Last month we posted here concerning a 5-part series at folo about Keith Shelton, an attorney in Mississippi who was framed and disbarred in what can best be characterized as an outrageous miscarriage of justice by a former district attorney and a corrupt judge. We are pleased to note that the Mississippi Supreme Court on Friday reinstated Keith Shelton (.pdf) to the Mississippi Bar. The decision is well worth reading as an official confirmation of the underlying facts; note especially the concurring opinion of Justice Dickerson. The Clarion-Ledger story here fails to accurately report the background of the case. Congratulations to Mr. Shelton, and a hat tip to folo.
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A two paragraph addendum to this Sun Herald story about the suspension of Judge Bobby DeLaughter indicates that Dickie Scruggs has asked the Mississippi Supreme Court to dismiss disbarment proceedings against him subsequent to his guilty plea “because U.S. District Judge Neal B. Biggers Jr. has not yet accepted his plea.”
However, on page 16 of the transcript of Scruggs’ March 14 plea hearing, Judge Biggers says [emphasis added] “the Court will accept your guilty plea and enter a judgment of guilty on your plea.”
Despite signing a plea agreement, Scruggs had to be prodded by his attorney John Keker into admitting his guilt in open court. Now this. It’s hard to figure out what he hopes to accomplish by this move, but once Judge Biggers learns of it, we shall probably hear more in short order.
Andrea Batronie, a licensed title agent from Land O’Lakes, Florida, was sentenced on Friday to 30 months in prison by US District Judge Richard Lazzara in Tampa for her part in a $6 million “equity stripping” mortgage fraud scheme that included identity theft. Batronie was found guilty of conspiring to commit mail, bank and wire fraud last October. A day earlier, licensed mortgage broker Luis Uribe pleaded guilty to single counts of wire fraud and aggravated identity theft in the same scheme. Uribe is said to have obtained 32 mortgage loans under false pretenses through a shell contracting company using stolen identities, apparently on the premise of additional construction work to be done. However, no work was ever performed by the contracting company. At closing Batronie would divert the funds into bank accounts under their control. Tampa Tribune, Tampa Bay Business Journal.
A March 19 ruling in the case of former Bristol-Myers Squibb CFO and senior VP Frederick Schiff has limited the scope of the prosecution’s case and delayed the trial which was to have begun last week in US District Court in Newark, New Jersey while the government appeals the ruling. Schiff and former Bristol-Myers executive VP Richard Lane were indicted in 2005 on charges of conspiracy and securities fraud in connection with a “channel stuffing” scheme to inflate sales. US District Judge Faith Hochberg’s ruling prevents prosecutors from tying Schiff’s alleged activities to investor losses when Bristol-Myers Squibb’s stock price dropped when the practice was disclosed. Judge Hochberg also criticized prosecutors for repeatedly changing the theory of the crime, saying “the court will permit no further ‘legal theory morphs’ in this case.” Lane’s trial will also be delayed. NY Times, Newark Star-Ledger.
In Columbus, Ohio on Thursday evening, US District Judge Gregory Frost issued a bench warrant for the arrest of Rebecca Parrett, one of the five executives of National Century Financial Enterprises convicted on March 13 on fraud charges in connection with the company’s 2002 collapse (here and earlier). Parrett, a co-founder of the company and vice chairwoman, secretary, treasurer and director, was found guilty of one count of conspiracy, six counts of securities fraud, one count of wire fraud and one count of money laundering. After the verdicts were announced, US District Judge Algenon Marbley allowed all five convicted executives to remain under house arrest with electronic monitoring pending sentencing. Parrett was supposed to report to the Pretrial Services Office near her home in Carefree, Arizona, for installation of an electronic ankle bracelet but she failed to show up and her whereabouts are unknown. The US Marshal’s Office has begun a search. Columbus Business First, Bloomberg.
In response to the petition by the Mississippi Commission on Judicial Performance for an interim suspension of Circuit Judge Bobby DeLaughter (earlier here and here), the Mississippi Supreme Court on Friday suspended DeLaughter indefinitely. The commission has charged DeLaughter with willful misconduct in two cases, Wilson v. Scruggs and Kirk v. Pope. In the former case, Joey Langston has pleaded guilty to bribing DeLaughter via former Hinds County DA Ed Peters on behalf of Dickie Scruggs. No one else has yet been indicted but DeLaughter is known to be under federal investigation in the case (Clarion-Ledger, Sun Herald).
Just hours after the House Judiciary Committee asked the DOJ to release former Alabama Governor Don Siegelman under guard to allow him to testify before Congress in May (Montgomery Advertiser, AP) — a move brought about by the DOJ’s refusal to cooperate with the HJC — the US Court of Appeals for the Eleventh Circuit on Thursday granted Siegelman’s motion for release on bond pending appeal, finding that his appeal raises substantial questions of law or fact. Since this issue had twice before been remanded to district court, the decision can be viewed as a direct repudiation of US District Court Judge Mark Fuller’s actions. Siegelman may be released as early as today (NYT (with link to order), AP). Scott Horton at Harper’s has editorial commentary here. In related news, the 11th Circuit has has given attorneys for Siegelman and HealthSouth founder Richard Scrushy until May 23 to file appellate briefs. Siegelman’s attorney Vince Kilborn estimated oral arguments on the case could be heard in late 2008 (AP).
