Recently in Criminal Law and Prosecution Category

It has been 10 years since Arthur Andersen LLP, former "Big Five" accounting firm, was indicted for its actions related to the audit of Enron. The firm gave up its CPA licenses and shed nearly 85,000 employees after being found guilty of numerous crimes by a district court and was never able to recover as a firm despite a ruling by the U.S. Supreme Court in Arthur Andersen LLP v. United States which overturned the conviction.

Jim Copland, director of the Center for Legal Policy at the Manhattan Institute, brings to light new tactics employed by the Department of Justice to enforce criminal laws against corporations. In an op-ed published by Bloomberg.com, Copland explains this new approach and why even in the DOJ's efforts to avoid collateral consequences that flow from large-scale prosecutions of corporations such an approach can be problematic:

...in the place of actual prosecutions, the Justice Department has aggressively pursued what are blandly called "deferred prosecution" or "non-prosecution" agreements -- DPAs and NPAs, for short -- through which prosecutors and companies negotiate terms to avoid a criminal trial. This approach may be avoiding the sort of corporate death sentence visited upon Andersen for what proved to be non-crimes, but nonetheless does something just as worrisome: It insinuates Justice Department career bureaucrats into the day-to-day management of major American businesses...

In each of the past three years, fines and penalties levied under federal deferred-prosecution and non-prosecution agreements have exceeded $3 billion. While such fines are not insignificant, of far greater concern are the sometimes sweeping powers that prosecutors have asserted over business practices. In recent DPAs and NPAs, federal prosecutors have variously pressured companies to change long-standing sales and compensation practices; to restrict or modify contracting and merger decisions; to carry out onerous compliance and reporting programs; to appoint corporate monitors with broad discretion over management decisions; and even to oust executives or directors.

Businesses accept the agreements with such aggressive terms because they can ill afford to fight a criminal investigation.

Copland's piece is only an overview of his deeper analysis of DPAs and NPAs undertaken in a Manhattan Institute Civil Justice Report titled The Shadow Regulatory State: The Rise of Deferred Prosecution Agreements. In this report, Copland zeros in on companies currently operating under these agreements and explores the agreed-to terms. He uncovers that "seven Fortune 100 companies are currently operating under the supervision of federal prosecutors: CVS Caremark (CVS) Corp., Google (GOOG) Inc., Johnson & Johnson, JPMorgan Chase & Co., Merck & Co., MetLife Inc. and Tyson Foods Inc."

Manhattan Institute's Center for Legal Policy also brought Copland together with Senator Rand Paul (R-KY) for a web conference to discuss the broader issue of overcriminalization, the rapid expansion over the last forty years of a host of criminal laws, many of which are vague, many of which overlap and those which decrease or eliminate the intent requirements that traditionally were the foundational principle of criminal law.

It will be important to track the developments of DPAs and NPAs especially as more corporations are subject to these agreements. As Copland explains, "others, such as Wal-Mart Stores Inc., currently facing scrutiny for alleged Mexican bribes prohibited under the Foreign Corrupt Practices Act, are sure to follow."

I talk about the John Edwards trial at The Daily. Earlier.

In North Carolina, John Edwards is currently standing trial for alleged felonies related to campaign finance violations: it is claimed that the Edwards campaign coordinated over a million dollars of third-party payments to Edwards's mistress, Rielle Hunter, to buy her silence for fear that Hunter talking would adversely affect Edwards's presidential campaign; the third-party contributions should be considered illegal "contributions," according to prosecutors. As Bradley Smith, among others, has noted, this seems abusive to take such a grey area of the law and turn it into a criminal prosecution, especially since Edwards had non-campaign reasons—a desire to hide the affair from his wife—to engage in such shenanigans. (Earlier on POL; and indictment coverage.)

In apparently entirely unrelated news, the New York Post reports that, in conjunction with Barack Obama's personal request, an Obama campaign supporter attempted to pay the Reverend Jeremiah Wright $150,000 to keep quiet during the 2008 presidential campaign, for fear that if Wright publicly talked too much, it would adversely affect Obama's presidential campaign. There doesn't seem to be anything other than political reasons to keep Wright quiet, since Mrs. Obama was present at the same controversial anti-American sermons that Obama supporters feared Wright would talk about. Nevertheless, not even the New York Post suggests the need for prosecutors, and I seem to be the only blogger asking why this payment isn't more problematic than the one Edwards is being prosecuted for.

Paul Larkin, senior legal research fellow at The Heritage Foundation's Center for Legal and Judicial Studies, in his most recent memorandum, offers a strong response to a paper entitled "Logging and the Law" published by the Union of Concerned Scientists (UCS) criticizing the proposed Freedom from Over-Criminalization and Unjust Seizures Act of 2012 (FOCUS Act). This is the second consecutive rebuttal offered by Larkin who also responded to an article by Jon Adler at the Police: The Law Enforcement Magazine Website, written on behalf of the Federal Law Enforcement Officers Association (FLEOA) which argued that the FOCUS Act "would put federal officers and agents at risk by taking away their right to carry firearms in the course of their criminal law enforcement duties."

In short the FOCUS Act as introduced by Senator Rand Paul (R-KY) and Representative Paul C. Broun (R-GA) respectively would substitute civil for criminal penalties in the federal Lacey Act and eliminate that law's reliance on foreign law. Groups like UCS urge that criminal enforcement of the Lacey Act is necessary and will benefit the global environment and the domestic economy. Larkin disagrees and articulates a two-part argument:

(1) criminal enforcement of the Lacey Act leads to miscarriages of justice, and

(2) criminal enforcement of the Lacey Act is unnecessary.

