Monday, June 29, 2009

Will "Nobody. . . Ever Plead Guilty Again" After Madoff?

The WSJ Law Blog has an interesting post entitled "Nobody . . . Is Ever Going to Plead Guilty Again," which asks whether anyone will plead guilty again after the 150 year sentence handed down to Madoff today. As you recall, Madoff pleaded guilty to 11 criminal counts, including fraud, money laundering, perjury, false filing with the SEC, and other crimes. What incentives remain for others in similar situations to plead guilty?

It’s only been a few hours, but already people in the white-collar world are buzzing over 150 year the sentence imposed by Judge Chin.

First, a couple notes on the sentence: Typically in white-collar cases, judges impose a sentence equivalent to the maximum statutory punishment for the most serious criminal count to which a defendant pleads guilty. In Madoff’s case, that would have been a charge of securities fraud, which carries a statutory maximum of 20 years. But Chin said he would take penalties for all 11 criminal charges and have them run consecutively, rather than concurrently.

Judges also don’t typically depart so greatly from a recommended sentence provided to them by the U.S. Probation and Pretrial Services System, an agency that researches every convicted defendant and submits a presentence report to help guide the judge. In Madoff’s case, Judge Chin said the probation office recommended a 50-year sentence.

And what about the guilty plea itself? If Madoff thought he might get sympathy from the judge for pleading guilty, rather than forcing prosecutors to spend time and money proving their case, it didn’t work. Some white-collar lawyers read a lesson into that: “Nobody in Madoff’s position is ever going to plead guilty again,” says Christopher Clark, a former federal prosecutor who is now a defense lawyer at Dewey & LeBoeuf in New York. “What benefit did this guy get for pleading guilty?”

But other lawyers point that Madoff’s crime – and the devastation it wrought — was extreme. Also, the judge said he didn’t think Madoff was cooperative with authorities after his arrest; typically cooperation helps defendants score points.

John Coffee, a law professor at Columbia University, said the Madoff case might help criminal defendants take a harder look at the evidence early on. If they realize “that if the evidence is strong,” they should take a plea bargain on fewer counts so that if the various sentences for each count run consecutively, it won’t amount to life in
prison.

“The only way to avoid life sentences in highly publicized cases is to strike a deal in the plea-bargaining phase,” Coffee says. “Otherwise you are subject to extraordinarily high punishment.”

Madoff Sentenced to 150 Years for Ponzi Scheme

Here is a summary of the sentencing from CNN.

Judge Denny Chin of U.S. District Court in New York announced the sentence just moments after Madoff apologized to his victims.

"I live in a tormented state for all the pain and suffering I created," Madoff said. "I left a legacy of shame. It is something I will live with for the rest of my life."

Turning to face some of his victims, he addressed them directly: "Saying I'm sorry is not enough. I turn to face you. I know it will not help. I'm sorry."

Madoff said he was not asking for forgiveness and not offering any excuses for his behavior.

"How can you excuse betraying thousands of investors?" he asked. "How can you excuse deceiving hundreds of employees? How can you excuse lying to and deceiving your wife who still stands by you?"

Victims urged a judge to hand down the maximum life sentence against Bernard Madoff, the mastermind of the largest and most sweeping Ponzi scheme ever. "We implore you to give the maximum sentence at a maximum prison for this deplorable low life," said one of the victims in court before Madoff spoke. "This is a violent crime without a tangible weapon."

Many of Madoff's investors were wiped out financially by the scam and sent letters to Judge Chin requesting he spend the rest of his life behind bars. Nine of the letter-writers were expected to speak in court on Monday.

Speaking on behalf of his wife and looking at Madoff, the victim said, "I have a marriage made in heaven. You have [a] marriage made in hell, and that's where you'll return. May God spare you no mercy."

The 150-year sentence is the maximum that federal prosecutors in New York requested, based on the number of Madoff's victims, the amount of money he stole and the extent of the damage he caused.

