WHITE COLLAR CRIME OUTLINE – Eliason – Fall 2011
White collar crime is
“wrongdoing committed by a person of respectability and high social status in the course of his
occupation.” (as defined by Sutherland)
“non-violent illegal activities which principally use deceit, deception, concealment, fraud, or
misrepresentation to obtain money, property, or some other advantage.” (as defined by DOJ)
-Elements of a crime are the components – all must be present or crime has not been committed
-Each must be alleged in the indictment and must be proven beyond a reasonable doubt
Characteristics of White Collar Cases:
-Complexity, scope, and magnitude of cases
-Role of defense counsel
-Parallel proceedings
-Centrality of mens rea
-Nature of the investigation – grand jury
-Organizational presence
-Multiple actors
-Breadth of the statutes involved & prosecutorial discretion
-Prosecutors have a tremendous amount of power because of their discretionary authority
I. Corporate Criminal Liability
-Corporate actors frequently are present as defendants or victims
-You almost certainly can charge corporations with a crime committed by agents of the corporation acting in their
capacity, but you have to determine whether you should
-U.K. common law held that you couldn’t prosecute a corp: it had “no soul to be damned, and no body to be kicked”
Pros of holding corporations criminally liable:
-Greater deterrent (moral condemnation)
-Discourage bad incentives
-Punish entity that benefitted from the crime
-Corporations have deep pockets for restitution
-Encourages greater oversight
Cons of holding corporations criminally liable:
-Deterrence not effective against a nonhuman entity
-Corporation may not have benefited from illegal act
-Punishes those who are innocent of the culpability
(employees, consumers, shareholders, etc.)
- Consequences could be harsh or disproportionate
-Goals of criminal punishment:
1) Deterrence – would this be achieved by just civil fines?
2) Rehabilitation – can criminal punishment really change corporate behavior?
3) Retribution/Punishment – is this meaningful where a corporation is concerned?
-In N.Y. Cent. & Hudson River R.R. Co. v. United States, the Court applied the concept of respondeat superior to
corporate criminal liability for reasons of public policy
-The railroad was prosecuted for violating the Elkins Act; it argued that it was unconstitutional to prosecute a
corporation because it took the shareholders property w/o due process, made some other constitutional arguments
-The Court said that not holding corporations criminally liable “would virtually take away the only means of
effectually controlling the subject-matter and correcting the abuses aimed at.”
This is a gross overstatement – there are a myriad of ways to control the abuses aimed at
-Corporations accept tremendous penalties in DPAs, to get the process behind them but also to avoid the stigma
-A corporation is liable for the criminal acts of its agents acting within the actual or apparent scope of their
authority and with the intent, at least in part, to benefit the corporation
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“Within the scope of their…authority”
-Purpose: to ensure employee is acting on company business, so it is fair to hold the company accountable
-Specific authorization or approval is not required
-Knowledge or acquiescence of high-ranking official or superior is not required
-Actual authority is not required – apparent authority is enough
“With the intent…to benefit the corporation”
-Purpose: to limit corporate liability to those acts done on the company’s behalf
-Corporation need not have actually received a benefit, and many have even been harmed
-Benefit to the corporation need not be the employee’s only, or even primary, motivation
United States v. Sun-Diamond Growers of California
-Investigation into Sun-Diamond and Secretary of Agriculture Mike Espy unearthed a scheme between SunDiamond VP Richard Douglas and RLSM partner James Lake
-Douglas arranged for Lake and four others to contribute $5000 (although he only gets $4000) and then SunDiamond pays a phony invoice to RLSM, then the donations get reimbursed
-Sun-Diamond gets charged based on the actions of Douglas
-The government argued that the “benefit the corporation” prong was met because Douglas was attempting to curry
favor with Secretary Espy for the company
-Corporate compliance efforts are generally irrelevant to criminal liability
-A corp can be held liable even if an employee violated express instructions or company policy (Hilton Hotels)
-It’s not a legal defense that a corporation has a policy and an employee violates the policy, but it is a strategic
defense and may well affect a prosecutor’s discretion on whether to charge or at sentencing
-Deferred Prosecution Agreement: DOJ files a criminal complaint but defers prosecution of the case by contract
with the defendant; if the defendant fulfills the terms of the DPA, the government will dismiss complaint
-Non-Prosecution Agreement: No charging instrument is filed; the investigation remains open pending the
defendant’s satisfaction of the terms of the NPA
Factors considered in charging a corporation:
(1) Nature and seriousness of offense
(2) Pervasiveness of wrongdoing
(3) History of similar misconduct
(4) Timely and voluntary disclosure of wrongdoing
(5) Existence and effectiveness of compliance program
(6) Remedial actions
-Personal executives could be liable if they
(1) Committed the crime themselves
(2) Aided, abetted, counseled, or caused others to commit the crime
(3) Conspired with the corporation or others to commit the crime
II. Federal Criminal Investigations
-White Collar Crime is a Grand Jury practice – that’s where the action is
-White collar defense usually means representing your client during investigations
-But the defense attorney, obviously, does not go into the Grand Jury room (only prosecutor is present)
-The prosecutor presents the evidence for grand jury’s consideration and acts as the legal advisor to the grand jury
-Grand Jury proceedings are secret
-Grand Jury proceedings are accusatory not adjudicatory proceedings (one sided)
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-The Federal Grand Jury is governed by Fed. R. Crim. Pro. 6
-Usually 20-23 members (16 needed for a quorum), vote of 12 needed to indict
-“In dealing with the grand jury, the prosecutor must always conduct himself or herself as an officer of the court
whose function is to ensure that justice is done and that guilt shall not escape nor innocence suffer . . . the prosecutor
must be scrupulously fair to all witnesses and must do nothing to inflame or otherwise improperly influence the
grand jurors.” USAM 9-11.010
-When prosecutors ask for an indictment, 99% of the time the grand jury will return a true bill (indictment)
-If a prosecutor determines during the investigation of the case that there will be insufficient proof, he simply closes
the case (he doesn’t ask for an indictment)
-Rules of Evidence and Exclusionary rules generally don’t apply to Grand Jury proceedings
-Hearsay is very common in Grand Jury testimony – witnesses frequently share what they learned from others and
that third person may or may not testify
-If the Grand Jury wants to hear from a witness, it is the prosecutor’s job to try to get that witness to testify
If there is disagreement then the Grand Jury will vote
-If something gets out that the Grand Jury is not supposed to hear, the prosecutor can instruct them to ignore it
-The “target” of the investigation is a potential defendant
-Prosecutor may invite target to testify, but they almost always decline (DOJ policy is not to subpoena targets)
-After Grand Jury is done hearing testimony, they deliberate (completely closed and in secret), and then if they
return an indictment (need vote of 12) then they sign the indictment and later bring the indictment down to a judge
-Once the indictment is returned, the prosecutor can no longer use the subpoena power to investigate, but if there are
further charges pending then the investigation can continue (there could later issue a “superseding indictment”)
-A Grand Jury can investigate crimes only within its district (limited by venue)
Grand Jury Subpoenas:
-Governed by Fed. R. Civ. P. 17; enforced by federal district court
-May be for witness testimony or documents
-Vehicle to challenge a subpoena is a motion to quash
-To quash, must demonstrate that compliance would be unreasonable or oppressive, or that there is no reasonable
possibility that materials sought will produce info relevant to general subject matter of investigation (R. Enterprises)
United States v. R. Enterprises, Inc.
