Tuesday, June 28, 2011
Do would-be white-collar offenders actually "get the message" from long sentences?
The question in the title of this post is prompted by this new piece by Professor Peter Henning from the New York Times headlined "Long Sentences Send a Message Few May Hear." Here are excerpts:
The Justice Department has asked for a sentence of as much as 385 years for Lee B. Farkas, former chief executive of the Taylor, Bean & Whitaker Mortgage Corporation, who was convicted of orchestrating a $2.9 billion fraud that caused the collapse of Colonial Bank. The reason for seeking such a severe penalty is to “draw the attention of corporate executives” to the potential for severe punishments for fraudulent activity, but the question is whether anyone will actually listen.
Mr. Farkas was convicted by a jury on 14 counts for selling falsified mortgage loans in a scheme that lasted from 2002 to 2008, and then trying to orchestrate a $533 million investment by the federal government through the Troubled Asset Relief Program to keep Colonial Bank afloat. Prosecutors say that he diverted some $40 million from Taylor Bean for personal investments in bars in Atlanta and Fort Lauderdale along with various trinkets, including a $28 million jet....
In order to grab the attention of other executives, Justice Department officials have asked for more than just a life sentence, instead requesting the maximum term for each charge to be served consecutively, which adds up to 385 years.
In seeking a punishment even greater than that imposed on Bernard L. Madoff, now serving a 150-year sentence, the Justice Department wants to use Mr. Farkas’s sentence as an example to other corporate officers who might be tempted to stray into illegality. According to prosecutors: “Sentencing him to the maximum penalty allowed by law will send the most forceful and unequivocal message to senior corporate executives that engaging in fraud and deceit in order to pump up your company or line your own pockets is unacceptable and will have severe consequences.”...
It is an interesting question whether the “unequivocal message to senior corporate executives” from a particularly harsh sentence would in fact be heard. I think the answer is that it would not.
Taylor Bean was a privately held company based in Ocala, Fla., and its primary lender, Colonial Bank, was based in Montgomery, Ala. Both were far from the major financial and banking centers. Taylor Bean was not a major player in the mortgage-backed securities market, and the prosecution took place somewhat off the beaten path for financial prosecutions: in the Eastern District of Virginia in Alexandria, not in New York where it might have garnered more attention....
It is unlikely that Mr. Farkas will become the face of the government’s efforts to root out criminal conduct arising from the financial maelstrom that hit in 2008. The intended audience for the government’s recommendation may well write off whatever sentence Mr. Farkas receives as hardly a blip on their radar screen. Packaging fake mortgages and diverting corporate funds to private ventures like bars is not something any self-respecting Wall Street executive would ever stoop to doing, at least so the thinking might go. Mr. Farkas can be classified an outlier who engaged in the type of naked fraud that corporate executives would never be so crass as to try, at least in their own minds....
In United States v. Martin, a case involving the sentencing of a former chief financial officer at HealthSouth, the United States Court of Appeals for the 11th Circuit asserted that “because economic and fraud-based crime are more rational, cool, and calculated than sudden crimes of passion or opportunity these crimes are prime candidates for general deterrence.”
I wonder whether corporate executives can be deterred by sentences given to others when they can rationalize misconduct they might engage in as necessary to preserve the company or to make a quarterly estimate, and they would never be caught doing something blatantly illegal. Even Mr. Madoff did not view himself as doing anything particularly troublesome while taking money from new investors and passing much of it on to old investors -- he even described some of his victims as “greedy.”
If executives can convince themselves that there’s nothing “really” wrong with what was done, like inflating revenue or paying a foreign official to obtain a contract, because there was a good reason for doing it, then the likelihood of being deterred by a long prison sentence seems fairly minimal. Corporate executives might not be good candidates for deterrence because they perceive themselves as different from -- and often better than --those who have been caught and punished, even if they are not.
Recent related post:
Monday, June 27, 2011
"Jury Convicts Blagojevich"
The title of this post is the headline of this Wall Street Journal piecereporting on the outcome of a high-profile retrial. Here are the details:
A federal jury on Monday found former Illinois Gov. Rod Blagojevich guilty of 17 counts of corruption, including trying to sell the U.S. Senate seat vacated by President Barack Obama. The jury found Mr. Blagojevich not guilty on one of 20 corruption counts in his second trial and deadlocked on two other counts. The verdicts came more than two years after Mr. Blagojevich, 54 years old, was arrested by federal agents.
Jurors told the judge they couldn't agree on two counts and were confident they wouldn't concur even if they kept deliberating. Scores of onlookers gathered outside the courthouse to await the verdict. Mr. Blagojevich arrived looking pale and shook hands and kissed a woman on the cheek when she wished him good luck.
The verdict was a victory for U.S. Attorney Patrick Fitzgerald, who initiated "Operation Board Games" just a few months after Mr. Blagojevich took office. In the hours after the then-governor's arrest, Mr. Fitzgerald said he had "interrupted a political corruption crime spree" and that Mr. Blagojevich had "put a for-sale sign on the naming of a United States Senator."...
Unlike his first trial, in which the former Chicago congressman escaped conviction on 20 of 21 counts, Mr. Blagojevich testified for seven days at his second trial. He said his intent was to use the seat as leverage to pass legislation that would have benefited the residents of Illinois....
After court was dismissed, Mr. Blagojevich hugged his wife and kissed her on the top of her head. Mr. Blagojevich was found guilty on counts including wire fraud and attempted exortion. He was found not guilty of soliciting bribes.
His attorneys have until July 25 to request a retrial. The judge told Mr. Blagojevich he may not travel outside the northern district of Illinois without permission of the court. "That doesn't mean I will never grant permission," Judge Zagel said.
Among other notable features, the conviction of Blagojevich now raises lots of interesting issues in the application of the 3553(a) sentencing factors. Readers are highly encouraged to suggest they think would be "sufficient, but not greater than necessary" for this former Governor of Illinois.