Judge Chin said that the Federal Department of Probation had recommended a 50-year sentence.

Madoff, who was stripped of his property in a legal action Friday, confessed on March 12 to running a massive Ponzi scheme. He pleaded guilty to 11 criminal counts, including fraud, money laundering, perjury, false filing with the Securities and Exchange Commission, and other crimes.

Lawyer Ira Lee Sorkin, who represents Madoff, asked for a 12-year sentence. In a letter to the judge, Sorkin explained that his 71-year-old client "has an approximate life expectancy of 13 years" and isn't likely to outlive the requested sentence by more than a year.

Wednesday, June 17, 2009

Judge Orders Defendant to Write Book

Last week, Judge Ricardo Urbina, United States District Court Judge for the District of Columbia, sentenced a former senior pharmaceutical executive at Bristol-Myers to an unusual sentence. Dr. Andrew G. Bodnar had pleaded guilty to making a false statement to the federal government about the company's efforts to resolve a patent dispute over the blood thinner Plavix. At sentencing, Judge Urbina sentenced Mr. Bodnar to two years probation, during which he must write a book about his experience connected with the case. He must also pay a $5,000 fine.

Here is further information on the case from the NYT.

Elkan Abramowitz, Dr. Bodnar’s lawyer, said he had never before heard of a case in which a judge sentenced a defendant to write a book.

But this is not the first time Judge Urbina has demanded written penance. In 1998, he sentenced a prominent Washington lobbyist to write and distribute a monograph to 2,000 lobbyists at the defendant’s own expense.

The lobbyist, James H. Lake, pleaded guilty to making illegal corporate campaign contributions. Judge Urbina ordered him to pay a $150,000 fine and to write a monograph describing the criminal provisions of federal laws governing corporate campaign contributions.

In the sentencing hearing on Monday, Judge Urbina said he would like to see Dr. Bodnar write a book about the Plavix case as a cautionary tale to other executives. The case concerned accusations that Bristol-Myers had made false statements to federal investigators about the company’s attempt to resolve a patent dispute with a Canadian maker of generic drugs, Apotex.

The Justice Department contended that the company in 2006 made a secret deal, in which Apotex would hold off making a generic version of Plavix. In exchange, the Justice Department said, Bristol-Myers indicated that it would subsequently give Apotex an exclusivity period in which it could produce its Plavix generic without Bristol’s making a generic of its own.

The government said that Bristol-Myers’s actions were anticompetitive and had the potential to restrict public access to lower-priced drugs. Plavix had sales of about $4.9 billion in the United States in 2008, according to IMS Health, a health care information company.

The initial accusations of anticompetitive behavior ended with only minor charges.
In 2007, in an agreement worked out with the antitrust division of the Justice Department, Bristol-Myers agreed to plead guilty to two violations of the Federal False Statements Accountability Act and to pay $1 million, the maximum fine.
In a separate suit, the Justice Department charged that Dr. Bodnar, who had negotiated with Apotex, misled the government over the Plavix agreement.

Monday, June 8, 2009

9/11 Detainees May Be Permitted to Plead Guilty

The NYT reports that the Obama administration is considering a change in the law for the military commissions at the prison at Guantanamo Bay, Cuba, that would allow detainees facing the death penalty to plead guilty without a full trial.

The provision could permit military prosecutors to avoid airing the details of brutal interrogation techniques. It could also allow the five detainees who have been charged with the Sept. 11 attacks to achieve their stated goal of pleading guilty to gain what they have called martyrdom.

The proposal, in a draft of legislation that would be submitted to Congress, has not been publicly disclosed. It was circulated to officials under restrictions requiring secrecy. People who have read or been briefed on it said it had been presented to Defense Secretary Robert M. Gates by an administration task force on detention. . . .

