the Indictment returned late last week in U.S. v. James Wolfe. Wolfe worked for 30 years for the United States Senate Select Committee on Intelligence ("SSCI") handling top secret and other classified information provided by the Executive Branch to Congress. According to the Indictment, Wolfe leaked the identity of "Male-1" to at least two reporters on two separate occasions and then lied about it to FBI Special Agents. Male-1 is none other than Carter Page and it is clear that the leaks were intended to damage Donald Trump. Reporter #2, referenced in the Indictment, is New York Times reporter Ali Watkins who was romantically involved with Wolfe for almost four years. Records of Watkins' email and phone contacts (but apparently not their contents) were subpoenaed from third party providers. Andrew McCarthy of NRO Online has commentary here, while Alex Pappas of Fox News examines some of Ms. Watkins' embarrassing historical tweets concerning the identity of leakers and the propriety of sleeping with sources. The press and certain members of Congress are concerned, as well they should be, about DOJ's capture of journalistic records. But keep in mind that the press is not the only institution with a watchdog role. The SSCI performs that function as well, and does so officially, with respect to intelligence-related oversight, and it is ironic (in a bad way) that its Chief of Security, if the charges are accurate, betrayed SSCI's trust. At this point Wolfe has only been charged, under 18 U.S.C. Section 1001 (the Martha Stewart statute) with lying to the FBI.

(wisenberg)

Third Superseding Indictment - Manafort

Special Counsel Mueller added two counts to Paul J. Manafort Jr.'s Indictment and charged Konstantin Kilimnik with these same two counts (Counts 6 and 7) -  (see Third Superseding Indictment here).  The new counts and new charges allege Obstruction of Justice (Count 6) and Conspiracy to Obstruct Justice (Count 7). Both of these alleged offenses come from the same statute - 18 U.S.C. 1512, with the conspiracy using subsection (k) of section 1512. 

The charges are intriguing in that the special counsel elected not to charge using the general conspiracy statute, section 371, a statute he did use in count 1 against Manafort.  The use of the conspiracy provision within a substantive offense is charged in count 2 (conspiracy to launder money), but here there is no charge of money laundering against Manafort. 

So basically you have one conspiracy to defraud charge, two conspiracy charges coming from specific offenses but not charged under the specific offense provision of the general conspiracy statute, and one of the conspiracy charges coming from the same statute as the specific offense that is charged.

So some questions to ponder:

• did the special counsel only want one conspiracy charge under 371 and did not want to combine the specific acts?
• did the special counsel not want to confuse the conspiracy to defraud the government charge with specific offense charges?
• did the special counsel want to leave more room to split the charges if one of the two people now charged decides to cooperate?

There are probably some out there who will argue that this is all to get cooperation. And whether that is true  is not the question being asked here. Special Counsel Mueller has a professional and skilled team and learning their thoughts on why things were charged in a certain way will hopefully be a talk he gives years from now to some bar association. In the interim, please continue to work as diligently as you have been.

(esp)

Taint Teams

Guest Blogger - Josh Greenberg

Biggest-Ever Health Care Fraud Case Jeopardized By Prosecutors’ Failure To Implement A Taint Team After Seizing Documents From Defendant’s Personal Attorney, In Contrast To The Practices Advocated By Their Counterparts (And The President!) In The Analogous Case Of The Search Of The Office Of Michael Cohen

In the summer of 2016, Philip Esformes was indicted in the U.S. District Court for the Southern District of Florida for what the government describes as the biggest health care fraud case in U.S. history. The indictment alleges that Mr. Esformes ran a network of skilled nursing facilities and assisted living facilities that defrauded Medicare and Medicaid of $1 billion.  Remarkably, after Mr. Esformes was indicted, the government did not create a taint team to review privileged documents seized from the office of one of his attorneys.  The prosecution is in jeopardy as a result.

On the same day the indictment was filed, the prosecution team applied for a warrant to search an assisted living facility named in the indictment. Several cooperating witnesses had informed the prosecution team that Mr. Esformes’s personal attorney maintained his law office at that facility and did legal work for Mr. Esformes on matters relating to the allegations in the indictment.  The application for the warrant did not disclose these facts.  Moreover, the U.S. Attorney’s Manual imposes strict conditions on applications for warrants to search the offices of an attorney who, as with Mr. Esformes’s personal attorney, is a subject of an investigation.  Before applying for such a warrant, federal prosecutors must both obtain “the express approval of the United States Attorney or pertinent Assistant Attorney General” and “consult with the Criminal Division.”  The prosecutors in Mr. Esformes’s case, who are based in D.C., evidently did neither.