-Issue presented is what standards apply when a party seeks to avoid compliance with a subpoena duces tecum
issued in connection with a grand jury investigation
-Grand Jury sitting in E.D. Va. was investigating allegations of interstate transportation of obscene materials;
company resisted and the Fourth Circuit applied the Nixon standards – Relevancy, Specificity, and Admissibility
-The Court disagreed and applied a different standard, finding that applying a strict standard to subpoenas at the
Grand Jury is not appropriate; the more stringent Nixon standard should be for trial
To quash, must demonstrate that compliance would be unreasonable or oppressive
-“In short, the Government cannot be required to justify the issuance of a grand jury subpoena by presenting
evidence sufficient to establish probable cause because the very purpose of requesting the information is to ascertain
whether probable cause exists.”
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-A Grand Jury subpoena is presumed to be reasonable and within the grand jury’s authority; the burden is on the
party receiving the subpoena to prove that the subpoena is unreasonable, oppressive, or that there is no reasonable
possibility that the materials sought will produce information relevant to the investigation
Types of witnesses before a Grand Jury:
-Target: grand jury has substantial evidence linking you to a crime and considers you a likely defendant
-Subject: your conduct is within the scope of the grand jury’s investigation
-Witness: you simply have information relevant to the investigation (neither subject nor target)
United States v. Williams
-Issue presented is whether a court may dismiss an otherwise valid indictment because the government failed to
disclose to the grand jury “substantial exculpatory evidence”
-Defendant convicted of making materially false statements on financial statements provided to banks; he alleged
that government failed to disclose allegedly exculpatory evidence to the grand jury regarding his records and ledgers
-The Court says that courts (under the Constitution) cannot require that the government disclose “substantial
exculpatory evidence” to the grand jury…various other trial protections do not apply to grand jury
According to the Court, it’s the job of Congress, not a judge, to create adjudicatory safeguards
-Constitution does not require the prosecutor to present exculpatory evidence to the grand jury (Williams)
-DOJ policy: if prosecutor is “personally aware of substantial evidence that directly negates the guilt” of the target, it
must be disclosed to the grand jury (USAM 9-11.233)
-The prosecutor’s obligation to do justice, fairness concerns, and tactical considerations all support liberal disclosure
of exculpatory materials (Spiderman principle: with great power comes great responsibility)
In re Sealed Case
-Issue is whether the OIC should be held in contempt for violating Rule 6(e)
-An article was published in the NY Times stating that prosecutors in the OIC believe that Ken Starr should ask the
grand jury to indict President Clinton on perjury and obstruction of justice
-Court found that the disclosure did not on its face violate Rule 6(e) – statements that assistant prosecutors wish to
seek an indictment does not implicate the grand jury and Clinton’s situation was already common knowledge
Grand Jury Secrecy – Rule 6(e)
-Rule 6(e) protects secrecy of “matters occurring before the grand jury”
-All participants are sworn to secrecy, except the witness
-No one may be present but grand jurors, witness, prosecutor, and court reporter
-During deliberations and voting, no one may be present but the grand jurors
-Rule 6(e) has implications for other proceedings – GJ materials can’t just be turned over
-Another major investigative technique: the search warrant
-Search warrants have become increasingly popular in white collar cases
-Factors that might enter into your analysis as to whether to subpoena or use a search warrant:
(1) Size and scope of the search – it may not be practical to execute a search warrant
(2) The element of surprise
(3) Do you have enough for probable cause?
(4) Secrecy vs. non-secrecy
(5) Amount of time it’s going to take
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III. Fraud
A. Mail & Wire Fraud: 18 U.S.C. §§1341, 1343, 1346, 1349
-Mail/Wire fraud transforms ordinary state law fraud into a federal offense
-Elements of the offense:
(1) Defendant devises or participated in a scheme or artifice to defraud; and
(2) In advancing or carrying out the scheme, or attempting to do so, the defendant used or caused the use of
the mails or an interstate wire transmission
-The unit of prosecution is the use of the mail/wire so each transaction is a potentially separate count
-Not necessary to prove damages or that the scheme was successful, so the fraud statutes apply to scheme that did
not come to fruition (however, prosecutor may say “no harm, no foul”)
-Statutes are interpreted almost identically. The key to both is proof of a “scheme or artifice to defraud”
-Only distinction is that mail fraud requires use of the mail whereas wire fraud requires use of an interstate wire
Schmuck v. United States
-Schmuck indicted on 12 counts of mail fraud based on a scheme in which he rolled back odometers on cars and
then sold those cars to car dealers, the dealers passed the artificially high prices on to the consumers after mailing in
title applications to the WI DOT
-Schmuck contended that his scheme ended when he sold the cars to the dealers, and so use of the mail did not
further the fraud; also argues that mail fraud cannot apply to routine innocent mailings (like the one involved here)
-Court reviewed precedent: Kann, Parr, Maze
-Court held that mailing was still part of the execution of the continuing scheme
Might have been different if it was a single bulk sale of cars to the dealers
-Dissent said that the fraud ended when he sold the cars to the dealer
Scalia: It’s mail fraud, not mail and fraud, that incurs liability
The “in furtherance” requirement:
-The mailing/transmission need not be an essential part of the scheme, but must be related to or incident to an
essential part of the scheme
-Must be a “part of the execution of the scheme as conceived by the perpetrator at the time” (Schmuck)
-The mailing/transmission need not be fraudulent or false, and can be routine or innocent
The “causation” requirement
-The defendant need not make the mailing or transmission personally
-“Where one does an act with knowledge that use of the mails will follow in the ordinary course of business, or
where such use can reasonably be foreseen, even though not actually intended, then he ‘causes’ the mails to be
used.” (Pereira)
-Mail fraud applies to U.S. Postal Service as well as private interstate carriers (Fed Express, UPS)
-Mailing need not cross state lines (because statute is pursuant to Congress’s mail power)
-Wire fraud applies to phone calls, faxes, radio, cell phones, internet transmissions, etc. (includes wireless)
-The transmission must cross state lines (because statute is pursuant to Interstate Commerce Clause)
-But the defendant need not know that the transmission is crossing state lines
-The “Scheme or Artifice to Defraud” requirement is not defined in the statute
-Generally, a plan or strategy to obtain something of value from another through the use of deceit, trickery, or other
dishonest methods
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-Violates “the sense of moral uprightness, of fundamental honesty, fair play and right dealing in the general and
business life of members of society”
-Misrepresentations that go to the heart of the bargain (i.e. candy selling example)
United States v. Regent Office Supply Co.
-Regent made false statements and misrepresentations when calling to “get past the secretary” and speak to someone
about selling goods; the lies weren’t about the products they were selling, but were instead about referrals, etc.
-Government’s theory is that those fraudulent statements were part of a scheme to defraud
-The Court (2d Cir.) disagrees, holding that the deceptions here had nothing to do with the price or quality of the
goods, and so did not constitute fraud under the wire fraud statute
Doesn’t mean that it’s not bad, but there are alternative avenues for prosecution
-Whether it is fraud or mere sales puffery may come down ultimately to whether something is essentially “criminal”
Is it a harm that the law should recognize?
-Denying the buyer all the facts doesn’t necessary make the misrepresentation a fraud (Regent Office Supply)
-Does a psychic injury as a result of a misrepresentation give rise to fraud? Does it matter where the money goes?
“Scheme to Defraud” – Intent
-To prove an intent to defraud, the government generally must show that some harm or injury to the victim, and
some gain to the defendant, was contemplated by the scheme
-Need not show actual injury, because attempts to defraud are also covered
“Scheme to Defraud” – Materiality
-Concept of a scheme to defraud includes requirement that the deceptions be “material” (Neder)
-“Material” means that a reasonable person would consider the issue important in determining how to act in the
transaction in question
Lustiger v. United States
-Defendant convicted of violating the mail fraud statute as a result of a scheme by which he sent pamphlets all over
the country advertising land in AZ, but he made a number of misleading statements about the property
-The statements, each taken individually, were technically true, so he claimed the statements were just sales puffery
-The Ninth Circuit says that it’s fraud: “If a scheme is devised with intent to defraud and the mails are used in
executing the scheme, the fact that there is no misrepresentation of a single existing fact is immaterial.”