Sunday, June 26, 2011
Feds ask for (inappropriate?) 385 years(!) for white-collar offender
As detailed in this Wall Street Journal article, headlined "U.S. Seeks 385 Years in Prison for Ex-Taylor Bean Chairman, the federal government is asking for a sentencing term of biblical proportions in a high-profile white-collar case out of Virginia. Here are the particulars:
Federal prosecutors said the former chairman of mortgage lender Taylor, Bean & Whitaker Mortgage Corp., Lee Farkas, should spend the rest of his life behind bars because he continues to deny responsibility for the devastation he wrought as the mastermind of a multibillion-dollar "fraud of staggering proportions."
Prosecutors on Thursday filed court papers urging U.S. District Judge Leonie M. Brinkema to impose the statutory maximum prison sentence of 385 years on Mr. Farkas, whom a jury in April found guilty of 14 counts of conspiracy and bank, wire and securities fraud. Mr. Farkas, 58 years old, is set to be sentenced next Thursday.
On Friday afternoon, Mr. Farkas's attorneys filed court papers requesting a sentence of 15 years, which they said would not only "adequately punish" Mr. Farkas but could also effectively be a life sentence for the 58-year-old man with a heart stent....
Mr. Farkas, who built up Ocala, Fla.-based Taylor Bean into one of the nation's biggest mortgage lenders, was found guilty of misappropriating about $3 billion from banks such as Colonial Bank of Montgomery, Ala., and of trying to fraudulently obtain more than $550 million from the government's Troubled Asset Relief Program, or TARP.
Prosecutors said Mr. Farkas personally pocketed $40 million from the scheme, which he used to buy a jet, an "exotic" car collection, multiple homes and businesses. "Farkas fueled his lifestyle of ostentatious wealth by ripping off banks and attempting to steal from the government, all with little to no regard for the consequences to TBW's or Colonial Bank's employees, thousands of whom lost their jobs when TBW and Colonial Bank closed," prosecutors said. "And to this day … Farkas continues to deny any responsibility for the devastation brought on by the staggering fraud scheme that he initiated and led."...
In addition to the 385-year prison sentence, prosecutors are also asking that Judge Brinkema order the forfeiture of $42.2 million from Mr. Farkas.
Meanwhile, dozens of letters from Mr. Farkas's friends, family members, former employees and other acquaintances have come in urging the judge to be lenient. The letters describe Mr. Farkas's philanthropy not only in the Ocala community but also in their lives, from helping people care for sick relatives, start their own businesses and fund college educations.
This month, Judge Brinkema handed down sentences for Mr. Farkas's co-conspirators in the scheme. Taylor Bean's former chief executive, Paul Allen, and former president, Raymond Bowman, received 40 months and 30 months in prison, respectively. Taylor Bean's former treasurer, Desiree Brown, received a six-year sentence, while Colonial Bank officials Catherine Kissick and Teresa Kelly received sentences of eight years and three months, respectively.
The disparity between those sentences and the proposed sentence for Mr. Farkas is warranted, prosecutors said. "Farkas's co-conspirators are generally decent people who made terrible decisions and failed to extricate themselves from a fraud scheme spiraling out of control. Farkas can hardly be included in this category," they said. "For years, he manipulated his co-conspirators and others to his personal advantage...Farkas exemplifies the adage that there is 'no honor among thieves'."
Prosecutors also said that handing down the highest-possible sentence to Mr. Farkas would serve as a powerful deterrent to executives lured by the promise of easy corporate profits and substantial riches for themselves.
I do not dispute (and neither does the defense team here, it seems, that Farkas merits a serious punishment for his serious crimes. But it strikes me as a bit silly and arguably inappropriate for the Government to assert that only a maximum term of 385-years imprisonment qualifies as "sufficient, but no greater than necessary" for Lee Farkas under the terms of 3553(a). Seem to me that for a 58-year-old offender, a sentence of, say, 100 years would seem to be more than enough to achieve whatever purposes that prosecutors deem critical. But, remarkable, the feds think they need to ask for more than triple that length of sentence for this offender.
Friday, June 24, 2011
Conrad Black has more federal time to do after resentencing
As detailed in this Reuters piece, which is headlined "Ex-media mogul Conrad Black sent back to prison," today's highest-profile federal sentencing did not result in merely a time-served outcome. Here are the particulars:
A U.S. judge on Friday ordered former media baron Conrad Black to serve 13 more months in prison for his fraud and obstruction of justice conviction. Judge Amy St. Eve of U.S. District Court, who sentenced Black to 6-1/2 years following his 2007 trial, ordered the 66-year-old member of Britain's House of Lords to serve a total of 42 months, of which 29 months has already been served.
Black's wife, Barbara Amiel Black, collapsed immediately after St. Eve ruled, and was assisted out of the courtroom by medical personnel. Black was released from prison in July 2010 based on a successful appeal to the U.S. Supreme Court. The high court narrowed the scope of the federal honest services law used to help convict him.
St. Eve said she took into accounts letters from inmates who had served time with Black, which said he had tutored and mentored them. But she said she also took into account the harm Black did to shareholders of Hollinger International, the media company he had controlled. "You had a duty of trust. The shareholders put their trust in you. And you violated that trust," St. Eve said. She said the sentence would "send a message to executives in your position to show respect for the law."...
Black was convicted of scheming with partner David Radler and other executives to siphon off millions of dollars in proceeds from the sales of newspapers as they unwound Hollinger International, then the world's third-largest publisher of English-language newspapers. It once operated the Chicago Sun-Times, the Jerusalem Post, London's Daily Telegraph and dozens of other newspapers across North America.
Any predictions for Conrad Black's federal resentencing?
As effectively detailed in this National Post piece, the high-profile trial, sentencing, appeals and now resentencing comes to an end today in a federal district court in Chicago. Here is the backstory:
Today, Lord Black, 66, returns to Judge St. Eve’s courtroom in the Everett McKinley Dirksen Federal courthouse, where the trial judge will mete out a new punishment for his diminished slate of convictions. It is widely expected to be a more lenient sentence than the 78-month prison term in a U.S. federal minimum-security penitentiary in Florida, where she dispatched him in March, 2008.
