Showing posts from October, 2008

McCain Op-Ed Discusses DOJ and Enforcement Priorities

Senator John McCain wrote an opinion article at the request of the National Law Journal regarding legal issues facing the next president. Below is a portion of the article discussing the Department of Justice, the ongoing mortgage fraud investigations, and organized crime. Much responsibility for the effective administration of justice is entrusted to the dedicated men and women who toil day in and day out at the Department of Justice. My first objective would be to ensure that the department is, and remains, above the political fray. The department must function with integrity and effectiveness above all else. I would also bolster law enforcement programs that will aid our struggling economy and address the ongoing threat of terrorism and other public safety concerns. Unfortunately, we have all recently observed what happens when banks, major financial institutions and other engines of commerce become subject to market manipulators. Those who make a mockery of rules designed to keep

KPMG Case Heads to Trial

Another case we have followed closely is that of the government's prosecution of former KPMG executives and an ex-partner at Sidley Austin. The case, which was once billed as the biggest tax-fraud case in U.S. history, began with 19 defendants, but only four remain. Both the New York Times and the Wall Street Journal Law Blog have articles on the case this week. From the NYT . Jury selection began on Tuesday in a closely watched tax shelter case once billed as the largest ever, but government prosecutors face a difficult road after a string of defeats in a proceeding that has been scaled back. The four defendants, including three executives who once worked for the accounting firm KPMG, are set to stand trial on fraud and conspiracy charges. They are accused of creating, selling and sometimes using abusive tax shelters that reduced clients’ tax bills by at least $2.5 billion from the late 1990s to recent years. Opening arguments in the trial, before Judge Lewis A. Kaplan of Federal

New Twist In Broadcom Co-Founder's Plea Bargaining Matter

We've been following the events surrounding the plead agreement reached between the federal government and Broadcom Corp. co-founder Henry Samueli for quite a while now. (see here and here ). Last month, the U.S. District Court Judge handling the case rejected the plea deal, which included five years of probation, a $250,000 fine, and $12 million in restitution to the U.S. Treasury. According to the District Court Judge, the proposed deal would "erode the public's trust in the fundamental fairness of our justice system" and would give the perception that "justice is for sale." The matter is on appeal to the 9th Circuit Court of Appeals. has an update of events this week. On Tuesday, Samueli and prosecutors declined to reject the plea deal, although both agreed to lift the binding provisions to allow the judge to consider a statutory maximum sentence of up to five years. Thom Mrozek, a spokesman for the U.S. Attorney's Office for the Central Dis

A Little Hollywood Drama in the Plea Bargaining World

Michael Edison, a con man who stole $2 million from the widow of Atherton Phleger, a founding partner of Brobeck, Phleger & Harrison, pleaded guilty to all charges this week in return for an agreement that the government will not seek prison time for his wife, an alleged accomplice in trying to obstruct justice by deceiving Edison's attorney. The full story of how Edison perpetrated his con is a story that involves a Hollywood star, private jets and yachts, and fake documents from Switzerland. For his part, Edison agreed to serve 63 months in prison and pay $2.5 million in restitution. has an article regarding the events. Michael Edison admitted targeting Jean Phleger, widow of Brobeck, Phleger & Harrison founder Atherton Phleger, in a financial swindle. Originally introduced to Phleger by her son-in-law, the actor Don Johnson, Edison agreed to refinance Phleger's house, pay down her old mortgage, and use $2 million in leftover cash to pay Phleger's bills.

Former Chief Executive of Enron Broadband Services Pleads Guilty

According to the Associated Press , the former chief executive of Enron Broadband Services, Joseph Hirko, pleaded guilty on Tuesday to one count of wire fraud. The agreement requires Hirko to serve up to 16 months in prison and pay up to $8.7 million in restitution to the government for victims of the Enron collapse. He will also cooperate with prosecutors in other pending broadband prosecutions. Sentencing will occur on March 3, 2009. As noted in the AP article, Hirko entered into the plea agreement because he did not want to risk the consequences of losing at trial. As has been discussed here previously ( see this post regarding my recent article of plea bargaining in financial crimes cases after Enron), many individuals prosecuted for financial crimes following Enron agreed to enter plea bargains due, at least in part, to the existence of significant "sentencing differentials" between the sentence offered by the government in negotiations and the potential sentence result

