Friday, February 26, 2010

Sixth Circuit Rejects Victims' Plea to Reject Corporate Plea Agreement

The Sentencing Law and Policy Blog has an interesting post regarding a recent 6th Circuit opinion that denied the victims' request that a corporate plea agreement be rejected. Below is a portion of the decision.

This petition for a writ of mandamus and a related appeal arise from the proceedings in United States v. Arctic Glacier Int’l Inc., No. 1:09-cr-00149 (S.D. Ohio). In that case, Arctic Glacier International was charged in a criminal information with violating 15 U.S.C. § 1 by participating in “a conspiracy to suppress and eliminate competition by allocating packaged-ice customers in southeastern Michigan and the Detroit, Michigan metropolitan area.” The petitioners describe themselves as “nine consumers and one business that paid too much for packaged ice as a result of Arctic Glacier’s offense” based on purchases both within and outside of the geographic area of the offense. Their civil action for damages is pending in the Eastern District of Michigan. In re Packaged Ice Antitrust Litig., No. 08-md- 1952 (E.D. Mich.). In these criminal proceedings, the petitioners claim to be victims of the crime under the Crime Victims’ Rights Act, 18 U.S.C. § 3771....

Whether these petitioners as indirect purchasers were “directly and proximately harmed” by the actions of Arctic Glacier is an issue that is largely beside the point, because we conclude that the district court afforded them the status of crime victims. That is, the petitioners were allowed a full opportunity for participation. That included their appearance through counsel at the arraignment, at the plea hearing, and at sentencing. The district court delayed a decision on whether to accept the guilty plea to allow counsel for the petitioners an opportunity to confer with government counsel. Counsel for the petitioners admitted at the sentencing hearing that upon their entry into the case, the district court had afforded them every opportunity for participation. Notwithstanding that active participation, the petitioners assert a right to an earlier notice prior to filing of the charges and direct involvement with the government’s negotiation of a plea agreement. The petitioners’ right to such notice is uncertain, and based on the record in this case, we do not find this to be grounds for relief in mandamus.

The petitioners disagree with the district court’s final decision, made after hearing from them on multiple occasions, to accept the plea agreement and impose sentence pursuant to that agreement. They object that the plea agreement makes no provision for restitution in deference to the pending civil causes of action. They seek through this petition to vacate the plea agreement, to direct the district court to reopen the proceedings, and to participate as a party to the renegotiation of a plea agreement that will include provisions for restitution in their favor. Although the Act reaffirms the right of crime victims “to full and timely restitution as provided in law,” it does not compel such a result in this case. Upon review, we cannot conclude that the district court abused its discretion in accepting the agreement. The record reflects a consideration of all appropriate factors. The district court reasonably concluded that the difficulty of determining the losses claimed would so prolong and complicate the proceedings that any need for restitution would be outweighed by the burden on the sentencing process.

Nadel Pleads Guilty in Ponzi Scheme

Arthur Nadel, founder of the Scoop Management hedge fund in Sarasota, Florida, has pleaded guilty to fifteen counts relating to his having run a Ponzi scheme. According to reports, Nadel disappeared for two weeks last year after authorities began investigating allegations that he had stolen money from his investors. Further investigation revealed that Nadel had raised over $350 million from 370 investors. While he informed the investors the fund's investments were returning double digit gains, the fund was actually losing money. Although investors were told the fund had over $360 million, it contained less than $125,000 at the time of its collapse.

According to an article from Bloomberg:

Florida money manager Arthur Nadel pleaded guilty to fraud 13 months after he disappeared for two weeks in January 2009 as state authorities began investigating investor complaints about missing money.

U.S. District Judge John Koeltl in New York accepted the guilty plea today. Nadel, 77, founder of Scoop Management Inc. in Sarasota, Florida, has been in custody since he surrendered in Tampa more than a year ago following his disappearance.

In April, prosecutors unsealed a 15-count indictment in New York alleging securities fraud, wire fraud and mail fraud. Nadel previously pleaded not guilty.

“I fabricated inflated rates of return for my trading activities,” Nadel told Koeltl in pleading guilty to all 15 counts. “I am profoundly sorry for what I have done.”
Nadel said he invented net asset values for the hedge funds he once ran and illegally
transferred money from them.

Each of the counts carries a maximum prison term of 20 years. Guidelines in the plea agreement call for a sentence of 12 years and 7 months to 24 years and 5 months, Koeltl said. The judge set a sentencing date of June 11. Nadel will remain in custody.

