Over at Point of Law.com, Moin Yahya, Assistant Professor of Law Faculty of Law at the University of Alberta, is dissecting the prosecution against Conrad Black (earlier posts here) in a series of posts, the first two of which are here and here. Unless you are in favor of the expansion of federal criminal power, his findings are troubling. Take, for example, the obstruction of justice charge against Lord Black:

One of the charges that the prosecution added against Black was obstruction of justice. This charge was added at the last minute and was not in the initial indictment. The charge related to the fact that Black removed boxes of documents from the offices of Hollinger Inc. (which was the parent company of Hollinger International the American company based in Chicago). The order not to remove the boxes had been issued by a Canadian judge in Toronto. (As an aside, wouldnít a simple contempt of court charge have sufficed?)
What jurisdiction did the United States have over Black for an event that took place on foreign soil? Putting aside the question of whether the prosecution already had these documents, so it is not clear that his removal obstructed any investigation; the more important and troubling aspect of this case is the creeping federalization of American law not just inside the United States but abroad. [. . .]
But now, will Congress seek to regulate the conduct of Americans and American corporations all over the world? . . . [A]s we have seen before, the courts cannot seem to find that magic bright line to constrain Congress . . . Today Congress regulates sex tourism, truly a noble cause, but tomorrow what else will it decide on. Will it outlaw dog-fighting in foreign lands? Will Congress criminalize paying workers in developing countries less than the minimum wage in the United States? Will Congress criminalize not following the mandates of Sarbanes-Oxley even if the American company is only listed on a foreign exchange? What then will be the result? The answer depends on your view of whether federalism is good or bad. If the growth of Congressional power concerns you, then these latest cases should cause you more concern; if not, then not.

Update: Professor Yahya’s third segment is here.
By the way, it sounds as if Houston business executive and philanthropist Dan Duncan is getting a dose of what Professor Yahya is talking about:

A 2002 big game hunting trip in Siberia could bring big trouble for Houston billionaire Dan Duncan.
The 74-year-old founder of pipeline giant Enterprise Products Partners may face criminal charges following his appearance Wednesday before a grand jury in Houston, where he answered questions about the trip he and other hunters took with Russian guides.
During the trip, Duncan shot and killed a moose and a sheep while riding in a helicopter, a practice Duncan said he did not know was illegal in Russia. Neither animal was considered endangered, he said.
Russian officials were aware of the hunting expedition ó Duncan’s attorney Rusty Hardin said the guide on the trip is now a top official with the Russian Federation’s hunting licensing agency ó but there were no complaints or charges filed in that country.
Hardin said prosecutors from Washington, D.C., may use the Lacey Act, a 107-year-old law designed to prevent the interstate and international trafficking of rare plants and animals, to bring felony criminal charges against Duncan. If found guilty he could face jail time, Hardin said.
“What the hell is the U.S. interest in bringing felony charges here for hunting on Russian soil, where not one single person has complained?” Hardin said Wednesday. “Is this really the best use of our prosecutorial resources?”

Read the entire article.

As widely anticipated, U.S. District Judge Lewis Kaplan dismissed all charges today against 13 former KPMG partners in the KPMG tax shelter case because of the prosecution’s interference with the defendants’ Constitutional rights under the Fifth and Sixth Amendments. A copy of the decision is here (pdf), Peter Lattman provides this handy timeline of the case, while Ellen Podgor and Larry Ribstein and Kevin Lacroix provide their usual lucid commentary on Judge Kaplan’s decision.
Although expected, Judge Kaplan’s decision is a watershed event in the government’s campaign since the demise of Enron to increase regulation of business through criminalizing merely questionable transactions where responsibility for financial loss is more appropriately allocated among multiple participants in a civil context. The difficulties of fitting the round peg of legal business transactions into the square hole of criminal law has resulted in an unprecedented surge in dubious cases and prosecutorial misconduct epitomized by the legacy of abusive tactics of the Enron Task Force. Jamie Olis is serving six years in prison after being put through precisely the same wringer that Judge Kaplan determined was unconstitutional in the KPMG tax shelter case. But the shameless prosecutorial tactics of pursuing weak cases against unpopular targets (see also here), icing witnesses with exculpatory testimony and introducing junk evidence to confuse the jury are just as alien to justice and the rule of law as depriving defendants of their ability to mount an effective defense.
And make no mistake about it, Judge Kaplan lays the wood to the U.S. Attorneys’ Office for the Southern District of New York in his decision. The following excerpts are just a sampling of his criticism. As to the government’s disingenous assertion that KPMG ceased paying defense costs of its former partners on its volition and not under the threat of the DOJ going Arthur Andersen on the firm:

It now is undisputed that KPMG has been paying the defense costs of at least eleven of the sixteen KPMG Defendants in civil cases relating to the tax shelters here at issue and also the defense costs of eight of them in regulatory inquiries relating to the conduct in question in this case. . . . it is striking that KPMG has paid these costs subject to the requirement that the individuals be represented in the civil matters by attorneys who are not involved in defending this criminal case.
The fact that KPMG is paying civil defense costs, regardless of amount, is consistent with its uniform practice over many years. What makes the criminal case different is only the Thompson Memorandum and the USAOís actions. Indeed, the fact that KPMG has been paying the civil defense costs on condition that the defendantsí lawyers in those matters be different than their lawyers in the criminal case ñ a condition that is at war with any consideration of economy or efficiency ñ demonstrates with astonishing clarity that the different treatment of the criminal case defense costs has been driven from the outset by the fear that the government would view any assistance in defending against the indictment as a black mark against KPMG. KPMG cut off payment of defense costs to anyone who was indicted for one reason and one reason alone ñ the Thompson Memorandum and the related actions of the USAO. In their absence, KPMG would have paid every penny, just as it always had done before.

On the prosecution’s shocking manipulation of KPMG to deprive the defendants of their constitutional rights:

Just as prosecutors used KPMG to coerce interviews with KPMG personnel that the government could not coerce directly, they used KPMG to strip any of its employees who were indicted of means of defending themselves that KPMG otherwise would have provided to them. Their actions were not justified by any legitimate governmental interest. Their deliberate
interference with the defendantsí rights was outrageous and shocking in the constitutional sense
because it was fundamentally at odds with two of our most basic constitutional values ñ the right to counsel and the right to fair criminal proceedings. But the Court does not rest on this finding alone. It would reach the same conclusion even if the conduct reflected only deliberate indifference to the defendantsí constitutional rights as opposed to an unjustified intention to injure them. [ . . . ]
The governmentís actions with respect to legal fees were at least deliberately indifferent to the rights of the defendants and others. In all the circumstances, this behavior shocks the conscience in the constitutional sense whether prosecutors were merely deliberately indifferent to the KPMG Defendantsí rights or acted more culpably.

And Judge Kaplan concludes with the following passage from Berger v. United States on the proper purpose and scope of prosecutorial conduct, the meaning of which has been lost among the current crop of prosecutors in the Department of Justice:

[A prosecutor] is the representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all; and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done. As such, he is in a peculiar and very definite sense the servant of the law, the twofold aim of which is that guilt shall not escape or innocence suffer. He may prosecute with earnestness and vigor ñ indeed, he should do so. But, while he may strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one.î

Amen.

So, despite being acquitted on 9 of 13 counts, former Hollinger CEO Conrad Black was convicted yesterday in Chicago of three counts of mail fraud and one count of obstruction of justice (previous posts on the case are here). Three of Black’s former Hollinger associates were also convicted of three counts of mail fraud.
The essence of the verdict against Lord Black and the others is that they stole millions in non-compete compensation from the sale of Hollinger assets that should have gone to Hollinger. As noted earlier here, the big problem with that theory is that the payments were disclosed and approved on multiple occasions by Hollinger’s audit committee and board of directors. Thus, in effect, Lord Black and the others were convicted for not disclosing their receipt of the non-compete payments well enough.
The implications of this latest government foray to regulate business through the criminalization of merely questionable business transactions is troubling, to say the least. As noted most recently here and many times over the years on this blog, the presumption in these prosecutions over wealthy businesspeople is no longer innocent until proven guilty. Rather, the presumption is that that these defendants are rich and the government is accusing them of all sorts of bad stuff, so they must have done something wrong. Although I think Lord Black made a mistake in not taking the stand in his own defense, a reasonable counter-argument can be made that doing so doesn’t make any difference when dealing with such an onerous presumption. Do any of us really think that we could stand up in the face of such winds if they turn toward us?
An extremely talented businessman and author is now facing the prospect of spending a good part of the remaining part of his life in prison. For an extraordinarily insightful analysis of Lord Black’s career and the vested interests that pursued the criminal case against him, take the time to read this lengthy Adrian and Olga Stein essay (pdf) entitled Conrad Black, Corporate Governance, and the End of Economic Man. The conclusion of the Steins’ essay is particularly apt in light of the verdict against Lord Black:

The prosecutors of Conrad Black know nothing of the ìanimal spiritsî to which Lord Keynes refers. Their only interest is to squash any independent spirit in the interest of defending the mirage of ideas that falls under the rubric of corporate governance. For the general public the challenge is to realise that injustice can conceal itself in attacks on the powerful, the privileged, the wealthy, and the elected; natural objects of resentment and envy, they are people for whom we tend to think a ëfallí or redress is in order. The injustice proceeds in small and public acts of complicity, and finds an abode in various subconscious registers of the psyche where schadenfreud and vicarious pleasure in the failures and misfortunes of others fester. The Spanish Inquisition, the French revolutionary trials, the Alfred Dreyfus Affair, the Soviet show trials, and the McCarthy-era hearings all happened within a sanctioned legal framework, with voluminous evidentiary support, cooperative witnesses, and with broad public consent. These trials were often conducted by zealous prosecutors. All of them maintained the pretense or facade of pursuing justice. It is only with the passing of time and the shift in the historical frame of reference that we come to understand the ëinjusticeí. The imperative is to see
injustice in all of its guises, to face it squarely, and confront it with courage.

Update: Larry Ribstein provides his usual sharp insight, while Peter Henning provides this initial analysis of the sentencing issues. Also, here are some further thoughts on the problems that juries confront in sorting out the issues in trials such as Black’s.

This earlier post noted how the shadow of the sad case of Jamie Olis continues to hang over the KPMG tax shelter case in New York, and this post explored how Olis’ defense was financially undermined by the Justice Department’s overt threats to go Arthur Andersen on his employer, Dynegy.
Now, this Lynnlee Browning/NY Times article analyzes evidence that has been generated in the KPMG case about how the Justice Department threatened KPMG with indictment unless it abandoned its policy of paying the defense costs of its partners who had been indicted. It’s a harrowing tale and a stark reminder of how the federal government’s awesome prosecutorial power is being abused to cause job loss and erosion of wealth while ruining careers and damaging families in the process. This is not the product of a truly civil society.

With the Conrad Black trial winding down in Chicago, it’s about time for another dubious prosecution of a businessman, this time former Brocade CEO Greg Reyes, who is the first executive to be prosecuted for fraud in connection with backdating stock options.

Larry Ribstein has been following the case since the start and has excellent analysis of the selective nature of the prosecution.

Here is Steve Stecklow’s WSJ article on the trial.

Given the widespread nature of backdating, there are probably more criminal defense attorneys watching this trial than any other single prosecution of a businessperson over the the past five years. If a blogger pops up to cover the trial, I’ll pass it along.

Mark Steyn — who has done a wonderful job blogging the Conrad Black trial — reports that the case will go to the jury next week after the defense rested this week with Black electing not to testify.
The Black’s defense team strategy in holding Black off the witness stand is risky. As Martha Stewart and Jamie Olis learned the hard way, jurors in white collar criminal cases expect to hear the defendants explain why the government’s charges are not true. When the jurors do not hear from the defendant, no jury instruction will ever remove the seeds of doubt from the jurors’ minds that the defendant is trying to hide something. Granted, as Jeff Skilling and Ken Lay experienced, testifying in one’s own defense certainly does not assure a successful defense. Likewise, the courtroom dynamics of each trial are different, so those in play in the Black trial courtroom may favor Black staying off the stand. But as the late Edward Bennett Williams used to advise his white collar criminal clients, “If you elect not to testify, then you better bring your toothbrush with you to the courthouse.” Inasmuch as the government’s case in the Black trial appears to be extraordinarily weak, here’s hoping that the Black defense team’s decision to keep Black off the stand does not come back to haunt them.