-“Deceitful statements of half truths or the concealment of material facts is actual fraud”
-The law still protects the naïve and gullible (footnote in Lustiger)
B. Honest Services Fraud
-In an “honest services” case, the defendant is charged with defrauding the victim not of money or property, but of
the intangible right of honest services
-Has been applied both to public officials and to private individuals, particularly in employee/employer context
McNally v. United States
-Defendants convicted under the mail fraud statute based on the theory that they deprived the citizens and
government of KY of certain rights including the right to have the Commonwealth’s affairs conducted honestly
-The defendants struck a deal with an insurance company giving them all the business for the state of KY’s
insurance policies, and in exchange the company would funnel commissions over $50,000 into shell corporations
which the defendants used as their personal checking account
No evidence that the state actually lost any money, so no traditional property theory
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-The government argued that the statute’s clauses were disjunctive and so the “scheme or artifice to defraud” was
not necessarily restricted to money or property
-Lower courts bought the “intangible rights” theory, but the Supreme Court reversed
The Court was concerned about the breadth of the statute and federalism issues, so prosecution based on
“honest services fraud” theory is no good
-McNally honest services theory arose when you couldn’t prove that victim was deprived of any tangible property
-Stevens’ dissent in McNally accepts the government’s argument about the disjunctive phrasing of the statute and
the case law from Hammerschmidt; he also argues that prior important statutes were deliberately worded broadly to
allow the court to define the crimes
-Maybe one reason to have federal statutes to punish state officials is that state officials may choose not to prosecute
within (or not create statutes to create a crime in the first place)
Carpenter v. United States
-Defendants convicted of securities fraud and mail/wire fraud based on scheme whereby writer in influential WSJ
column would divulge the information contained with the column beforehand to two friends so that they could take
advantage of likely future stock movements
-Defendant argued that the confidential info was not money or property and was beyond the scope of the statute
-Court finds that confidential business info, like the info that would be published in the WSJ column, is property
(though intangible) and therefore the violation of the property interests as part of the scheme constituted fraud
-Thus “property” may include intangible property, such as confidential business information (Carpenter)
-The mailing in Carpenter is the delivery of the WSJ – the column is essential to the scheme
Innocent mailings by someone other than the defendants, but it qualifies
-Fraud can be based on failure to disclose material info, but only if relationship exists that gives rise to a duty
-What’s the nature of the scheme to defraud? (Affirmative act or Failure to disclose)
-What’s the object of the scheme to defraud? (Tangible property or Intangible property)
-The “lulling letters” theory: when a fraudster sends letters to the person who he defrauded to put that person at ease
or lull them into complacency, that is furtherance of the scheme (because it covers it up)
-The object of the fraud must be property in the hands of the victim at the time of fraud; government regulatory
interests (like unissued licenses) are not property (Cleveland)
-Once the license is issued, then it becomes property, but before issued the state doesn’t have a property interest in it
-After McNally, Congress passed 18 U.S.C. § 1346:
“For the purposes of [mail and wire fraud and other statutes], the term ‘scheme or artifice to defraud’
includes a scheme or artifice to deprive another of the intangible right of honest services.”
-After the enactment of §1346, twenty years of confusion followed in the lower courts
-The vast majority of cases where §1346 was applied were corruption/bribery cases
But there were more marginal cases (i.e. patronage issues, IRS employee snooper)
Skilling v. United States
-Skilling convicted of conspiracy to commit securities and wire fraud along with 25 other counts
-The opinion summarizes the case law history for “honest services” fraud
-The Court refused to throw out the statute for vagueness, but it did narrow its scope of §1346 to only bribes and
kickbacks –the government also wanted “self-dealing” but the Court did not include that
-Justice Scalia (concurring) argues that the statute is hopelessly vague and Congress must fix it
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-Skilling limited application of § 1346 to honest services fraud involving public/private officials and kickbacks or
bribes
Sarbanes-Oxley Act of 2002
-Enacted 18 U.S.C. § 1349: Attempts and conspiracies to commit mail and wire fraud now subject to the same
punishment as mail and wire fraud
-Increased statutory maximum penalties for mail and wire fraud from 5 to 20 years
IV. Conspiracy
-Elements of §371 Conspiracy:
(1) Existence of an agreement to achieve an unlawful objective;
(2) Defendant’s knowing and voluntary participation in the conspiracy; and
(3) Commission of an overt act in furtherance of the conspiracy
-Conspiracy is a means by which the government can attack planned criminal activity that has not come to fruition
Or criminal activity that has been unsuccessful, because there is no federal attempt statute
Advantages of a Conspiracy Charge:
(1) Straightforward and easy to understand
(2) Easy to lay out entire criminal scheme and construct a case
(3) Hearsay advantages – FRE 801(d)(2)(E)
(4) Statute of limitation advantages – does not run until the last overt act in furtherance of the conspiracy
Then you can also charge the underlying acts associated with the conspiracy
(5) Venue advantages – anywhere any part of the conspiracy took place
(6) Allows joinder of many defendants and charges in a single indictment
(7) Success or completion of the criminal scheme is not required
-Whether an uncompleted crime will be charged will depend upon the gravity of the crime
(i.e. conspiracy to commit robbery vs. conspiracy to blow up the Capitol)
-Why do we charge conspiracy? Danger of “group action”, Crime can be more complex, Damage more severe, etc.
Elements of Conspiracy:
(1) Two or more persons form an agreement
(a) to commit an offense against the United States; or
(B) to defraud the United States
(2) Defendant knowingly and voluntarily joins the conspiracy with the intent to further the criminal
objective
(3) At least one overt act in furtherance of the conspiracy is committed by one member of the conspiracy
-§371 is the general catch-all conspiracy statute (some statutes also have conspiracy provisions)
-Conspiracy is a separate crime; you can charge both conspiracy and the underlying offense
-Punishment is 5 years
-Two prongs:
(1) Conspiracy to commit an offense against the United States, and
(2) Conspiracy to defraud the United States
-Both prongs may be charged in the same indictment, and even in the same count
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-Conspiracy to commit an offense against the U.S. does not necessarily mean that the U.S. is a victim; committing
any federal crime will satisfy that element
-A conspiracy may have multiple objects and all may be alleged in the same count
-Conspiracy to defraud the U.S. includes not only defrauding the U.S. of money or property but also impairing,
obstructing, or impeding a lawful government function by deceit, craft, or trickery; monetary loss not required
-Conspiracy to defraud includes more than just money or property
United States v. Arch Trading Co.