Still, it won’t be the complete vindication he sought — and promised — since his legal ordeal began six years ago. Instead, in the wake of a partial victory at the U.S. Court of Appeals for the Seventh Circuit, the former international press baron now faces the stark prospect of returning to prison for a shorter stint, or deportation from the United States.
“This was going to be the capstone for this U.S. Attorney’s office efforts to fight white-collar crime. And instead of the big bang, this is a case that is hanging on by its fingernails on the fraud charges,” observed Hugh Totten, a Chicago-based criminal lawyer who monitored the case closely.
Given that U.S. prosecutors originally sought a jail term of between 24 to 35 years after his 2007 convictions on three counts of mail and wire fraud and one count of obstruction of justice – he wound up with 6½ years – it would seem reasonable to anticipate the federal judge won’t likely force Lord Black back to the Coleman Federal Correctional Complex to complete his term, as the U.S. government has strenuously urged.
Rather, some legal experts expect Judge St. Eve, who presided over the four-month criminal trial, to follow the guidelines set out in a pre-sentencing report by the U.S. Probation department, which recommends a term of between 33 to 41 months. If that happens, Lord Black can claim victory, since his lawyers have argued for time served based on the 29 months he’s already served plus a three-month credit for good behaviour.
“No way he’s going back to jail with that PSR [pre-sentencing report],” predicts Jacob S. Frenkel, a criminal lawyer and former U.S. attorney based in Potomac, MD. “There will be a lot of posturing and bluster, which will have no effect on the judge. The bottom line is that she has made up her mind and the hearing is to go through the motions to give him credit for time served and wrap this thing up as far as the court is concerned.”
Others, such as Chicago lawyer Andrew Stoltmann, disagree: “Conrad Black is heading back to serve the entirety of the rest of his term,” he wrote in an e-mail. “While U.S. District Judge Amy St. Eve has some discretion in overturning the ruling, Black has many factors working against him.”
Most expect there will be passionate arguments before the judge, but few surprises. Sentencing hearings are generally brief because most of the reasonings have been laid out in court submissions filed by both sides weeks ago.
If Judge St. Eve decides to release Lord Black from prison for time served, as his lawyers have requested, she could still attach any number of conditions, including probation time and fines. In that case, the Canadian-born media baron who famously relinquished his Canadian citizenship to become a British peer in 2001, would be arrested by the U.S. Immigration department and become subject to deportation proceeding....
In court filings, U.S. prosecutors have practically begged Judge St. Eve to send Lord Black, who once controlled the world’s third largest English-language newspaper empire including the National Post, back to Coleman to complete his 78-month sentence noting his defiance and lack of remorse.
Even after acknowledging the former businessman was a model prisoner, prosecutors still attempted to portray him as a haughty inmate unworthy of release by filing contradictory testimony from Coleman prison staff alleging Lord Black “demanded special treatment” and was a lax tutor, even though the same employees described him as “not intimidating or condescending” and “always polite and respectful” in prison progress reports and to the probation officer.
The unflattering depictions of Lord Black outlined in the sworn testimony from prison staff “are not allegations Black will want hanging over his head going into the re-sentencing,” said Mr. Frenkel, because the Supreme Court noted that Lord Black’s behaviour while in prison and on bail could be factored into re-sentencing.... To support his case for a full release, there are 18 letters from former prison inmates and staff espousing Lord Black’s positive contributions to prison life.
The Montreal-born businessman, who was released on bond last July pending his appeals, and three other Hollinger International Inc. executives were convicted in 2007 of misappropriating US$6.1-million in the form of non-competition payments. Lord Black was also found guilty of obstruction of justice for removing 13 boxes from his Toronto head office during the U.S. government’s investigation in 2005.
UPDATE: As reported in this new post, Black ended up getting 42 months of imprisonment at his resentencing, and thus he now has 13 months left to serve in the federal pen.
Wednesday, June 22, 2011
Former CEO of big mortgage firm gets 40 months on fraud conviction
This Reuters story, headlined "Ex-CEO of mortgage lender sentenced to prison," reports on one (of many?) criminal justice echoes of the housing crash. Here are the basics:
The former chief executive of one of the largest mortgage firms to collapse in the U.S. housing crash was sentenced to more than three years in prison on Monday for his role in a fraud scheme dubbed "Plan B" that federal prosecutors say cost investors $1.5 billion.
Paul Allen, 55, the former CEO of Taylor, Bean & Whitaker, or TBW, pleaded guilty in April to one count of making false statements and one count of conspiring to commit bank and wire fraud. The Justice Department said the fraud scheme contributed to the failure of TBW, which was one of the largest privately held U.S. mortgage lending companies, as well as the bankruptcy of Alabama-based Colonial Bank, which was one of the 50 largest U.S. banks.
Former TBW Chairman Lee Farkas, who was convicted on April 19 on 14 counts of fraud for his role in masterminding the scheme, is scheduled to be sentenced on June 27....
Allen's co-conspirator Sean Ragland, a 37-year-old former senior financial analyst at TBW, was also sentenced today by Judge Leonie Brinkema to three months in prison. Four other senior officials with TBW and Colonial Bank have also been sentenced to time in prison ranging from three months to eight years for their role in the fraud.
Friday, June 17, 2011
Sentencing proof that Brooklyn never quite gets the respect of Manhattan...
comes from this New York Daily News article, headlined "Fraudster dubbed 'Brooklyn's Bernie Madoff' sentenced to 20 years in prison." Here are the basics:
A Brooklyn fraudster was sentenced Friday to 20 years in prison for fleecing hundreds of hard-working victims in a Ponzi scheme that went on for three decades. Philip Barry, dubbed "Brooklyn's Bernie Madoff" received far less jail time than the 150 years his namesake is serving, but the financial ruin he wrought was no less devastating.
