Federal Criminal Lawyer Blog

A few hours ago the Atlanta-based United States Court of Appeals for the Eleventh Circuit reversed a former county attorney's mail fraud and money laundering convictions based on a "material variance" between the allegations in the indictment and the proof at trial. The money laundering charges were based on the underlying fraud case, so these convictions also were reversed. A second set of fraud convictions were affirmed, but because the sentence was based on both sets of fraud charges, the court sent the matter back for a new sentencing hearing. The case is United States v. Lander.

Mr. Lander was the County Attorney of Dixie County, Florida. He also was trying to develop a vitamin company. The Court affirmed the fraud conviction that arose from the scheme involving the vitamin company.

Other fraud and money laundering charges emanated from a different set of facts. Some real estate investors wanted to develop property in the county and approached Lander for assistance. The developers put up about $850,000 as assurance that the project would go forward. Lander deposited these funds into his law firm's trust account, but used a large chunk of these funds for purposes not related to the real estate development.

The indictment alleged that Mr. Lander engaged in a scheme to defraud by falsely telling the developers that the county required the $850,000 as a performance bond. However, at trial the developers did not recall hearing Landers say this. The government then shifted gears mid-trial, arguing that the scheme to defraud involved Lander falsely telling the developers that he would help them through the regulatory process, when instead he used some of the funds for other purposes.

The Eleventh Circuit noted that a defendant has the right to defend against the specific allegations in an indictment, and when the prosecution changes theories mid-stream this can result in what we lawyers call a "material variance." If the defendant was surprised and disadvantaged by this change in theory, the variance is deemed to be "prejudicial." Here, the Court noted that Landers walked into trial planning on defending against a claim that he falsely told the developers one thing, but by the time the prosecutor made the closing argument the government had shifted to a different theory. This prejudicial material variance thus doomed the fraud charges, the money laundering crimes that came out of this supposed scheme, and the sentence that was predicated in part of the reversed charges.

Last week, the Eleventh Circuit Court of Appeals affirmed the convictions of Larry Langford, the former mayor of Birmingham, Alabama who was convicted last year on various federal white collar offenses, including mail and wire fraud, bribery, money laundering, and federal tax offenses.

To me, the most interesting aspect of the opinion is the way in which the Court of Appeals discussed the honest services portion of the federal mail and wire fraud charges. As we discussed in this previous post, last summer, the Supreme Court issued its opinion in United States v. Skilling, a case which, in essence, limited the honest services provision of the federal fraud statutes to bribery and kickback schemes.

Before Skilling was decided, many (if not all) federal circuits made a distinction between honest services prosecutions that involved public officials, as opposed to those working in the private sector. At the risk of simplifying the issue too much, it was far easier for the government to prove an honest services violation against a public official. Skilling itself, however, did not distinguish between public officials and private actors, leading some to believe that after Skilling, the prosecution of both public and private officials would be governed by the same standards.

In its decision in Langford last week, though, the Eleventh Circuit appeared to recognize that the public official/private actor distinction that existed in this Circuit before Skilling still exists. According to the Eleventh Circuit: Public officials inherently owe a fiduciary duty to the public to make governmental decisions in the public’s best interest. . . . [I]n a democracy, citizens elect public officials to act for the common good. When official action is corrupted by secret bribes or kickbacks, the essence of the political contract is violated. Illicit personal gain by a government official deprives the public of its intangible right to the honest services of the official."

Well before Skilling, there was considerable disagreement among judges regarding the reach and meaning of the honest services statute in both the public and private sector. Although Skilling limited the reach of the statute to cases that involve bribery and kickbacks, it did not address the abundance of issues over which this considerable disagreement existed. Given the Eleventh Circuit's apparent decision to return to the pre-Skilling era in which a distinction exists between the standards governing the prosecution of public officials and private actors, there are many issues that should and will be litigated in this amorphous area known as "honest services" fraud. As Justice Scalia himself recognized in Skilling, even with the majority's pairing down of the statute, the honest services statute nonetheless remains unconstitutionally vague.