In Newark, New Jersey on Thursday, US District Judge Stanley Chesler sentenced former Suprema Specialties Inc. President and CEO Mark Cocchiola to 15 years in prison for his role in a fraud that caused the Paterson, New Jersey cheesemaker to collapse in 2002. He was also ordered to pay $115 million restitution to investors and banks; the total loss has been estimated at more than $177 million. Cocchiola and Suprema Specialties CFO Steve Venechanos were convicted in April 2007 on 38 counts including conspiracy, bank fraud, making false statements to the SEC,wire fraud and mail fraud. The charges arose from a complex and long-running scheme to increase the company’s stock price by fraudulently inflating inventories and by billing $400 million in non-existent sales. Venechanos is scheduled for sentencing on April 7. New Jersey Star-Ledger, AP.
The US Court of Appeals for the Eleventh Circuit on Thursday granted former Alabama Governor Don Siegelman’s request to be released from prison pending the outcome of his appeal (Birmingham News).
KPMG either initiated or tolerated accounting fraud at New Century Financial Corp., according to a 581 page report by Michael Missal, the bankruptcy court’s independent examiner appointed at the request of the Department of Justice to investigate New Century’s 2007 plunge into bankruptcy. The report also blames New Century’s management, and details significant departures from generally accepted accounting practice. New Century was once the nation’s second largest subprime lender. Reuters has an excellent piece here by Amanda Beck. The Washington Post’s Carrie Johnson has a story as well. KPMG, the financial industry’s poster child for abandoning your employees in the face of a federal investigation, vigorously denies the report’s conclusions.
A three-judge panel from the US Court of Appeals for the Second Circuit on Tuesday heard arguments in the government’s attempt to reinstate the indictments of 13 former KPMG LLC executives in what was once the largest criminal tax shelter prosecution in US history. In July 2007 US District Judge Lewis Kaplan dismissed the indictments of 13 out of an original 19 defendants in US v. Stein et al because the government threatened to indict KPMG if the company did not stop paying the defendants’ legal costs despite contractual obligations to do so. The Bloomberg News story indicates that the judges were highly critical of the government’s arguments. While AUSA Karl Metzner contended that a fair trial was still possible and that dismissal of the indictments was “too drastic a sanction” despite Kaplan’s ruling that the government’s actions violated the defendants’ rights, Chief Circuit Judge Dennis Jacobs noted that “time has moved forward” and Judge Peter Hall likened a reinstatement to “putting toothpaste back in the tube”.
Predictably, the government response to Jeff Skilling’s supplementary appellate brief denies that the Enron Task force withheld material exculpatory information from the former Enron CEO’s defense team. The government’s brief, filed on Tuesday, asserts, “Skilling’s claims rely on isolated snippets culled from 420 pages of handwritten notes and stripped of their context.” It accuses Skilling of using “hyperbolic rhetoric” and says that the Andrew Fastow interview notes that Skilling cites in his supplemental brief either contain information that Skilling had prior to the trial in the summaries of the notes “or would have had minimal value in impeaching Fastow.” Houston Chronicle here (with link to the brief), our earlier posts here, here and here. The US Court of Appeals for the Fifth Circuit has scheduled arguments in the appeal for April 2.
Six days after the Mississippi Commission on Judicial Performance filed a petition with the Mississippi Supreme Court asking for an interim suspension of Judge Bobby DeLaughter for judicial misconduct in two cases, one of them involving Dickie Scruggs (earlier), DeLaughter delivered a letter to the Commission stating that he will not challenge a temporary suspension pending a decision after a hearing if it is so ordered. SunHerald, DeLaughter letter.
After about 6 hours of deliberation yesterday and today, a federal jury in Columbus, Ohio has convicted former National Century Financial Enterprises CEO and co-founder Lance Poulsen and his associate Karl Demmler on one count each of conspiracy to obstruct justice, witness tampering, witness tampering by influencing testimony and corruptly persuading a federal witness. They face a possible maximum of 55 years in prison. The charges arose from their attempt to pay former National Century Executive VP for compliance Sherry Gibson $500,000 to $1 million to have a “memory lapse” when called to testify against Poulsen in his fraud trial in connection with National Century’s 2002 collapse. Poulsen’s trial on 47 counts including conspiracy, wire fraud, securities fraud and money laundering is now scheduled to begin August 4.
