As the summer of vindication winds down (well, at least the summer part), three more so-called specialist traders might get to enjoy the final days. Last month, the Second Circuit upheld the acquittal of David Finnerty, a former specialist trader at Fleet Specialist, who’d been accused of making improper trades for his firm’s account at the NYSE, and reversed the convictions of two more specialists who used to work at Van der Moolen Specialists.
Now, DJ Newswire’s Chad Bray reports, U.S. District Judge Sidney Stein in Manhattan has vacated the guilty pleas (to securities fraud) of two other Van der Moolen specialist traders — Patrick McGagh and Joseph Bongiorno — and dropped the criminal case against a former LaBranche & Co. trader, Freddy DeBoer. This final blow to SDNY prosecutors means their office goes 0-15 on specialist prosecutions. A spokeswoman for the U.S. attorney’s office in Manhattan, which brought the cases, declined to comment Monday. . .
Marjorie J. Peerce, the lawyer for both McGagh and DeBoer, said of McGagh: “He served about a year in jail for something which has now been determined is not a crime. It’s been a long and difficult ordeal. He looks forward to continuing his life as a husband, father, son, brother and productive businessman.”
Thursday, August 28, 2008
Saturday, August 23, 2008
Kilpatrick's legal problems did not end there, however, as he is also alleged to have assaulted two police officers who were attempting to serve a subpoena related to the perjury case on one of his friends. The New York Times is reporting that Kilpatrick turned down a plea deal in the assault case on Friday. The plea offer Kilpatrick rejected would have required him to resign in exchange for the Michigan Attorney General's Office dropping one of the two felony assault charges.
A spokesman for his defense team, Marcus Reese, said Mr. Kilpatrick rejected the plea deal because it was politically motivated and insincere. Mr. Reese called the case “weak and frivolous.”
“The attorney general is clearly concerned that the mayor’s legal team has begun to seriously hurt his credibility as it relates to this case, and is worried his time as political grandstander may be waning,” Mr. Reese said in a statement. “This so-called offer was made by someone who has no authority to request such a thing and was done purely to score points in front of the cameras.”
A spokesman for the prosecutor, Rusty Hills, rejected that contention. “It is a very genuine offer based on very genuine charges that we intend to prove in court if we go forward with our case,” Mr. Hills said.
At a bond hearing set for Monday, a judge is to decide whether Mr. Kilpatrick will have to continue to wear an electronically monitored tether and remain under travel restrictions.
Thursday, August 21, 2008
This library collection contains scanned federal organizational prosecution agreements. It is intended to provide a resource for research concerning federal prosecution of organizations. The Web site was created by Professor Brandon Garrett (firstname.lastname@example.org) and Jon Ashley (email@example.com) and will be periodically updated to reflect additional agreements or other developments. We welcome any inquiries or feedback, including questions, corrections or suggestions for additional material to be added to the collection. The agreements, as indicated below, may be displayed by name of entity, jurisdiction or date. Additional information concerning organizational prosecution agreements is in a 2007 Virginia Law Review article.You can access the collection here. The article referenced above is a 2007 piece by Professor Brandon L. Garrett entitled "Structural Reform Prosecution," 93 Va. L. Rev. 853 (2007).
In what I call a structural reform prosecution, prosecutors secure the cooperation of an organization in adopting internal reforms. No scholars have considered the problem of prosecutors seeking structural reform remedies, perhaps because until recently organizational prosecutions were themselves infrequent. In the past few years, however, federal prosecutors have adopted a bold strategy under which dozens of leading corporations have entered into demanding settlements, including AIG, America Online, Boeing, Bristol-Myers Squibb Co., Computer Associates, HealthSouth, KPMG, MCI, Merrill Lynch & Co., and Monsanto. To situate the DOJ's latest strategy, I frame alternatives to the pursuit of structural reform remedies as well as alternative methods prosecutors can use to pursue structural reform. To better understand what the DOJ accomplished by choosing to pursue structural reform and then doing so at the charging stage, I conducted an empirical study of the terms in all agreements the DOJ has negotiated to date. My study reveals imposition of deep governance reforms, consistent with the purposes of the Sentencing Guidelines, but also some indications of overreaching, if perhaps not abuse of prosecutorial discretion. I conclude by framing the issues that such prosecutions raise where, given the breadth of prosecutorial discretion and the deferential, limited nature of judicial review, the DOJ's emerging structural regime for deterring organizational crime raises important questions for all actors involved and affected.You can view the article here.