The full opinion in Langford can be found here.

Just a few hours ago the 11th Circuit Court of Appeals sitting here in Atlanta affirmed most, but not all, of the convictions in the long-running saga of US v. Don Siegelman and Richard Scrushy.

Don Siegelman was the Governor of Alabama. Richard Scrushy was the founder and Chief Executive Officer of HealthSouth. The case stemmed from allegations that Governor Siegelman placed Scrushy and others on a State Board in return for a $500,000 payment. The government charged them with a series of crimes relating to alleged public corruption. Specifically, Siegelman and Scrushy were alleged to have violated 18 U.S.C. §666(a)(1)(B), the law that prohibits bribery involving organizations that receive federal funds. The government also charged the defendants with "honest services" mail fraud, and conspiracy to commit same. Finally, Governor Siegelman was charged with obstruction of justice.

While the case was on appeal, the Supreme Court issued the well-known decision in US v. Skilling, a ruling that restricts the scope of the federal "honest services" branch of mail and wire fraud. Each defendant contended that Skilling changed the landscape, and that their convictions must be reversed. Likewise after the verdicts, the defendants uncovered what appeared to be troubling evidence of juror misconduct and exposure to extrajudicial materials.

A Panel of the Eleventh Circuit affirmed most of the fraud convictions and rejected the claims of juror misconduct. Along the way, the Panel made a few observations that are noteworthy for future cases.

For the charges alleging violations of §666, the Panel held that while there likely must be a quid pro quo between the bribery payor and the recipient, and that while there must be an explicit agreement that the recipient do something in exchange for the bribe, such an explicit agreement need not be express. In other words, the government does not need an email or a recorded conversation between the payor and recipient in order to get a §666 conviction.

The Panel affirmed some, but not all, of the post-Skilling "honest services" fraud convictions. Recall that Skilling restricted the honest services theory to traditional bribery/kickback schemes. Here, because the indictment alleged just such a scheme for many of the counts, the Panel affirmed the convictions on these charges. However, two charges alleged that Scrushy did not bribe anyone, but instead engaged in "self-dealing." The Panel reversed these convictions based on insufficient evidence that either defendant committed these crimes.

Perhaps some of the most sensational aspects of this case have been the post-verdict revelations of possible juror misconduct. Defendants uncovered evidence that the jurors had been exposed to certain extrajudicial information. Furthermore, their legal teams received anonymous emails indicating that some of the jurors began deliberating before it was time to do so, had made up their minds long before the evidence was closed, and that some other jurors did not even participate in the deliberations.

The Panel rejected all the juror misconduct claims. First, the Eleventh Circuit held that the sort of extrajudicial information to which this jury was exposed was innocuous to the point where it did not affect the case. Second, the panel resorted to the rule that courts will rarely, if ever, intrude on a jury's deliberations. Because of this reluctance, the Panel held that the anonymous emails were insufficient to result in a new trial.

This has been a sensational case, with law and politics colliding. I have a feeling it's not over yet.

In this post last week, we announced the Supreme Court’s decision in Skilling v. U.S. The Court held that 18 U.S.C. § 1346, the honest services law that the government has been using to prosecute nearly everything as a federal crime, applies only to bribery and kickback schemes.

The honest services fraud statute simply defines “scheme or artifice to defraud” as used in the mail- and wire fraud statutes to “include a scheme or artifice to deprive another of the intangible right of honest services.” Congress enacted this statute quickly after the Supreme Court, in McNally, held that the fraud statutes were “limited in scope to the protection of property rights.” Congress intended to incorporate pre-McNally case law that had recognized fiduciary duties as intangible rights to honest services and a breach of those duties as fraud.

The majority’s rationale for limiting the honest services fraud statute to only bribes and kickbacks was that such cases constituted the “core” of pre-McNally honest services fraud cases and that statutes should be construed, where possible, rather than invalidated. Because, the Court said, circuit conflicts and disagreements regarding honest services fraud cases were primarily outside the bribery and kickback scheme cases, limiting the application of the statute to those cases would avoid vagueness troubles.