US District Judge Algenon Marbley has not set a date for sentencing but ordered Demmler held without bond because of threats he made against two local judges and an attorney in the taped conversations which were entered into evidence at the trial. Poulsen is already in custody because his bond on the original fraud charges was revoked after he was indicted on the witness tampering charges. Columbus Business First, Bloomberg, our earlier trial coverage here, here and here.
Charles Head of La Habra, California, alleged leader of a nationwide mortgage fraud scheme, and 18 others have been charged in two separate indictments unsealed on Monday by the US Attorney’s Office in Sacramento; charges include mail fraud, conspiracy to commit mail fraud, conspiracy to commit money laundering, bank fraud and identity theft. In the first, Head and 15 others were indicted on 13 counts These charges arise from an alleged “foreclosure rescue” scam involving $6.7 million taken from 47 homeowners, mostly in California. Homeowners in distress were convinced to add the name of an investor to their titles for purposes of repairing their credit while paying less than their mortgage amounts in rent to the investor, but Head and his associates allegedly switched the titles to their own names, refinanced and took the equity. In the second, Head and 6 others (including two also charged in the first scheme) were indicted on 5 counts in connection with a similar “equity stripping” scheme in which $5.9 million in equity was allegedly stolen from 68 homeowners nationally, recruited with the help of mortgage brokers. Prosecutors indicated that more indictments are likely. San Francisco Chronicle, DOJ.
A mother and daughter who formerly operated a travel agency in McKinney, Texas were sentenced to federal prison on Monday by US District Judge Richard Schell in Sherman, Texas. Carol Ribaudo of Clearwater, Florida received a 57 month prison sentence; her daughter Sonia Ritz, also of Clearwater, received 37 months in prison. Both were convicted by a jury last August on one count of conspiracy, five counts of mail fraud and nine counts of wire fraud in connection with a scheme to sell bookings for a cruise that never existed. The travel agency they operated between July 2003 and January 2004 sold at least $210,000 in bookings to about 50 people for a charter cruise that was to sail in February 2004 out of Miami, but they never actually planned a trip or contracted with any cruise line.
The KTVT-CBS 11 Dallas story states that Judge Schell “announced in court on Monday that Ribaudo told a probation officer that she and her daughter had no intention of serving any time in prison” and ordered both women taken into immediate custody as flight risks. DOJ Press Release.
Following the news that the three former Merrill Lynch executives still possibly facing retrial in the Enron Nigerian Barge case have filed a motion asking US District Judge Ewing Werlein to order the government to give them the Andrew Fastow notes (earlier here; Chronicle here), Tom Kirkendall at Houston’s Clear Thinkers posts here on the motion filed by Sidney Powell, attorney for defendant James A. Brown, to dismiss the indictment on grounds of egregious prosecutorial misconduct, Brady violations and double jeopardy, and links here to the motion, which he has bookmarked. It’s a stunning motion which goes well beyond the Fastow notes in its allegations.
The defense rested on Monday in the in the witness tampering trial of former National Century Financial Enterprises CEO and co-founder Lance Poulsen and his associate Karl Demmler (earlier here and here). The government rested on Friday after playing tapes of conversations between Poulsen and Demmler which appear to confirm that Poulsen suggested to Demmler that former Executive VP for compliance Sherry Gibson should plead unfamiliarity with the fraud charges against Poulson and other executives (AP here). The defense had contended that it was all a misunderstanding and that Poulson was merely seeking to help Gibson; however, when Poulson took the stand in his own defense Monday, he alleged that Gibson was an abusive employee “both sexually and physically” and that she had stabbed him in the back by agreeing to become a government witness. The case is expected to go to the jury today Columbus Business First here.
Two Miami-Dade county men, Rodrigo Molina and Marcos Macchione, were indicted on Thursday by a federal grand jury in Miami on 16 counts including conspiracy and money laundering. The charges stem from their alleged involvement as money launderers in an international stock fraud scheme headquartered in Brazil. They were arrested February 25 along with 18 others in Brazil. The alleged scheme was an “advance fee” fraud which caused investor losses estimated at more than $50 million, mostly from investors in the UK. It involved a series of fictitious companies including Heritage Financial of Trenton, New Jersey, which offered to buy low value stock at above market value; fictitious brokers — actually “boiler room” telemarketers located in Brazil — would require advance fees from the investors and then would abandon the transactions after the fees were paid. Funds were allegedly wired to Florida accounts controlled by the defendants. The Brazilian suspects allegedly stole identities of real US brokers and created well-designed websites to convince investors they were legitimate US securities dealers. AP, DOJ (via PR Newswire).
Lotus and NMC at folo have put together a remarkable narrative here, here and here, going back more than a decade to examine the trail of machinations and alleged public corruption attempted and sometimes achieved by Dickie Scruggs and associates. The winding tale concerns the asbestos litigation legal fees suits filed by attorneys Alwyn Luckey and William Roberts Wilson against their former partner Scruggs, and the actions taken by Scruggs over the years to thwart them and prevent the cases from ever being heard. While Luckey did eventually prevail, the Wilson case has resulted in the federal guilty plea by Joey Langston for bribing state Circuit Judge Bobby DeLaughter on behalf of Scruggs, a matter which will almost surely result in more indictments shortly. DeLaughter’s actions (as described in the second installment) are nothing less than shocking. DeLaughter continues to assert his innocence.