Tuesday, August 19, 2008
One particularly interesting story was that of Erma Faye Stewart, who learned first hand the collateral consequences of pleading guilty, a topic often overlooked by those deciding down which path to venture.
It is the centerpiece of America's judicial process: the right to a trial by jury system that places a defendant's fate in the hands of a jury of one's peers. But it may surprise many to learn that nearly 95 percent of all cases resulting in felony convictions never reach a jury. Instead, they are settled through plea bargains in which a defendant agrees to plead guilty in exchange for a reduced sentence.
"The real American justice system is unlike anything depicted on Law & Order and Court TV," says producer Ofra Bikel. "I know I was stunned when I realized that only about 5 percent of all felony convictions result from jury trials. The rest are settled by plea bargains. And these deals aren't always to the defendant's advantage."
"The Plea" tells several stories -- different people, different charges, different parts of the country, all with one thing in common: the difficult dilemma of confronting a plea.
The program's website also offers materials and links regarding plea bargaining. These materials include commentary from Professors Stephen Schulhofer and Albert Alschuler on the question, "Can the system be fixed?"
Critics, however, contend that the push to resolve cases through plea bargains jeopardizes the constitutional rights of defendants, who may be pressured to admit their guilt whether they are guilty or not. In Erma Faye Stewart's case, for example, she says her defense attorney encouraged her to accept a plea bargain when she was arrested in a major drug sweep based upon information provided by a police informant who was later deemed not credible. The 30-year-old mother of two steadfastly maintained her innocence, but says her court-appointed defense attorney didn't want to hear it.
"He was, like, pushing me to [plead guilty and] take the probation -- he wasn't on my side at all," says Stewart, who tells FRONTLINE that after spending 25 nights in a crowded jail cell, she decided to follow her attorney's advice. "Even though I wasn't guilty, I was willing to plead guilty because I had to go home to my kids. My son was sick."
After accepting the plea bargain and 10 years' probation, Stewart was freed. What she didn't know was that under the terms of her probation, she would be required to pay a monthly fee to her probation officer. Her felony conviction also meant that the single mother was banned from the federal food stamps program. Within three years of pleading guilty to a crime she says she didn't commit, Erma Faye Stewart had fallen behind in her probation payments and been evicted from her home.
"One reason that a lot of people plead guilty is because they're told they can go home that day, because they will get probation," says Steve Bright, a defense attorney and law professor who serves as director of the Southern Center for Human Rights. "What they usually don't take into account is that they are being set up to fail."
This program is well worth watching on-line, and the additional materials provided on the program's website provide excellent additional resources.
Law professors Stephen Schulhofer and Albert Alschuler believe there is a way to ensure the defendant doesn't forego getting a public hearing while at the same time cutting down on the onerous costs of giving every defendant a jury trial. "The simple solution," says Schulhofer, "is to discourage plea bargaining by giving defendants an incentive to give up the jury only, and take their case to a trial before a
Philadelphia's trial system largely has worked this way for decades says Schulhofer. "What happens is that well over 50 percent of the cases are tried before a single judge. About 5 percent of the cases go to a jury trial. And again, defendants know and lawyers know from experience that juries tend to react in certain ways to certain cases and that effects how judges will decide cases without a jury. A judge knows that a jury wouldn't convict in a certain type of case, he has to take that into account, or no defendant would accept a trial before that judge. At the same time the system can give slightly lower sentences, the gap obviously doesn't have to be as great because the defendant isn't giving up as much. This system has worked in practice very effectively for many, many years, so it's not an imaginary idea, and it essentially solves 99 or 100 percent of the problems we've been discussing."