SEC Follows DOJ Regarding Requests for Waiver of Privilege

The National Law Journal is reporting that the SEC has released its "Red Book" publicly for the first time. The Red Book is similar to the Department of Justice's U.S. Attorney's Manual and provides guidance to the staff of the SEC Enforcement Division in the investigation of potential violations of the securities laws. The manual addresses the privilege waiver issue as well as a number of areas that should aid practitioners, including the evaluation of possible investigations, issuing Wells letters, communicating with senior SEC officials, responding to document subpoenas, "witness assurance" letters and contacting current and former employees. In the privilege section, the manual contains the following statement in bold face type: "The staff should not ask a party to waive the attorney-client or work product privileges and is directed not to do so." It adds that all decisions about potential waivers are to be reviewed by the assistant supervisin

ABA Task Force's Draft Recommendations Regarding Upjohn Warnings

A Task Force of the ABA has been working on recommendations regarding a set of best practices for company counsel to follow when providing Upjohn Warnings to company employees during internal investigations. Below is the executive summary from the Task Force's latest draft. This Report and Recommended Best Practices are the product of a Task Force established in early-2008 by the White Collar Crime Committee of the American Bar Association’s Criminal Justice Section. They are intended to address an increasingly-common question associated with the attorney-client privilege: What best practices should corporate counsel follow when interacting with corporate employees while conducting internal investigations on behalf of the corporate entity? In particular, what advice or warnings – commonly referred to as Upjohn warnings, or corporate Miranda warnings – should corporate counsel (attorneys for any legal entity that is distinct from its members) provide to corporate Constituents (em

DAG on the New Corporate Charging Guidelines

Last week, the Deputy Attorney General, Mark Filip, discussed the new DOJ corporate charging guidelines at the Third Annual National Institute on Securities Fraud Conference sponsored by the ABA Criminal Justice Section. During the speech, the DAG outlined the major provisions of the corporate charging guidelines dealing with waiver of the attorney-client privilege and employee legal rights. During the question and answer portion of the event, Mr. Filip said that he did not believe that federal legislation was needed to protect the attorney-client privilege and employee rights now that the Department has refined its policies. He also said that the Department continues to support separate legislation (introduced in previous Congresses but not currently pending) that would allow companies to voluntarily produce privileged materials to the government without waiving the privilege as to third parties (the so-called "selective" or "limited" waiver proposals). The audio o

Guilty Pleas from the Subprime Mortgage Fallout Begin is reporting that three people have pleaded guilty to a multi-million dollar subprime mortgage scheme in the Southern District of New York. Galina Zhigun and her son, Garri Zhigun, operators of the Brooklyn-based mortgage brokerage AGA Capital NY Inc., and Maryann Furman, an AGA employee and the wife of Garri Zhigun, entered guilty pleas to fraud charges before Southern District of New York Magistrate Judge Gabriel Gorenstein. Accused of using false documents and straw buyers to obtain loans fraudulently, the three were among 26 people indicted in the subprime scheme. Friday's pleas bring to 11 the number of those who have pleaded guilty in the case. The remaining 15 defendants are scheduled to go to trial in two waves, the first on Nov. 17 and the second on Jan. 19. When he is sentenced on Jan. 5, Garri Zhigun is expected to receive up to nine years in prison. He has agreed to forfeit a total of $2.5 million. His co-defendants are expected to receive between up to four ye

From Special Attorney to Special Counsel: The History of "Special" Lawyers

Slate had an interesting article today that discusses the difference between special counsels, special attorneys, and special prosecutors. The piece stems from discussion of Connecticut federal prosecutor Nora Dannehy's appointment as a "special attorney," though many in the media are mistakenly using the title "special prosecutor." Here is an excerpt from the article discussing the history of the various titles. The term "special prosecutor" first came into use in the United States during the Teapot Dome scandals of 1920s, when Calvin Coolidge appointed outside lawyers to look into the corrupt land-leasing practices of federal officials. Special prosecutors were given more official status in the aftermath of Watergate, when Richard Nixon finagled the firing of the one assigned to investigate him. The Ethics in Government Act of 1978 called for the position of "special prosecutor" to be separate from the executive and legislative branches an