The government argued that undisclosed self-dealing cases should be included, but the Court held that the relative infrequency of and intercircuit inconsistencies regarding such cases disallowed the statute’s application to undisclosed self-dealing. In a lengthy footnote, the Court indicated numerous questions Congress would need to clearly address to include such cases in the statute.

Justice Scalia, an open critic of the honest services fraud statute, disagreed with the majority’s limitation of honest services fraud to bribery and kickback schemes. In his concurring opinion, he argued that the Court had no precedent for “paring down” a statute to save it from invalidity and that, even with the limitation, the statute remains unconstitutionally vague. Although the Court clarifies what acts constitute a breach of the “honest services” obligation, the statute and case law do not clearly determine the character of the fiduciary capacity to which the restriction applies. What is the source of fiduciary obligations; who qualifies as a fiduciary; and is anything beyond a breach of fiduciary duty necessary for conviction?

As Justice Scalia recognized, the majority's decision fails to resolve a host of issues surrounding the honest services doctrine. For this reason, litigation surrounding the meaning of this amorphous doctrine will not end with the Court's decision in Skilling. Also, by extending the Yates decision to cases on direct appeal, the impact of the favorable ruling in Mr. Skilling's case is yet to be determined.

While we are relieved that the previously outrageous reach of this statute has finally been limited, we are disappointed that Justice Scalia’s analysis did not gain the support of the majority of the Court.

This morning, the United States Supreme Court issued its opinions in three honest services fraud cases: Skilling, Black, and Weyhrauch. We have previously discussed these cases here (discussion of cases and background of honest services fraud,) here (Skilling,) here (Black), and here (Weyhrauch.) In Skilling, the Court limited the federal criminal honest services fraud statute to only bribery and kickback schemes. Based upon that opinion, the Court reversed in Black and Weyhruach. The Court also held that Jeffrey Skilling of Enron fame was not denied a fair trial due to publicity and community prejudice.

We will provide analysis of these opinions next week. In the meantime, the opinion in Skilling is available here; the opinion in Black is available here; and the single-sentence per curium opinion in Weyhrauch is available here.

Last Tuesday, the United States Supreme Court heard oral arguments in Black v. U.S. and Weyhrauch v. U.S., two of the three federal honest services fraud cases currently before the Court. On Friday, lawyers for Jeffrey Skilling submitted their brief in the third, Skilling v. U.S. This Monday, the Court set oral arguments for Skilling for March 1, 2010, at least three weeks before it would normally be heard. We have previously discussed these cases here, here, here, and here.

Background

For many years, federal prosecutors successfully argued that the mail fraud and wire fraud laws covered schemes to defraud the people of the “intangible right” to have affairs conducted honestly. Now referred to as “pre-McNally caselaw” this body of law was not uniform; the circuits disagreed on exactly what conduct constituted the illegal conduct at the boundaries of the law. In McNally v. U.S. in 1987, the Supreme Court held:

Rather than construe the statute in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, we read [the mail fraud statute] as limited in scope to the protection of property rights. If Congress desires to go further, it must speak more clearly than it has.

Congress reacted by passing 18 U.S.C. § 1346, which states: “For the purposes of this chapter, the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.” Everyone agrees that Congress intended to overrule McNally and most seem to agree that the statute covers bribery and kickbacks, but because Congress failed to speak clearly, many issues at the borders of the law remain unresolved.

Since 1987, prosecutors have attempted to extend “honest services fraud” to many situations that would be less-than-obvious to readers of the statute. In Black, Conrad Black was convicted of honest services fraud in a private setting for use of a scheme to increase his own compensation that caused no harm to the corporation. In Skilling, Jeffrey Skilling was convicted in a private setting (Enron) in which the scheme involved no personal gain. In Weyhrauch, an Alaska legislator was convicted for failure to disclose a conflict of interest, even though Alaska law imposes no duty to disclose. When the Supreme Court denied certiorari in Sorich v. U.S. this year, Justice Scalia dissented, saying that it seemed irresponsible “to let the current chaos prevail” in this area of law. The Court will finally take on the responsibility with Black, Weyhrauch, and Skilling.