Nadel also agreed to forfeit $162 million, the amount his investors lost, according to

“It was obvious that Mr. Nadel was very remorseful for what he did,” Mark B. Gombiner, his lawyer with the Federal Defenders of New York Inc., said after the hearing. “He accepted responsibility for what he did.”

Nadel allegedly raised more than $397 million from almost 250 investors during a 10-year period starting in 1999 in a classic Ponzi scheme. Withdrawals were covered by new money coming in, according to a lawsuit against investors brought by the funds’ receiver.

Nadel falsely told existing and potential investors that the funds were yielding from 11 percent to 55 percent a year, when in fact the returns were usually negative, according to court documents.

Investors were told the funds’ accounts had more than $360 million while less than $125,000 was actually available when the scheme collapsed, according to prosecutors. Nadel took in $63.9 million in fees and trading profits, including $45 million from 2005 to 2007, they said.

The money supported Nadel’s lavish lifestyle and allowed him to invest in businesses, including a real-estate project in North Carolina and his wife’s flower shop, prosecutors said.

Click here for the Wall Street Journal Law Blog article and here for the Bloomberg story. You can also read the plea agreement here.

Monday, February 22, 2010

Breaking News - Zazi Pleads Guilty in Plot to Blow Up Subways

The New York Times is reporting that Najibullah Zazi has pleaded guilty to terrorism charges after admitting to his involvement in a plot to blow up NY City subways.

He admitted that he came to New York around the anniversary of the Sept. 11 attacks to kill himself and others on the subway, to draw attention to the killing of Afghan civilians by the United States military.

Mr. Zazi appeared before Judge Raymond J. Dearie at Federal District Court in Brooklyn. He pleaded guilty to conspiracy to use weapons of mass destruction, conspiracy to commit murder overseas, and providing material support for a terrorist organization. He faces a sentence of life in prison...

Throughout the 45-minute proceeding on Monday, Mr. Zazi seemed unaffected by his circumstances, even smiling on several occasions. And when he spoke, he did so in an unapologetic, matter-of-fact manner.

“I would sacrifice myself to bring attention to what the United States military was doing to civilians in Afghanistan,” he said to the judge.

Mr. Zazi, who was born in Afghanistan and was raised in Pakistan and later Flushing, Queens, where he attended high school, was working as an airport shuttle driver in Denver when he was arrested in September 2009.

The federal authorities said he had received weapons and explosives training at a Qaeda camp in Pakistan, bought beauty products that contained the raw materials to build a bomb and traveled to Queens with bomb-making instructions in his laptop on the eve of the anniversary of the Sept. 11 attacks.

Breaking News - Zazi to Plead Guilty to Terror Charges

Numerous sources are reporting today that Najibullah Zazi, an Afghan immigrant labeled one of the most serious threats to the United States since the 9/11 attacks, has agreed to plead guilty to terrorism charges later today.

According to the New York Times, Zazi will appear before Judge Raymond J. Dearie at the Federal Courthouse in Brooklyn at 2:30pm to enter his plea to charges of conspiracy to detonate bombs in the Unites States.

Mr. Zazi, who was born in Afghanistan and was raised in Pakistan and later Flushing, Queens, where he attended high school, was working as an airport shuttle driver in Denver when he was arrested in September 2009.

The federal authorities said he had received weapons and explosives training at a Qaeda camp in Pakistan, bought beauty products that contained the raw materials to build a bomb and traveled to Queens with bomb-making instructions in his laptop on the eve of the anniversary of the Sept. 11 attacks.

Two people with knowledge of the case said that in recent weeks, Mr. Zazi had begun providing information to prosecutors as part of the initial stages of an agreement that led up to his expected guilty plea Monday.

Such an arrangement suggests that prosecutors believe Mr. Zazi can provide valuable information, including evidence about the plot, the involvement of others, including those who may be overseas, and other intelligence on Al Qaeda. A number of other people have been arrested in the case, including his father, his uncle and two of his classmates at Flushing High School. Those actions, including the filing of more serious charges against his father earlier this month, may have in some way influenced the decision to plead guilty, another lawyer suggested.

“I am aware that he is under intense pressure because of what’s happening,” the lawyer said.

Other sources reporting on the matter include Fox News and CNN.