"He's just like a bank robber," Francis Monteleone said in Brooklyn Federal Court. "He robbed my dad, a struggling tailor who trusted him," said Monteleone who also handed over $215,000 from her divorce settlement to the bum.
Barry, 53, a boyish-looking schlub who is a master manipulator, listened impassively as seven victims poured out their hearts to Judge Raymond Dearie.
Linda Poluha said Barry won't have to worry about his three square meals or a roof over his head that doesn't leak like her family does. "If there was still such a thing as a chain gang I believe you deserve that," Poluha said.
The judge dismissed defense lawyer's Lisa Hoyes' argument that Barry lived frugally and didn't enrich himself with the life savings entrusted to him. "Does that make any difference to these folks?" Dearie said.
Assistant U.S. Attorney Jeffrey Goldberg pegged the victims' losses at more than $24 million.
The joke in the title of this post is based on the fact that "Brooklyn's Bernie Madoff" received a prison sentence only roughly 12% as long as Manhattan's Bernie Madoff. Then again, given that the victims' losses caused by Madoff have been pegged to be many billions of dollars, "Brooklyn's Bernie Madoff" actually got a longer sentence for his fraud if measured on a dollar-for-dollar, prison-term-for-prison-term basis.
Wednesday, June 15, 2011
Lots of notable sentencing talk in big Eleventh Circuit opinion affirming big mortage fraud convictions
As detailed in this Atlanta Journal-Constitution article, an Eleventh Circuit panel yesterday "upheld the convictions and 28-year prison sentence against Atlanta real estate developer Phillip Hill, who prosecutors said oversaw a massive mortgage fraud scheme." The panel "also upheld all the convictions and sentences against eight of Hill's associates -- brokers, lawyers and recruiters."
The 163-page opinion in US v. Hill, No. 07-14602 (11th Cir. June 14, 2011) (available here), has lots of discussion of lots of sentencing issues. Among many interesting passages, these passages referencing carrots and sticks caught my eye:
Van Mersbergen contends that he was, arguing that he was deprived of due process because the district court threatened to punish the defendants at sentencing if they refused to agree to reasonable stipulations in order to expedite the trial proceedings.... If one considers a criminal defendant’s failure to stipulate to be the exercise of a constitutional right, it would seem that increasing a defendant’s sentence because of his failure to stipulate crosses the line. But some of the lines in this area are blurry....
In Roberts the Supreme Court held that a court could lengthen a defendant’s term of imprisonment by imposing consecutive instead of concurrent sentences because he had refused to cooperate in the investigation of another crime in which he was a confessed participant.... That those who fail to cooperate receive longer sentences than those who are equally culpable but do cooperate is an inevitable product of encouraging cooperation.
That principle is written throughout our criminal law. For example, the Supreme Court has held that it is entirely permissible for prosecutors to threaten a defendant with a harsher charge carrying a much longer sentence in order to pressure him into pleading guilty, and then carry through with the threat when the defendant has the temerity to insist on his constitutional right to trial....
A distinction might be drawn between the carrot and the stick, between rewarding a defendant for giving up rights to which he is entitled on one hand, and punishing him for refusing to give up those rights on the other. The argument against that distinction is that the result for the defendant is the same. If a defendant receives a sentence of 100 months because he went to trial while his equally culpable co-defendant gets 50 months because he cooperated by pleading guilty, is a stick being administered to the defendant or a carrot being given to the co-defendant?
Whatever may be said about the use of sticks, the law seems to be clear that he who receives a break has gotten a carrot, and there is nothing wrong with doling them out. And that is enough to decide this case. At trial, the district court sometimes expressed its sentiment regarding stipulations by indicating that cooperation would result in a lower sentence, and at other times by indicating that failure to cooperate would result in a higher one. At sentencing, however, there were only carrots — cooperation was rewarded all around.
Monday, June 06, 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:
- Media reporting that John Edwards is to be indicted today
- Would John Edwards be wise to consider a guilty plea even if he is truly innocent?
Tuesday, May 31, 2011
Rubashkin appeal raising more questions about high-profile federal fraud case
Regul;ar readers likely recall some aspects of the high-profile federal case, detailed in this prior post, in which last summer a federal district court in Iowa decided to give Sholom Rubashkin a 27-year federal prison sentence for his leadership in a financial fraud involving his kosher meat-packing plant. As explained in this post, I helped put together an amicus brief on sentencing issues as the case comes before the Eighth Circuit, and thus I am not a truly non-partisan observer of these proceedings. Nevertheless, anyone interested in this case or more generally in the administration of the federal criminal justice system will want to check out this new article from the Des Moines Register headlined "New questions surface about impartiality of federal judge." Here are excerpts:
The court schedule of a federal judge who faces allegations of bias in the financial fraud trial of Sholom Rubashkin has raised fresh questions about judicial impartiality. Defense attorneys argue that Rubashkin, who is serving a 27-year sentence, deserves a new trial because U.S. District Chief Judge Linda Reade failed to disclose all of the meetings she held with prosecutors before a 2008 immigration raid on Agriprocessors, a kosher meatpacking plant in northeast Iowa where Rubashkin served as an executive.
Oral arguments are scheduled for the afternoon of June 15 at the 8th U.S. Circuit Court of Appeals in St. Louis. That morning, Reade -- a judge in the Northern District of Iowa temporarily filling in on the appeals court -- will hear cases with two of the three judges who will later listen to arguments in Rubashkin's appeal. Reade is also scheduled to sit with the same judges a day earlier.
The scheduling is unfortunate because the subject of the appeal is judicial impartiality, said Steven Lubet, a law professor at Northwestern University. However, he said he doesn't expect it to disqualify any of the judges from hearing the case. "I would call it awkward, but I don't think there's anything more to say about it," he said....
