Lawyers in Federal Court; Major Case Affirms Right to Have Company Pay Legal Fees for Employees

August 29, 2008 by Paul Kish

The right to have a lawyer defend a person against federal criminal charges was affirmed yesterday in a major ruling issued by the United States Court of Appeals for the Second Circuit. The case, United States v. Stein, affirmed a decision by a District Judge who dismissed all charges because the prosecutors violated the Sixth Amendment rights of company employees who wanted the company to pay their legal fees. This case is a major development, in that it assures both companies and their employees that it is appropriate to have the employer pay the worker's attorneys.

It has been a standard practice for many years for large companies to pay the defense fees for its high ranking employees. Many companies are regularly investigated, and operate in areas where the law is not always clear. Few people would agree to take high-ranking positions in such companies if they anticipated having to pay huge legal fees every time the company comes under scrutiny. As a result, most companies agree to indemnify the defense expenses for their employees. This is important in that getting qualified counsel is a very expensive proposition, especially when the investigation is far-flung and results in the defense attorney having to cull through millions of documents in order to properly advise his or her client.

About 7 years ago the Department of Justice (DOJ) began taking the position that companies which pay the legal fees for their employees are less deserving of a break when it came to resolving potential criminal charges. In 2004, the massive accounting firm KPMG was under investigation. The company then worked out its own deal through which no charges would be brought (although KPMG agreed to pay over $450 million in fines, etc.) but DOJ then indicted 13 employees.Under pressure from DOJ, the company restricted its usual practice of paying the legal fees for its employees under investigation who actually got indicted. The case was massive, and the attorneys for the defendants pointed out there was no way they could ever get paid unless the company adhered to its usual practice of indemnifying legal expenses.

The District Judge agreed with the defendants. He found that DOJ pressure was the reason the company changed its usual practice of paying legal fees. He determined that there was no way to put the clients back into their previous status, and that dismissing the indictment was the only remedy. The prosecutors appealed, and yesterday the Court of Appeals agreed that the dismissal was appropriate.

This case is based on the idea under the Sixth Amendment that a person is entitled to get the lawyer of his or her choosing in order to defend against criminal charges. When the government forces a company to change its usual practice of indemnifying for legal expenses, that is the same as government action that infringes on the constitutional right to counsel of one's own choice.

Sentencing Issues for Federal White Collar Crime Cases

August 22, 2008 by Paul Kish

The United States Court of Appeals for the Tenth Circuit recently issued a very lengthy opinion that covers a variety of sentencing issues we see quite often in federal white collar cases. Although this case came out of the appellate court that covers Denver, we see similar issues in cases here in Atlanta, the rest of Georgia, as well as in Alabama and Florida.

The case out in Denver involved charges of fraud against some bankers. They were convicted, and on appeal both the defendants and the prosecutors argued that the trial judge made mistakes when imposing the sentences.

The main sentencing issue on appeal involved the question of "loss" under the Federal Sentencing Guidelines. I have written at length on the Guidelines in other posts. The "loss" calculation is especially tricky. The defendants in the Denver case, through their very able lawyers, made the rather sensical argument that what they got out of the crime is the same as the "loss." Unfortunately, a lot of lawyers who do not get into federal court all that often mistakenly believe that this is the law. It is not. The concept of "loss" under the Sentencing Guidelines is far greater than what a person gets. It also covers "intended loss", along with losses caused by other people who did the same thing.

The court in the Denver case sent it back for a new sentencing hearing. The defendants' attorneys did a good job for their clients the first time. They will have a rougher road the second time around.

Federal Criminal Cases: Some Prisoners Have Email Access

August 21, 2008 by Paul Kish

A recent story in USA Today explains a recent trend for people convicted in a federal criminal case. More and more federal prisons are implementing an email system to allow prisoners to use this method for communicating with friends, family, and even their attorneys.

On the surface, one might wonder if emails could be abused by people convicted of white collar crimes, fraud, money laundering and the like. After all, people in these type cases are accomplished at using business tools to commit crimes. However, as the USA Today story explains, the same could be said for inmates using the phone or old fashioned "snail mail." The emails are screened for certain words. Furthermore, recipients must agree to receive messages from an inmate, and can reject any message they do not want to accept.

I have written previously about some bad aspects of our federal criminal justice system. The move to emails is a positive side, a method to allow incarcerated persons to remain in closer contact with the outside world.

Court of Appeals Issues Interesting Ruling In Federal Criminal Case

August 14, 2008 by Carl Lietz

Although we do not normally report on decisions issued in federal criminal cases that do not directly apply to matters in Georgia, Florida, or Alabama, a case that was recently decided by a federal appellate court that sits in Louisiana (the Fifth Circuit) is certainly interesting and therefore worth mentioning. As noted by Professor Ellen Pogdor over at the White Collar Crime Prof Blog, recently, the Fifth Circuit issued a decision involving the statute of limitations that applies in federal cases that charge an individual based on an aiding and abetting theory of liability. Specifically, in United States v. Rabhan, the Fifth Circuit concluded that "aiding and abetting is a form of derivative liability and should be treated the same as the substantive or underlying offense." In other words, since 18 U.S.C. section 2 (the aiding and abetting statute) does not establish a distinct offense, but is instead "simply a different method of demonstrating liability for the substantive offense (and one which is derivative of, rather than separate from, the underlying or substantive offense)," the statute of limitations for the underlying substantive offense must govern.

Even though this decision will not have an impact on a significant number of federal criminal cases, it did have an impact in this particular case. That is because in Rabhan, the Government charged the defendant after the expiration of the five year statute of limitations that typically applies in most federal criminal cases, but before the expiration of the ten year statute of limitations applicable to the underlying substantive offense at issue. Therefore, based on the ruling described above, the Fifth Circuit reversed the trial court's decision dismissing the offense that was charged beyond the five year statute of limitations.

Again, this case will not have an impact on a significant number of federal criminal cases; however, since this issue has apparently not yet been addressed in the Eleventh Circuit (the Court that hears federal appeals in Georgia, Alabama, and Florida), federal criminal attorneys that practice in these areas may want to make a mental note of this issue. Professor's Pogdor's analysis of this case can be found here, and the opinion itself can be found here.

Reversal of Conviction in Federal Criminal Case: Lawyers need to Keep Fighting!

August 4, 2008 by Paul Kish

The Court of Appeals in New York recently reversed securities fraud convictions in a federal criminal case. This case, which said that the defendants simply did not commit a crime, reminds me of how important it is for lawyers to keep fighting, even after a jury says the client is guilty.

The case in New York was a complicated set of prosecutions targeted at "floor supervisors" at stock exchanges. These supervisors matched up buyers with sellers. The prosecutors claimed that these supervisors would make a few pennies for themselves on the matches by purchasing the stock and quickly flipping it, then skimming the profits. The defense lawyers argued that it was absurd for such highly paid supervisors to go after what was in effect, chump change, and pointed out that a few mistakes does not mean the supervisors were trying to make a profit. The Court of Appeals agreed, based on a ruling in a similar case, that there was no proof that the supervisors acted deceptively.

The lawyers in those cases kept fighting, even after the jury found their clients guilty. I have a similar case, a matter I will post about in the future, as it is currently pending in front of the judge. It involves a case where a man was found guilty by the jury, but there simply is no evidence that he knew he was doing anything wrong! I was brought into the case after the trial, and have filed a request for both a new trial and that the judge throw the charges out altogether. We will see what happens!