Moscow vs NY Justice

"Inside a rundown government building on Novaya Basmannaya Street in Moscow, a bizzare lawsuit is playing out involving $7.5 billion in illicit money transfers and America's ninth-largest bank. ... What makes the dispute unique is that Russia has filed the suit not in 'any appropriate United States district court,' as the RICO statute contemplates, but in a Russian court. Moscow's commercial court is widely regarded as not only a place susceptible to corruption but one in which judges simply lack the judicial independence required to rule against important state interests. While a judgment in Moscow might well not be enforceable in the U.S., the Bank of New York [BNY] does business in more than 100 countries, and the judgment would almost certainly be enforceable in some of them. Moreover, as a multinational operation, the [BNY] does not relish the prospect of defying any country's judiciary. ... The case raises a larger issue: Can any Western company get a fair shake in the Russian court system when the adversary is the Russian government? ... Acting on a tip, Manhattan federal investigators raided the couple's apartment in August 1999. They pleaded guilty in February 2000 to having operated an unlicensed branch of a foreign bank and conspiracy. ... But contemporary press accounts suggest that the prosecutors' attempts to enlist Russian assistance were largely rebuffed at the time. (Mary Jo White, the U.S. attorney at the time, declined to be interviewed for this article). ... As for Edwards's supervisors and the bank iteself, prosecutors leveled no charges. ... In it, the [BNY] acknowledged Keystone Kops-style incompetence, but no knowing, intentional misconduct. ... The bank has always maintained that none of those acknowledgements amounted to an admission of criminal conduct. ... The press release and the nonprosecution agreement soon came to the attention of Florida attorney Marks, who had represented the Russian Federal Customs Service in unsuccessful litigation in U.S. courts against the major tobacco companies for allegedly smuggling cigarettes into Russia to circumvent taxes. ... Why did Marks choose to bring the case in Russia? The lawyer contends he was effectively required to do so, because of a Manhattan federal district judge's 2001 ruling in a case known as Pavlov v. [BNY]. ... [BNY] lawyers argued that the depositors' case was mainly a Russian matter which should be heard in a Russian court, which could provide 'an adequate, alternative forum'. ... Marks also contends that because the [BNY] favored moving the Pavlov case to Russia, it is now legally barred from taking a contrary position in the current case. ... Matt Biben ... joined the [BNY] in 2004, after spending 12 years as a federal prosecutor--six in Manhattan--and having brought many criminal RICO suits. Biben has also personally negotiated the language of the [BNY's] nonprosecution agreement in 2005. ... Last month, the U.S. Attorney's offices for both the Eastern and Southern Districts of New York ... belatedly amended the confusing joint press release. It now states that the [BNY] 'admitted its criminal conduct with respect to the Eastern District of New York investigation'. ... After Fortune informed Marks that the press release had been amended, he e-mailed back, 'It is absolutely amazing that Justice would amend the release some three years later during pending civil litigation potentially to help the wrongdoer. ... This should be troubling to all of us that Justice is apparently subject to such influence and that the bank has such power'," my emphasis, Roger Parloff (RP) at Fortune, 29 September 2008.

Mike Garcia's (MG) office takes BNY's orders. It's good that MG knows who the boss is. MG's office amending the press release indicates the Fed's and BNY's initial settlement was collusive. I agree with Marks, BNY found Russia a good forum, it should be "judically estopped" from objecting now. RP is correct with respect to criminal RICO, which must be filed in a federal court. Tafflin v. Levitt, 107 LEd 2d 887 (1990) permits bringing a civil RICO case in a state court. I see no reason even Roberts' Supremes would rule it couldn't be brought in a Russian court. Why does RP care if BNY can get a fair hearing in Russia? I ask why the Feds gave BNY a nolle prosequi? RP should read about Craig Gile's case, Fortune, 9 June 2008, my 25 June 2008 post. US v BNY looks like another SDNY stinker. The Feds throw two nobodies to the wolves while not prosecuting the BNY. Russia's judges "lack judicial independence"? RP, what about our Supremes? RP, ask can an individual "get a fair shake" in US courts. "[P]ersonally negotiated the language", interesting. An ambiguity should be construed against the drafter. A second civil RICO case anyone? Yes, naming the SDNY US attorney's office and BNY as co-conspirators in a conspiracy to deprive the public of honest services. Whaaaat?