Alschuler believes there are three ways to fix the system. "Plan A is just spend the money. We're one of the richest nations on the planet, and we've decided we can't afford to give criminal defendants their day in court? There's got to be something wrong with that picture, but the problem is that our trials are so over-proceduralized that maybe we can't afford to do that. … Plan B would be to simplify our trial procedures, and thereby make trials more available to defendants who want them. We don't need these prolonged jury selection procedures. We don't need the complicated rules of evidence; there are lots of other ways we could simplify criminal trials."
And Alschuler's Plan C is the city of Philadelphia's model -- a trial before the judge alone. "Why did that happen? Well, because in Philadelphia, as everywhere else, a defendant who asks for a jury and was convicted got a very tough sentence. But if a defendant asks for a trial before the bench, his sentence was not likely to be tougher than a guilty plea sentence. So guilty pleas were very low. The defendant was tried before a court in a relatively expeditious proceeding, typically taking only a half an hour for an ordinary street crime. That's a troublesome practice for some of the same reasons that plea bargaining is troublesome -- I mean, you've got a right in the Constitution to a jury trial. … But at the same time, this is a system where the defendant does have his say before an impartial third party, and he does not give up his chances of acquittal. …"
Friday, August 15, 2008
The NPR article also contains links to various resources, including the Southern Methodist University study discussed above. The study concluded the following:
There's a rare set of relationships here among criminals, court officials, judge, case managers and drug and alcohol therapists that's grounded in the repetition of seeing each other every week, often several times a week.
"Natasha, I'm glad you're here today because you're going to Phase Three," Creuzot announces to widespread applause. It's taken Natasha Stephens a year to get this far, and she returns to her seat, beaming at his praise.
"You proud of yourself — you were pretty damn mean when you first got here, girl," the judge says.
Stephens says she began drinking when she was 8 years old. By the time she was busted for possessing a gram of cocaine at age 21, she'd been addicted to cocaine and alcohol for years.
"All through my teens — couldn't even go to class," she explains. Stephens was facing a felony conviction and up to two years in prison. But because it was her first arrest and the amount she was carrying was relatively small, she was a candidate for Creuzot's DIVERT Court.
Stephens soon discovered that diversion is not easy. Instead of doing nothing in jail, she had to meet with her case manager twice a week and attend Narcotics Anonymous and Alcoholics Anonymous meetings, because she had both addictions. There were intensive outpatient treatment sessions and drug tests.
Those who know something about alcohol and cocaine addiction probably won't be surprised to hear that one weekend, Stephens fell off the wagon and subsequently failed a drug test.
This is where the differences between the philosophy of DIVERT Court and the rest of the Texas criminal justice system become particularly apparent. Instead of kicking Stephens out of the program and sending her off to prison, Creuzot sent her to 45 days of intensive inpatient drug treatment.
Stephens says that changed her life.
Understanding just how close she was to a life of oblivion, Stephens dropped her know-it-all attitude and got serious about recovery. She's been sober ever since, with the drug tests to prove it.
Creuzot says what's different about DIVERT Court is the intense judicial oversight.
"A person who relapses on drugs needs further treatment. Our responses are research-driven," he says.
The statistics back him up. Two studies by Southern Methodist University show that DIVERT Court cuts the recidivism rate by 68 percent over the regular Texas criminal justice courts. For every dollar spent on the court, $9 are saved in future criminal justice costs.
Creuzot says the next step is to expand these courts to include perpetrators of property crimes and to raise the possession limits. Currently, if you're busted with two grams of cocaine, for example, that's too much to qualify. Creuzot would like to see DIVERT expanded beyond first-time offenders.
