Category Archives: Legal – General

While you’re at it, Judge Rakoff

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jedrakoff The legal and business communities are still buzzing over U.S. District Judge Jed Rakoff’s scathing refusal earlier in the week to approve the proposed $33 million "settlement" (i.e., sweep under the rug) between the SEC and Bank of America over that the Bank’s failure (at least transparently) to disclose to its shareholders the billions in bonuses that the Bank agreed that an insolvent Merrill Lynch was allowed to pay to its employees.

The 12-page decision is certainly worth a read. Judge Rakoff tears into into the SEC for contradicting its own guidelines in penalizing BofA shareholders rather than the executives and lawyers who supposedly approved the lack of disclosure. The settlement "does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the Bank’s alleged misconduct now pay the penalty for that misconduct." The Judge didn’t buy the SEC’s contention that this punishment will result in better management, characterizing it as "absurd." Sort of like the notion that the SEC can really police this type of thing in the first place.

Judge Rakoff goes on in his opinion to raise at least another half-dozen or so good questions about the proposed settlement. But there’s a couple more that I wish he’d asked.

A few years ago, former Enron chairman Ken Lay was prosecuted to death for promoting Enron to its shareholders even though he had a reasonable basis for believing that what he was saying about his company was true.

In contrast, the BofA executives and lawyers could not even offer the defense in a criminal fraud trial that the bad things they intentionally failed to tell BofA shareholders about the Merrill Lynch deal were immaterial.

So, isn’t it about time that somebody in the federal government acknowledge that it was a mistake to prosecute Ken Lay to death? And isn’t it about time that the government do something about this barbaric injustice?

Understanding storytelling

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Story telling graph When young attorneys ask me how they can become more effective advocates in the courtroom, I usually tell them: "Become better at telling stories."

Several years ago, Derek Sivers interviewed the late Kurt Vonnegut, who was no slouch as a storyteller. Check out Vonnegut’s views on story-telling, which he believed promotes the need for drama in people’s lives.

Essential reading for anyone who seeks to persuade.

Confession and Avoidance

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As our own country confronts the difficult issues involved in conducting war, it seems appropriate to recall the closing defense argument in one of the all-time great lawyer movies, Breaker Morant.

Rationing health care in a disaster

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DALLAS MORNING NEWS If you read one article health care-related this week, make it this extraordinary Sheri Fink/NY Times Magazine article on the impossible choices that the heroic doctors — including Dr. Anna Pou — faced at the former Memorial Medical Center in New Orleans in rationing limited medical and evacuation services for their patients during the chaotic aftermath of Hurricane Katrina.

Ms. Fink summarizes the issues raised by the issues that Dr. Pou and her colleagues well:

The story of Memorial Medical Center raises other questions:

Which patients should get a share of limited resources, and who decides?

What does it mean to do the greatest good for the greatest number, and does that end justify all means?

Where is the line between appropriate comfort care and mercy killing?

How, if at all, should doctors and nurses be held accountable for their actions in the most desperate of circumstances, especially when their government fails them?

Interestingly, after the federal, state and local governments largely failed the doctors, other workers and patients at Memorial in the aftermath of Katrina, get a load of how the government forces acted once the decision was made to arrest Dr. Pou:

AT ABOUT 9 P.M. on July 17, 2006 — nearly a year after floodwaters from Katrina swamped Memorial hospital — Pou opened the door of her home to find state and federal agents, clad in body armor and carrying weapons. They told her they had a warrant for her arrest on four counts of principal to second-degree murder.

Pou was wearing rumpled surgical scrubs from several hours of surgery she performed earlier in the day. She knew she was a target of the investigation, but her lawyer thought he had assurance that she could surrender voluntarily. “What about my patients?” she asked reflexively. An agent suggested that Pou call a colleague to take over their care. She was allowed to freshen up and then was read her rights, handcuffed and ultimately driven to the Orleans Parish jail.  .   .   .

Read the entire article. Whose judgment do you trust more? Dr. Pou and her colleagues? Or that of those governmental officials who decided to arrest her?

