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June 6, 2011

Notable skepticism about making a federal criminal case against John Edwards

A piece appearing here at Am Law Daily under the headlined "On Edwards Indictment, Am Law 200 Ranks Include Plenty of Skeptics" could well serve as exhibit A if and when John Edwards moves to dismiss the federal felony indictment under which he is now charged.  Here are highlights:

[U]nsolicited statements e-mailed to The Am Law Daily Friday by partners at several leading firms were uniformly skeptical of the six-count indictment against Edwards, who, before entering politics, made a small fortune as a plaintiffs lawyer.

Artur Davis, a former Democratic congressman and candidate for governor of Alabama, focused his statement on the Justice Department's decision to hand off the Edwards case to federal prosecutors in North Carolina.  "It's telling that the local U.S. attorney's office in Raleigh issued the indictment," says Davis, now a partner at SNR Denton's white-collar and government investigations practice in Washington, D.C. 

"While [Main] Justice has to sign off on the case, it is very unusual that any direct action [against] such a prominent individual like Edwards be left in the hands of a satellite office far from Washington."...  "The case at its core is a dispute over whether certain funds were a legitimate campaign contribution, a gift, or an independent expenditure," Davis said. "It is extremely rare that these disputes produce a criminal investigation, much less an indictment."

DLA Piper's Peter Zeidenberg believes that the government's case could chart new legal territory because campaign finance violations usually result in civil fines levied by the Federal Election Commission rather than criminal charges. Aggressively prosecuting Edwards over the alleged use of campaign donations to conceal an affair could set a dangerous precedent, he added. "It is a very slippery slope if gifts, which do not directly benefit a campaign, are deemed to violate the law simply because they have some indirect benefit," Zeidenberg said.  "In addition, while Edwards is hardly a popular politician right now, this case has very little jury appeal. It is hard to identify what the public harm is in this conduct. This may well be viewed by a potential jury as piling on, and simply kicking a guy when he is down."

Barry Pollack of Washington's Miller & Chevalier believes that just because prosecutors can target an individual as widely vilified publicly as Edwards has been for his personal conduct doesn't mean that they should do so.  "Federal criminal laws are expansive enough that a clever prosecutor can recast almost any bad behavior into a federal crime," Pollack said. "Being a jerk should make you a jerk, not a federal felon."

Glen Donath, a white-collar and government enforcement partner with Katten Muchin Rosenman in Washington, also expressed displeasure over the Edwards indictment. "It is both surprising and distressing that the government has brought these charges, considering the novel theory underlying its case," Donath said.  "Campaign finance violations are very difficult to prosecute given both the complex and subjective nature of the elements of the offenses."

In addition to confirming my first impression of the Edwards indictment, these comments have me hungering even more for the possibility that Edwards might try to use his skills as an advocate and lawyer to turn the tables on the feds here and put their prosecutorial charging and bargaining choices on trial in the weeks and months ahead. 

The enormous discretionary powers of federal prosecutors and the often questionable forces that can drive the execise of these powers never get as much scrutiny as they justify.  Especially in a case like this where it is hard to fully understand the national importance of spending considerable federal resources to try to turn a jerk like Edwards into a federal felon, I am hoping not only that federal prosecutorial charging and bargaining choices get put under the microscope, but also that we might learn some broader lessons about the possibilities and problems created by broad a novel application of federal criminal law.

Some recent posts on the Edwards indictment:

June 6, 2011 at 12:25 PM | Permalink

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Comments

Headline One: White collar defense firms criticize white collar indictment.

Headline Two: Dog Bites Man.

P.S. As to the division of labor between Main Justice and the USAO, Mr. Arthur Davis doesn't know what he's talking about.

Posted by: Bill Otis | Jun 6, 2011 1:11:06 PM

As I mentioned in an earlier thread, practically everyone agrees that it is unusual for this type of case to be pursued as a criminal matter. No one would cite Edwards as a paragon of virtue. But it really is questionable whether he could/should have known he was breaking the law, if no one had been prosecuted before in similar circumstances.

