United States: White Collar Roundup: Materiality, Brady, RICO & More (July 2017)

Agents' Aggressive Search Ends Up Costing Them

Sometimes when agents execute a search warrant, they don't consider the risks of being too aggressive and focus instead on gathering as much evidence as they can. That appears to have happened in the government's prosecution of Benjamin Wey, who is charged with a stock-manipulation scheme by the U.S. Attorney's Office for the Southern District of New York. U.S. District Judge Alison Nathan issued a 92-page ruling suppressing the documents, email messages, business receipts, computer hard drives and other records obtained during a daylong search of Wey's office in lower Manhattan and his nearby apartment in early 2012. According to this article in the New York Times, Judge Nathan found that "the 17 agents with the Federal Bureau of Investigation who conducted the searches were largely indiscriminate in seizing property — taking such things as drug prescriptions, X-rays of Wey family members and his children's school records and test scores." She noted neither the lead FBI agent nor the lead prosecutor "had instructed the agents carrying out the raids 'as to any sorts of items that should not be seized during the forthcoming search.'" She also noted there was apparently no indication that any of the agents other than the lead agent had read the 100-page affidavit accompanying the search warrant application. The Times also reported Judge Nathan's expressed concern "that it took more than a year for law enforcement to complete a 'taint review' to determine which electronic communications and documents on Mr. Wey's computers and cellphones were subject to 'potential privilege' claims by Mr. Wey and could not be used as evidence against him." It is unclear what evidence the government will use in the trial against Wey, but perhaps Judge Nathan's ruling will inspire agents to be more discriminating when executing search warrants.

Some Eye-Opening (Revised) Data on Corporate DPAs and NPAs

The Manhattan Institute for Policy Research (MI), a free-market–oriented research organization, annually reports on the growth of deferred and non-prosecution agreements (DPAs and NPAs). The reported data is synthesized from government, university and law-firm sources. In late June, MI issued the original version of its 2017 report. In it, MI included data on the number of federal DPAs and NPAs requiring target companies to submit to monitorships. In early July, MI issued a revised report in which it reduced the number of monitorships imposed in 2015 and 2016. MI explained the revision "more accurately reflects an apple-to-apples comparison across time." With those corrections, the revised report may be of interest to observers of corporate criminal law enforcement. Among other things, MI's revised report states:

  • During their respective two-term intervals in office, the Obama administration entered into 325 DPAs and NPAs, and the George W. Bush administration entered into 130 such agreements.
  • The annual number of DPAs and NPAs (not counting settlements with Swiss banks) in the Bush administration ranged from five to 41 and in the Obama administration ranged from 23 to 40 — with 35 concluded in 2016.
  • Between 2008 and 2016, the number of new DPAs and NPAs mandating monitorships (not counting settlements with Swiss banks) varied widely, ranging from one in 2009 to 14 in 2010. Such agreements constituted about a third of the annual total in each of 2010 and 2013 but no more than about a quarter in any other year, including in 2016. Monitorships established by DPAs and NDAs between 2013 and 2016 ranged from five to nine per year — compared with the six such monitorships established in 2008.
  • Since 2010, parent or subsidiary firms of 18 of the Fortune 100 have entered into DPAs or NPAs.

SCOTUS and the Materiality Requirement

In Maslenjak v. United States, the U.S. Supreme Court addressed whether 18 U.S.C. §1425(a), which makes it a crime to "knowingly procure[], contrary to law, the naturalization of any person," can be violated when the person makes an immaterial false statement. In the case, petitioner Divna Maslenjak, an ethnic Serb who resided in Bosnia during the civil war in the 1990s, sought refugee status in the United States for her husband and children. During the interview, Maslenjak said her family feared persecution in Bosnia from both sides because of their ethnicity and because her husband had evaded service in the Bosnian Serb Army. The United States granted them refugee status. Six years later, she sought naturalization. Question 23 on the application asked whether she had ever given "false or misleading information" to a government official when applying for an immigration benefit. Question 24 asked whether she had ever lied to a "government official to gain entry or admission into the United States." She said no to both, but the real answers should have been yes. It turns out most of her refugee story was false, including the bit about her husband, who in fact was an officer in the Bosnian Serb Army and had participated in the Srebrenica massacre, which involved the "slaughter of some 8,000 Bosnian Muslim civilians." At her trial for violating §1425(a), the district court instructed the jury that "a conviction was proper so long as the Government 'prove[d] that one of the defendant's statements was false' — even if the statement was not 'material' and 'did not influence the decision to approve [her] naturalization.'" She was convicted and appealed. The U.S. Court of Appeals for the Sixth Circuit affirmed, and she petitioned for certiorari. The Supreme Court held "that the Government must establish that an illegal act by the defendant played some role in her acquisition of citizenship." It also detailed the type of false statements that would meet the materiality threshold and those that would not. While the Court's opinion dealt strictly with the statute at issue, it detailed the importance and scope of the materiality standard, which might bear on prosecutions for making false statements to law-enforcement officers, in violation of 18 U.S.C. §1001, or other statutes that require the government to prove materiality.