Reed Kyle Diehl of Coto de Caza,California was arrested last Tuesday after a complaint was filed in US District Court in Santa Ana charging him with wire fraud. The charge arises from an alleged offer to secure a $24 million line of credit for a developer who was planning to build a resort project in Mexico. The complaint alleges that the developer was required to deposit $2.5 million in a designated account for collateral, but that Diehl withdrew the money, used it to pay off others who had invested with him and never obtained a line of credit. Diehl is also being investigated in connection with a number of earlier schemes dating back several years.
The DOJ Press Release describes Diehl as a former Tennessee Titan but according to the KNBC Los Angeles story he was signed as an undrafted free agent in 2001 and released before the season started; he played football at University of California and is currently a high school football coach in Santa Ana. Could this be the first confirmed instance of Titans’ owner Bud Adams exercising good judgment?
Two Dallas-area men were sentenced to prison last week by US District Judge Sam A. Lindsay for their roles in a scheme involving submission of fraudulent claims to Medicare for power wheelchairs and accessories. Friday Udo Johnny, the owner of Metropolitan Home Medical Equipment in Grand Prairie, was sentenced to 37 months in prison, and Emmanuel “Bob” Edet of Mesquite was sentenced to 30 months in prison; both were ordered to pay restitution. Both men pleaded guilty last year to conspiracy to commit health care fraud and pay illegal remunerations. They admitted to conspiring to pay illegal kickbacks to Lloyd McGriff, M.D., a Dallas physician currently serving a 16 month federal prison sentence. McGriff executed 257 fraudulent Certificates of Medical Necessity (CMNs) for which Johnny and Edet paid $200 each. Over an 11 month period in 2002 and 2003, they submitted more than $1.7 million in claims to Medicare, and Medicare paid the two men $905,000 based on the fraudulent CMNs and claims. Dallas Morning News, DOJ.
Friday’s Miami Herald reports here that longtime GOP operative Roger Stone alerted the FBI to Eliot Spitzer’s call girl habit last year. In November of 2007, Stone’s Cosa Mesa, CA attorney sent a letter to the FBI declining an interview request but reporting Stone’s admittedly second-hand information about New York’s then-Governor. Stone had learned from Miami Velvet, an acquaintance, that Spitzer once used the services of a high-priced call girl in Miami. Stone, in the letter, reported what he knew and stressed that the information was second hand. Stone’s Florida lawyer released the letter last week in an effort to counter Internet-based conspiracy theories about his purported role in bringing down Spitzer, a long-time nemesis. Hat tip to TalkLeft for alerting us to this story.
File this one under Department of Ho-Hum. Even if the snoopers revealed passport contents to outsiders, they have only committed misdemeanors. The Washington Post story, here, does suggest, somehwat murkily, that State Department employees and contractors accessing passport files must first represent (by touching a “Yes” button on a computer monitor) that they are authorized to view the contents. Will a zealous prosecutor claim that such a representation by an unauthorized person constitutes a false statement to the government under 18 U.S.C. Section 1001? Your guess is as good as mine. The Post says that the State Department’s OIG will investigate, but may ask for assistance from DOJ.
Zach Scruggs has pleaded guilty to a one-count information for misprision of a felony, in exchange for dismissal of the original indictment. There is no requirement for cooperation. He admitted to improper ex parte contact, knowing about improper ex parte contact by others and doing nothing to prevent or report it. He denied knowing about the bribe to Judge Lackey.
The charge carries a maximum penalty of three years in prison but the government has recommended probation. However, US District Judge Neal Biggers pointed out, per customary practice, that the court does not have to accept that recommendation. This report comes from David Rossmiller’s contact in the courtroom. More to come.
UPDATE:
Sun Herald story by Anita Lee, Zach Scruggs Plea Agreement, Zach Scruggs Factual Basis, Zach Scruggs Plea Hearing Transcript.
The transcript confirms the earlier report above. There will be no further charges arising out of this case, but the agreement does not preclude any prosecution in any other case. However, the government has “no knowledge that he has any information on other cases at this time,” which indicates he is not currently a target in the investigation related to the Joey Langston plea; Dickie Scruggs is under investigation in that case.
Judge Biggers made it quite clear, per standard federal plea bargain procedure, that the court is not bound by the recommendation of probation contained in the plea agreement. He ordered a presentencing report and stated that sentencing would probably take place in six to eight weeks.