A real head scratcher

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James Davis The Stanford Financial Group scandal has been anything but typical, but yesterday’s developments may have been the most bizarre yet.

The big news, other than the hospitalization of R. Allen Stanford, was the guilty plea that Stanford’s right-hand man and long-time friend, James Davis, entered in connection with a plea bargain that he worked out with federal prosecutors.

The background section of the plea deal makes for some entertaining reading (bribes to, and a blood oath with, an Antiguan bank regulator?). But the more interesting aspect is that Davis’ plea is the latest chapter in a most curious defense strategy.

From almost the outset of the Stanford Financial scandal, Davis’ attorney — Dallas-based attorney David Finn — has been telling any media outlet that was willing to quote him that his client was guilty of a huge fraud on Stanford investors and that Davis was going to plead guilty to charges as soon as he could work out details of a plea deal with federal prosecutors. Even the most rabid prosecutors would never risk making such public statements, so effectively Finn has been doing much of the prosecutors’ public relations work for them.

And now we finally know the terms of the plea deal between the prosecutors and Davis.

On one hand, David pled guilty “in exchange for” a Level 43 under the Sentencing Guidelines (reduced from a Level 46 — do the Sentencing Guidelines even go up that high?!) “with acceptance” deal. Based on my understanding, that means that Davis has agreed to a prison sentence of 30 years to life. Davis is 60, so assuming that he gets the full benefit of the the traditional 1/3rd off under the guidelines for being a good snitch (no cinch bet in Judge Hittner’s court), Davis will do 20 years and be 80 by the time he shuffles out of prison.

On the other hand, the prosecution "gets” Davis as their primary witness, who — according to the prosecution’s own theory of the case — was one of the key participants in a six billion dollar scam from the beginning. If, as prosecutors alleged during the hearing, Stanford Financial was a “giant house of cards," then why cut a “deal” with the guy who was one of the lead architects of the scam?

Well, we now have the answer to that question. The plea deal is not a "deal" at all. It’s total surrender.

Davis is reportedly working as a day laborer at $10 per hour to pay his legal fees. From the looks of it, he is getting the quality of representation that he is currently capable of paying for.

Scalding Scalia

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scalia Never one to avoid a lively debate, Harvard law prof Alan S. Dershowitz (previous posts here) lays the wood to Supreme Court Justices Antonin Scalia and Clarence Thomas in this Daily Beast op-ed over the extent of their rationalizations to avoid restricting application of the death penalty:

I never thought I would live to see the day when a justice of the Supreme Court would publish the following words:

“This court has never held that the Constitution forbids the execution of a convicted defendant who has had a full and fair trial but is later able to convince a habeas court that he is ‘actually’ innocent. Quite to the contrary, we have repeatedly left that question unresolved, while expressing considerable doubt that any claim based on alleged ‘actual innocence’ is constitutionally cognizable.”

Yet these words appeared in a dissenting opinion issued by Justices Antonin Scalia and Clarence Thomas on Monday. Let us be clear precisely what this means.

If a defendant were convicted, after a constitutionally unflawed trial, of murdering his wife, and then came to the Supreme Court with his very much alive wife at his side, and sought a new trial based on newly discovered evidence (namely that his wife was alive), these two justices would tell him, in effect: “Look, your wife may be alive as a matter of fact, but as a matter of constitutional law, she’s dead, and as for you, Mr. Innocent Defendant, you’re dead, too, since there is no constitutional right not to be executed merely because you’re innocent.”

You know, he’s got a point. As noted earlier here, Justices Scalia and Thomas’ rigid reasoning sure do lead to some dubious decisions.

Where is the outrage?

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bob_dylan A couple of stories caught my eye over the weekend.

The first was the one involving Bob Dylan being pulled over by a couple of young cops while taking a walk in a New Jersey neighborhood a few hours before his show that evening. The theme of the story is how funny it is that neither of the 20-something year-old policeman recognized the iconic musician.

However, my thought was the same as Radley Balko’s — how sad it is that a 68 year-old grandfather cannot go for a walk in a neighborhood without being confronted by a couple of policeman and ultimately escorted back to his hotel. Dylan was doing nothing wrong and there was no report of a crime in the area, yet he is pulled over and taken off the street simply because he left his ID back at the hotel. As with the Gates affair, the primary reason that police are getting away with treating citizens in such a manner is that most of the public is simply making light of it when it happens to someone else.