The Zazi plea deal comes shortly after I blogged about my new article, Plea Bargaining in the Shadow of Terror. As described in that post, my article discusses the motivations behind terrorists who plead guilty. The Zazi case is reminiscent of the Richard Reid (aka The Shoe Bomber) case. Reid pleaded guilty in return for no leniency from the government. Rather than leniency, Reid was motivated by a desire to avoid the emotional and financial costs of a lengthy terrorism trial on his family. It appears Zazi may be motivated by similar forces. We will have to see, however, whether Zazi receives any sentencing benefits for him cooperation and agreement to plead guilty or whether he is simply attempting to avoid the costs of trial on himself and his family.

Monday, February 15, 2010

Professor Berman on a Comic Book Plea Deal

Over at the Sentencing Law and Policy blog, Professor Doug Berman has added some interesting comments about plea bargaining and sentencing differentials to the end of a blog regarding a man who pleaded guilty to violation of the 2003 Protect Act and was sentenced to six months in prison for importing and possessing Japanese manga books depicting illustrations of child sex and bestiality.

With regard to the decision of the individual to plead guilty, Professor Berman stated:
Because I am not a First Amendment guru, I have no strong sense of whether Christopher Handley's prosecution and conviction for importing the wrong kind of comic books from Japan should be considered constitutionally problematic. But, as a sentencing guru, I do have a strong sense that the threat of a much longer (guideline recommended?) sentence after any trial likely prompted Handley to plead guilty and to apparently forego whatever constitutional defenses he might have had available.

The Case Against Plea Bargaining

This is the title of an interesting article I found from the Cato Institute back in 2003. In the piece, Timothy Lynch argues that plea bargaining is unconstitutional. A link to the article is here, and a brief portion of the argument is available below.

Plea bargaining has come to dominate the administration of justice in America. According to one legal scholar, “Every two seconds during a typical workday, a criminal case is disposed of in an American courtroom by way of a guilty plea or nolo contendere plea.” Even though plea bargaining pervades the justice system, I argue that the practice should be abolished because it is unconstitutional...

Thomas Jefferson famously observed that “the natural progress of things is for liberty to yield and government to gain ground.” The American experience with plea bargaining is yet another confirmation of that truth. The Supreme Court unleashed a runaway train when it sanctioned plea bargaining in Bordenkircher v. Hayes. Despite a steady media diet of titillating criminal trials in recent years, there is an increasing recognition that jury trials are now a rarity in America — and that something, somewhere, is seriously amiss. That “something” is plea bargaining.

As with so many other areas of constitutional law, the Court must stop tinkering around the edges of the issue and return to first principles. It is true that plea bargaining speeds caseload disposition, but it does so in an unconstitutional manner. The Framers of the Constitution were aware of less time-consuming trial procedures when they wrote the Bill of Rights, but chose not to adopt them. The Framers believed the Bill of Rights, and the freedom it secured, was well worth any costs that resulted. If that vision is to endure, the Supreme Court must come to its defense.

Monday, February 8, 2010

New Article Regarding Plea Bargaining in Terrorism Cases

I have just posted my new article entitled Plea Bargaining in the Shadow of Terror: Plea Bargaining During the War on Terrorism and the Dual Chambers of the Plea Bargaining Machine on SSRN (link here). An abstract of the article is contained below.


While obtaining the exact number of defendants who have pleaded guilty to terrorism or terrorism related charges since September 11, 2001 is impossible due to the federal government’s refusal to release such information, it is estimated that there have been several hundred convictions of which over 80% resulted from a plea of guilty. While this plea rate for terrorism cases is certainly lower than the plea rate for other federal offenses, which on average has remained above 95% for almost every year since 1999, a plea rate in excess of 80% is remarkably high given the psyche of those who would engage in the acts being prosecuted. This article seeks to understand why a terrorist would plead guilty and, by the same token, why the United States government would offer leniency to an admitted enemy in the war on terrorism in return for such a plea. Through this analysis, a quarter century of plea bargaining theory will be reevaluated and the existing conflict between two competing theories of plea bargaining will be harmonized into a more encompassing theory that better explains the operation of the entire plea bargaining process.

This article is particularly timely as recently released information from the government indicates that the Christmas Day Bomber, Umar Farouk Abdulmutallab, is cooperating with the FBI and may be preparing to enter into a plea agreement. If this is true, this will serve as yet another example of the significance of plea bargaining in the American criminal justice system and the importance of further examination of its operation. Though this article focuses on terrorism prosecutions as a vehicle for exploring plea bargaining, the article’s proposed theory regarding the operation of the plea bargaining machine applies to all manner of criminal prosecution.