Oral Arguments in Black and Weyhrauch

At the oral argument in Black last week, the Court seemed eager to determine whether the constitutionality of § 1346 was properly before them in these two cases. Many of the Justices asked about a constitutional argument. Black’s lawyer asserted that he was presenting the constitutional question of vagueness (both notice and prosecutorial discretion) as a predicate for the logical disposition of the question presented. The government’s lawyer asserted that the constitutional question had not been posed in Black, but that Skilling, which had not yet been briefed, may present the issue. Chief Justice Roberts responded by asking, “you agree it would be very unusual if in June we announced the opinion in your case agreeing with you and then the next case announced that the statute is unconstitutional?”

The Court asked the government’s lawyer about the ins and outs of what is covered by honest services fraud, particularly what the lawyer called “undisclosed conflicts of interest by an agent or fiduciary who takes action to further that interest.” Justice Breyer worried that “perhaps there are 150 million workers in the United States. I think possibly 140 of them would flunk [the government’s] test.” The government’s explanation was that materiality and intent to defraud would exclude such employees, but Justice Scalia wasn’t satisfied with the government’s circular reasoning, asking, “I’m still waiting to hear what materiality consists. Is it just – de minimus doesn’t count?” and later remarking that nothing in the government’s brief or argument had “eliminate[d] these de minimus kind of … misrepresentations to the employer.”

The Court spent the next hour on oral arguments in Weyhrauch. Weyhrauch’s counsel argued primarily about the duties enforced by the honest serviced statute. When the government lawyer returned, however, the Justices turned back to the constitutional issues. The Court contemplated the ability of the average citizen to understand the law, with Justice Scalia asking at one point, “What is the citizen supposed to do? He is supposed to go back and read all those pre-McNally cases?” The government lawyer eventually assured the Court that vagueness is a legitimate concern that the government would not shy away from once raised in Skilling.

The Court has not asked the parties to brief the constitutional vagueness issue in Black or Weyhrauch, but the Skilling brief addresses it directly. Because oral arguments in Skilling have been pushed forward since that brief was filed, the Court will likely tackle the constitutional issue before announcing opinions in Black or Weyhrauch.

Skilling Brief

Filed on Friday, Skilling’s brief focuses on two issues: the constitutionality of honest services fraud, particularly where no private gain was intended, and whether the Government may rebut the presumption of jury prejudice. Regarding honest services fraud, Skilling set forth the following arguments.

A. To identify any meaning in § 1346, one must consult two decades of conflicting and confusing cases, so it is unconstitutionally vague.

The brief identifies five basic questions that the pre-McNally cases disagreed upon, making it “hopelessly unclear and conflicting” so as not to provide fair notice of what is criminalized by § 1346. These disagreements included: what source of law identifies the illegal conduct; whether contemplated economic harm to the employer was a necessary element; whether public and private sector standards were identical; whether duties extended beyond “official action,” and whether use of the fiduciary position was a necessary element. The brief quotes a dissenting judge from the Second Circuit as saying, “Ordinary people cannot be expected to undertake such an analysis [of the meaning of pre-McNally cases]; rare is the lawyer who could do it…”

The brief also details numerous conflicting meanings assigned to the statute by the government in the history of its prosecutions. The government has used this statute as a deus ex machina (a disgraceful literary device defined here) to proffer any meaning necessary to prosecute whichever defendant happens to be in its sights. By facilitating arbitrary prosecutions, this statute implicates “the other principle element of the vagueness doctrine.” In oral argument in Black, Justice Breyer brought up this point, joking about a criminal statute reading, “'It is a crime to do wrong.’ sometimes adding, ‘in the opinion of the Attorney General.’” He then asked, “Now do you see the problem?”