Bill Otis usually takes the prosecutor’s side, which is fair enough, given that he was one. But prosecutors sometimes overreach, and ruin peoples’ lives -- not that Bill himself ever did (for all I know), but he is just one guy. The Arthur Andersen prosecution put thousands of people out of work, and it was later overturned on appeal. Former Reagan cabinet official Raymond Donovan (who was acquitted) was another prominent example. Prosecutors, like anglers, like to snag the big fish.

Edwards isn’t a sympathetic figure, but it’s not a crime to be a jerk.

Posted by: Marc Shepherd | Jun 6, 2011 6:05:57 PM

Marc --

Every statute has a first-time application.

I have agreed on Crime and Consequences that this is a dicey case, see http://www.crimeandconsequences.com/crimblog/2011/06/a-more-skeptical-view-of-the-e.html.

The government could lose. But the charge is credible, and I have no evidence that it was brought in bad faith. I would not be surprised in the least if DOJ brought similar charges against John Ensign of Nevada, or the losing (and appalling) Republican candidate in the 2010 Deleware Senate race, Christine O'Donnell.

Generally, I am against campaign finance laws for some of the same reasons I'm against the Fairness Doctrine, to wit, they come too close for my comfort to controlling not just speech, but political speech, which is the very core of the First Amendment.

Still, there they are, and, for as much as I disagree with AG Holder on many things, if the law is there and you have a credible case that it's been broken, you don't just sit there. As I've said on an earlier thread, inaction is certain to undermine public confidence in the law, in the sense that it will feed the perception that rich, politically connected people get a pass that others, less well situated, wouldn't.

Posted by: Bill Otis | Jun 6, 2011 6:43:48 PM

"Prosecutors sometimes overreach, and ruin peoples’ lives"

"Prosecutors, like anglers, like to snag the big fish.

"Edwards isn’t a sympathetic figure, but it’s not a crime to be a jerk.

Three very astute comments and exactly the point made by several commenter's in the previous thread on this subject.

In regard to Bill's adamant position that "The idea that prosecutors have to go after innocent people to build up their stats is flat-out crazy." It is equally crazy to stick ones head in the sand and pretend that it doesn't happen and frequently.

Another quote from Bill:

"I can also say that a defendant cannot enter a plea agreement without the prosecutor's assent, and I would not have, and never did, enter such an agreement unless the defendant was factually guilty. If he wanted to agree to plead guilty for "tactical" reasons, but in fact was not guilty, I would not have signed the agreement."

Maybe you didn't and I have no reason to doubt what you say. However, as Marc said, you are just one man. What about the others without your ethics who insure that a defendant takes the "deal" by threatening to include any and everyone within reach in the "conspiracy" if the deal is not accepted?

Posted by: Thomas | Jun 6, 2011 6:52:25 PM

"As I've said on an earlier thread, inaction is certain to undermine public confidence in the law, in the sense that it will feed the perception that rich, politically connected people get a pass that others, less well situated, wouldn't."

...I think many in the public already have questionable confidence in the law and how it gets applied towards rich or politically connected individuals ....

Posted by: james | Jun 6, 2011 7:24:19 PM

Bill--

I don’t imagine prosecutors sitting in a room, and saying, “Tee hee hee, of course he’s innocent, but wouldn’t it be great to get this notch on our belts.”

At the same time, with analysts of all political stripes describing this as a novel application of the law, I cannot imagine that this fact did not occur to them. With a less prominent defendant, perhaps they would not have bothered to prosecute. I believe you’ve acknowledged that the government does not bring every case in which there is a colorable argument that a crime was committed.

“Every statute has a first-time application.”

Right, but this statute has been around a long time. You have to be suspicious when, all of a sudden, the government advances a new theory of criminality that, over a period of many years, had never occurred before.

In a case that, as you admit, the government could lose, I have to wonder about this use of scarce judicial and prosecutorial resources. Edwards is not an ongoing danger to the public, as his political career is clearly over. And there is no serious concern about deterring others: no one who has seen what happened to Edwards would believe that his behavior was worth emulating.