A magistrate judge issued the warrant without being told that the facility to be searched included an attorney’s office. One day after the indictment was filed, agents executed the warrant and seized over 170,000 pages of documents – including many privileged documents, a number of which addressed matters relating to the allegations in the indictment.  By this point, even though Mr. Esformes’s Sixth Amendment right to counsel had attached, no taint attorney was assigned to the search.  Instead, one of the agents was tasked with taking the lead in identifying and segregating potentially privileged documents.  But the agent was not given the information needed to do so, such as the names of the attorneys and law firms defending Mr. Esformes.  Of the documents the agents seized, only ten were put in a box marked “Taint.”  The rest were put in 69 boxes – one of which was labeled “Carlton Fields,” the name of the law firm then defending Mr. Esformes – and given to the prosecutors.  In addition, agents who executed the warrant remained or later became part of the prosecution team.   

During the search, Marissel Descalzo, one of the attorneys from Carlton Fields, informed agents at the scene orally – and the lead prosecutor via email – that Mr. Esformes’s personal attorney represented Mr. Esformes, that the agents were seizing privileged materials, and that Mr. Esformes objected to these seizures. Whereas the lead prosecutor assured Ms. Descalzo that a taint team was in place, the same prosecutor began reviewing privileged documents in the 69 boxes on the next business day.  The documents the lead prosecutor reviewed included notes and spreadsheets prepared at Ms. Descalzo’s request by a legal assistant for Mr. Esformes’s personal attorney.  Later, despite learning that the notes and spreadsheets were privileged, the lead prosecutor, another prosecutor, and case agents from several different agencies questioned the legal assistant about those documents and learned the defense strategies reflected therein.  The prosecutors decided not to notify either Mr. Esformes or the court of their review of the privileged documents or their interrogation of the legal assistant.

In April 2017, Mr. Esformes’s defense team – Roy Black, Howard Srebnick, and Jackie Perczek of Black Srebnick Kornspan & Stumpf and Ms. Descalzo, now of Tache, Bronis, Christianson and Descalzo – moved to dismiss the indictment or disqualify the prosecution team. A lengthy evidentiary hearing ended earlier this year and the motions are fully briefed.

 The prosecution team’s approach in Mr. Esformes’s case stands in sharp contrast to the positions taken by the U.S. Attorney’s Office for the Southern District of New York (the “USAO-SDNY”) and by President Donald Trump in the case of Michael Cohen, the President’s personal attorney. Following  the search of Mr. Cohen’s office, before any law enforcement official reviewed a single seized document, the USAO-SDNY sought the court’s permission to implement a “rigorous” taint team protocol, as is “common practice in th[at] District,” after Mr. Cohen sought a temporary restraining order.  (This protocol is also the norm in other districts, including the Southern District of Florida.)  Under the protocol, attorneys walled off from the prosecution team identify potentially privileged documents and “confer with counsel for the privilege holder” before sharing such documents with the prosecution team.  To the extent that the privilege holder’s counsel objects, the taint team seeks a judicial determination as to privilege by submitting the documents under seal so that each side can present its arguments.  A narrow exception allows ex parte review in “extraordinary cases” if “absolutely necessary,” such as where explaining the government’s position “would jeopardize a covert aspect of [an] investigation.”  (Even under that exception, the privilege holder still receives judicial review.  Mr. Esformes received no protection whatsoever.) 

President Trump objected to a taint team, insisting that attorneys from the same office prosecuting Mr. Cohen cannot be trusted to decide which documents are potentially privileged and cannot fairly make such decisions. President Trump sought far greater protections, contending that his attorneys should decide which documents relating to him are withheld on the basis of privilege from the prosecution team.  Ultimately, the court ruled that the USAO-SDNYs position was correct as a matter of law, but that it would appoint a former judge as a special master to avoid even an arguable appearance of bias given the politically charged nature of the case.

In Mr. Cohen’s case, recognizing the importance of protecting the attorney-client privilege even before an indictment, the USAO-SDNY sought to follow accepted taint team procedures rather than risk disqualification or dismissal in a potential future prosecution. The prosecution team in Mr. Esformes’s case, however, did not take such prophylactic measures when searching his personal attorney’s office after Mr. Esformes was indicted.  Even if due to mere negligence, such exposure to privileged information – the very harm that a proper taint team prevents – cannot be undone.  It is difficult to see how Mr. Esformes could have a fair trial against a prosecution team that learned his defense strategies long in advance.  Courts have disqualified prosecutors who even inadvertently encountered far less significant privileged information.  Insofar as the prosecutors recklessly or deliberately reviewed privileged materials that reveal his trial strategy, Mr. Esformes may also have a strong argument that his case should be dismissed.  In the Eleventh Circuit, dismissing an indictment is appropriate where a Sixth Amendment violation caused “demonstrable prejudice.” United States v. Ofshe, 817 F.2d 1508, 1515 (11th Cir. 1987).  That standard may be met when a post-indictment failure to establish a taint team results in prosecutors, and perhaps their supervisors as well, obtaining particularly sensitive privileged information without any judicial review. 