The proposal would ease what has come to be recognized as the government’s difficult task of prosecuting men who have confessed to terrorism but whose cases present challenges. Much of the evidence against the men accused in the Sept. 11 case, as well as against other detainees, is believed to have come from confessions they gave during intense interrogations at secret C.I.A. prisons. In any proceeding, the reliability of those statements would be challenged, making trials difficult and drawing new political pressure over detainee treatment. . . .

The provision would follow a recommendation of military prosecutors to clarify what they view as an oversight in the 2006 law that created the commissions. The law did not make clear if guilty pleas would be permitted in capital cases. Federal civilian courts and courts in most states with capital-punishment laws permit such pleas.

But American military justice law, which is the model for the military commission rules, bars members of the armed services who are facing capital charges from pleading guilty. Partly to assure fairness when execution is possible, court-martial prosecutors are required to prove guilt in a trial even against service members who want to plead guilty.

Monday, June 1, 2009

Former Enron Executive Pleads Guilty to Avoid Third Trial

The WSJ Law Blog is reporting that former Enron Broadband Services CFO Kevin Howard pleaded guilty today to one count of falsifying books and records. The plea deal comes six years and two trials after he was first indicted. Howard's first trial ended in a hung jury. The second trial ended with a conviction that was later overturned because of the government's use of the honest-services statute. Under the agreement, Howard will serve a maximum of 12 months home confinement. (A short summary of the Enron Broadband trial can be found here).

The Houston Chronicle also wrote about the plea agreement.

Howard first went to trial alongside four other ex-broadband executives in 2005 in a three-month case that ended with a handful of acquittals, no convictions and jurors hung on dozens of other counts — including all pending against him.

Two other broadband executives — former co-CEO Kenneth Rice and former chief operating officer Kevin Hannon — each pleaded guilty to crimes in 2004. Both finished prison terms earlier this year.

Most of the 2005 trial involved tedious, technology jargon-filled testimony regarding three defendants accused of overstating the division’s capabilities so they could pocket millions from selling company stock inflated by the hype.

The case against Howard and former in-house accountant Michael Krautz involved allegations that they manufactured earnings by selling future revenues in a video-on-demand venture that failed.

Unable to win convictions in the first trial, prosecutors split the defendants among three separate, pared-down cases. In their second round before a jury in 2006, Krautz was acquitted while Howard was convicted of conspiracy, wire fraud and falsifying books and records.

Gilmore tossed out Howard’s convictions in 2007, ruling that prosecutors prevailed by flawed means.

Gilmore based her ruling on a 5th U.S. Circuit Court of Appeals decision that wiped out most convictions in another Enron case because prosecutors wrongly presented a theory of guilt that was also used in Howard’s case.

That theory held that the defendants robbed Enron of their “honest services” by helping cook Enron’s books. However, the 5th Circuit ruled that the theory didn’t apply because the defendants didn’t steal, take a bribe or otherwise rob Enron of money or property.

In Howard’s case, the government conceded that four of his five convictions would be tossed out on appeal, but Gilmore threw out all five. The 5th Circuit upheld her decision, so prosecutors moved to try Howard a third time. As part of today’s deal, prosecutors stipulated Howard did not personally benefit from any fraud at Enron.
The honest services issue is central to former Enron CEO Jeff Skilling’s appeal as
well.

Like Howard and the defendants in the other Enron case, Skilling didn’t take money or property. But the 5th Circuit ruled earlier this year that as a CEO, he set the fraudulent agenda rather than carry out orders from above, and upheld all 19 of his convictions. Skilling is seeking a review by the U.S. Supreme Court.

Of the other three broadband defendants, former co-CEO Joseph Hirko pleaded guilty to wire fraud last year and faces a 16-month prison term after he is sentenced in September. The other two — former top strategist Scott Yeager and software executive Rex Shelby — are still fighting and have yet to be tried a second time.

The Supreme Court heard Yeager’s appeal earlier this year that the government should drop insider trading and money laundering charges against him because the 2005 jury acquitted him of underlying fraud and conspiracy charges. Shelby’s retrial is on hold pending the outcome of Yeager’s appeal.