Prosecutorial misconduct

The U.S. Department of Justice took another ethical black eye yesterday, this time from the 2nd Circuit Court of Appeals in Manhattan. The court held — in a widely watched KPMG tax fraud case — that DOJ attorneys illegally interfered with the defendants’ access to legal counsel, protected under the 6th Amendment to the United States Constitution.

At its launch in October 2005, the DOJ touted the case — against thirteen KPMG partners and employees — as “the largest criminal tax case ever filed.” Perhaps they should have christened it “The Titanic.” In the related press conference, U.S. Attorney Michael J. Garcia pompously proclaimed, with requisite moralistic gravitas: [click to continue...]

Before he died, in 1960, Earl Long managed to serve three times as Governor of Louisiana and — despite widely acknowledged corruption — not a day in prison. In the context of today’s plague of litigation and over-zealous white collar prosecution, some might find helpful this advice of Governor Long:

Don’t write anything you can phone. Don’t phone anything you can talk. Don’t talk anything you can whisper. Don’t whisper anything you can smile. Don’t smile anything you can nod. Don’t nod anything you can wink.

A June 26 NPR report confirms suspicions I first expressed on June 20 that the Bear Stearns indictments distort facts, casting them in the most unfavorable light possible. I’ve reached the point in reading indictments that I disbelieve 90 percent of what they contain. A disturbing percentage of prosecutors are either blantant liars (maybe trained by Worldcom accountants?) or they go off half-cocked, substantially lacking essential context.

Who to blame? Mothers, professors, law schools? Hard to say, but one thing’s sure: they have a huge credibility problem. [click to continue...]

I have to disagree with WSJ Lawblogger Dan Slater’s takeaway from the Bear Stearns indictments. Dan wrote, late Friday afternoon:

Yesterday, as we broke down the Bear Stearns fund-manager indictment, one thing stood out to us as clear, and poignant (presuming for the sake of this post that the allegations in the indictment are true): It seemed Matthew Tannin was vexed inside by competing voices. . .

The NYT reported today that Tannin was known within his group as a worrier. Again, presuming the government’s allegations to be true, perhaps Tannin should have trusted, and acted upon, his worries, his instincts. Instead, the indictment alleges, he didn’t.

These two paragraphs don’t seem to go together. I agree that the material in the indictment suggests Tannin was “vexed inside by competing voices” or some such thing. But this, to me, does not translate to “Tannin didn’t trust his instincts.” In fact, I read just the opposite in the indictment: Tannin did trust his instincts and he trusted the people he worked with, especially Ralph Cioffi. And that trust was what got him into trouble. [click to continue...]

The indictment of Bear Stearns fund managers Ralph Cioffi and Matthew Tannin makes depressing reading. It seems damning to the defendants. But readers should understand that indictments are supposed to be damning. Prosecutors go as far as they can to cast the facts — which in this kind of case can be highly complex and ambiguous — in the manner most unfavorable to the accused. If the cases go to trial, we’ll get a much more balanced account of events.

Apart from the eventual finding of guilt or innocence, the more I consider the FBI’s and SEC’s conduct in the arrests, the more I see it as a political show calculated not to enforce the law, but rather to satisfy the blood lust of investors and borrowers who should themselves be spanked for thinking they should be entitled to high returns (or sub-prime mortgages) without running high risks. [click to continue...]

What a difference two years and appellate review make! Today, the D.C. Circuit Court Appeals exonerated David Safavian, former General Services Administration Chief of Staff, overturning all of his June 2006 convictions for making false statements and obstruction of justice in connection with the Abramoff scandal.

The convictions were reversed, in part, because the trial judge inexplicably allowed prosecutors to fabricate a non-existent duty of “full disclosure” which the jury then applied to convict Safavian. In other words, prosecutors just made up the law on the spot to produce their desired outcome and the judge went along with the scam. Prosecutors have a penchant for this kind of thing, as I have pointed out in connection with Jeff Skilling’s appeal. Given the stakes involved, it’s a mystery why trial judges don’t do a better job of punishing them for it.

Almost exactly two years ago, on June 21, 2006, in goofy cloak-and-dagger reportage (including the above pic of Abramoff) prematurely headlined “Safavian Lied in Abramhoff Scandal,” Washington Post reporter Jeffrey H. Birnbaum crowed:

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What do Enron and Bear Stearns have in common? If you’re a Bear Stearns exec, you’d better hope the answer is “not much.” At least you won’t have to litigate in Houston. New York’s a bigger, better melting pot when it comes to judges and juries. Prosecutors and governors? Don’t change the subject!

Today, a colleague wrote: “Do you think Skilling is innocent including of the insider trading charge?” Here’s my relatively off-the-cuff answer, understanding that a few months ago I did a presentation on the subject of “honest services fraud,” the legal theory on which Skilling was presumably sent to jail. For some accounting professionals and jilted investors — who want to believe that there’s only one true “net income” for any company in a given year and that someone must be at fault any time a stock “goes south” — this won’t go down easy. I feel confident, however, that fairness will eventually trump emotion. [click to continue...]