Melvyn Weiss has agreed to plead guilty to a single racketeering count, specifically that he engaged in a pattern of racketeering activity covering at least the period of 1979 to 2005. Weiss admits to multiple instances of kickbacks to plaintiffs and agrees to serve a sentence of 18 to 33 months in prison and to forfeit $10 million. He shortly will formally plead guilty before US District Judge John Walter in Los Angeles and prosecutors will ask for the 33-month maximum.
The firm, which will now be known as Milberg LLP, still faces criminal charges. The New York Times story here quotes from statements released by Weiss and the firm, and contains this observation from Stanford law professor Joseph Grundfest, a former SEC commissioner: “It’s a situation where it appears that there has been fraud in pursuit of fraud. And just like mom explained that two wrongs don’t make a right, it follows both that corporate executives shouldn’t lie and the lawyers suing them shouldn’t steal. What’s complicated about that?”
The US Court of Appeals for the District of Columbia Circuit on Thursday disbarred Scooter Libby from the practice of law in DC effective June 12, 2007, the date he filed an affidavit of voluntary compliance with the court’s rules on professional ethics for lawyers. The court wrote:
- When a member of the Bar is convicted of an offense involving moral turpitude, disbarment is mandatory. When convictions on more than one count are involved, disbarment is mandated if any one of them involves moral turpitude. This court has held that obstruction of justice (18 U.S.C. § 1503) and perjury (18 U.S.C. § 1623) are crimes of moral turpitude per se. Since respondent was convicted of each of these offenses, as the Board concluded, disbarment is mandatory under D.C. Code § 11-2503 (a) [citations omitted].
Libby had not contested the recommendation of the Board of Professional Responsibility. The disbarment will last at least five years and should affect his standing in other states where he is licensed. The Washington Post story is here.
Television producer Drew S. Levin (IMDb credits and congratulatory blurb-style biography), chairman and CEO of TMC Entertainment and formerly founder and CEO of the now-defunct Team Communications Group, on Wednesday was indicted by a federal grand jury in Los Angeles on 13 counts including conspiracy, falsifying company books and records, making false statements in SEC filings, making false statements to outside auditors and lying in an SEC deposition. The charges arise from his alleged activities at Team Communications, which was a publicly traded producer, distributor and licensor of television programming. From the DOJ press release (via Lawfuel):
- …Levin perpetrated a scheme to falsely overstate Team’s annual and quarterly revenue to make Team appear to be profitable, when Team actually was operating at a substantial loss. The indictment charges Levin with causing Team to book revenue in violation of the accounting rules applicable to television producers and distributors. For example, Team licensed television programming to customers for inflated distribution fees. When the customers were unable to pay the inflated fees, Levin caused Team to send them millions of dollars of Team’s own money, which the customers then used to make payments to Team. Levin disguised these “circular payments” by routing them through third parties, purportedly to buy television programming.
Team fired Levin in 2001 and declared bankruptcy in 2002. Levin could face a statutory maximum of 200 years in prison if convicted on all counts. LA Times here.
That’s Melvyn Weiss, former name partner at Milberg Weiss, LLP, the securities class action powerhouse. WSJ.com has the story here. The WSJ.com Law Blog has more detailed info here. The LA Times reports here that Weiss’ lawyer says he is pleading to “limited participation in a criminal conspiracy.” The Indictment against Weiss alleged that he and former partners enaged in a scheme to pay illegal kickbacks to class-action plaintiffs.
In light of the revelations in Jeff Skilling’s recently unsealed brief regarding the Andrew Fastow notes (earlier here and here), attorneys for James A. Brown, Daniel Bayly and Robert Furst — the three former Merrill Lynch executives still possibly facing retrial in the Enron Nigerian Barge case — have now filed a motion asking US District Judge Ewing Werlein to order the government to give them the notes. The retrials are currently delayed while the defendants’ appeal of Werlein’s refusal to dismiss is pending before the Fifth Circuit (earlier). Kristen Hays’ Houston Chronicle story is here.
Zach Scruggs’ defense team filed three motions on Wednesday, which was the revised motions deadline. Zach Scruggs’ James Hearing Motion seeks to force the prosecution to prove its basis for allowing 404(b) evidence now that he is the sole defendant. Zach Scruggs’ Motion To Reconsider An Anonymous Jury is based primarily on his alleged lack of involvement in the judicial bribery referenced in Joey Langston’s plea. It asks alternatively for a change of venue or a revised supplemental jury questionnaire. Zach Scruggs’ Motion For Continuance asks for another 90-120 days in light of the changed circumstances brought about by the guilty pleas of Dickie Scruggs and Sid Backstrom.
Based on his prior statements, US District Judge Neal Biggers is not likely to countenance a delay in the scheduled March 31 trial date, whether or not he grants the James Hearing motion.
Two developments regarding corruption allegations against Judge Bobby DeLaughter in cases involving Dickie Scruggs:
First: In response to William Roberts Wilson’s recusal motion (earlier), DeLaughter and the two other circuit judges have recused themselves: Wilson v. Scruggs Recusal (h/t folo). But unlike Judges Kidd and Yerger, DeLaughter saw fit to editorialize and proclaim his innocence:
The undersigned judge of this Court has never, in this or any other case, issued a ruling in exchange or consideration of anything (money or otherwise) other than the applicable law, all allegations to the contrary being belied by the record.