"Appellants with one Harry I. Schwimmer were indicted under an indictment which charged them with conspiring to defraud the [US] government in violation of [18 USC 371]. The single count indictment alleged that the purpose of the conspiracy was to defraud the [US] of the proper administration of the Internal Revenue laws and regulations, of the proper and faithful service of appellants Connelly and Caudle and to commit the offenses of bribery, perjury and knowingly making false statements and entries. ... Matthew J. Connelly was Appointment Secretary to President Truman; appellant T. Lamar Caudle was an Assistant Attorney General in charge of the Tax Division of the Department of Justice; Harry I. Schwimmer was a Kansas City, Missouri, lawyer; Ellis N. Slack was an attorney in the Department of Justice; Irving Sachs was a St. Louis, Missouri, shoe broker, and Shu-Stiles, Inc., was a Missouri corporation of which Sachs was president. The indictment further charged that the purpose of the conspiracy was to protect Irving Sachs from criminal prosecution for Internal Revenue law violations", Connelly v. US, 249 F2d 576, 578 (8th Cir., 1957). Wow, an Assistant Attorney General! "The Internal Revenue agents on investigation reported that Sachs as president of Shu-Stiles, Inc. had fraudulently evaded taxes due the government by the company to the extent of $188,378.32. ... The government's testimony tended to prove certain business transactions between Schwimmer and appellants by which the appellants profited, the payment of large sums of money by Sachs to Schwimmer, entries in books of Schwimmer indicating disbursement of sums of money on behalf of appellants, evidence that Schwimmer had purchased for appellant Connelly two suits of clothes, and evidence of visits by Schwimmer to and consultations with the appellants at various times", 580. I estimate $188,378.32 1949$ are about $2.8 million today; peanuts, 41% of my Blankfein test. "Appellant Caudle was a lawyer with wide experience in criminal prosecutions on behalf of the government", 581. "It appears without dispute that Irving Sachs was guilty of a wilfull and flagrant tax fraud to which there was apparently no defense. ... In this situation, Harry I. Schwimmer, a lawyer of Kansas City, Missouri, was employed for the express purpose of thwarting this threatened criminal prosecution. ... Caudle ... disregarded the recommendation of the Bureau of Internal Revenue and ordered that Sachs not be criminally prosecuted but that the case be treated on the basis of civil liability. ... It appears from the evidence that Schwimmer made frequent calls on Caudle and Connelly. ... Schwimmer received in payment for his services in seeking to thwart the criminal prosecution of Sachs some $46,000, from which apparently he paid to each of the appellants or on behalf substantial sums of money", 585. Substantial? $46,000 1949$ are about $690,000 today. Enron's Jeffrey Skilling might have spent $25-30 million on his legal defense! Would a judge admit as evidence tens of millions in fees paid by a large bank to a "NY Big Law" which regularly hires AUSAs? I doubt it. Sachs was a peanut. These guys were all peanuts. Look at the Aguirre-Mack matter in front of the SEC. Who was indicted over it?