Many also questioned the 27-year sentence she handed down, two years more than the prosecution requested. Before sentencing, six former U.S. attorneys general signed a letter expressing their concern about the sentence sought by prosecutors. The American Civil Liberties Union of Iowa, the Washington Legal Foundation in Washington, D.C., and the National Association of Criminal Defense Lawyers filed legal briefs in support of Rubashkin's appeal.
Forty-five members of Congress have written to U.S. Attorney General Eric Holder to ask questions about the handling of the case. Last month, three members of the House of Representatives asked Holder about the case when he testified before the judiciary committee.
Reade had previously acknowledged that she worked with the prosecution on logistics before the raid to ensure attorneys and interpreters would be available for the 389 workers arrested on immigration charges, but offered no further details. The defense argued Reade failed to disclose that she began meeting with law enforcement officials more than six months before the raid, and that she discussed topics far beyond "logistical cooperation."...
Lubet, the law professor, said he can't imagine why Reade decided to sit on the trial. By doing so, she became a judge who made a point of assisting the prosecution in at least the initial stages of the case, he said. "Why not have a judge who had nothing to do with the prosecution, instead of one who had devoted significant time and energy into facilitating it?" he said.
Related prior posts on the Rubashkin case:
- "More Former AGs Question Sentence Sought in Bank Fraud Case"
- Can and should religious considerations influence bail decisions?
- Federal sentencing hearing starting in high-profile Rubashkin white-collar case
- Federal prosecutors now seeking 25-year prison term for Rubashkin
- Kosher plant chief Sholom Rubashkin sentenced to 27 years imprisonment
- An appellate amicus brief in the Rubashkin case on sentencing issues
Wednesday, May 25, 2011
Third Circuit to hear feds' complaints about 55-month sentence for corrupt state politician
As effectively reported in this new piece in the Philadelphia Inquirer, which is headlined "Prosecutors to argue for longer Fumo jail term," the Third Circuit hears argument today in a high-profile sentencing appeal by prosecutors. Here are the essentials:
Federal prosecutors will appear before a three-judge panel Wednesday to argue that former State Sen. Vincent J. Fumo, nearly midway through a 55-month sentence for corruption, should be resentenced to a longer term. Once one of the most influential politicians in Philadelphia and Harrisburg, Fumo was convicted in 2009 on 137 counts of corruption and fraud. Prosecutors want a sentence that meets federal guidelines, which call for a much longer term of 21 to 27 years....
Fumo was sentenced after the jury found that he had turned his Senate staff into personal servants and political minions, doing errands for him on state time. The jury also found that he had defrauded a pair of nonprofit organizations. After Fumo realized the FBI was on the trail, he tried to obstruct the probe. The wrongdoings cost taxpayers and the nonprofit groups more than $2 million.
At sentencing, U.S. District Judge Ronald L. Buckwalter said the 55-month term was justified by Fumo's public service, 259 letters asking for leniency and extolling Fumo's work, and the nature of Fumo's offenses.
"It's not murder. It's not robbery. It's not even assault," Buckwalter said of Fumo's wrongdoings. "It's nothing violent. It's not the selling of a political office," Buckwalter said at Fumo's sentencing hearing.
His decision produced an outcry, and federal prosecutors are hoping the Third Circuit will send the case back for resentencing. Meanwhile, Fumo is asking for a new trial. The three-judge panel will decide both issues. "It is likely impossible to identify a defendant in recent years who stole over $2 million, abused a position of public trust, and obstructed justice in the process who received a sentence anything like Fumo's," Assistant U.S. Attorney Robert Zauzmer wrote in the government's appeal....
In their court filings, the defense attorneys argue that there were "no significant" errors in Buckwalter's sentencing and that the cost to taxpayers of Fumo's fraud was just below $2.5 million. A greater financial loss, as prosecutors insist occurred, would have likely meant a longer sentence.
Related posts concerning Fumo sentencing and appeal:
- State senator Fumo gets below-guideline sentence of 55-months imprisonment on corruption charges
- Comparing white-collar apples and drug dealing oranges at sentencing
- "Feds seek to appeal 'unreasonable' Fumo sentence"
- Continued buzzing about the (soft?) sentence given to Fumo
- High-profile below-guideline political corruption sentence headed to Third Circuit
- An amusing spat in the Third Circuit over a not-very-brief sentencing brief
- Feds make case to Third Circuit that corruption sentence too low for state senator
UPDATE: As detailed in this Philadelphia Inquirer piece, it appears that at least two judges on the Third Circuit panel indicatyed at oral argument that "the sentencing of the disgraced politician in 2009 was rife with serious procedural errors."
Tuesday, May 24, 2011
Brother of Raj Rajaratnam asks friends to write letters to judge urging leniency
As detailed in this interesting article, which is headlined "Raj's Brother Tells Friends How They Can Influence Raj's Sentencing With A Letter To The Judge," Rengan Rajaratnam "has sent a long letter to friends asking them to write to Judge Holwell to help make sure his brother Raj gets a more lenient sentence." Here are excerptsfrom the now-public letter:
As we prepare for the appeals process, we need your help and I am I only sending this letter to a handful of people. The sentencing phase is coming up relatively quickly and the federal guidelines are calling for 15 to 19 years in jail. The guidelines are harder and less flexible than many prison sentences for violent and predatory offenders. This is simply unfair, and we are praying for leniency from the judge while we prepare for the appeal.
In the meantime, on behalf of Raj and the family, I would like to enlist your support one last time. Positive character letters from family, friends, and colleagues that know Raj well can play a pivotal role in helping persuade the Hon. Judge Holwell to be fair, and lenient during Raj’s sentencing.
If you can find it in your hearts to write a personal letter to Judge Holwell describing your relationship with Raj; when and how you met; as well as illustrate some of the positive experiences you’ve had with him, it would be of immense service to Raj and our family. The longer you can state you have known Raj, clearly the better.