-Arch Trading convicted of conspiring to commit an offense against the U.S. for entering into a contract with a
quasi-governmental body in Iraq in violation of an Executive Order prohibiting such business during the Gulf War
-Issue is whether the indictment was defective because it charged that Arch Trading “committed an offense” when it
should have only been charged with “conspiracy to defraud”
-Court holds that a violation of an executive order for which Congress has provided criminal sanctions constitutes an
“offense” for purposes of §371
-Court also found that the government’s decision to proceed under “offense” instead of “defraud” prong was an
appropriate exercise of discretion
-If you get charged with both “offense” and “defraud” and are convicted of both, they will merge
-The agreement is the heart of a conspiracy; it must often be proved by circumstantial evidence
-A defendant cannot conspire solely with his own corporation (Stevens) or solely with an undercover agent
-There can be no conspiracy when there is only one human actor; a human conspiring with corporation(s) is not
valid, there must be two or more human minds (Stevens)
-The dangers of a conspiracy still exist even if, unknown to the conspirators, their criminal goal would be impossible
-The agreement is a “distinct evil” which may exist and be punished independent of the substantive crime
-You don’t have to agree on every detail, as long as you agree on the essential nature of the crime
-A conspiracy does not automatically terminate simply because the government, unbeknownst to some of the
conspirators, has defeated the conspiracy’s object; impossibility is not a defense to conspiracy (Recio)
United States v. Stavroulakis
-Court holds that so long as the unlawful source of money is proven to be one of the illegal activities enumerated in
§1956(c)(7) [money laundering statute], it isn’t essential that the conspirators agree on the same illegal activity
Single vs. Multiple Conspiracies:
-To create a single conspiracy, there must be some interdependence
-“Wheel” analogy: one person at the center, with multiple “spokes.” To be a single conspiracy, the
“spokes” must be aware of each other and do something to further a common criminal goal.
-“Chain” analogy: each conspirator is a link in the chain, dependent on the other links for the conspiracy’s
overall success
-Variance: prosecution charges one conspiracy, but proves multiple conspiracies – conviction may be thrown out if
the defendant was prejudiced
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Overt Act Requirement:
-The overt act need not be illegal itself
-The overt act need not have been committed by this particular defendant
-All of the overt acts alleged in the indictment need not be proven; only need to prove one
-Overt act must be in furtherance of the conspiracy and must take place during the life of the conspiracy
-Overt acts can be the key to venue and statute of limitations issues
Pinkerton rule: Each member of a conspiracy is liable for substantive crimes committed by co-conspirators – even if
they did not actually participate in those crimes – if the crimes were committed during the course and in furtherance
of the conspiracy, were within the scope of the conspiracy, and were reasonably foreseeable
V. Public Corruption
A. Bribery – 18 U.S.C. §201(b)
-Elements:
(1) A “public official”
(2) Corruptly;
(3) Demands, seeks, receives, accepts, or agrees to receive and accept, something of value;
(4) In exchange for being influenced in the performance of an official act, or for being induced to do or
omit to do an act in violation of his/her official duty, or for being influenced to commit a fraud against the
United States
-Penalty: 15 years
-§201 does not apply to private commercial bribery; must involve a “public official”
-“Public official” includes not only federal employees, but also state employees or private individuals who are
administering federal programs or funds, or who occupy a position of public trust with fed. responsibilities (Dixson)
-Key to bribery is the corrupt intent to influence; gratuity does not require corrupt intent
“Corrupt intent” is defined as acting with the intent to influence, or to be influenced in, the performance of
official acts
-A bribe says “please” while a gratuity says “thank you”
-“Thing of value” is very broadly defined, to include almost anything of subjective value to the recipient
What matters is the subjective value of the thing to the recipient
-Note that a bribe may be received personally or on behalf of “any other person or entity” while a gratuity must be
received “personally”
-The statute applies to employees of the District of Columbia (i.e. D.C. jail guards)
-In bribery, the crime is the deal
So if the eventual result of the deal never transpires, it doesn’t matter
-Even if the official never intended to do or omit to do the act that was “bought” the crime of bribery is still
committed when the official accepts the money
-If you’re defending someone against bribery, the statute gives you several points of attack:
Not a public official; Didn’t act corruptly; Didn’t demand/seek/receive/accept something of value; Wasn’t
in exchange for any influence involved with an official act
United States v. Alfisi
-Alfisi convicted of bribery of a public official, paying an unlawful gratuity, and engaging in a conspiracy to commit
bribery – paying FDA inspectors to downgrade produce (cheaper cost)
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-Alfisi argued that there was no corrupt intent because he was merely paying the FDA inspectors to do their jobs
-Court said that Alfisi’s conviction should stand because the “corrupt” intent is in the nature of the quid pro quo
-Court says that if you’re being extorted then you can raise the extortion defense
B. Gratuity – 18 U.S.C. §201(c)
-Elements:
(1) A “public official”
(2) Knowingly and willfully;
(3) Demands, seeks, receives, accepts, or agrees to receive and accept, something of value;
(4) For or because of any official act performed or to be performed
-Penalty: 2 years
-The purest distinction between bribery and gratuity is temporal: the bribe comes before the act, while the gratuity
comes after
-A lot of gratuity cases are just weak bribery cases
-It’s possible for the two parties to the transaction to have different intents – the money-giver may have the intent to
bribe the official, while the official has no intention of being influenced
-A gratuity can be an after-the-fact payment; no need to prove official was influenced or induced to do anything
-Gratuity is usually a lesser included offense with bribery
United States v. Sun-Diamond Growers of California
-Sun-Diamond indicted for making illegal gifts to Secretary of Agriculture Mike Espy
-Court looks to language of the statute: Is it enough to sustain a charge just based on the Secretary’s position?
No, according to the Court (no “status gratuity”)
-Court held that both bribery and gratuity require a link to a specific act
-Court also notes that a narrow prohibition “is more compatible with the fact that §201(c)(1)(A) is merely one strand
of an intricate web of regulations” governing the acceptance of gifts
-After Sun-Diamond, you have to identify an act with which the gratuity is associated
-After Sun-Diamond, the clear traditional gratuity is now the after-the-fact “thank-you”
If it’s a forward looking gratuity, there is a gray area between that and a bribe
-No more “status-gratuity” after Sun-Diamond
DOJ started charging the whole thing as honest-services fraud (couldn’t prove the link)
C. Federal Program Bribery (18 U.S.C. § 666)
-Elements:
(1) Defendant solicited or received a thing of value;
(2) Defendant was agent of organization or agency that received > $10/year in federal benefits;
(3) Briber was in connection with business valued at $5000 or more;
(4) Defendant acted corruptly
-§666 also applies to the one who paid the bribe
Fischer v. United States
-Defendant convicted under §666; issue is whether Medicare funds provided to hospital (essentially to reimburse
them for expenditures on Medicare patients) were government “benefits” under the statute
-Court finds that the Medicare payments are “benefits” under the statute because the health provider that receives the
payments is “the object of substantial Government regulation”
-Court looks to the dictionary definition of a benefit, and examines the other subsections of §666
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-Congress passed §666 in part to provide a vehicle to prosecute state and local corruption
-Officials who may not qualify under §201 may be able to be targeted under §666
D. Hobbs Act (18 U.S.C. § 1951)
-Elements:
(1) A public official obtained property of another (must be something tangible);
(2) With consent;
(3) Under color of official right;
(4) Causing an effect on interstate commerce
-Applies to robbery, extortion by force, violence, or fear, and extortion “under color of official right”
-Another important vehicle for prosecuting state and local corruption
-The big issues arise about what is “under color of official right”
-In a public official context, it’s usually “You need to give me this, or I won’t do what you want me to do or will do
something to hurt you”
-In extortion, the payor is the victim (as opposed to bribery when both sides are culpable)
-Very minimal requirement to satisfy the interstate commerce element
Evans v. United States
-Defendant, an elected member of the Board of Commissioners of DeKalb County, GA, convicted of extortion under
§1951 after taking $7000 in cash and not reporting it on his campaign-finance disclosure or income tax return
-Issue is whether an affirmative act of inducement by a public official (like a demand) is a required element of
extortion under the Hobbs Act
-Court finds that an affirmative act of inducement is not required; “passive acceptance of a benefit by a public
official is sufficient to form the basis of a Hobbs Act violation if the official knows that he is being offered the
payment in exchange for a specific requested exercise of his official power”
-Court says that “induced” only applies to the definition of the offense by the private individual, not the offense by
the public official AND that even if “induced” applied to the public official, the word “induced” does not necessarily
indicate that the transaction must be initiated by the recipient of the bribe
“…the coercive element is provided by the public office itself.”