BetOnSports-112508L Meanwhile, the Dylan affair received more publicity than even a greater outrage — that is, the guilty plea to racketeering charges of Gary S. Kaplan, who did nothing other than create and help run the publicly-owned internet gambling company named BetOnSports (previous posts here).

You may remember this lurid case from 2006. Avaricious federal prosecutors, with apparently nothing else to do, indicted BetOnSports, Kaplan and several other of the company’s executives were arrested while changing planes in the U.S. despite the fact that the company was not accused of doing anything dishonest toward its customers, who simply enjoyed placing bets online. As a result of the arrests and the indictment, BetOnSports ultimately liquidated, resulting in hundreds of millions of dollars in losses for American customers.

In essence, Kaplan and his associates were thrown in U.S. jails for years before trial and told that a business that they believed was legal was a criminal enterprise even though it was being run in the open and publicly-traded on the London Stock Exchange. Apparently, U.S. prosecutors now believe they can enforce even ambiguous U.S. laws on any business, wherever based, solely because some of the customers of the business happen to be Americans. The legal theory is bad enough, but the imprisonment of foreign businessmen passing through the U.S., while at the same time causing American citizens to suffer undeserved financial losses, reflects a serious lack of adult supervision at the Department of Justice.

Sure, Dylan is a funny old man now. And who cares about a few foreign businessmen who get inconvenienced by the American criminal justice system?

But as Sir Thomas More reminds us, "when the last law was down, and the Devil turned ’round on you, where would you hide, the laws all being flat? .   .  . do you really thing you could stand upright in the winds that would blow then?"

One of the clearest lessons of the 20th century is that large governments, unrestrained by their citizenry, have the capacity to cause unspeakable evil. As injustices such as the foregoing unfold with nary a protest from citizens, is that lesson already forgotten?

The Stanford D&O Policy

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stanford_logo

This earlier post noted that alleged Ponzi-schemer R. Allen Stanford has been denied use of proceeds of a director’s and officer’s insurance policy to pay his defense costs because of claims made on that policy by the receiver appointed in the SEC’s civil lawsuit against Stanford Financial Group.

Inasmuch as Stanford’s personal assets have been frozen in that civil lawsuit, the lack of insurance coverage under the D&O policy has effectively prevented Stanford from finalizing arrangements for his defense in the criminal case. That state of affairs has certainly contributed to this unfortunate situation.

Thus, the issue of who is entitled to the proceeds of the Stanford D&O policy is extremely important, and Kevin LaCroix over at The D&O Diary has done this excellent analysis of the issues involved. It looks to me as if the Stanford officers have the better case than the receiver to the proceeds, but what do I know?

At any rate, if I am right, then Stanford and other Stanford Financial Group officers are being severely damaged as a result of the insurers declining to pay claims under the policy pending resolution of the receiver’s claim to the policy proceeds.

It sure doesn’t look as if anyone in the judiciary cares about that much.

What’s the purpose of the Madoff sentence?

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Madoff When Bernie Madoff was sentenced a few weeks ago, my reaction was that it is utterly absurd to imprison a 72 year-old white collar criminal for 150 years. I mean, really — what’s the point?

Herb Hoelter agrees:

Bernie Madoff’s 150-year prison sentence was an affront to the federal criminal justice system.  .  .  .

I’ve been a professional federal sentencing consultant for more than 32 years. I have worked with hundreds of white-collar offenders over the past 25 years – Madoff, most recently – whose punishments dramatically increased in direct proportion to the government trumpets of justice, punishment and deterrence. Having lived through the past two decades of federal sentencing guidelines (no longer to be "presumed reasonable," ruled the Supreme Court this year), I know that the Madoff sentence was the crown jewel for the government.

In imposing sentence, however, the court ignored virtually all statutory sentencing principles and trumped the defunct federal sentencing guidelines. The sentence was imposed, acknowledged Judge Denny Chin, for symbolic purposes, which violates the supposed blindfolds of our nation’s justice system.