All the government would really gain, if they won, is further ruin to a reputation that was ruined anyway.

Posted by: Marc Shepherd | Jun 6, 2011 8:12:14 PM

What overwhelms me is juxtaposing the prosecutorial zeal exhibited here and the near-simultaneous claim that the DOJ has insufficient grounds and/or resources to pursue any case against Angelo Mozilo or any of the other executives whose fraud caused the 2008 financial crisis. In my view, the Edwards case makes it clear that those executives are deliberately being given a free pass.

Posted by: James | Jun 7, 2011 4:12:21 AM

"...the possibility that Edwards might try to use his skills as an advocate and lawyer to turn the tables on the feds here and put their prosecutorial charging and bargaining choices on trial in the weeks and months ahead."

To deter.

Posted by: Supremacy Claus | Jun 7, 2011 8:33:29 AM

James --

I agree that the Department's giving a pass (so far) to so many of the actors in the financial/housing meltdown should draw some questions. The idea that a catasptophe of that magnitude, from which so many profited so handsomely, all came about simply because of bad business decisions, and not because of SOME aspect of criminal venality, is just very hard to swallow.

I would expand the investigation beyond merely the bank and insurance big shots, however. I would also include those -- of whom there were quite a few -- who flagrantly lied on their mortgage applications about their incomes, assets and pre-existing debts. If those lies don't get told, the sub-prime market never gets to the size it did, and the crisis gets, if not averted, considerably abated.

Posted by: Bill Otis | Jun 7, 2011 9:16:10 AM

SC --

If I had been assigned by the AG to lead this prosecution, I would get down on my knees and pray that Mr. Edwards would "try to use his skills as an advocate and lawyer to turn the tables on the feds...and put their prosecutorial charging and bargaining choices on trial."

If Edwards tried such a tactic, the prosecutor could almost surely stop it, with objections of irrelevance: Prosecutorial priorities are not among the questions before the jury.

But I would make no such objection. I would relish every word. For a man who has done what Edwards has done to go on offense, and try to blame others, is exactly the man I would want the jury to see. His behavior toward his wife and daughter (who for years he denied) hardly forms the predicate for him to launch an assault on the prosecutors (or anyone, for that matter). So if that's what he wants to do, I'd let him, the more the merrier. What would actually happen is that Edwards would fill in, with his belligerence and laughable I'm-a-victim attitude, any holes in the government's case.

Think about it. What is actually in the best interests of the defense? To present Edwards as a warrior against government over-reaching? Or to present him as a humbled man who did not grasp the novelties of a complicated law, and therefore never had the mens rea needed for a conviction?

Of course Edwards' problem is that, in fact, he is anything BUT a humble man. He'd need the acting job of his life to sell himself to the jury in that way. He might be able to pull it off, but probably not. He's more likely to want to follow the path that you and Doug suggest. He just thinks he's too good -- too smart, too rich, too accomplished -- to be done in by some government lackey.

Fine. Have at it. More than once in my career I saw the defendant talk his way into jail. The more he talked, the more everyone in the courtroom saw who he actually was.

Posted by: Bill Otis | Jun 7, 2011 9:49:27 AM

"I would expand the investigation beyond merely the bank and insurance big shots, however. I would also include those -- of whom there were quite a few -- who flagrantly lied on their mortgage applications about their incomes, assets and pre-existing debts. If those lies don't get told, the sub-prime market never gets to the size it did, and the crisis gets, if not averted, considerably abated"

In fact, there have been thousands of prosecutions and convictions of low-level offenders who lied on their applications, etc. That actually has been the focus of many prosecutors. The big fish still have not been prosecuted in nearly the same measure, or at all.

Posted by: anonymous | Jun 7, 2011 1:31:58 PM

anonymous --

I haven't heard of the mortgage applicants being prosecuted much at all. Can you cite some news stories I could look at?

I continue to agree that the executives should be investigated and, if the case is there, prosecuted. The amount of greed and deceit in this country is staggering. Criminal law has something to say about these things.