The record? It is precisely because of what allegedly transpired off the record that he is under investigation.
Second: The Mississippi Commission on Judicial Performance on Wednesday filed a petition with the Mississippi Supreme Court to suspend DeLaughter based upon actions he took which were allegedly under the corrupt influence of Ed Peters on behalf of Dickie Scruggs in Wilson v. Scruggs, according to the guilty plea of Joey Langston; and also in the case of Kirk v. Pope, one of two other known cases which did not involve Scruggs but which did involve the intercession of Ed Peters. Commission v. DeLaughter. The petition contains specific details of the alleged violations. The Sun-Herald has an AP story here.
A three-judge panel of the 5th US Circuit Court of Appeals on Tuesday ruled that US District Judge Vanessa Gilmore was correct when she refused to dismiss most of the remaining charges against former Enron Broadband Services executives Joseph Hirko and Rex Shelby and all the remaining charges against Scott Yeager. The three men were tried in 2005 and acquitted on some charges while the jury deadlocked on others (Houston Chronicle trial verdict story here); Judge Gilmore declared a mistrial but would not dismiss the charges. In Tuesday’s ruling, the appeals court said that despite the acquittals it could not be concluded that the men could not be found guilty of some of the other charges against them. Hirko’s lawyer Per Ramfjord indicated that a motion for rehearing before the full appellate court was possible. The Mary Flood/Kristen Hays Houston Chronicle story is here.
A federal grand jury in Richmond, Virginia on Monday indicted Edward Okun of Miami on three counts in connection with a scheme which allegedly defrauded clients of $132 million. Okun was charged with one count of mail fraud, one count of bulk cash smuggling and one count of false statements and forfeiture. Okun operated 1031 Tax Group (1031TG), a qualified intermediary company which acted as a neutral party to hold transaction funds for property investors deferring taxes under IRS Section 1031. The indictment alleges that between 2005 and 2007, Okun misappropriated $132 million in client funds held in trust under agreements and converted it for his personal and business use. He was arrested in Miami and has waived extradition to Virginia. AP, DOJ (via PRNewswire).
In opening statements on Tuesday in the witness tampering trial of former National Century Financial Enterprises CEO and co-founder Lance Poulsen and his associate Karl Demmler (earlier), the defense sought to portray Poulson’s $500,000 offer to former Executive VP for compliance Sherry Gibson as a misunderstanding. According to defense attorney Peter Anderson, Poulsen only sought to “make her whole” because she had gone to prison and given up her assets in her plea deal. And according to Demmler’s attorney Darryl Parker, Demmler was the intermediary because he was a longtime friend of Gibson and was only urging her to use the money to get a new attorney. However, Gibson took the stand on Tuesday afternoon and testified that she construed the initial offer as a bribe, contacted the government and agreed to wear a wire at future meetings with Demmler. The jury heard tapes in which Demmler offered to set Gibson up with an offshore account for a 10% fee if she took Poulsen’s offer and told her ” “Money laundering is my business on private contracts.” And regarding the testimony she was to give in Poulsen’s now-delayed fraud trial, Demmler said “Don’t remember. You don’t have to lie. You’re not lying. He’s not asking you to lie” and referred to a scene in Godfather II where a witness forgets testimony. The government also has taped conversations between Poulsen and Demmler in which they allegedly used code words in case their phones were bugged. Poulson is expected to take the stand in his own defense. Gibson’s testimony in the recently completed fraud trial of five other National Century executives (earlier) also included testimony implicating Poulsen in the fraud. Columbus Business First here and here.
The US Court of Appeals for the Tenth Circuit in Denver on Monday reversed the convictions of former Qwest CEO Joe Nacchio and remanded the case for retrial before a different circuit court judge. Nacchio was convicted in April 2007 of 19 of 42 counts of insider trading after a jury trial before US District Judge Edward Nottingham in Denver. The charges arose from his sale of $101 million worth of Qwest stock in 2001 while allegedly knowing that Qwest’s outlook was deteriorating. He was sentenced to 72 months in prison in July but has remained free on bail pending appeal. Nacchio had appealed on grounds that the evidence was insufficient to convict him, that the jury instructions were improper and that Judge Nottingham improperly excluded exculpatory evidence: an expert witness and classified information. In overturning the convictions the majority opinion states:
- We agree that the improper exclusion of his expert witness merits a new trial, but we conclude that the evidence before the district court was sufficient for the government to try him again without violating the Double Jeopardy Clause.