This study finds the Benefit-Cost ratio associated with the DIVERT Court program over a 40 month follow-up period to be 9.43:1. That is, on average, for every dollar spent on upgrading drug treatment from the Control group (traditional adjudication) to drug treatment through DIVERT Court, $9.43 of costs can be saved by society over a 40 month post-treatment period. Even though this Benefit-Cost ratio is quite substantial, it is still a conservative estimate of the benefits forthcoming from the DIVERT Court program for reasons detailed in the report.Read the full article and listen to the NPR story here. Examine the Southern Methodist University study here.
Monday, August 11, 2008
After almost two years in prison, New Yorker Tremayne Durham could stand it no longer. His craving for a decent bit of nosh was so intense that he agreed to pay a high price - a life sentence. Durham, 33, struck a plea bargain last month in which he was guaranteed a meal of KFC chicken, Popeye's chicken, mashed potato, coleslaw, carrot cake and ice cream - in return for pleading guilty to murder. As part of the deal, and after receiving a life sentence this week in court in Portland, Oregon, Durham will also get a second feast, this time on an Italian theme, with calzone, lasagne, pizza and ice cream.
The judge, Eric Bergstrom, is understood to have accepted the bargain because it would save the state of Oregon thousands of dollars in hosting a trial and possible subsequent appeals. The murder happened in June 2006 as a revenge killing. Durham travelled from New York City right across the country to confront an Oregon company from whom he had ordered a truck costing $18,000.
He had been intending to enter the ice cream business, but when he changed his mind the company refused to give him a refund on the truck. In a blaze of fury, he intended to collar the owner of the truck company but instead came across a former employee, Adam Calbreath, and shot him dead.
He will now have 30 years behind bars before he is given any chance of parole and the opportunity for another KFC feast.
We have discussed sentencing differentials before and the significant impact they have on a defendant's decision regarding pleading guilty. Generally, the greater the sentencing differential between the bargained for sentence and the sentence faced at trial, the greater the chance the individual will accept the offer. While I'm sure there was some sentence bargaining going on in the background of this story (note the life sentence rather than LWOP or capital punishment), it seems to tell a very sad story that this defendant may have been persuaded, at least in part, to plead guilty in return for some fast food. On the other hand, perhaps he knew he would enter a plea deal and decided to get a little something extra out of a bargain he would have accepted regardless. We can only hope the latter is the case.
There's no disputing that the feds are going after a lot of state and local officeholders these days. Since 2002, both the number of public corruption cases and the number of FBI agents devoted to such cases has increased by more than 50 percent. But is it because there's been a sudden spike of mischief in office? Or is it more an epidemic of prosecutorial zeal and ambition? Those are not easy questions to answer. But they're increasingly important to ask.
What's clear is that we are dealing with a national phenomenon. In the past three years, the FBI's long-running undercover operation in Tennessee (code named "Tennessee Waltz") has led to the conviction of a dozen officials, including several state senators and a state representative, the most recent of them in April. In New Jersey, U.S. Attorney Christopher Christie has prosecuted more than 125 state and local officials, without a single acquittal. In North Carolina, U.S. Attorney George Holding successfully prosecuted House Speaker Jim Black in a corruption scandal, followed this spring by the conviction and expulsion of one of Black's top lieutenants — the first expulsion of a legislator in that state since 1880. And in Alaska, a major bribery scandal involving an oil services company has already led to seven convictions, including that of former state House Speaker Pete Kott.
Corruption cases always have been, and always will be, part of the public-sector landscape. A prosecutor seeking to press such cases can usually find plenty of work — and prosecutors have shown they can obtain an indictment from a grand jury without presenting anything close to an airtight case. Given the vast discretion prosecutors maintain in picking their targets, they are subject to regular complaints that they are interfering with the political process and the normal operations of government. Democrats still single out Ken Starr, the special prosecutor who published an X-rated account of President Clinton's love life, in their pantheon of villains. For their part, many Republicans have excoriated Patrick Fitzgerald, the U.S. attorney in Chicago and special counsel in the Valerie Plame investigation, for his successful prosecution of former vice presidential chief of staff I. Lewis "Scooter" Libby.