-Court finds that the passive inducement satisfies the quid pro quo requirement of McCormick
-Justice Thomas in dissent attacks the majority’s notion that that public office itself is coercive; he also points out
that the expansive definition of extortion seems to just make it a bribe
McCormick: In a campaign contribution case, an explicit quid pro quo is required
An explicit promise or undertaking OR obtaining payment not entitled to
-Any time you have a public corruption fact pattern, you have four main things in the arsenal:
(1) §201
(2) §666
(3) Hobbs Act
(4) Honest services fraud
-§201 for federal officials (unless they meet the Dickson standard for state/local officials)
-§666 for federal or state/local
-If you think your payors were more victims than willing participants, then Hobbs Act
-“Stream of things of value” and official acts together create the direct link
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VI. Perjury & False Statements
A. Traditional Perjury (18 U.S.C. § 1621) and False Declaration (18 U.S.C. § 1623)
-Elements of perjury (pertinent to both perjury and “false declarations” under §1623):
(1) Testimony given (or, for 1623, records or documents used) while defendant was under oath;
(2) Testimony (or record or document) was actually false at the time;
(3) Defendant knew at the time that it was false; and
(4) False information was material.
Differences between 1621 and 1623:
-Perjury (18 U.S.C. § 1621)
(1) Applies to testimony not just before a U.S. court or grand jury, but in any proceeding where an oath is
authorized by law (i.e. Congressional investigations)
(2) Recantation is not a defense
(3) Two-witness rule applies (perjury prosecution must be based on the testimony of at least one witness
plus some kind of corroboration)
-False declaration (18 U.S.C. § 1623)
(1) Applies to proceedings before or ancillary to a U.S. court or grand jury
(2) Applies to documents and records as well as to oral testimony
(3) Proof may be made by two inconsistent statements – 1623(c)
Don’t have to prove which one was false
(4) Limited recantation defense provided by statute – 1623(d)
(5) No two witness rule – 1623(e)
-Defenses to perjury:
1) Literal truth (not technically a truth because government has to prove falsity)
2) Question was ambiguous
3) No criminal intent (believe that the false statement was true)
4) Recantation (for 1623 only)
5) Two-witness rule (for 1621 only)
-To be perjury, testimony MUST BE under oath or sworn to under pain and penalty of perjury
-Must look to other statutes for unsworn statements to federal agents, unsworn testimony before Congress, and other
false statements not under oath
-What is “falsity”? See Bronson
Bronson v. United States
-Bronson Productions was filing for bankruptcy; during a hearing held for the benefit of the creditors regarding the
company’s assets he answered a question truthfully but his answer was not really an answer to the question (“Have
you ever [had any bank accounts in Swiss banks]?”)
-He is convicted and the Court of Appeals affirms; Government’s theory is perjury by negative implication
-Supreme Court reverses and says that it is not perjury because a jury should not be determining whether a question
and answer exchange was sufficiently clear; the burden is on the questioning attorney to probe
-“Precise questioning is an imperative as a predicate for the offense of perjury”
-The standard for falsity is narrower for perjury than in the fraud context because perjury takes place in the context
of the institution of the advocacy system, which has rules and a structure
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Falsity:
-Testimony must be actually false at the time it is given
-No room for ambiguity – even if misleading but still literally true it is not perjury
Intent:
-Defendant must know at the time of the testimony that it is false
-Mistakes, carelessness, failures to recall are not perjury
Materiality:
-Testimony must be material to the proceeding
-Testimony is material if it has the natural tendency to influence, or is capable of influencing, a
decision of the tribunal
-Not all lying is necessarily perjury (because of materiality requirement)
Competent tribunals requirement:
-1621 applies to any proceeding where an oath is authorized by law
-1623 applies to testimony before or ancillary to any court or grand jury
Ancillary proceeding requires some degree of formality, as in a deposition (Dunn)
-The “two-witness rule” requires either two or more witnesses, or one witness plus sufficient corroborative evidence
inconsistent with innocence (under common law, perjury could not be proven solely by testimony of one witness)
-The recantation defense applies only to 1623; it is not a defense to 1621
-The statute (§1623) says recantation is a defense if at the time defendant recants, the false testimony has not
substantially affected the proceeding OR it has not become manifest that falsity will be exposed
But most courts read “OR” to mean “AND”
B. False Statements (18 U.S.C. § 1001)
Elements:
(1) A false statement, writing, or concealment;
(2) False statement or information concealed was material;
(3) In a matter within the jurisdiction of the federal executive, legislative, or judicial branches;
(4) Defendant acted knowingly and willfully
-No requirement that statement be under oath
-No requirement that government relied upon the statement in any way (or even looked at)
-No requirement that government suffered damage or harm, financial or otherwise
-No requirement that the statement actually influenced the agency
-Doesn’t matter if the statements were required or voluntary
-There are lots of cases that legally fall within the statute but end up not being charged (prosecutorial discretion)
-Often part of a larger indictment, and may end up being proof of intent for the case as a whole
-Three prongs of 1001:
(1) Concealing material facts by trick, scheme or device
(2) Making material false statements
(3) Making or using materially false writing or document
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(1) Concealing material facts by trick, scheme or device
-Only applies if there was a duty to disclose the concealed information
Duties come from statutes, rules, regulations
-Duty to disclosure must be based on specific requirements to disclose specific information
-Broader standard for false statements as opposed to perjury (applies to statements that would not pass Bronson test)
(2) Materiality: A statement is material is it has “a natural tendency to influence, or is capable of influencing, the
decision of the decision-making body to which it was addressed”
(3) False statements or writings
-Must prove actual falsity; no room for ambiguity, misinterpretation, or literal truth
Defense can say “I didn’t lie; it wasn’t false”
-Does not matter whether the statements are required or voluntary – no “duty to disclose” requirements
“Within the jurisdiction”
-Phrase construed very broadly, covers “all matters confided to the authority of an agency or department” (Rogers)
-Statement need not be made directly to the federal agency, so long as it concerns matters within the federal
agency’s jurisdiction (Herring)
United States v. Rogers
-Man lied to the F BI and Secret Service after he lost his wife; his defense was that his statements were not within
the jurisdiction of the federal government because the agencies involved couldn’t make final decisions
-The Court did not buy the argument; said that jurisdiction should be construed broadly
United States v. Herring
-Herring lied on his GA Unemployment Insurance benefits application; he argued that the government lacked
jurisdiction to prosecute him because the false statements were made by to a state agency and that such statements
are only actionable when there is a direct relationship between false statement and a function of the federal agency
-Eleventh Circuit held that false statements need not be made directly to an agency of the United States and federal
funds need not actually be used to pay a claimant, also rejected Herring’s claim of a lack of materiality
“Executive, legislative, or judicial branch”
-Old version of the statute (before 1996) referred only to a “department or agency of the United States” and the
Court had applied that phrase to all three branches of government
However, some courts created a “judicial function” exception
-Hubbard v. United States read the old language to mean only the executive branch
-Congress amended the statute in 1996 following Hubbard v. United States to create the current language
incorporating all three branches (the “Hubbard fix”)
-Note exceptions in the statute for certain statements made to legislative and judicial branches
-In Brogan v. United States, the Court held that §1001 applies to false statements that consist of the mere denial of
wrongdoing, the “exculpatory no”
-Ginsburg concurred in Brogan; she’s concerned that the statute gives prosecutors too much authority and allows
them to essentially manufacture crimes (Stevens dissents for that reason)
Could also allow prosecutors to convert a state law violation into a federal felony, or get someone under