Professor Daniel Fischel, an expert on corporate law and economics, was the excluded expert witness. Prosecutors had argued that the defense failed to establish the reliability of Fischel’s opinions. Nottingham excluded Fischel in part because he thought it would not be helpful to the jury. But the appeals court rejected that reasoning:
- This misunderstands the nature of economic expertise. An economic expert is permitted not only to tell the jury that an economic concept “is an issue” but to analyze the concept and offer informed opinions. In other words, expert testimony may “assist the trier of fact to understand the facts already in the record, even if all it does is put those facts in context. ….That is why expert economic testimony is routine when a materiality determination requires the jury to decide the effect of information on the market. ….Armchair economics is not the way to decide complex securities cases [citations omitted].
NYT/Reuters here.
US District Judge Neal Biggers on Monday entered an order based on Friday’s hearing, formally denying Zach Scruggs’ separate dismissal motion and granting 5 additional days from March 14 to amend current motions or file additional motions, but ruling that the extension “in no way affects any other deadlines previously set forth in this cause, including the change of plea deadline of March 17, 2008, or the trial date of March 31, 2008.” Zach Scruggs 3/17 Order. The big surprise of the day was former Mississippi AG Mike Moore’s Entry of Appearance on behalf of Zach Scruggs. Moore was a key player in Dickie Scruggs’ multi-billion dollar looting of the major tobacco companies. A Sun-Herald story here quotes Moore as saying Zach Scruggs “asked me to represent him should his case ever get to trial.” We should know by Wednesday if that plea deadline was set in stone or if this case will proceed to trial.
A jury was selected Monday in the witness tampering trial of former National Century Financial Enterprises CEO and co-founder Lance Poulsen, and opening arguments are to begin today in Columbus, Ohio before US District Judge Algenon Marbley. Poulsen had been indicted in 2006 on 47 counts including conspiracy, wire fraud, securities fraud and money laundering in connection with the same acts for which five former executives were convicted last week (earlier) and is scheduled for trial on August 4 in that case. But in this case, he and an associate, Karl Demmler were indicted on one count each of conspiracy to obstruct justice, witness tampering and witness tampering by influencing testimony. The indictment alleges that they attempted to bribe Sherry Gibson, National Century’s former Executive VP for compliance, with $500,000 to “develop amnesia” on the witness stand in the fraud case. Gibson pleaded guilty in 2003 to one count of conspiracy to commit securities fraud and agreed to cooperate with prosecutors; she was sentenced to 48 months in prison in June 2004. She was the government’s star witness in the case that concluded last week and is scheduled to testify in this case. Columbus Business First has the story here.
Jodi Andes in the Columbus Dispatch analyzes last week’s verdicts here.
Paul and Zibia Gunther, the father and daughter arrested last week in connection with a $70 million international stock fraud scheme involving fake shares in hijacked dormant companies (earlier), made their initial appearances Monday before US Magistrate Judge Thomas McCoun in Tampa. McCoun agreed to release Zibia Gunther on a $150,000 bond secured by property, but he denied release to Paul Gunter, who had offered a $500,000 property-secured bond. Calling Paul Gunter a flight risk, McCoun said he will require at least $1 million posted from his family and friends before he said he would consider his release, stating “I want people to come forward and say they have so much faith in him that they’ll put up their house.” Paul Gunter holds English citizenship. Further details of the government’s case emerged: a prosecutor alleged that financial transactions have been tracked to numerous accounts controlled by Paul Gunter in at least nine different countries. However, he is currently represented by a public defender. Attorneys for both defendants claim they are only escrow agents acting for others. Tampa Tribune, Tampa Bay Times.
The Journal story is here. The conviction was overturned because of the trial court’s limitations on the testimony of the defense’s expert and its limitations on the defense’s use of classsified data.
Thanks to David Rossmiller, the Friday transcripts are now available:
Dickie Scruggs Plea Transcript
Sid Backstrom Plea Transcript
Zach Scruggs Motion Hearing Transcript
Zach Scruggs’ motion to dismiss was denied, and his attorney Todd Graves indicated that he would be conferring with prosecutors on other pending motions. And despite Friday’s pleas, today is the actual deadline for plea agreements. The Clarion-Ledger first reported, then withdrew a report that Zach Scruggs would surrender his law license in exchange for deferred prosecution (earlier). In light of the way the hearing ended, a plea deal could still be in the works. Alan Lange at Y’all Politics thinks so, and explains why here.
The Backstrom transcript indicates a dispute over language in the plea agreement that was resolved, but Backstrom clearly admitted entering into a conspiracy, apologized and accepted full responsibility.
In contrast, during Dickie Scruggs’ response to Judge Biggers’ questioning, his attorney John Keker had to intervene and practically prod him into answering in manner that would be accepted by the court. See pp.15-16 of the transcript. Scruggs offered no apology.
Perhaps more significant to Dickie Scruggs’ future was this statement from AUSA Thomas Dawson: “…I want to make it painfully clear that the investigation with respect to the Wilson matter that is currently under investigation - - that this plea agreement and this plea has no affect with respect to any charging decision or subsequent prosecution with respect to that case.”