The goal is to appeal to Judge Howell, by informing him that Raj is a loving human being with deep friendships and ties to the community. That Raj is a person of good character, a positive member of society who is deserving of the court’s leniency. As many of you may be aware, Raj has donated significant amounts of money to charity in excess of $30 MM in the last 5 years alone. If you need specifics, please call me.
It is important that the letter come from you, and paints Raj in a positive light. Since time is of the essence, it would be great if you could send the letters to me before the end of the week or the early part of next week.
The format of the actual letter is important, and there are several examples on the web. I have included one link that I found helpful on some guidelines on how to properly write a character reference: http://www.ehow.com/how_4683439_write-letter-judge-before-sentencing.html
I am interested to hear from experienced federal practitioners concerning whether they believe in this case (or others) that "character letters from family, friends, and colleagues ... can play a pivotal role" in post-Booker sentencing decision-making.
Thursday, May 19, 2011
"Enron exec Andy Fastow nears prison release"
The title of this post is the headline of this new CNN piece. Here are snippets:
Former Enron executive Andrew Fastow has been transferred from prison to a halfway house, the last stage of incarceration before his scheduled release later this year, according to the federal Bureau of Prisons.
Fastow, who was chief financial officer at the now-defunct energy company, was moved on Monday to a facility in Houston, according to the bureau. Moving into a halfway house is a typical move for most prisoners during the last portion of their sentence. "It's a bridge, if you will, a transition period," said bureau spokesman Edmond Ross.
The purpose of the halfway house is for prisoners to reestablish family ties and adjust to society outside of prison, he said. Prisoners are allowed to leave the facility to go to their jobs, but their movements are still controlled. "They cannot come and go as they please," said Ross. "Their lives are restricted to the rules of the halfway house."...
Fastow pleaded guilty in 2004 to two counts of wire and securities fraud for his role in the accounting scandal that brought down Enron.... Fastow provided information on Enron's sketchy financial shenanigans, including the names of bankers who he considered complicit, to lawyers representing Enron shareholders.
Thursday, May 12, 2011
What insider trading sentence for Raj Rajaratnam would avoid "unwarranted" disparity?
I had not been following closely the trial of Raj Rajaratnam, but the conviction of the founder of the Galleon Group on all counts of insider trading (basics reported here) now turns the case into a interesting federal sentencing story. And this new Reuters piece, headlined "Factbox: Prison sentences in insider trading cases," prompts the question in the title of this post. Here are the facts reported by Reuters:
The Galleon Group founder could face up to 25 years in prison when he is sentenced in July, although prosecutors said on Wednesday that [Raj Rajaratnam] could get 15-1/2 to 19-1/2 years in prison under federal sentencing guidelines. Following is a list of punishments meted out to defendants in other high-profile insider trading cases:
IVAN BOESKY -- Boesky, the famed Wall Street stock speculator of the 1980s, was sentenced to three years in prison in 1987 after pleading guilty to a criminal charge related to insider trading. Boesky, who faced a maximum penalty of five years, cooperated with prosecutors in their probe of trading firms that resulted in charges against more than a dozen people.
MARK KURLAND, ROBERT MOFFAT AND ALI HARIRI -- All three pleaded guilty in the sweeping Galleon probe. Kurland, a former senior managing director at New Castle Funds LLC, was sentenced in May 2010 to two years and three months in prison. Kurland admitted to trading on information he got from Danielle Chiesi, also a former New Castle employee who became a central figure in the Galleon investigation. Chiesi has pleaded guilty and is awaiting sentencing. Moffat, a former International Business Machines Corp executive, was sentenced to six months in prison for tipping Chiesi about an impending IBM deal with Advanced Micro Devices Inc. Hariri, a former executive at chipmaker Atheros Communications Inc. received an 18-month sentence in November for tipping a former Galleon employee.
SAM WAKSAL -- The founder of biotechnology company ImClone Systems Inc. was sentenced to seven years in prison after pleading guilty to insider trading in 2002. The scandal also ensnared Waksal's father as well as lifestyle entrepreneur Martha Stewart, who was convicted of lying to federal agents about her sale of ImClone stock. She served five months in prison.
JOSEPH NACCHIO -- Nacchio, the former CEO of Qwest Communications, was sentenced to six years in prison, later reduced by two months, after he was convicted in a 2007 trial of 19 counts of insider trading in selling $52 million in Qwest stock. A judge also ordered Nacchio to forfeit $44.6 million and pay a $19 million fine.
JOSEPH CONTORINIS -- Contorinis, a former hedge fund manager, received a 6-year sentence in December for his role in providing tips on impending mergers, such as the 2006 buyout of the supermarket chain Albertsons Inc.
HAFIZ NASEEM -- A judge sentenced Naseem, a former Credit Suisse Group investment banker, to 10 years in prison after he was found guilty in February 2008 of participating in a $7.5 million scheme to leak inside information about pending corporate deals.
RANDI AND CHRISTOPHER COLLOTTA -- Randi Collotta, a former Morgan Stanley lawyer, received a sentence of 60 days in prison on nights and weekends for passing along tips to her husband about impending merger deals. Her husband, Christopher, got a sentence of 6 months' home confinement.
So, based on this (incomplete) list, it appears that nobody has received more than a decade for insider trading and that sentences of six year or much less are more common for this crime. Does this entail that the sentencing judges in Raj Rajaratnam's case ought to feel a special statutory obligation to impose a below-guideline sentence based on Congress's instruction in 18 USC 3553(a)(6) to consider at sentencing "the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct"?
Tuesday, May 10, 2011
"Prosecutors in the Boardroom: Using Criminal Law to Regulate Corporate Conduct"
The title of this post is the title of this new book edited By Anthony Barkow and Rachel Barkow, which has just been released by NYU Press. Here is a summary of the book's coverage from the NYU Press website:
Who should police corporate misconduct and how should it be policed? In recent years, the Department of Justice has resolved investigations of dozens of Fortune 500 companies via deferred prosecution agreements and non-prosecution agreements, where, instead of facing criminal charges, these companies become regulated by outside agencies. Increasingly, the threat of prosecution and such prosecution agreements is being used to regulate corporate behavior. This practice has been sharply criticized on numerous fronts: agreements are too lenient, there is too little oversight of these agreements, and, perhaps most important, the criminal prosecutors doing the regulating aren’t subject to the same checks and balances that civil regulatory agencies are.