§1001 when the statute of limitations for the underlying crime has passed
-DOJ policy is generally not to charge pure “exculpatory no” cases
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“Knowing and willful”
-Government must prove that the defendant knew the statement was false; may also have to prove that defendant
acted with intent to deceive (Circuit split)
-Don’t need to prove that defendant knew the statement was “within the jurisdiction” of the federal govt. (Yermian)
-Sarbanes-Oxley created a new false statement statute (18 U.S.C. § 1350), which provides criminal penalties for
corporate officers who make false statements when complying with the new requirement that they certify reports
VII. Racketeer Influenced and Corrupt Organizations Act (RICO): 18 U.S.C. §§ 1961-1964
-Passed in 1970 as part of an attempt to attack organized crime
-Used far more in other white collar prosecutions than to prosecute organized crime
Reasons to hate RICO:
-Too complex
-Gets abused
-May seem heavy-handed
-Hard to explain to jury
-“The crime of being a criminal”
-Need approval from Main Justice
-The pattern in RICO cases has been for judges to impose limitations; the Supreme Court has repeatedly struck
down these limitations
-Civil RICO cases are a goldmine because they provide for treble damages and attorneys fees
-The strange thing about RICO is that it really doesn’t define a distinct crime – it essentially criminalizes being a
criminal as a part of a criminal enterprise
-The main statute that we study is 1962(c)
Elements:
(1) Defendant was “associated with” or “employed by”
(2) An “enterprise” affecting interstate commerce, and
(3) Defendant engaged or participated in the conduct of the enterprise’s affairs
(4) Through a “pattern of racketeering activity” (“PORA”)
-1962(a) prohibits the use of funds obtained through a PORA to acquire an interest in, or to establish or operate, any
enterprise
-1962(b) prohibits using a PORA itself to acquire or maintain an interest in or control of any enterprise
-1962(d) prohibits conspiracies to violate sections (a), (b), or (c)
-The legislative history seems to suggest that Congress’s original intent was to stop organized crime from infiltrating
legitimate businesses and organizations (like labor unions)
-In Turkette, the defendant claimed that Congress was only concerned about racketeering in legitimate legal
enterprises; the Court acknowledged that this was a primary concern but that sections (a) and (b) are focused on
legitimate enterprises while (c) can also apply to criminal enterprises
-1961 has definitions, 1963 provides for forfeiture, and 1964 deals with civil penalties
What is an enterprise?
-1961(4):
Category One: “any individual, partnership, corporation, association, or other legal entity”
Category Two: “any union or group of individuals associated in fact although not a legal entity”
-Most controversy surrounds “association in fact” enterprises
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-When dealing with an exam question, look at different potential enterprises and the advantages and disadvantages
of choosing each one
United States v. Turkette
-Defendant and twelve others charged with a RICO violation on top of eight other counts of various criminal
activity; alleged enterprise was a group organized for the purpose of drug dealing and other crime
-Turkette argued that RICO only applies to legitimate business enterprises; Court of Appeals agreed with Turkette
but Supreme Court reversed and found that RICO applies to legitimate and illegitimate enterprises
-Three arguments from Court of Appeals:
(1) Ejusdem generis – Court says that this doesn’t apply because there is no uncertainty in the language and
there are two separate categories instead of just one
(2) Giving “enterprise” its ordinary meaning would create inconsistency and redundancy – Court says that
the way the statute is constructed still establishes that the government must prove an enterprise and a
pattern of racketeering activity (“the evidence might coalesce” but the two are still separate distinct things)
(3) Will alter the balance between federal and state enforcement – Court says that Congress was aware of
this and went forward with the statute anyway; Congress intended to skew this balance of power in the
realm of organized crime
-If you have a federal conspiracy, do you need RICO?
It seems like the interpretation of enterprise turns RICO into conspiracy +
Boyle v. United States
-Defendant charged with RICO violation for participating in a number of bank robberies with various other people
-Defendant argued that because the group didn’t have any clear structure or hierarchical organization that there was
no enterprise for the purpose of the statute
Examples: common modus operandi, regular meetings, dues, leaders, etc.
-Court rejects the defendant’s argument that the structure be “ascertainable” – it’s redundant
-Court held that an association-in-fact enterprise was required to have a structure, but need not have an ascertainable
structure beyond that inherent in the pattern of racketeering activity in which it engaged; that enterprise need not
have a hierarchical structure or chain-of-command
-Definition of enterprise includes both legitimate and illegitimate enterprises (Turkette)
-The enterprise may have economic or non-economic purpose (Scheidler)
-The enterprise must have (1) a purpose, (2) relationships between its members, and (3) longevity sufficient permit
those members to achieve the purpose of the enterprise BUT need not have a structure beyond that inherent in the
pattern of racketeering activity in which it engaged (Boyle)
-An “association in fact” enterprise is a group of people associated together for a common purpose of engaging in a
course of conduct
-Must have common purpose, relationship among members, and sufficient longevity to pursue enterprise’s purpose
Ascertainable structure beyond that inherent in the PORA not required
-A group of individuals that get together one time on the day of a bank robbery for the purpose of robbing the bank
probably not sufficient for RICO (no pattern, no relationships, no longevity)
-A legal entity is, by definition, an enterprise – see 1961(4)
-If an enterprise is a legal entity (i.e. a corporation), you don’t need to get into the “association in fact” analysis
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-Under 1962(c), the enterprise cannot be a defendant “person” because it cannot be “employed by or associated
with” itself
-Under 1962(a) and 1962(b), the enterprise may also be a defendant
Use 1962(a) if you want the corporation as a defendant
Cedric Kushner Promotions, Ltd. v. King
-Plaintiff goes after defendant under RICO statute; the former alleged that the latter conducted his corporation (the
enterprise) through a pattern of racketeering activity
-Defendant argues that 1962 requires a person and an enterprise, and that because he is the sole shareholder of the
corporation there are not two distinct actors (can’t be associated with himself)
-Court rejects King’s argument and finds that the corporation and the sole shareholder are two distinct entities
because the corporation is a separate legal entity
-Have to be distinct in 1962(c) but not in (a) or (b)
-RICO has essentially become a glorified conspiracy statute
Reves v. Ernst & Young
-Bankruptcy trustee sues Ernst & Young alleging that the firm fraudulently conducted the affairs of the enterprise
-1962(c) requires that the defendant conduct or participate in the conduct of the enterprise’s affairs
-Operation or management test: operation/management demonstrates direction, which is a requisite for “conduct”
-Court holds that in order “to conduct or participate” in the enterprise, one must participate in the operation or
management of the enterprise itself
-“Conduct” requires some element of direction; to participate in the conduct of the affairs, one must have some part
in directing those affairs (Reves)
-Unclear to what extent this applies to lower-level employees or outsiders
-Whether the individual had some part in directing the affairs is a factual question
-Lower-level employees or lower-level management can direct the enterprise, but in a different manner than upperlevel executive management
-Distinction between direct and indirect control
-Don’t forget interstate commerce component (usually very easy to meet though)
“Racketeering activity”
-Defined at 1961(1)
-Includes nine categories of state offenses and dozens of federal crimes
-White collar RICO predicates include mail/wire fraud, Hobbs Act, bribery, obstruction of justice, and money
laundering
-Defendant need not be charged with or convicted of the predicate acts (in typical cases they will be)
“Pattern of Racketeering Activity”
-Defined at 1961(5): at least two acts of racketeering activity…within a ten year period
-Pattern need not involve multiple schemes, but there must be “continuity plus relationship” in the acts of
racketeering activity (Northwestern Bell)
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H.J. Inc. v. Northwestern Bell Tel. Co.