Because of the vagueness issues and the Justices’ questions and remarks during oral argument, we are hopeful that the Court will decide that § 1346 is unconstitutional, now that the issue has been presented directly. The Court may, however, simply limit its application. Skilling argues that doing so would require creation of federal common law, which is not a part of the Court’s duty. Justice Scalia addressed this point numerous times during oral argument, saying, “[Y]ou speak as though it is up to us to write the statute… but that’s not our job.”

B. If the Court decides to uphold the statute, it should limit it to covering bribes and kickbacks, the only category of conduct unambiguously prohibited in pre-McNally caselaw.

Skilling argues that, if the Court upholds the constitutionality of § 1346, it should limit its application to the bribery and kickbacks that were paradigmatic of pre-McNally caselaw, rather than including the “self-dealing” types of cases that have garnered much of the confusion regarding this law. The bribery and kickbacks cases are what an average citizen would likely find when attempting to determine the meaning of the statute and the government has stated that Congress meant to codify the paradigm cases in enacting § 1346. The rule of lenity requires such a limitation. In addition, the pre-McNally self-dealing cases were effectively money or property fraud cases that did not need to be addressed by a new statute, so this is already-covered territory and extending honest services fraud to it would be redundant.

C. If the Court reads self-dealing into the statute, it should require private gain as an element of the offense, and disqualify normal compensation incentives established by the employer as “private gains.”

Finally, Skilling argued that even if self-dealing is covered by the statute, it should only apply in cases in which the defendant gained privately. Every circuit that addressed a private gain requirement in the pre-McNally cases enforced a requirement that the government prove that the defendant personally gained some economic benefit. Even during oral argument in Weyhrauch, the government lawyer stated that the government was after “personal conflicting financial interests.” When the Chief Justice twice repeated the word “financial,” the government lawyer responded each time with “That’s right.” If the majority of the Court follows through with these comments by the Chief Justice, then it appears that private gains will be a necessary element in an honest services fraud prosecution.

Skilling then argued that normal compensation incentives for doing a good job for the employer is not a private benefit for the purpose of § 1346. No pre-McNally cases held that normal compensation incentives qualified as private gains. In addition, since people are presumed to act in their financial self-interest and employers count on that behavior in incentivizing performance, “every salaried employee can be said to work for her own interest while purporting to act in the interests of the employer,” according to Judge Jacobs of the Second Circuit, in his dissent in U.S. v. Rybicki.

We look forward to reading the government’s reply brief, which is due January 25, 2010. We hope the Court will eventually hold that this statute is unconstitutionally vague, but, as Timothy O’Toole pointed out at the White Collar Crime Prof Blog, the Court denied certiorari in another honest services fraud case on December 7th. The case is U.S. v. Kincaid-Chauncey and the Ninth Circuit opinion is available at 556 F.3d 923. Because this case dealt with more straightforward bribery charges against a public official, the denial of cert. leads us to believe the Court may consider leaving the bribery and kickback aspects of the statute intact.

Transcripts from the oral arguments are available here
(Black) and here (Weyhrauch).
Skilling’s brief is available here.
Additional reading is available at the following locations:
ScotusBlog
White Collar Crime Prof Blog
NPR’s All Things Considered

Yesterday a jury found Georgia criminal defense attorney J. Mark Shelnutt not guilty on all counts. He was acquitted of money laundering, drug conspiracy, and attempted bribery.

Three weeks ago, the Eleventh Circuit Court of Appeals, which hears appeals from cases in Georgia, Florida, and Alabama, decided U.S. v. Velez in favor of the defendant. That case involved a money laundering charge against a criminal defense attorney under 18 U.S.C. § 1957. Shelnutt was prosecuted under 18 U.S.C. § 1956, which required federal prosecutors to attempt to prove that ill-gotten gains were used for certain prohibited purposes, including facilitating underlying criminal activity, tax evasion, or evading money laundering statutes. The prosecution was unable to prove its case.