Prosecutors in the Boardroom explores the questions raised by this practice by compiling the insights of the leading lights in the field, including criminal law professors who specialize in the field of corporate criminal liability and criminal law, a top economist at the SEC who studies corporate wrongdoing, and a leading expert on the use of monitors in criminal law. The essays in this volume move beyond criticisms of the practice to closely examine exactly how regulation by prosecutors works. Broadly, the contributors consider who should police corporate misconduct and how it should be policed, and in conclusion offer a policy blueprint of best practices for federal and state prosecution.
Contributors: Cindy R. Alexander, Jennifer Arlen, Anthony S. Barkow, Rachel E. Barkow, Sara Sun Beale, Samuel W. Buell, Mark A. Cohen, Mariano-Florentino Cuellar, Richard A. Epstein, Brandon L. Garrett, Lisa Kern Griffin, and Vikramaditya Khanna.
Thursday, April 21, 2011
Intermediate Louisiana court declares 60-year sentence for post-Katrina scammer excessive
A helpful reader alerted me to this interesting story from Louisiana reporting on an interesting state appellate ruling. The piece is headlined "60-year prison sentence thrown out in post-Katrina home contracting scam," and here are the basics:
A state appeals court panel on Wednesday scrapped the 60-year prison sentence that an Orleans Parish judge leveled last year on a former Alabama state legislator convicted in a home contracting scam that fleeced six families out of $247,000.
John Wesley Colvin, 64, pleaded guilty to six counts of theft for bilking the families, who were desperate to return to New Orleans two years after Hurricane Katrina. The victims testified that Colvin promised them affordable modular homes, took between $40,000 and $65,000 from each -- much of it Road Home grant money -- then failed to deliver.
Unswayed by pleas from Colvin, his friends and family -- and a letter from Alabama Lt. Gov. Jim Folsom -- citing Colvin's charity toward the poor, his remorse and his bad business sense, Orleans Parish Criminal Court Judge Darryl Derbigny on Feb. 12, 2010, handed down consecutive 10-year sentences to Colvin for each of the six counts and ordered him to pay restitution....
But on Wednesday, the panel of the 4th Circuit Court of Appeal called the punishment unconstitutionally excessive and sent the case back to Derbigny for a lesser sentence.... In his 15-page opinion, Judge Roland L. Belsome cited those who spoke on Colvin's behalf, his attempt to return $5,000 to one victim before his arrest and his lack of a criminal record....
Yet the panel also said it didn't think a 10-year sentence for Colvin is enough, "considering the extreme economic and emotional harm suffered by the victims in this case." Colvin, who briefly served as an Alabama state representative in 1989, has remained in state prison since May 2009, said his attorney, Craig Mordock, who hailed the appeals court ruling. "It shows that for people who take responsibility for their actions, they're not going to be subject to excessive sentences, which this clearly was," Mordock said.
The opinion in Louisiana v. Colvin can be downloaded below, and here is the key concluding substantive paragraph:
Although mindful of the trial court’s discretion with regard to sentencing, we find that the sentences imposed are excessive under these particular facts and circumstances. Considering the mitigating evidence presented to the trial court, the age of Defendant, Defendant’s attempt to mitigate the loss to one of the victims before his arrest, and the fact that Defendant is non-violent and has no prior criminal record, we find that the trial court abused its discretion in ordering the six ten-year sentences to be served consecutively. See State v. Cox, supra. However, we do not find that a ten-year sentence is sufficient either, considering the extreme economic and emotional harm suffered by the victims in this case. Accordingly, the matter is remanded to the trial court for resentencing.
Tuesday, April 12, 2011
Intriguing health-care fraud sentencing and restitution ruling from Sixth Circuit
Savvy federal criminal justice practitioners know that health-care fraud is a hot topic, and this morning brings a hot new ruling on heath-care fraud sentencing issues from the Sixth Circuit. The ruling in US v. Jones, No. 09-3664 (6th Cir. Apr. 12, 2011) (available here), covers an array of sentencing issues and these snippets provide a taste of some of the specifics:
There is no rule that a district court must rely upon statistical analysis in a situation such as this to determine the amount of loss pursuant to section 2B1.1. However, here, the district court relied solely upon a statistical analysis. Without a sound representative sample, that analysis was flawed. As a result, the amount of loss calculation was clearly erroneous. We remand this case so that the correct amount of loss may be established by a preponderance of the evidence....
In the context of mail fraud convictions, we have read [the mandatory restitutiuon] statutory definition of “victim” to allow for restitution for the loss attributable to all the victims of a defendant’s scheme to defraud, even when the defendant was not indicted or convicted of fraud with respect to each victim....
es’s indictment defined his scheme as a broad, over-arching plan “to defraud and to obtain money by means of false and fraudulent pretenses, representations and promises.” The indictment listed as components the more specific acts falling under that plan such as up-coding, billing for services not rendered to Carter and Tubbs, billing under Stewart’s Medicare Provider Number, and others. Therefore, the grand jury defined Jones’s scheme as a general plan to defraud Medicare and Medicaid by committing many different distinct acts. The scheme included not only the acts of which he was convicted, but also the ones of which he was acquitted.
Accordingly, once the district court correctly determines the amount of loss caused by Jones on remand, it may properly order him to pay restitution for both his convicted and acquitted conduct.