(JG)

It's Not You - White Collar Cases Are Down

If you are in Washington, DC, and practice white collar criminal defense, you have probably seen an uptick in representing individuals related to ongoing investigations from the Special Counsel's Office.  But outside of the city, and actual cases, white collar criminal defense is way down. So if you are not getting the cases - it is not you.

According to TRAC Reports (here), white collar cases are down 40.8 % from 1998, and 31.3% from 2008. Looking just five years ago, it is down 33.5%. Looking at the lead charge in the cases being brought, wire fraud (section 1343) comes in as number one.  And if you are in the Southern District of New York or Southern District of Florida, the number of cases is higher in these areas than in other parts of the country.

One caveat here - These numbers may not accurately represent white collar cases being brought, as many white collar matters may be brought under "shortcut offenses" such as obstruction of justice, false statements, or perjury and may not accurately be reflected in white collar numbers (see here).  Also the use of RICO can skew these numbers as it may not be reported as a white collar offense even though the predicate acts are fraud related.(see here)

(esp)(w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

U.S. v. Olga Hernandez: A Smashing Victory For Bill Reid

Congratulations to my old friend and colleague William T. Reid IV (aka Bill Reid) of Reid Collins & Tsai (see Bill's bio here) who recently won a complete acquittal for his client Olga Hernandez in San Antonio federal court. Hernandez, a longtime San Antonio Independent School District ("SAISD") Trustee, had been charged with conspiracy to commit honest services wire fraud and conspiracy to violate 18 U.S.C. 666--the infamous mark of the beast statute. The case was brought by the U.S. Attorney's Office for the Western District of Texas, which happens to be my old district and Bill's as well. The government maintained that Hernandez received an excessive and inappropriate amount of travel and entertainment ("T&E") from several people involved in insurance bid rigging.  Its theory was that these bid riggers in essence bought Ms. Hernandez’s vote through the excessive T&E. The government, as is par for the course, offered 5K1.1 deals to the alleged co- conspirators in exchange for their testimony against Olga Hernandez.  There was ample proof of the gifts and each of the alleged co-conspirators testified against Hernandez. 

The defense theory of the case was that Ms. Hernandez was in fact friends with the conspirators and their wives.  She accepted substantial gifts of T&E from the conspirators, but she did so out of friendship.  With respect to the rewarding of insurance contracts by SAISD, Hernandez simply voted (along with all other trustees) consistent with staff recommendations by SAISD's Risk Management director. Olga had no idea that bribes were being paid and never got involved in the RFP Process that led to the various insurance contracts in question. 

As often happens in honest services cases, the government relied heavily on Olga's purported violation of SAISD's conflict of interest/gift disclosure policy. Although violation of such policies is not in itself a crime, the government loves to merge or bootstrap such violations into the charged offense. The argument goes like this: "If the defendant is really innocent, why didn't she disclose these gifts in accordance with the school district's policy?" But the prosecutors had a problem in Olga's case.

According to Reid, "the biggest mistake the government made was using the wrong, inapplicable gift/conflict policy (that post-dated the conduct in question) to argue that Olga’s failure to disclose the T&E was evidence of her culpability.  When, though a great deal of effort, we located the truly applicable policy we were able to prove that none of the gifts required disclosure. The government looked stupid. "

Reid now a high-end, high-stakes civil attorney who splits his time between Austin and Manhattan had not tried a criminal case since he left the U.S. Attorney's Office in 2000.  Perhaps the most impressive thing about Bill's victory is that he took and tried the case pro bono, as a favor to his old friend (and mine), legendary San Antonio criminal defense attorney Alan Brown. (See Alan's bio here.) Bill tried the case with his partner Brandon Lewis and with Alan.

He told me that the case, "was by far the most rewarding case of my career.  We were successful in defending Olga because of the hard work that our team put in to understand the evidence and hold the government accountable for trying to use the wrong gift disclosure policy.  We also, explored the details of the process that led to the insurance contracts in question very closely so that we could demonstrate how minimally involved Olga was and thereby break the connection between gifts and any official act.  This case was a stark example of how the government can obtain a wrongful conviction if defense counsel does not do his or her homework. "

Reid's Closing Argument, which focused on confirmation bias, was outstanding. Here are some additional stories on the case from the San Antonio Express-News, Law Dragon, and the Rivard Report.

https://www.mysanantonio.com/news/local/article/Fate-of-SAISD-trustee-now-in-jury-s-hands-12441813.php

https://www.lawdragon.com/2017/12/24/lawyers-christmas-story/

https://therivardreport.com/former-saisd-trustee-found-not-guilty-of-federal-bribery-charges/

(wisenberg)