Weekend articles of interest include Patsy Brumfield’s Daily Journal story which takes a look at the courtroom drama and the LA Times staff story which provides a very good overall view.
The Associated Press and other news sources will not hesitate to take action against those who reuse their photos without permission. A Photo District News story here points out that Ashley Alexandra Dupré — Eliot Spitzer’s “Kristen” — owns the MySpace photos which the same news organizations apparently thought they could reuse without permission.
Mark Steyn at NRO’s The Corner expects legal action: “…it’s pretty clear from her general philosophy that ‘Kristen’ doesn’t give away much for free….You go, girl! It’s not often you get a case where there’s someone in the room with a higher hourly rate than the lawyers.”
Two Houston policemen, officer Tracie Bell and first-year probationary officer Kirshondra Richardson, were indicted last week by a Harris County grand jury on felony charges of theft of more than $100,000. The indictment alleges that they billed the Red Cross over $160,000 for a two-week basketball camp for 310 Hurricane Katrina refugees but the camp only lasted two days and had only 10 attendees. If convicted they could face up to 20 years in state prison. Houston Chronicle here, FoxHouston here.
This would never have happened if Herman Short were still chief of police.
Here, for our readers, is Jeff Skilling’s Supplemental Brief Regarding Andrew Fastow Interview Notes. Originally filed under seal, and now unsealed, the brief details the material withheld from Skilling and how this withholding affected Skilling’s trial defense. We breathlessly await the government’s response. Brady-Giglio claims seldom prevail on appeal. An appellant must prove, among other things, that the withheld information was material, non-cumulative, and unavailable to the defendant by other means. Nevertheless, my initial take on this issue, after coming to it late, is that Skilling has a decent chance to win. The government’s use of a composite 302, which allegedly masked Fastow’s changing stories, as well as the government’s failure to show all of its raw Fastow interview notes to the trial court, are, in my view, quite striking (troubling) factors–and highly unorthodox. Ideoblog discusses the matter further, here, as does the always informative Tom Kirkendall, in Houston’s Clear Thinkers.
The Houston Chronicle reports here on convicted former Enron CEO Jeff Skilling’s latest substantive, and fully unsealed, appellate brief, which publicly references for the first time all of the Fastow interview notes that Skilling claims were improperly withheld from the defense by the prosecution. According to Hays, “[a]fter the trial, jurors told reporters that they didn’t give Fastow’s testimony much weight.” This gratuitous information, whether true or false, will be utterly irrelevant to the Fifth Circuit’s ultimate analysis of whether there was a Brady violation, and, if so, whether it warrants reversal.
UPDATE: The revised C-L story here now says that Zach Scruggs’ status is not known. The Daily Journal story here and other sources state that Zach Scruggs is still scheduled to stand trial on March 31.
This seems to be confirmed by a related development: following the November 27 search of the Scruggs Law Firm offices, an FBI “taint team” turned over certain evidence to two AUSAs from the Western District of Tennessee. Today the two AUSAs filed a motion to allow disclosure of that evidence to prosecutors in the Northern District of Mississippi by no later than March 21 for use in this case. If granted, at this point the evidence would be used against Zach Scruggs and the motion header is worded US v. David Zachary Scruggs rather than US v. Scruggs et al. The evidence was turned over to Judge Biggers on yesterday. Did attorneys for Dickie Scruggs and Sid Backstrom know this? If so, it could have precipitated their pleas today. US v. Zach Scruggs Motion To Disclose Search Evidence
The Clarion-Ledger is reporting that the government will defer prosecution of Zach Scruggs in exchange for surrender of his law license, but there is no confirmation of that yet in any court documents.
Dickie Scruggs’ guilty plea to the single conspiracy count carries a maximum five year sentence; the actual sentence will be at the court’s discretion. The remaining five counts are dismissed. Dickie Scruggs’ plea does not include an agreement to cooperate, and the agreement specifically does not preclude the government from bringing charges in any other case, federal or state.
Sidney Backstrom’s guilty plea to the single conspiracy count includes the provision that his sentence will be no more than half of Dickie Scruggs’ sentence, and in any case no more than 30 months in prison. Backstrom does agree to cooperate fully in this case and “all other criminal offenses in any way.” So it appears that this saga is far from over.
(h/t Rossmiller)
Former National Republican Congressional Committee (”NRCC”)Treasurer Christopher J. Ward has been accused by GOP officials of diverting up to $1 million from various campaign coffers to his personal accounts. The Washington Post has Paul Kane’s story here.
An early report from this morning’s pretrial conference in US v. Scruggs by AP’s Holbrook Mohr indicates that Dickie Scruggs and Sidney Backstrom have each pleaded guilty to conspiracy counts in connection with the attempted bribe of Judge Henry Lackey. There is no word yet of a plea for Zach Scruggs; his second motion to dismiss is on today’s agenda.