Friday, July 07, 2006

CHICAGO PATRONAGE SCANDAL (AND THE SUN ROSE IN THE EAST) -- "A jury convicted four former city officials here on corruption charges Thursday, sending a resounding message, prosecutors said, that City Hall's legendary patronage machine should come to a halt." See also WaPo (discussing political impact on Chicago Mayor Richard M. Daley).

Missed from yesterday, Boeing and DOJ entered into a non-prosecution agreement with some unusual features (See also WSJ Law Blog.):
In the agreement, which covers a two-year period, Boeing agrees not to commit any criminal offenses related to stealing of other companies' sensitive procurement information or the laws governing federal bribery, graft and conflict of interest.

But unlike the 50 or so corporate deferred and non-prosecution agreements that have preceded this one, Boeing's team of lawyers had inserted this item:

If a non-executive level Boeing employee violates the agreement, that's not a violation by Boeing.

In an update from yesterday, Judge Kaplan has declined prosecutors' invitation to tone down his opinion, which sharply criticized the government for pressuring KPMG to cut off legal fees to its employee-defendants: "In yesterday’s order, Judge Kaplan underscored his feelings on the issue, writing that the policy 'dutifully carried out' by the feds is 'more than a disappointment — it is unconstitutional.' He also refused Garcia’s request to strike from the opinion the names of the federal prosecutors involved in the case."

Speaking of which, CCR considers at what point SEC/DOJ cooperation is not permissible: "'But in addition to disclosure, Stringer and Scrushy suggest other factors that come into play,' Krakaur said. 'Did the U.S. Attorney suggest questions for the SEC to ask? Or are there questions that the U.S. Attorney wants the SEC not to ask? Is the U.S. Attorney calling the SEC and asking them to take testimony in one location as opposed to another for venue purposes? That might be viewed as another indicator as to whether the U.S. Attorney’s office is pulling the strings on how the SEC should conduct its investigation. In short, there are other circumstances that weigh in a court’s decision on whether the government agencies have interacted appropriately.'"

Two SEC commissioners appeared to offer somewhat conflicting views on options timing: "Speaking at an event in Washington, D.C. departing commissioner Cynthia Glassman said she believed that some stock-options backdating had been 'clearly illegal.' At a separate conference of institutional investors, Commissioner Paul Atkins said that the practice of springloading — setting a grant date and exercise price of an option just before the release of positive corporate news — should not be considered insider trading because 'there is no counterparty who could be harmed.' He went on to explain that the counterparty to an options grant is the corporation (i.e., the shareholders), which is intended to benefit from the decision."

Across the pond, the europeans begin pushback on data monitoring program: "The European Parliament demanded Thursday that European governments and European institutions in Brussels disclose how much they knew about a secret U.S. program to tap into international banking data."

Another data security breach: "A hacker broke into a University of Tennessee computer containing names, addresses and Social Security numbers of about 36,000 past and present employees, but university officials said Thursday that they doubt the data was used."

Southern Poverty Law Center to release report on hate groups' infiltration of the military: "A decade after the Pentagon declared a zero-tolerance policy for racist hate groups, recruiting shortfalls caused by the war in Iraq have allowed 'large numbers of neo-Nazis and skinhead extremists' to infiltrate the military, according to a watchdog organization."

Thursday, July 06, 2006


Western Union has blocked scores of wire transfers on terrorist finance suspicions based on the names of senders and recipients, the company disclosed.

According to WSJ Law Blog, the options timing scandal has cost Mercury Interactive $70 million in legal fees.

Prosecutors have sent a letter to Judge Kaplan objecting to his harsh tone in slapping the government for pressure KPMG to cut off their employee-defendants' legal fees.

TPMMuckraker summarizes the Vanity Fair summary of the Duke Cunningham scandal.

A lobbying firm at the center of an ongoing corruption probe against Rep. Jerry Lewis underreported its income by about $1.3 million. TPM wants credit for the scoop.

In Nashville, two corrupt cops were indicted for faking a traffic stop and ripping off a drug dealer.

A Maryland accountant denied allegations he conspired with county officials to obtain a $250,000 bribe.

An FBI consultant was able to hack into the law enforcement agency's classified computer system with little difficulty.

It's back to jail for Barry Bonds's trainer, after he refused to testify to a federal grand jury investigating Bonds for perjury.

Three people have been charged with corporate espionage after they allegedly stole Coca-Cola secrets and attempted to sell them to Pepsi.
KEN LAY'S PASSING -- It has been big news, so here's a brief round-up:

The Man:

NYT opines: "A true bootstraps story, Mr. Lay's life seemed at first scripted by Horatio Alger, now by Theodore Dreiser. With his folksy charm, the preacher's son who grew up poor in Missouri captivated the nation's attention in a way that Jeffrey Skilling, the former McKinsey consultant who was Mr. Lay's co-defendant, never could. A boardroom Icarus, Mr. Lay made a spectacular fortune and befriended the president before his beloved company evaporated, taking the dreams and retirement accounts of workers and investors with it and utterly changing the way corporate books and decisions are scrutinized."

Peggy Noonan opines: "Putting aside all judgments and conclusions, all umbrage, outrage and indignation, and all debates on who was most responsible for the Enron scandal--putting all those weighty and legitimate concerns aside--isn't it obvious that Ken Lay died of a broken heart? We forget that people do, or at least I forget, but they do."