Larkin explains these points at length in his paper and makes a strong case for the proposed legislative reforms needed to curb overcriminalization.

If you're putting your prescription medication in a seven-day pill box to ensure you don't forget to take your pills (or to make it easier to travel with a single container instead of bringing your whole medicine chest), you're breaking the law in many states. And remember to declare that original container to Customs when you cross the border.

Walter Olson tackles well the controversy over Wal-Mart's Mexico problem and the Washington Post's misguided coverage. [Daily Caller; Cato; OL]

Early this week, the WSJ published an article about Nancy Black, a marine biologist and operator of whale watching boats, who is facing multiple criminal charges that can land her in prison for up to twenty years. Her crime, while surely an oversimplified description, can be boiled down to allegedly lying to federal officials in violation of Title 18, Section 1001 of the U.S. Code.

The WSJ reports:

When one of her boat captains whistled at a humpback whale that approached the boat a few years ago, regulators investigated whether the incident constituted harassment of a whale, which is illegal.

This past January, Ms. Black was charged in the case -- not with whale harassment, but with lying about the incident. She also faces a charge of illegally altering a video of the whale encounter, as well as unrelated allegations involving whale blubber. Together, [all of] the charges carry up to 20 years in prison.

... on a morning in November 2006, more than a dozen federal agents, led by a NOAA inspector, entered her house with a search warrant and took away her files, photos and computers.

In the five years since the raid, Black says she has paid more than $100,000 in legal fees so far. Her lawyer notes that despite years of investigation, the government didn't find evidence to charge Black with wrongdoing.

But that's not all for maritime overcriminalization. A new bill has been introduced in the Senate sponsored by Senator John Kerry (D-MA). S. 2279: R.M.S. Titanic Maritime Memorial Preservation Act of 2012 "makes it a federal crime, punishable by up to five years imprisonment, to disturb, remove or injure Titanic property; engage in activities that threaten public safety; sell, purchase, barter, or import Titanic property, including human remains; or to enter the hull of the sunken vessel."

So if anyone had any plans to scour the Atlantic in search of the Heart of the Ocean, they may want to call off the exploration party. While the blue diamond is fictitious, the effort to institute serious criminal penalties in protecting an already legislatively protected historical site is peculiarly very real.

Every first year law student knows the concept of mens rea, which requires proof of a "guilty mind" before a defendant may be convicted of a crime. Many criminal statutes require that a defendant "know" a particular fact before he may be convicted of a crime. For example, the federal counterfeiting statute requires that the defendant "knowingly" attempt to pass off a counterfeit bill -- i.e., that the defendant know not only that he is using a bill, but also that the bill he is using is bogus.

But what does it mean to "know" a fact? In Global-Tech Appliances, Inc. v. SEB, S.A., the Supreme Court held for the first time that "willful blindness" may satisfy a statute's knowledge requirement (most Circuit Courts had already accepted the doctrine). Under the "willful blindness" doctrine, a defendant may be convicted of violating a statute that requires knowledge of a fact, even if the defendant did not have actual knowledge of that fact, where the defendant's ignorance is deliberately contrived. The Gloal-Tech court went on to hold that recklessness is insufficient to prove "willful blindness;" it requires proof that an individual "subjectively believe[d]" that a "high probability" existed with regard to the fact in question, and took "deliberate actions to avoid learning of the fact."

To the extent it imposes these requirements on the "willful blindness" instruction, Global-Tech can be read as heightening the prosecution's burden. But it is worth taking a step back, and, rather than focusing on the requirements of the doctrine, questioning the validity of the doctrine at all. Justice Kennedy did just that in his dissent in Global-Tech. The majority in that case wrote that an individual who deliberately avoids learning a fact "can almost be said to have actually known" that fact (emphasis added), but as Justice Kennedy pointed out, the willful blindness doctrine is used "to bring those who lack knowledge within the ambit of a statute that requires knowledge" (emphasis added). The majority also wrote that willfully blind defendants "are just as culpable as those who have actual knowledge," but Justice Kennedy found this to be a "question of morality and of policy" that is "best left to the political branches."

The willful blindness doctrine has been created not by legislatures, but by, in Justice Kennedy's words, "judges . . . broadening a legislative proscription by analogy." Moreover, as Justice Kennedy also noted, Global-Tech involved the interpretation of a civil statute concerning patent infringement, and the Court's decision was made without briefing or argument from the criminal defense bar." In short, in Global-Tech, the Supreme Court put its imprimatur on a doctrine that substantially eases the burden of prosecutors in proving knowledge, and that may allow convictions for very serious crimes based on far less evidence of complicity than was contemplated by the legislature that created the crime requiring "knowledge." It did so in a case in which there was no briefing or argument concerning the effect of the decision on criminal proceedings. There can be little doubt that the decision will result in more findings of guilt, either by juries not required to find actual knowledge, or through plea agreements driven by defendants' fear that, even if they did not know a crime was being committed, a jury might find that they should have.

Prosecutors charged Dickie Scruggs and Zach Scruggs with multiple crimes, and as part of plea bargaining, they pled guilty to honest services fraud. Zach previously unsuccessfully used the Skilling decision in an attempt to undo his guilty plea, and Alan Lange predicts that Dickie Scruggs's similar effort will come to naught, but imagines that Scruggs is hoping for positive PR implications.

But under our legal system, there's no penalty for, and thus no downside to, wasting a court's time with a motion with a 0.1% chance of success.

Hans Bader discusses the seemingly incoherent approach of the Department of Justice to prosecuting financial abuses, though I suspect it's a little early to criticize the lack of prosecutions in the MF Global case. If there aren't indictments closer to the statute of limitations deadline, then we can raise an eyebrow.