More information in the Shelnutt case can be found here.
Our previous posts regarding U.S. v. Velez are here and here.
We discussed U.S. v. Kaley, another case involving the payment of legal fees to criminal defense lawyers, here in September.

Earlier this week, the Supreme Court granted certiorari in another honest services fraud case: Skilling v. United States. Jeffrey Skilling, of Enron notoriety, is challenging his conviction for honest services fraud and the venue of his trial.

The honest services fraud statute, 18 U.S.C. § 1346, expands the definition of a scheme or artifice to defraud under the mail and wire fraud statutes to encompass schemes that “deprive another of the intangible right of honest services.” This federal criminal case will address whether the statute requires the government to prove that the defendant’s conduct was intended to achieve “private gain” rather than to advance the employer’s interests, and, if not, whether the statute is unconstitutionally vague. A second issue in the case involves when a presumption of jury prejudice arises.

We have previously discussed two other honest services fraud cases, Black v. United States and Weyhrauch v. United States, that the Court will also hear this term. Our discussion of Black is here and of Weyhrauch is here.
The differences between the three cases are:
Black: A corporate executive’s use of a fraudulent scheme to increase his own compensation that caused no harm to the corporation.
Skilling: A corporate executive’s use of a fraudulent scheme with no personal gain or benefit to the corporation.
Weyhrauch: A state legislator’s failure to disclose conflict of interest where state law does not require such disclosure.
Although these three cases have not been consolidated, we hope that the Court takes a comprehensive approach and straightens out the myriad issues plaguing interpretation of this law.

In its amicus brief in support of Skilling’s petition for a writ of certiorari, the National Association of Criminal Defense Lawyers (NACDL) encouraged the Court to resolve three principal issues: whether courts have the power to engraft limiting principles on the vague language of § 1346; if courts do not have that power, whether § 1346 is void for vagueness; and if they do, the content of those limiting principles. In addition to addressing these three issues, we hope that the Court takes the opportunity to create some meaningful and clear distinctions between public sector and private sector honest services fraud.

For an interesting analysis of the potential outcomes from these cases, see this post at the SCOTUSblog.
For more detail on the chaos plaguing interpretation of this statute, see this New York Times article. (A favorite tidbit of ours quotes Justice Scalia carrying it to its logical extreme, saying, “it would seemingly cover a salaried employee’s phoning in sick to go to a ballgame.”)
The briefs filed in Skilling are available at the SCOTUSblog.

Last Monday, the Supreme Court granted certiorari in Weyhrauch v. United States, a federal criminal honest services fraud case. We are in Atlanta, Georgia, which is in the Eleventh Circuit. Because this case may impact Eleventh Circuit law, we will follow this case closely and provide any updates.

The question to be decided in Weyhrauch is "Whether, to convict a state official for depriving the public of its right to the defendant's honest services through the non-disclosure of material information, in violation of the mail-fraud statute (18 U.S.C. Sec. 1341 and 1346), the government must prove that the defendant violated a disclosure duty imposed by state law."

The defendant in this case is a lawyer and was a member of the Alaska House of Representatives. He is accused of honest services fraud due to conflicts of interest in conducting business with an oil field services company. The government wanted to introduce evidence of his concealment of the conflicts of interest to support the fraud charges, even though the state did not require disclosure.

We have been disappointed in how far federal prosecutors have gone in stretching honest services fraud to cover an expansive range of conduct and we hope that the Supreme Court finally limits this statute. In her post at the White Collar Crime Prof Blog, Professor Pogdor quotes Justice Scalia’s stance:

This case presents another opportunity for Justice Scalia to use his words from the denial of cert in the Sorich case, where he stated that the "28 words" in the statute had "been invoked to impose criminal penalties upon a staggeringly broad swath of behaviour, including misconduct not only by public officials and employees but also by private employees and corporate fiduciaries."