Posted by: Bill Otis | Jun 7, 2011 4:15:49 PM

Marc --

I just wanted to clarify one thing. I don't usually take the prosecution's side because I used to be there. It's the other way around. I used to be there because my way of viewing the world coincides more with the prosecution than with the defense, both pre-law school and now.

The way I view the world is pretty ordinary, actually: Tell the truth and expect others to do the same, pay your own way, stop complaining, don't make excuses, don't steal stuff, stay off drugs, don't use violence, be respectful as long as possible, be forgiving but don't be a fool, listen to the other side and learn from it, don't bully and don't allow yourself to be bullied, stand behind what you say and do, be accountable and don't be pushed off holding others accountable.

I have always thought (1) every one of those things is uncontroversial, and (2) every one of them is consistent with how prosecutors should, and for much the most part do, behave.

Posted by: Bill Otis | Jun 7, 2011 6:27:08 PM

The term “mortgage fraud” is a figure of speech (not a legal word of art) that can fairly describe a variety of criminal schemes. This has created a problem in accurately analyzing and describing the housing market crash, because people have indiscriminately used “mortgage fraud” to describe what happened. This indiscriminate use obscures rather than illuminates, and sometimes it is used intentionally to obscure.

At least as far as the housing market crash is concerned, I think a more useful term would be “mortgage securitization fraud.” I believe it is important to make this distinction, because all forms of “mortgage fraud”, including “mortgage securitization fraud”, use the same type of deceits to succeed.

"Mortgage securitization fraud" occurs when the paper of a liar's loan is sold by the originating lender with affirmative warranties and representations to another lender who then quickly resells the paper to another lender again with affirmative warranties and representations.

This process is repeated several times until the paper is finally conveyed to a trust according to the terms of a Pooling and Servicing Agreement where it is bundled with other debt instruments to create a mortgage backed security. The security is then rated by a rating agency and then sold by an investment bank with affirmative warranties and representations to institutional investors.

At each stage a fee is charged and collected by everyone who plays a part in the process.

If there are too many liar's loans backing the security and/or the terms of the Pooling and Servicing Agreement aren't strictly followed (I know there is a debate about the significance of non-compliance with the Pooling and Servicing Agreement), the security is worthless notwithstanding the affirmative warranties and representations and rating by the rating agency. These securities are the toxic assets that create zombie banks.

A good example of the necessity for this distinction can be found in a letter from the FBI National Press Office dated September 2, 2008 to the LA Times responding to an editorial critical of the FBI for not doing more in stopping mortgage fraud during the run-up to the housing market crash: “But the FBI is a law enforcement and intelligence agency, we are not banking regulators.”

http://www.fbi.gov/news/pressrel/press-releases/letter-to-the-editor-regarding-the-mortgage-crisis

According to the FBI’s own records and press releases the number of “mortgage fraud” investigations and prosecutions has significantly increased over the past three years. However, I am aware of no prosecutions for “mortgage securitization fraud.”

Posted by: Fred | Jun 7, 2011 11:58:58 PM

Bill: All the lawyer inside stuff would plague the judge only. The motions for sanctions, for mistrial, for legal fees against the prosecutor would be in chambers or with the jury removed.

The only thing the jury would see would be humbled, grief stricken (for his deceased wife) Edwards, always carrying his Bible and seeking his solace in it at every break in the proceedings.

Posted by: Supremacy Claus | Jun 8, 2011 10:56:28 PM

SC --

"All the lawyer inside stuff would plague the judge only. The motions for sanctions, for mistrial, for legal fees against the prosecutor would be in chambers or with the jury removed."

Lawyers often think they can turn attitude off-and-on. Wrongo. But for however that may be, I'd love it for Greg Craig to occupy himself with losers instead of staying focused on things he might win with.

"The only thing the jury would see would be humbled, grief stricken (for his deceased wife) Edwards, always carrying his Bible and seeking his solace in it at every break in the proceedings."

Juries are better than you might think at spotting phonies, and the plan you suggest might as well have Edwards holding up a neon sign shouting, "I'M A PHONY."

Posted by: Bill Otis | Jun 9, 2011 2:32:01 AM

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