Steven Pearlstein opines: "The remarkable rise and tragic fall of Ken Lay is really a story about a man whose optimism was finally outrun by reality. Early on, he found he could succeed by putting the best face on things, stretching the truth, dismissing the doubts of naysayers. But in the end, those habits became his undoing."

The Case:

NYT reports that his death complicates the government's forfeiture effort: "In yet another bizarre twist to the Enron saga, the sudden death of Kenneth L. Lay on Wednesday may have spared his survivors financial ruin. Mr. Lay's death effectively voids the guilty verdict against him, temporarily thwarting the federal government's efforts to seize his remaining real estate and financial assets, legal experts say."

WaPo adds: "Lay's death all but ensures that defense lawyers will seek to throw out his criminal conviction -- and casts serious doubt on the ability of the government and investors to recover money from the Lay estate, legal experts said. Barry Boss, a Washington lawyer not involved in the Enron case, said Lay's death complicates prosecutors' request Friday for a $43.5 million money judgment against him because it is not clear whether the government can seek restitution against someone who has died. 'Under the prevailing case law . . . I don't see any way they can proceed against Lay for restitution in the criminal case, or anything else for that matter,' said Boss of Cozen O'Connor."

Forbes explains:
With his death from a massive heart attack today, Ken Lay cheated justice. And then some. Not only will the Enron founder not end his days in prison, but according to legal precedent, his entire case will be erased from the records.

That means that, in legal terms at least, Lay was never convicted, tried or even indicted for Enron misdeeds.

For Lay's estate, and his widow Linda, the positive implication of this grim day is that the government now has no means to collect on its forfeiture claim against Lay for $43.5 million.
But the Houston Chronicle reports the civil cases will proceed anyway: "The two large civil lawsuits against him and others linked to Enron will also move forward, but it's not yet clear if either will continue to seek damages from Lay's estate."

Pot Pourri:

WSJ Law Blog has reactions, questions and answers, and a wikipedia update tick-tock.

Wednesday, July 05, 2006

PROFILE OF INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION -- "His office in the Crystal City neighborhood of Arlington across the Potomac offers a stunning view of the Washington power structure that created one of the most influential investigative jobs in the world. He has near carte blanche to probe how the administration has managed nearly $70 billion in Iraqi and U.S. taxpayer rebuilding money. His rapid-fire series of reports on the reconstruction at times have seared the White House and delighted its Democratic critics."
PROFILE OF AN IDENTITY THIEF -- "By the time of Shiva Brent Sharma's third arrest for identity theft, at the age of 20, he had taken in well over $150,000 in cash and merchandise in his brief career. After a certain point, investigators stopped counting."
THE FIGHT OVER INTERNET GAMBLING -- "Faced with bills to curb online betting, which attracts an estimated $12 billion a year in wagers worldwide, an array of interest groups like casinos here and abroad, as well as sports leagues, antigambling coalitions and even poker players, has dispatched lobbyists to argue what should be legal and what should not."
"CORRUPTICUT," LAND OF THE SCANDAL -- "There was the mayor who liked to be plied with $100-plus bottles of Bordeaux. The governor who took a free hot tub. The state senator who was given a job that paid $30,000 for doing nothing -- and then demanded a raise."
While advocating for openness, Mr. Coburn is also placing a philosophical bet that the more the public learns about federal spending, the less it will want.

"Sunshine's the best thing we've got to control waste, fraud and abuse," he said. "It's also the best thing we've got to control stupidity. It'll be a force for the government we need."

But Mr. Coburn's plan, hailed by conservatives, is also sponsored by a Democrat, Senator Barack Obama of Illinois, and applauded by liberal groups that support activist government.
A cynic might say this sounds to good to be implemented.
FIGHTING TERRORIST FINANCE -- WaPo profiles Stuart Levey, the Tresury official responsible for the financial intelligence and terrorist finance. See also WSJ Law Blog.
DIGESTING THE KPMG DECISION -- No doubt that law firms are burning up the information superhighway with analysis of the recent KPMG decision that slapped the DOJ for pressuring corporations not to pay the legal bills of their employee-defendants. See, e.g., WSJ Law Blog (discussing Wachtell's guidance to clients).
Even though Donald R. Matthews put his sprawling new residence in the heart of rice country, he is no farmer. He is a 67-year-old asphalt contractor who wanted to build a dream house for his wife of 40 years.

Yet under a federal agriculture program approved by Congress, his 18-acre suburban lot receives about $1,300 in annual "direct payments," because years ago the land was used to grow rice.

Matthews is not alone. Nationwide, the federal government has paid at least $1.3 billion in subsidies for rice and other crops since 2000 to individuals who do no farming at all, according to an analysis of government records by The Washington Post.
Not exactly surprising, but still disappointing.

Update: Here's part two of the story.
Rebuffed on several requests for state and federal financing to help rebuild its crumbling bridge, this small resort town [Treasure Island, Florida] was all but resigned to raising the money by doubling the 50-cent bridge toll, increasing property taxes and issuing bonds.

But in a last-ditch gambit, city officials hired a federal lobbyist who had known the local congressman for four decades. Within weeks, the congressman, Representative C. W. Bill Young, called the mayor to say he had slipped a special $50 million appropriation, known as an earmark, into an omnibus bill.
Isn't this the sort of thing a community's elected representatives are supposed to do -- you know, lobby on behalf of his/her constituents?