He stated that "[w]ithout some coherence limiting principle to define what 'the intangible right to honest services" is, whence it derives, and how it is violated, this expansive phrase invites abuse by headline-grabbing prosecutors in pursuit of local officials, state legislators, and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct." Justice Scalia concludes his dissent in Sorich by stating that "it seems to me quite irresponsible to let the current chaos prevail."

The Petition for Certiorari is available here.
The Brief in Opposition is available here.
The Petitioner's Reply is available here.

We are currently following another honest services fraud case, Black v. United States, that the Supreme Court agreed to hear back in May. Our posts about it can be found here and here. In that case, the Court will decide whether Section 1346 applies in a purely private setting where the defendant’s conduct did not risk any foreseeable harm to the putative victims.

Eleventh Circuit case law, the controlling federal law here in Georgia, is at risk of changing next fall, when the Supreme Court will likely decide a criminal case and resolve a split among the circuit courts of appeals.

The mail fraud and wire fraud laws are the bread and butter for federal prosecutors bringing white collar cases. Each of these laws requires a scheme to defraud another person out of “money or property.” For many years, federal prosecutors successfully argued that the word “property” included the right to “honest services” from public employees (such as elected officials). In 1988, the Supreme Court ruled that the word “property” does not include “honest services,” but several months later Congress amended these statutes so as to include the concept of “honest services” within the universe of cases that can be prosecuted under the federal mail and wire fraud statutes. Specifically, Section 1346 of the Federal Criminal Code expands the definition of a “scheme or artifice to defraud” under the mail and wire fraud statutes to encompass schemes that “deprive another of the intangible right of honest services.”

Despite the background of this type of fraud, the concept of “honest services” has now been extended by federal prosecutors beyond situations where a public official may have engaged in fraud. Recently, federal prosecutors are bringing more and more cases against people who work for private companies, arguing that the employee breached his or her duty of rendering “honest services” to the employer.

Last Monday the United States Supreme Court granted certiorari in Black v. United States. The Court will decide whether this Section applies in a purely private setting where the defendant’s conduct did not risk any foreseeable harm to the putative victims.

The case involves media mogul Conrad Black, who built an international newspaper empire from a single Canadian newspaper, eventually owning hundreds of community newspapers, as well as several large newspapers, such as the Chicago Sun-Times and London’s Daily Telegraph. In the late 1990s, Black predicted the affect the internet would have on newspapers and suggested that the company sell most of its smaller newspapers. As a part of those deals, purchasers paid Black for covenants not to compete, which the government construed as a scheme to defraud the company’s shareholders, although the money from those deals would have been paid to a different company controlled by Black and his co-defendant, anyway. The trial court’s instructions permitted the jury to convict even if they found that the shareholders didn’t lose any money. Black was convicted. The Seventh Circuit upheld the conviction, even though the law in at least five other circuits would have required reversal.

In 1999, the Eleventh Circuit here in Atlanta decided United States v. DeVegter, requiring the government to prove that economic harm was at least reasonably foreseeable in a private “honest services” case such as this one. Without this rule, Black argued in his petition to the Supreme Court, “[t]he only obstacle to converting every violation of corporate governance or company rules into federal crimes would seem to be the moment-to-moment whims of federal prosecutors.” We hope that the Supreme Court, when it decides this case, agrees with the Eleventh Circuit.

The Court's docket for this case is available here.
The Seventh Circuit's opinion below is available here.
Mr. Black's petition for certiorari is available here.
The government's brief in opposition is available here.
Mr. Black's reply brief is available here.

Former Clinch County Superior Court Judge Brooks E. Blitch III faces numerous federal charges for various alleged public corruption activities, ranging from fixing cases to making illegal payments to courthouse employees. Last Monday, two of the charges, involving retaliation against witnesses, were thrown out by the U.S. District court.