-Plaintiffs alleged that the Northwestern Bell bribed officials of the Minnesota Public Utilities Commission to
extract rates for the company in excess of a fair and reasonable amount
-Alleged violation of
1962(a) – derived income from PORA, enterprise = NW Bell
1962(b) – acquired MPUC, enterprise = MPUC
1962(c) – conducting MPUC affairs, enterprise = MPUC
1962(d) – conspiracy to do all of the above
-8th Circuit said that it didn’t fit because there was only one scheme – to make bribes to get better rates
-Court said 8th Circuit test was too restrictive; comes up with new standard: relationship plus continuity
-Court gets a little muddled in discussing continuity: “A party alleging a RICO violation may demonstrate continuity
over a closed period by proving a series of related predicates extending over a substantial period of time.”
A RICO pattern can be established “if he related predicates themselves involve a distinct threat of longterm racketeering activity, either implicit or explicit” (multiple related schemes in continuous pattern)
-As a result of Northwestern Bell, you need to worry about conduct that terminates – is there continuity?
A “distinct threat of long-term racketeering activity” – continuity + relationship
RICO Conspiracy – 1962(d)
-Makes it a crime to conspire to violate sections (a), (b), or (c)
-No requirement that each conspirator personally agree to commit at least two predicate acts (Salinas)
Salinas v. United States
-Sheriff of Hidalgo County took bribes in exchange for him allowing a prisoner to receive contact visits from his
wife and girlfriend; his deputy Salinas aided in the scheme
-The RICO pattern was a series of violations of TX state law bribery statute
-Could have applied §201 to Salinas under the Dickson standard (because he was guarding a federal prisoner)
VIII. Money Laundering
-The concealment of the existence, nature, or illegal source of illicit funds in such a manner that the funds will
appear legitimate if discovered
-Primarily aimed at drugs and drug money, but now used to combat other white collar crime
-Like RICO, money laundering is a long complicated statutory scheme
-Money laundering + conspiracy gives you almost everything that RICO gives you
-Under the old sentencing guidelines, money laundering would turn a small fraud case into a substantial sentence;
money laundering was a way to beef up white collar offenses
-But Congress changed the law so now money laundering directly tracks the underlying guideline
18 U.S.C. § 1956: The true “laundering” statute: requires one of four specific intents or types of knowledge in
connection with a financial transaction involving illicit funds
18 U.S.C. § 1957: The “transaction” statute: requires only a knowing monetary transaction with illicit funds, but no
further specific intent or knowledge
Elements of §1956(a)(1)
(1) Defendant conducts or attempts to conduct a “financial transaction”
(2) Knowing that the property involved represents the proceeds of some form of unlawful activity
(3) The financial transaction does in fact involve the proceeds of a “specified unlawful activity” (SUA)
(4) Defendant acts with one of four specific intents or types of knowledge
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(1) “Financial Transaction” (defined at 1956(c)(4))
-Almost any transaction/transfer involving money or something of value
-Very broad definition, includes virtually any kind of transaction or transfer involving money, financial instruments,
or certain types of property
-Each transaction if the unit of prosecution (so each may be a separate count)
(2) Knowledge Requirement (defined at 1956(c)(1))
-Must show that at the time of the financial transaction, the defendant knew that the property involved represented
proceeds of “some form of unlawful activity”
-Unlike “specific unlawful activity” there is not a specific list of offenses that will qualify, so any felony under state,
federal, or foreign law will suffice
(3) Specified Unlawful Activity, or SUA (defined at 1956(c)(7))
-Financial transaction must in fact involve the proceeds of an SUA
-SUAs include many common white collar offenses, including bribery, mail and wire fraud, obstruction of justice,
and the Hobbs Act
(4) Specific Intent/Knowledge
-One of four options:
(a) Intent to promote an SUA – (a)(1)(A)(i)
(b) Intent to evade income taxes – (a)(1)(A)(ii)
(c) Knowing that transaction is designed to conceal or disguise the nature, location, source, ownership, or
control of the proceeds of an SUA – (a)(1)(B)(i)
(d) Knowing that the transaction is designed to avoid a CTR filing requirement – (a)(1)(B)(ii)
United States v. Campbell
-Real estate agent convicted of money laundering in connection with a real estate transaction where a client
purchased a house in all cash (the cash was drug money)
-The false statement conviction in Campbell bolstered the government’s evidence of guilty knowledge (mens rea)
-Review in Campbell: Considering the evidence in a light most favorable to the government, could a rational
member of the jury found her guilty – if so, then convicted upheld
§1956 in Campbell:
1) Financial transaction – real estate closing
2) Knowing that property involved proceeds of some form of unlawful activity (contested)
3) Proceeds of SUA – drug money
4) Acted with one (of four) specific intents (contested)
-Government alleged specific intent #3 – (a)(1)(B)(ii)
-What did she know? Court applies willful blindness standard (willful blindness is a legitimate jury instruction)
-Campbell contended that she believed that the purchaser was a legitimate businessman
-What it all boils down to is whether she knew that it was drug money
-“Financial institution” as a term of “monetary transaction” from §1957 is not strictly limited to banks (but monetary
transaction is still narrower than financial transaction)
United States v. Piervinanzi
-Two separate but related schemes to transfer funds electronically out of banks and overseas
-Under 1957: monetary transaction is fraudulent wire, in excess of $10k, the SUA is bank fraud
Issue is whether transaction is in “criminally derived property” because the fraudulent wire never went through so
defendant alleges he never obtained the proceeds
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-Under 1956(a)(2), defendant makes similar argument regarded it not being criminal proceeds
Defendant not as successful because (a)(2) is aimed at international transfer, so there’s no requirement that
it be dirty money or proceeds – no necessity of distinct transaction
-We don’t need a second way to punish mail fraud or bank fraud through laundering; the statute is not designed to
do this (supposed to be looking at the “downstream” events)
United States v. Johnson
-Defendant involved in Ponzi scheme, found guilty on 62 of 63 counts involving money laundering
-Counts 2&3 under 1956 on promotion theory (people convinced to invest based on his purchase of a home and car)
-Counts 4-31 under 1957 – monetary transactions are wires from investors to his account
Court reverses the convictions on those counts because funds weren’t yet “criminally derived property”
-Counts 32-63 under 1957 – monetary transactions are checks going out to investors
Defendant makes commingling argument; Court rejects this argument on a similar rationale to Jackson –
the account is tainted by the dirty money
-Rutgard: 9th Cir. case that adopted commingling theory, but only in circumstances where the money withdrawn
from an account could theoretically have been all clean money (i.e. account $100k, $50k dirty, $30k withdrawn)
-Currency Transaction Reports (CTR): must be filed for all cash transactions in excess of $10k
-Form 104 for financial institutions, Form 8300 for any “trade or business”
-Willful failure to file the reports is a felony
-31 U.S.C. § 5324 makes it a crime to structure transactions so as to avoid CTRs being filed (“smurfing”)
IX. Obstruction of Justice (18 U.S.C. §§ 1503, 1505, 1512)
-Statutes:
1503: influencing or injuring officer or juror generally (“omnibus clause”)
1505: proceedings before departments, agencies, and committees
1510: criminal investigations
1512: witness, victim, or informant
1519: destruction, alteration, or falsification of records in federal investigations
1520: destruction of corporate audit records
§1503 Obstruction:
-Most commonly charged is the “omnibus clause” – applies to anyone who corruptly influences, obstructs, or
impedes the due administration of justice, or endeavors to do so
-Applies only to federal judicial and grand jury proceedings
§1505 Obstruction – basically the same as omnibus clause of 1503, but 1505 applies to the obstruction of
Congressional and federal agency proceedings
Elements of §1503/1505 Obstruction:
(1) There is a pending proceeding
(2) Defendant knew about the proceeding
(3) Defendant corruptly influenced, obstructed, or impeded the proceeding’s due administration of justice,
or endeavored to do so
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-To constitute obstruction, defendant must know that endeavor to obstruct will have the “natural and probable
effect” of interfering with due administration of justice (Aguilar); this is the “nexus requirement”
-Note that an “endeavor” is enough; defendant need not be successful
-§§1503 and 1505 require that a proceeding be pending and that the defendant knows it is pending
-§§1512, 1519, and 1520 do not require that a proceeding be pending, but some proceeding must be contemplated or
foreseen by the defendant (some “nexus” still required)
-§§1503, 1505, and 1512 require corrupt intent: Defendant must wrongfully or dishonestly intend to obstruct the
proceeding by his/her conduct
-§1512 Obstruction: traditionally a witness tampering statute, later applied to corrupt attempts to influence others
-Arthur Andersen charged under old 1512 with corruptly persuading its employees to withhold documents
Sarbanes-Oxley Act of 2002
-New 18 U.S.C. §1512(c): applies to document destruction and other obstruction of “official proceedings”
-New 18 U.S.C. §1519: document destruction or alteration in federal agency investigations and bankruptcy
Broader than 1505 – doesn’t require a pending proceeding (only if proceeding is “anticipated”)
Weaker intent than 1505: knowledge of obstructive acts AND intent to obstruct
-New 18 U.S.C. §1520: destruction of corporate audit records
Doesn’t require corrupt intent – only “knowingly and willfully”
Establishes positive duty to retain records and penalties (“knowing and willful” fail to meet duty)
New Section 1512:
-Section 1512(c) applies to anyone who corruptly “obstructs, influences, or impedes any official proceeding or
attempts to do so” (the new omnibus clause?)