Monday, April 11, 2011
Monica Conyers makes impossible(?) sentence modification request from prison
This local piece coming from Detroit, headlined " Monica Conyers asks to serve remainder of her sentence at home," provides an interesting example of a high-profile federal prisoner making what seems to be an impossible sentencing request. Here are the details:
Former City Council President Monica Conyers wants out of "Camp Cupcake." The imprisoned wife of U.S. Rep. John Conyers, D-Detroit, has asked a federal judge to modify her 37-month prison sentence for bribery and let her serve time at home, according to a three-page handwritten letter filed today in U.S. District Court in Detroit.
In arguing for reconsideration, Conyers, 46, said a federal judge failed to consider her age, education, work skills, employment record, family ties and "likihood (sic)" she would commit another crime. Plus, her son's babysitter is returning to school soon, Conyers wrote in the letter to U.S. District Judge Avern Cohn.
Her bid is a long shot considering Conyers has filed an appeal, which is pending before the 6th U.S. Circuit Court of Appeals, said Peter Henning, a law professor at Wayne State University and former federal prosecutor. "You can ask," Henning said. "Barring extraordinary circumstances, I doubt he would reconsider."
The request comes seven months after Conyers reported to a federal women's prison camp in Alderson, W.Va. Dubbed "Camp Cupcake," the prison camp offers plenty of perks, including washers, dryers, microwave ovens, hair dryers, curling irons and cosmetology areas where inmate-to-inmate pedicures and manicures are allowed.
In a letter, Conyers said the court could, as an alternative, sentence her to home confinement, community confinement or intermittent confinement to "correct the blatent (sic) sentencing disparities." Conyers is serving the sentence after pleading guilty to accepting at least $6,000 for her deciding vote in the 2007 Synagro Technologies Inc. sludge contract.
After her sentence, Conyers tried to withdraw her guilty plea and appealed. She complained that she pleaded guilty because she was unable to resist pressure from her lawyer, the government and the news media, according to an appeal brief....
In a letter to The Detroit News this year, Conyers complained that Camp Cupcake doesn't live up to its cushy nickname, provides no second servings of food to inmates and has few education opportunities.
Those interested in seeing Monica Conyers' letter to the judge can check it out at this link. And, as the title to my post is meant to suggest, I am pretty sure Judge Avern Cohn lacks any legal authority to give Conyers' the relief she seeks even if he were moved by her request.
Sunday, April 03, 2011
Detroit's Granny Valjean gets probation and home confinement for Social Security fraud
Last week I asked in this post what would seem a fitting federal sentence for an elderly woman who fraudulently received nearly $120,000 in Social Security benefits over a 20-years period and used the funds to raise and support her grandkids. Here is the news report on her actual sentencing:
In the end, the judge showed her mercy. Mary Alice Austin, a Detroit grandmother who admitted she stole from the government because she needed money to help raise her five grandchildren, avoided a prison sentence Friday when a federal judge gave her probation instead. But Austin will have to pay back $119,000 in restitution and will serve four months in home confinement on a tether.
U.S. District Judge Victoria Roberts issued the sentence after Austin, 67, pleaded for her freedom. She faced 10-16 months in prison for unlawfully receiving her son's disability checks while he was in prison. "Please understand me. Please," a frail-looking Austin said at her sentencing.
Austin told the judge she still has a mentally ill son in an institution to look after. She also talked about the struggles she faced in raising five grandchildren and said desperate times forced her to make a bad choice. "I am remorseful," Austin said. "I got scared. I got very scared."
According to court records, Austin paid someone to pose as her mentally ill son so she could continue receiving his disability benefits while he was in prison. From 1990 to 2009, Austin received nearly $120,000 in benefits -- about $6,000 a year, records show....
At Austin's sentencing, Assistant U.S. Attorney Blondell Morey conceded Austin doesn't present a threat to the public but pushed for prison time. "I think basically Ms. Austin is a good woman, but she did some bad things. ... And she needs to be punished."
Tuesday, March 29, 2011
Third Circuit finds procedurally(?!?) unreasonable two below-guideline white-collar sentences
The Third Circuit has an interesting ruling today in US v. Negroni, No. 10-1050 (3d Cir. March 29, 2011) (available here), in which two white-collar defendants have their below-guideline sentences vacated. Here are a few snippets from the Negroni opinion that provides an incomplete summary :
The United States appeals orders of the United States District Court for the Eastern District of Pennsylvania sentencing Appellee James Hall to fifteen months' imprisonment and Appellee Paul Negroni to five years' probation, including nine months' in-home detention. Because the District Court committed procedural error in reaching both of those sentences, we will vacate the orders and remand for resentencing....
These consolidated cases spring from a massive fraud scheme organized and conducted by a man named Kevin Waltzer. Between the years 2000 and 2008, Waltzer fraudulently obtained more than $40 million in payments from settlement funds in three class action lawsuits...In 2007, the scheme was uncovered by the IRS, and, in cooperation with the IRS investigation, Waltzer began to provide information regarding the other individuals involved, including Hall and Negroni....
Hall's calculated ... Guidelines range called for 46 to 57 months' imprisonment.... For Negroni, the District Court calculated ... a Guidelines range of 70 to 87 months' imprisonment. [Hall was sentenced to fifteen months' imprisonment; Negroni got five years' probation, including nine months' in-home detention.]...
[O]ur review is frustrated because, while the District Court individually identified each § 3553(a) factor, it did not discuss some of them and, as to those it did discuss, it did not explain how they justified the frankly dramatic downward variance it gave. The insufficiency of the explanation prevents us from judging whether the Court “gave meaningful consideration” to the relevant factors and is itself procedural error.
I have placed "(?!?)" as a suffix to the the term procedurally is the title to this post because I sense that it is the substantive outcome much more than the procedures used below that really bothers the Third Circuit in these cases. Nevertheless, as has been the case in lots and lots of post-Booker reasonableness appeals, it seems that the circuit judges ultimately felt me comfortable declaring the outcome only procedurally unreasonable and thereby giving the district court a second opportunity to consider both the sentencing process and result once more, this time with some added wisdom from this circuit ruling.