The federal statute that was the basis for those charges protects witnesses and victims from retaliation in criminal cases. The indictment in this federal criminal case accuses Blitch of attempting to influence officials in two Georgia towns not to hire an applicant for the police chief position in both cities. That applicant was a former agent for the Georgia Bureau of Investigation who helped prosecute and convict Blitch’s son in a 1996 arson case.

The District Court ruled that the prosecutors misinterpreted the language of the statute when using it to charge Blitch. His ruling stated that “The statute is intended to protect from retaliation the private citizen who comes forward to provide law enforcement with information about a federal crime.” However, the law does not “protect the law enforcement officer who receives the information.”

Berrien Sutton, Blitch’s former law partner and a former State Court judge who was appointed by Blitch, has been indicted in this case, as well.

The Office of the Inspector General for the U.S. Department of Justice issued a massive report earlier this week concerning how the various federal prosecutors around the country are doing (or not doing) their jobs. While there's a lot of truth to the old saying about "lies, damn lies and statistics", the numbers in this report give some clues about why certain federal white collar criminal investigations simply wither away over time.

The Department of Justice is the mother ship for all of the various lawyers who work for the federal government. When it comes to prosecuting federal criminal cases, the 94 U.S. Attorneys offices around the country have front-line responsibility. The U.S. Attorney him or herself is a person appointed by the President to head up one of these 94 offices. However, the day-to-day operations usually are handled by prosecutors who have generally made a career of or have spent a long time as an Assistant U.S. Attorney (AUSA). The statistics in this new report show that there can be great variations between the 94 offices when it comes to how AUSA's handle white collar federal criminal cases.

Some of the statistics in this report are set out in Appendix XIV. This Appendix details how federal prosecutors have handled white collar criminal investigations over the past 5 years. The Appendix goes through each of the 94 U.S. Attorneys offices, and details how many such cases were referred to the prosecutors, provides numbers on how many were actually prosecuted, gives figures on how many were refused for prosecution, and sets out how many are still just hanging around with no decision.

Again, remember that statistics can often mislead. Nevertheless, this report shows that in some U.S. Attorneys' offices, the majority of white collar cases lead to formal criminal charges. In others, a relatively small percentage ever result in a criminal case. In many districts, the majority of white collar cases languish for many years before anyone makes a decision.

We represent many people who are investigated for federal white collar offenses such as mail or wire fraud, public corruption, money laundering and the like. The toll of such an investigation can weigh heavily on our clients and their families. These statistics show clearly that for some of our clients, they may have to wait many years before the case is either refused for prosecution or simply dies on the vine.

In a federal criminal case originating in Atlanta, Georgia, the Eleventh Circuit Court of Appeals affirmed substantial sentence reductions for two executives who were convicted of public corruption charges. In the lower court, the two defendants faced sentencing ranges under the United States Sentencing Guidelines of 41 to 51 months. Based on a variety of factors, however, the lower court varied from that guideline range and imposed custodial sentences of thirteen months, and seven months, respectively.

In its third appeal to the Eleventh Circuit, the Government attacked the downward variances on a number of grounds. Among other arguments, the Government claimed that the defendants's sentences were unreasonably low given the nature of the crimes. The Court of Appeals rejected this argument, stating that "whether we agree or not with the disrict court's rationale for the downward variances or its characterization of the crimes, we cannot say that the sentences imposed in consideration of the factors delineated in 18 U.S.C. section 3553(a) were unreasonable."

Unlike most of the decisions that come out of the Court of Appeals, the decision in this case was not unanimous. In dissent, Judge Carnes stated that the sentences imposed should be vacated, because in calculating the guidelines ranges the court violated the law of the case doctrine.

As Paul Kish pointed out in the previous post, a recent decision involving an affirmance of a substantial variance in a child pornography case provoked a dissent from Judge Dubina. Two dissents in less than one week from the Eleventh Circuit is certainly an anomaly. And this surely seems to suggest that in spite of the Supreme Court's recent decision in Gall v. United States, sentencing law in the Eleventh Circuit remains unsettled at this point.