-“Official proceeding” is defined broadly to include proceedings before all three branches of government
-The official proceeding does not need to be pending (see §1512(f)(1))
-Penalty is 20 years, versus 10 years for §1503
X. Procedural Issues
A. Immunization
-The role of prosecutorial discretion in pretrial of criminal cases
-There are laws that require federal prosecutors to follow state ethics rules
-Courts can also impose external controls on prosecutions
-Immunizing witnesses if one of the most powerful weapons that you have
-A lot of distinctions between which statutes to charge defendants and a lot of discretion
-General guideline from DOJ is charge the most serious offense related to the defendant’s conduct for which you
can sustain a conviction
-Two different type of immunity: transactional and use
-Typically get use immunity, which means that the state cannot use your testimony against you directly or
derivatively in a future prosecution
-More rarely given is transactional immunity, which completely immunizes you from future prosecution related to
the offense on which you testified (broader)
-The immunity statute also gives Congress the ability to grant immunity
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Kastigar v. United States
-Issue was whether the statute providing for use and derivative use immunity was coextensive with the Fifth
Amendment or the Fifth Amendment was broader
-Court says first that transactional immunity is not required (use immunity is sufficient) and then compelling
testimony does not allow you to plead the Fifth
-All that is required is that the government cannot prosecute you criminally for the statements that you make which
are immunized
-If you’re trying to prove that you didn’t make any use of immunized testimony, you must have a Kastigar hearing
to prove that by a preponderance of the evidence
-There’s also “letter immunity” or “pocket immunity” – you can agree to an informal immunity
-A letter that says the same thing as the immunity order
-Proffer agreement: attorney will bring client into office and they will tell the prosecutor everything; what they say
cannot be used against them but the government can make derivative use of everything they say
-Who can you charge? Who can you get to plea? Who do you just simply leave out?
Start with the small fish at bottom of the ladder and move up to the big fish
-Very difficult to keep the prosecution untainted by immunized testimony
-Practically speaking, if you’ve immunized a witness, you will not be charging them
-Main DOJ has to approve grants of immunity by federal prosecutors
-Immunization does not protect a witness from perjury or making false statements
You still get in trouble if you lie (to grand jury, to court, to Congress)
-May want to consider how court order compelling testimony and immunity might look better or worse than signing
a letter of agreement with the prosecutor (i.e. police officer example)
B. Pleas
-You always have the right to plead to all the charges and go straight to sentencing
-More commonly, the prosecutor agrees to drop several charges in exchange for you pleading guilty to the
remaining charges
-If you cooperate as part of the plea, that will likely favorably affect your sentencing based on the guidelines
-The majority of white collar cases end in pleas
-In federal court all plea agreements must be in writing, signed by both defense attorney and defendant
-Rule 11 hearing: hearing where judge discusses the plea with the defendant before accepting the plea and
government makes a proffer as to the evidence they would have presented at trial
-Rule 11 proffer: prosecutor tells judge what the state’s evidence would have shown at trial
Must establish all the elements of the charged offenses
Defendant also has opportunity to agree or disagree with proffer
-If the defendant disagrees with the proffer, then the plea breaks down
-Pre-Sentence Report: information on defendant and the circumstances of the offense; probation department also
puts together a sentencing recommendation based on the guidelines
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C. Parallel Proceedings
-Federal criminal investigations, state criminal investigations, civil lawsuits, SEC investigations, IRS investigations,
Congressional investigations, etc.
-It’s not at all unusual in the white collar context for your client to be facing multiple parallel investigations
-Parallel investigations present problems for prosecutors too because witnesses from whom you seek information
may be overwhelmed by requests related to parallel investigations being done by other governmental bodies
-Issues with Congress immunizing witnesses and harming subsequent criminal proceedings
-Issues with Grand juries and maintaining secrecy under Rule 6(e)
-Issues with collateral estoppel (implications in future civil cases)
-To solve these issues, you can attempt to seek a stay in civil and administrative proceedings
If you’re convicted or plead guilty in criminal case, the parallel civil case will likely also be resolved
-You can also answer interrogatories in civil case, but then the client’s sworn answers are out there and can be used
by the government as admissions in the criminal case
-If you refuse to answer and plead the Fifth, the court shouldn’t rely only on that to decide against you in a summary
judgment motion, but an adverse inference can be drawn for the purpose of the resolution of the motion
-You can also answer the interrogatories and seek a protective order
But that’s not a guarantee, because in a number of circuits criminal subpoenas trump protective orders
United States v. I. Lewis “Scooter” Libby
-The eventual result of a series of events beginning with the Bush Administration’s investigation of Iraq’s alleged
attempts to obtain yellowcake uranium and ending with the leaking of the identity of CIA agent Valerie Plame
-Classic coverup crime case; no one gets charged with leaking Plame’s name but Libby charged with making false
statements to the FBI and the Grand Jury about his role in the investigation
-Counts:
(1) Obstruction of Justice, 18 U.S.C. 1503
(2&3) False Statements, 18 U.S.C. 1001
(4&5) Perjury, 18 U.S.C. 1623
-Found guilty on counts 1, 2, 4 and 5; President Bush commuted Libby’s sentence
IMPORTANT TO DO MORE THAN JUST SPOT THE STATUTE – UNDERTAKE THE FULL ANALYSIS
RECOGNIZE POSSIBLE CHARGES THAT YOU MIGHT NOT CHARGE AND FOR WHAT REASON
ALWAYS GOOD TO CITE THE CASES AND WHAT THEY STAND FOR
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