Public corruption cases may not be the most certain way for a prosecutor to advance his career — they create plenty of enemies even when, or especially when, they're successful — but they do guarantee bigger headlines than conducting drug seizures or even sending a series of murderers to death row. That sort of motivation was starkly on display in 2004, when e-mails leaked from the office of Thomas DiBiagio, then the U.S. attorney in Maryland. He demanded that his staff bring no fewer than three "front-page" corruption indictments by Election Day. Given the current climate, it's become the first line of a vigorous defense for public officials to suggest they are the latest victims of politically-motivated investigations.
On the other hand, there are safeguards. To carry off a partisan prosecutorial vendetta really does require something of a conspiracy, with a U.S. attorney having to bring on board his or her own career staff, FBI agents and other investigators, the media, a judge and a jury. It's such a tough trick to pull off that even David Iglesias, a U.S. attorney who was told to speed up prosecutions of Democrats and ultimately was fired by Gonzales, is skeptical about the existence of organized partisan scalp-hunting. Iglesias, who just published a book about his experience, concedes there was an "attempt to politicize the Justice Department both in Washington and out in the field," but argues that it failed. In his biggest case, which led to the conviction of two New Mexico state treasurers, Iglesias says that "our referral wasn't from the Republican Party, it was from a state employee caught copying U.S. currency on an office photocopier."
There is always a risk that prosecutors will want to score points by aiming at the ripe target of elected leadership. Yet in the vast majority of cases, government officials who are formally charged with crimes end up either entering into a plea bargain or being convicted. Even critics of the system concede that it remains a necessary corrective to the temptations of exploiting public office. And when politicians do get caught, they normally have themselves, much more than the prosecutors, to blame. "People in public office, particularly legislators, ought to know they are in somebody's gun sights," says Alan Rosenthal, an expert on legislatures at Rutgers University. "If it's not an opponent or a newspaper, it's the prosecuting attorney."
Friday, August 8, 2008
The story has been picked up by various news outlets, including a lengthy story in the Pittsburgh Post-Gazette. Here is some of the discussion by the WSJ Law Blog
For Karen Fletcher, the sentence imposed on her by a federal judge yesterday will not drastically alter her life. Yes, she was sentenced to five years probation. And yes, the first six months of those, she will be forced to remain inside her Donora home with few exceptions.
But Ms. Fletcher, an agoraphobic, has already spent years inside that house -- afraid to leave. She has no family, and only one friend. She spends the majority of her time alone, dealing with what she calls her "monsters." Those monsters are what landed her before U.S. District Judge Joy Flowers Conti. Ms. Fletcher, 56, pleaded guilty to violating federal obscenity law based on a number of stories she wrote that depicted the rape, murder and torture of children.
Though she began writing the stories as a kind of self-imposed therapy, Ms. Fletcher published them on a Web site where she charged members a $10 per month subscription fee. She had 29 members. Nearly two years ago, the U.S. attorney's office filed six counts of transmission of obscene matters against Ms. Fletcher. She originally planned to fight the charges -- and had a team of First Amendment lawyers on her side -- but as the time neared for a trial, her fear of possibly losing and being sentenced to prison was too much for her. She faced a recommended guideline range of 27 to 33 months in prison. As part of her plea agreement, though, the government agreed incarceration was not appropriate.
That's not because prosecutors didn't believe it was a serious case, said Assistant U.S. Attorney Stephen R. Kaufman. "The premise of this prosecution is that words have power," he said. "The images conjured by Ms. Fletcher's words are as horrifying or more horrifying than any photographs or videos of child pornography which can be seen on the Internet."