"Gorman was an Economic Crime Specialist and an [AUSA] assigned to the [US] Attorney's Office for the Northern District of Ohio in Toledo. From August of 1982 through February or April of 1983, he was the lead prosecutor investigating a check kiting scheme which involved a bankrupt, James Hartley, and several banks with which Hartley had dealt. ... In the course of his work, Weber [a creditors' representative from Phoenix, Arizona] concluded that Hartley engaged in a massive check kiting and illegal bank stock transfer scheme related to the bankruptcy. If others, including banks, are convicted of participating in criminal activity which harmed the creditors, creditors could seek recovery from such parties. In civil suits, a bank's criminal conviction could be introduced under the doctrine of collateral estoppel, thus making the only remaining issue that of damages", my emphasis, US v. Gorman, 807 F2d 1299, 1301 (6th Cir., 1986). Offensive collateral estoppel is critical to understanding DOJ case selection. "Gorman also kept Weber apprised of grand jury proceedings in the Hartley case, and discussed how to time grand jury subpoenas to put extra pressure on banks to settle, as well as numerous other unsavory tactics", 1302. The DOJ working with unsecured creditors is "unsavory" if the target is a bank! Gorman got loans totalling about $40,000 as a result of Weber's influence, 1302. "Gorman was convicted on one count each of violation of 18 USC S 208 and 18 USC S 201(g)", 1302. "The evidence presented by the government in this case showed Weber had a 10% contingent fee arrangement with Hartley's creditors. Expert testimony indicated that criminal investigations against banks accused of cooperating or conspiring with a criminal bankrupt could prompt their settlement with the bankrupt's creditors at times regardless of the banks' culpability", 1304. Does this mean no bank should ever be investigated for possible criminal activity? What did the Feds do in the KPMG tax shelter case if not bring extralegal pressure on the individual defendants? Disagreeing with the 6th circuit; I would have excluded this opinion testimony as it is on an issue of ultimate fact and should have been made in closing argument, it at all. Further, you can make this argument with respect to any criminal defendant. Could Joe Schmoe in Ohio on trial for bank fraud complain of the bank's potential offensive collateral estoppel use of his criminal conviction? I think the trial judge would laugh him out of court. "The purpose of Section 201(g) is to reach all situations in which a government agent's judgment concerning his official duties may be clouded by the receipt of an item of value given to him by reason of his position", my emphasis, 1304. "A similar analysis applies to the future employment promised the appellant by Weber. ... However, Gorman neglects to indicate that the employment with Weber would have paid him $150,000 per year for two years. This was approximately three times his salary as an [AUSA]", 1305. Can future employment prospects influence an AUSA's judgement? What was Paul Gorman's crime? Working against as opposed to for a bank. How many AUSA's in MG's office now seek better paying "NY Big Law" positions and have each's "judgment clouded" by future employment prospects? Does MG hand each of them a copy of Gorman on day one with the admonition, "thou shalt not indict a bank unless the case was already on page one of the New York Times"? Where are the two AUSA's who handled Uncle Sam's Gorman appeal? James M. Cole is a partner with Bryan Cave (BC), an 800-person firm of attorneys in Washington, DC, Ellyn Marcus Lindsay is an AUSA in Los Angeles. Cole's BC experience includes: "Appointed as the independent consultant for American International Group, Inc., to examine its transactions and oversee the revision of its corporate compliance and financial disclosure policies. ... Counseled Arthur Andersen in its efforts to revamp its document management and compliance procedures after the Enron related events were uncovered. ... Represented chief risk officer of Enron. ... Represented individuals and entities on money laundering investigations", my emphasis. Talk of painting a target on one's back. Anyone for suing AIG and Bryan Cave? Crime-fraud exception anyone? Let's see with a $123 billion recent AIG bailout, if the plaintiffs' bar can even get 1% out of BC, that's $1.23 billion. Not a bad settlement. If the judge awards a 20% fee, that's $246 million. Plaintiffs' bar, start your engines!