Time to Fight for Brady: Early, Early, Early

Another Supreme Court opinion, Turner v. United States, should serve to remind defense counsel about the often-anemic post-conviction protections of Brady v. Maryland, 373 U.S. 83 (1963). Turner involved a brutal rape and murder that occurred in Washington, D.C., in 1985. Several defendants were jointly tried for having committed the crime. The government's evidence was largely testimony from two cooperators and a few other witnesses who didn't see the crime occur but placed one or more of the defendants in the vicinity of the crime at or around its occurrence. At trial, each defendant relied on a "not me, maybe them" defense to point the finger at his co-defendants. Long after the trial was over and most of the defendants were convicted, their attorneys learned the government had not provided them with exculpatory material. They then filed post-conviction motions to vacate the convictions. The district court denied their claim, finding that the withheld Brady evidence was not material because it would not have changed the outcome of the case. The court of appeals agreed, and the defendants petitioned for certiorari. The Supreme Court, in a 6-2 opinion authored by Justice Stephen Breyer, affirmed. The government conceded that the withheld evidence was "favorable to the accused" and that it had been "suppressed ... either willfully or inadvertently." Instead, the issue was materiality. Specifically, the petitioners would be entitled to a new trial only if the Supreme Court found "'there is a reasonable probability that, had the evidence been disclosed, the result of the proceeding would have been different.'" The Court determined the result would not have been different because, while the suppressed evidence would have provided ammunition at trial to impeach many, if not all, of the witnesses against the defendants, those witnesses had already been impeached at the trial with similar evidence. As a result, "the cumulative effect of the withheld evidence is insufficient to 'undermine the confidence' in the jury's verdict." Justice Elena Kagan, joined by Justice Ruth Bader Ginsburg, dissented. In her view, "[w]ith the undisclosed evidence, the whole tenor of the trial would have changed" because it would have given all the defendants the ability to abandon the "not me, maybe them" defense and point their fingers at the same alternate suspect. This case demonstrates the difficulty of showing, after the conviction, that the outcome of a case would have been different and reiterates the importance of fervently pressing for Brady material pretrial.

Heartache for Cardiac-Monitoring Companies Caught Cheating

Four cardiac-monitoring companies and one executive agreed to pay more than $13.4 million to resolve False Claims Act allegations that they billed Medicare for higher and more expensive levels of cardiac-monitoring services than had been ordered by doctors. According to documents filed in the case and the settlement, the companies and one executive, Joseph A. Bogdan, knowingly designed their online enrollment process for doctors to select telemetry for all Medicare patients. Telemetry provided the highest rate of reimbursement for the companies, which meant doctors who requested less-expensive services were provided with the more-expensive service. As a result, the company received higher Medicare reimbursements. The allegations were raised in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act. Pursuant to the act, private plaintiffs with information about fraud may bring civil actions on behalf of the government and may also share in the recovery. In this case, the lawsuit was filed in the District of New Jersey. The Health Care and Government Fraud Unit in the New Jersey U.S. Attorney's Office routinely investigates qui tam actions and remains a leader in prosecuting healthcare fraud. Whistleblower counsel are able to file anywhere in the country where venue exists, and this case demonstrates the unit's aggressive pursuit of national cases. Since 2010, the unit has recovered more than $1.32 billion in healthcare and government fraud settlements, judgments, fines, restitution and forfeiture under a variety of federal laws. For a copy of the press release, click here.

Rare RICO Reversal

The Fourth Circuit in United States v. Pinson vacated the defendant's convictions, among others, for conspiracy to participate in a racketeering enterprise under the Racketeer Influenced and Corrupt Organizations Act (RICO). It left in place his convictions for honest services fraud, mail and wire fraud, money laundering, and making false statements to federal agencies. The case involved Jonathan Pinson's various business relationships and ventures from 2006 through 2012. The charges focused on Pinson's involvement in four business ventures. To prove a RICO conspiracy, the government has to prove there was a RICO "enterprise" in which the defendant conspired to participate. Further, the conspiracy has to have involved plans to engage in at least two racketeering acts that would form a "pattern of racketeering activity." The court "conclude[d] that the evidence did not establish a single conspiracy, a RICO enterprise encompassing all four ventures, or a pattern of racketeering activity." The court reasoned that while there appear to have been conspiracies with regard to each of the four allegedly corrupt ventures, Pinson was the only participant in all of them. Therefore, it concluded there was no common RICO enterprise with which he conspired. Because each venture stood apart from the others, the court also determined there was no "common purpose" for them all.

Hostile Second Circuit Panel to Defendant: Enough Is Enough!

Petitioner-appellant Eric Klein's attorney had a hostile audience during oral argument (.mp3) before the Second Circuit on June 19, 2017. Klein had been convicted in 2005 and filed an appeal to the Second Circuit, which he lost. He then filed a 2255 habeas petition in district court, which was denied. He again appealed to the Second Circuit and again lost. Klein then filed a petition for a writ of error coram nobis, which the district court denied. It then denied his request for reconsideration, and Klein appealed. The tone of the argument was set by Judge Guido Calabresi, who said at the outset about the arguments, "It was raised and a 2255 petition was sought and it was denied and the whole case was settled. So how do you come back now and say, 'Now, I don't think that [the district judge] paid enough attention,' when that was all part of that case and therefore part of any appeal with respect to that case? That ain't what coram nobis is about." Judge Denny Chin's question was more direct but equally telling: "Why are you here? Do you have a good-faith basis for being here?" In its approximately one-minute argument, the government contended Klein was a "vexatious" litigant who has filed dozens of meritless motions and appeals since his conviction and who has been admonished time and again not to file anything without first seeking permission from the district court. Not surprisingly, within days of the argument, the court issued a summary order affirming the denial of Klein's petition. At the end, the court said, "We remind Klein and his counsel that Klein may not make any further motions in the district court relating to his 2005 conviction without permission of the district court and that any violation of this order may subject Klein and his counsel to further actions."

Click here to read further Insights from Day Pitney

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.