Judge Griffin Bell died of pancreatic cancer yesterday, at 90. Undoubtedly one of the finest Attorney Generals in U.S. History, Bell was fiercely independent and a legendary supporter of individual privacy rights while in office and afterwords. Patrick Lyons’ N.Y. Times Obituary, buried here on A18, is excellent, but fails to mentione Bell’s successful stand against Labor Secretary Ray Marshall’s plan to implement a uniform nationwide identity card.
Bernard Madoff’s wife sent some of the couple’s valuables to family members and friends, allegedly in violation of an injunction obtained by the SEC in its civil case against Madoff. Ergo, the SDNY U.S. Attorney’s Office wants Madoff’s bond revoked, on grounds that he is a flight risk and and an economic danger to the community. Magistrate Judge Ronald Ellis seemed skeptical at yesterday’s hearing and wants to see some law. The Government’s brief is due today, and Madoff has through Wednesday to respond. Alex Berenson’s NYTimes story is here. I’ll be discussing this issue on CNBC’s Power lunch today, sometimes between 12:15 and 12:30 PM Eastern Time.
The Washington Post has the story here. Apparently the pace of the federal criminal inquiry quickened after President-Elect Obama announced Governor Richardon’s nomination. FBI Special Agents assisting the Senate in its nominee vetting process purportedly alerted the Obama transition team to the seriousness of the allegations under investigation. According to the Richardson and Obama camps, there was no pressure from the Preseident-Elect on Richardson to withdraw.
Scott Horton of Harper’s gives this less than charitable take on former Attorney General Alberto Gonzales’ tenure, in light of Gonzales’ recent WSJ interview. The interview was covered/summarized here in yesterday’s WSJ. Gonzales’ basic complaint/defense is that he was not, as White House Counsel, the evil mastermind of the Bush administration’s War on Terror policies; he was one of several lawyers who had a willing hand in formulating those policies. Horton believes that Gonzales lacked a critical lawyering skill–the ability to say “no” to a client. It is hard to argue with this. Gonzales never seemed fully to grasp the critical distinction between the role of White House Counsel and the role of Attorney General. The Attorney General must be a loyal Executive Branch official, but he is not the President’s personal lawyer. He also has an independent duty to uphold the law, including the Constitution. Given the White House’s truly breathtaking claims of Executive Privilege, some of which apparently trumped explicit criminal sanctions contained in federal statutory law [see FISA], and given Gonzales’ role in formulating/defending those claims, his unsuccessful transition from White House Counsel to Attorney General was a foregone conceptual conclusion. This is particularly so, given Gonzales’ longstanding role as Governor and President Bush’s yes man.
Even today Gonzales seems clueless as he discusses his famous hospital visit to Attorney General Ashcroft’s side, where he stood off against Deputy AG Jim Comey and the FBI’s Bob Mueller. According to Gonzales, Ashcroft (who had temporarily ceded the AG’s powers to Comey during gallbladder surgery) was “as lucid as I’ve seen him at meetings in the White House.” Really? Was somebody secretly spiking Ashcroft’s punch during Cabinet meetings?
And in the believe it or not category, Gonzales is angry that Comey gave his famous congressional testimony about the hospital visit showdown without having had ”the decency to notify anyone” beforehand. I’m not making any of this up.
Former GSA Chief of Staff David Safavian was convicted on Friday for obstruction of justice and lying to federal officials concerning his dealings with disgraced former lobbyist Jack Abramoff. Safavian didn’t testify or call any witnesses. His original convictions were thrown out by the U.S. Court of Appeals for the D.C. Circuit. U.S. District Judge Paul Friedman presided at the trial and Lawrence Robbins was lead defense attorney. Justin Schur represented DOJ. Jesse Holland’s AP story is here. . . . For five years the FBI improperly instructed its agents in Iraq to over-report hours, resulting in at least $6 million dollars in improper overtime and Sunday payments, according to the DOJ Inspector General’s report. Ben Corey’s Washington Times story is here. The FBI has admitted wrongoing and says it has stopped these deceptive practices. Spencer Hsu’s Washington Post piece reports that six straight counter-terrorism chiefs condoned the false reporting. Apparently not one of these officials consulted with the FBI’s General Counsel’s Office. Agents were told, among other things, to report time spent at cocktail parties and doing laundry as overtime. One FBI employee took the position that, “When you’re in that environment, anything you do to survive is work for the FBI.” No doubt this is true in some sense. But I don’t see DOJ applying that principle to its various criminal investigations of contractor fraud in Iraq. Apparently there are special rules in Iraq for special people. . . . Meanwhile, Washington Post Personal Finance Columnist Jane Bryant Quinn here discusses two obvious red-flags that should have been apparent to Bernard Madoff’s victims: 1) His fund was audited by an obscure, allegedly rinky-dink, accounting firm with no website; and 2) The funds were held in Madoff’s own advisory firm rather than with “a large, independent financial institution that reports cash flows and trading activity to you directly.”
Chief US District Judge Michael Mills on Tuesday sentenced Joey Langston to 36 months in prison for his role in the public corruption scandal now known as “Scruggs II” (Daily Journal, Clarion-Ledger). Langston pleaded guilty in January to a one-count information charging him with bribing Judge Bobby DeLaughter. He received the maximum sentence allowable under his plea agreement despite a a motion for downward departure filed by prosecutors last month citing his extensive cooperation. The implications for Bobby DeLaughter and Ed Peters (not to mention Dickie Scruggs) are ominous.
More: the Daily Journal hints at upcoming Scruggs II indictments, NMC’s courtroom commentary at folo, sentencing transcript (.pdf).
Rob Cox of breakingviews.com has an excellent column placing the Madoff Ponzi Scheme Fraud within the context of boom and bust economic cycles. Big frauds (or “bezzles”) like Madoff’s remain hiddden in speculative boom years and typically come to light during downturns. The dowturns are in part caused by the excesses and scams of the boom years. The bezzle theory was developed by economist John Kenneth Galbraith. According to Cox, Galbraith taught that the first frauds uncovered are seldom the largest. Thanks to Dave Westheimer for shooting this article to me.
Yahoo! News carries this AP story by Don Thompson on mortgage fraud as a booming business for federal prosecutors. Although the article focuses on the rising number of mortgage fraud prosecutions at the federal level, an important subtext is that most of the criminal cases are being brought against relative pikers. Thanks to my friend Michael Clark of Hamel Bowers & Clark for sending this piece to me.
High society investment advisor and Wall Street legend Bernard Madoff has been arrested for running what the SEC calls “a stunning fraud that appears to be of epic proportions.” Madoff was turned in by his sons. The Wall Street Journal has the story here. Losses are estimated to be in the $50 billion range. The SEC has filed suit and DOJ has issued a criminal complaint.
White collar crime is our focus, but America is our beat. And the politics of prosecution in the Department of Justice is always something that we will examine. Here is today’s Washington Post story on the indictment of five former Blackwater guards unsealed yesterday. The guards were providing security for the State Department on a dangerous convoy in Iraq. There are several troubling things about these charges, which we intend to comment on in coming days: 1) it is unclear whether a federally cognizable crime was committed; 2) jurisdiction is iffy; 3) there are serious evidentiary issues caused by the issuance of Garrity assurances to guards who were interrogated; and 4) dubious inclusion of inappropriate firearms/deadly weapons charges. More to come.