F. William Sawyer (FWS), an attorney and lobbyist for John Hancock Mutual Life Insurance (JHMLIC), was found guility of "fifteen counts mail fraud, nine counts of wire fraud, eight counts of interstate travel to commit bribery, and one count of conspiracy", US v Sawyer, 85 F3d 713, 722 (1st. Cir., 1996). FWS spent a few thousand dollars on trips to influence Massachusetts legislators to act favorably on JHMLIC sponsored legislation. "The cases in which a deprivation of an official's honest services is found typically involve either bribery of the official or her failure to disclose a conflict of interest, resulting in personal gain. ... When an official fails to disclose a personal interest in a matter over which she has decision-making power, the public is deprived of its right either to disinterested decision making itself or, as the case may be, to full disclosure as to the official's potential motivation behind an official act", 724. "A person might not, however, give an unlawful gratuity with the intent to effect a specific quid pro quo. Rather, as the government contends here, a person with continuing and long-term interests before an official might engage in a pattern of repeated, intentional gratuity offenses in order to coax ongoing favorable official action in derogation of the public's right to impartial official services", 730. Think about this. Could MG's AUSAs actions be influenced by their looking for seven-figure "NY Big Law" partnerships? Don't even think it.

Wonderful. The Feds prosecute cases over a series of $5-$200 bribes to plumbing inspectors, US v. Urban, 404 F3d 754 (3rd Cir., 2005). The peasants are screaming for today's Marie Antoinettes to be led to the guillotine and the Feds had time for crap like this.

This case has so much: Russia, billions of dollars, a big NY bank and last but not least, my all time favorite "Fed", Mary Jo White! It tough to get better. I hope Marks finishes this with say a $580 million fee. Go Marks! What will you do, MG, have 100 NY FBI agents investigate Marks to try to nail him for "interstate flight to avoid the payment of overdue parking tickets"? Do you think you could pull off another Eliot Spitzer here, to protect BNY? As was said in 1968 Chicago, "the whole world's watching"!

The Feds amaze. They let the BNY pass. Why? Are they unaware of US v. Bank of New England, 821 F2d 844 (1st Cir., 1987)? "The Bank was found guilty of having failed to file CTRs on cash withdrawals made by James McDonough", 847. "As some of the cases cited hold, the reporting requirements may attach, even if a customer obtains $10,000 or more by visiting different branches of the same bank at various times in a single day", 850. "The common theme running through these three cases is that a pattern consists of repeated violations or a series of violations", 853. "The trial judge properly instructed the jury that it could infer knowledge is a defendant consciously avoided learning about the reporting requirements. ... The judge instructed that the knowledge of individual employees acting withing the scope of their employment is imputed to the bank. ... The trial judge then focused on the issue of 'collective knowledge': In addition, however, you have to look at the bank as an institution. As such, its knowledge is the sum of the knowledge of all of the employees'," 855. "A collective knowledge instruction is entirely appropriate in the context of corporate criminal liability", 856.

US v. Masters, 924 F2d 1362 (7th Cir., 1991) (Posner, J), is interesting. In it, Alan Masters, an attorney and James Keating, "a lieutenant in the Cook's County Sherriff's Police Department who commanded the vice squad and later the criminal investigative unit, and [Michael] Corbitt the Chief of Police of Willow Springs", 1365, supposedly participated in a RICO association in fact (RAIF). "The RICO enterprise, as the government conceives it, was an informal association among the three defendants and three other entities (so a total of six in all): Masters' law firm (a professional corporation of which he was the sole shareholder and which employed another lawyer) and the two police departments", 1365. A law firm and two police departments can be part of a RAIF. Interesting. "The systematic corruption of law enforcement in the west Chicago suburbs brought about by the Masters enterprise could be used to a variety of purposes without destroying the integrity, the rationale, of the enterprise", 1367. Could the SDNY US Attorneys' office and a group of "NY Big Laws" constitute a similar enterprise? No, "round up the usual suspects". All Masters convictions were sustained.

"Courts have interpreted the term 'scheme or artifice to defraud [to] include a scheme or artifice to deprive another of the intangible right of honest services,' ... giving rise to the 'intangible rights doctrine.' This doctrine reaches public and private fraud at the state and local levels, including prosecutions of public officials or employees who have failed to provide honest services to the citizenry they serve", US v. Antico, 275 F3d 245, 261 (3rd Cir., 2001). Does this apply to the Feds too? If not, why not? If you read enough "honest services" cases, you should be disgusted by the paltry cases Feds bring. And appalled at those they fail to bring.