The sentence was, of course, within the law. But being within the law does not always mean a sentence is appropriate. Legal scholars will be hard-pressed to find a first-offender sentence of Madoff proportions – the maximum statutory term imposed on each count, to be served consecutively. [.  .  .]

The court’s responsibility is to deliver justice, not respond to emotional tactics. The Madoff sentence – with its "symbolic" justification – failed a big test.   .   .   .

In the meantime, this even more egregious sentence of a man who didn’t steal a dime from his company or investors continues to fade from our society’s consciousness.

A truly civil society would find a better way.

The Real Message of the Gates Affair

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Despite America’s dubious legacy of exercising state power to oppress minorities, that legacy really was not the most important dynamic in play in regard to the improper arrest of Harvard professor Henry Louis Gates.

Rather, the real issue here is the increasing arrogance of America’s governmental officials to condone arrest of citizens as punishment for non-criminal behavior that police or prosecutors simply don’t like.

Interestingly, as Alice Ristroph explains, the judicial acquiescence to this increasing problem has Texas roots.

Gail Atwater was an Austin-area soccer mom who got into it with police officer and was arrested for a seatbelt violation, a “crime” that calls for no jail time. Atwater fought the charges, but the U.S. Supreme Court held in a 5-4 decision (what were Justices Souter, Kennedy, Scalia, Thomas and Rehnquist thinking?) that police officers may arrest citizens even for perceived offenses that call for no jail time.

In short, the Court concluded that the “gratuitous humiliations” that the police officer imposed on Atwater were within the scope of the officer’s discretion. Thus, Sergeant Crowley’s exercise of power to put Professor Gates through the same humiliations over a bullshit disorderly conduct charge is protected by the Supreme Court.

Couple the foregoing with America’s penchant for increasing criminalization of virtually everything and you have a very troubling trend.

As Glenn Loury notes in this NY Times op-ed, “anyone who looks closely into the issue of crime and punishment in America cannot fail to notice that the institutions of domestic security — policing, surveillance, prisons, anti-drug policy, post-release parole supervision — have grown hugely over the past two generations.”

Similarly, given the expansion of the federal criminal code over the past generation, Radley Balko notes that “you’re probably a federal criminal, too.” Indeed, the Cato Institute for years has been criticizing what it calls the “overcriminalization of conduct and the overfederalization of criminal law.” We already know all about that here in Houston, now don’t we?

As I first noted in 2004 in regard to Martha Stewart’s conviction on bogus criminal charges, and as I’ve noted many times over the years in regard to other examples of overreaching prosecutions, Sir Thomas More in A Man for All Seasons alerts us on why we should all be concerned with such increasing judicial deference to the overwhelming prosecutorial power of the state. The context is the scene in which Sir Thomas explains to his wife, his daughter and her fiance why he won’t misuse his power as Chancellor of England to arrest his student Richard Rich, despite the fact that Rich is preparing to betray Sir Thomas to Thomas Cromwell and Henry VIII:

Lady Alice (Sir Thomas’ Wife): “Arrest him!”

Sir Thomas: “For what?”

Lady Alice: “He’s dangerous!”

Roper: “For all we know he’s a spy!”

Daughter Margaret: “Father, that man is bad!”

Sir Thomas: “There’s no law against that!”

Roper: “But there is, God’s law!”

Sir Thomas: “Then let God arrest him!”

Lady Alice: “While you talk he’s gone!”

Sir Thomas: “And go he should, if he were the Devil himself, until he broke the law!”

Roper: “So, now you give the Devil the benefit of law!”

Sir Thomas: “Yes! What would you do? Cut a great road through the law to get after the Devil?

“Roper: “Why, yes! I’d cut down every law in England to do that!”

Sir Thomas: “Oh? And when the last law was down, and the Devil turned ’round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man’s laws, not God’s! And if you cut them down–and you’re just the man to do it, Roper–do you really think you could stand upright in the winds that would blow then?”

“Yes, I’d give the Devil the benefit of the law. For my own safety’s sake.”