... Judge Conti told Ms. Fletcher that she would have seriously considered a sentence of incarceration had the government not recommended against it. "If anyone would have read the story and acted upon it, a little child could have suffered devastation that you would have had to live with for the rest of your life," she said. In addition to probation and house arrest, Ms. Fletcher must also pay a $1,000 fine.
Thursday, August 7, 2008
The WSJ Law Blog post can be found here.
It was over a month ago that Samuel Israel III — the hedge-fund-CEO-turned-felon-turned-fugitive who disappeared on the day he was to report to prison for a 20-year sentence — surrendered to police in Massachusetts. Yesterday, the 49 year-old Israel, former CEO of defunct hedge-fund Bayou, appeared before U.S. District Judge Kenneth Karas in White Plains and attempted to plead guilty to jumping bail, an offense that could net him another 10 years in prison. But Judge Karas wasn’t having it.
“The fact there is some doubt about [your competence] makes it imprudent to go forward today,” said Karas, after being told by Israel that he was using methadone to wean himself from fentanyl patches — a prescription painkiller. (In June, just before Israel was to report to prison, his SUV was found abandoned on a bridge in New York’s Westchester County with the words “suicide is painless” scrawled in the dust on the hood.
Wednesday, August 6, 2008
The Jamie Olis case is a particularly interesting one in the plea bargaining world. I briefly discussed the events surrounding this case in my recent article examining plea bargaining in financial crimes cases after the collapse of Enron, which was entitled "Plea Bargaining's Survival: A Continued Triumph in a Post-Enron World."
A federal judge — asked to remove himself from former Dynegy employee Jamie Olis' criminal case because he had several things in common with a former prosecutor — ruled this week that he will not.
U.S. District Judge Sim Lake, in a 44-page opinion, said a reasonable person would not think the judge biased because he and the late Mike Shelby, the former U.S. attorney for Houston, happened to have worked at the same law firm, gone to the same law school, served in the same military branch and attended some of the same
Lloyd Kelley, an attorney for the imprisoned Olis, had asked Lake to bow out of Olis' attempts to have his case reopened based on prosecutorial misconduct. Olis' initial 24-year prison sentence was reduced to the six-year term he's serving for conspiracy and fraud.
Further evidence to support the above conclusions is found through examination of post-Enron cases where one can compare the differential between the plea offer the government presented and the sentence the defendant faced at trial. The best example of the significance of the post-Enron differential is Jamie Olis of Dynegy. Olis, a mid-level executive, was initially sentenced in excess of twenty four years after losing at trial. In comparison, the CEO of the company only received fifteen months in return for a guilty plea. As a mid-level executive, one must imagine Olis was offered a similar, if not more lenient, deal. Therefore, Olis likely faced a differential of fifteen months for pleading guilty or 292 months for proceeding to trial, an almost 2000% increase for putting the government to its burden. It is hard to imagine any defendant, including an innocent one, rejecting such odds. Olis, however, exercised his right to a trial, and, unlike his colleagues, reaped the full wrath of post-Enron reforms. Another example is Lea Fastow, former Director and Assistant Treasurer of Corporate Finance at Enron, who was offered a plea deal that required her to plead guilty to a single count of filing a false tax return and serve one year of supervised release. If she had rejected the offer, she would have gone to trial facing a six count indictment that charged her with participation in a $17 million fraud. If convicted on these six counts, her sentence may have exceeded ten years in prison. Unlike Olis, Fastow chose not to risk facing the trial differential. Other instances of staggering sentences do not allow for a glimpse at what was offered by the government, but do illustrate the type of sentences faced by those who go to trial. For instance, Bernard Ebbers, former head of WorldCom, was sentenced to twenty-five years in prison. More recently, Jeffrey Skilling, former chief executive of Enron, was sentenced to twenty-four years and four months in prison. It appears, therefore, that while those who risk trial face the possibility of radically increased sentences, the 95% or more of defendants who plead guilty, even in some of the most publicized post-Enron cases, have received sentences similar to those handed down in these types of cases for over a decade.Click here to link to the full article's ssrn page.