Archive for November, 2008

NYPD and DOJ Wiretap Fight: Each Accuses the Other of Endangering the Public

Friday, November 21st, 2008


Over the summer, New York City’s police force demanded that the FBI and the Justice Department make it easier to get wiretaps on suspected terrorists. The feds refused, and the dispute has escalated ever since. The New York Times reports that correspondence has flown between the U.S. Attorney General and the Police Commissioner themselves, as “each accuses the other of mishandling terrorism cases and embracing an approach that made the public more vulnerable.”

Wiretaps are considered one of the most invasive state actions, and so any request for electronic eavesdropping is going to be put under enormous scrutiny before it is ever presented to a judge. Every “i” must be dotted, every “t” must be crossed, and no detail is too small to be overlooked. The slightest inadvertent error can result in a wire being deemed improper, resulting in the exclusion of all the evidence gathered as a result. No law enforcement agency wants to spend vast amounts of time and money on a wire investigation, only to have the evidence thrown out.

So prosecutors carefully prepare wire applications, dissect them, and then send them up the chain of command for approvals. In the DOJ, these internal approvals can take an extraordinarily long time. New York City prosecutors, with bureaus specializing in such applications, can turn around a wire application much faster. Although both tend to err significantly on the side of caution, to minimize the chance of error being found down the road, the feds are much more cautious than the city prosecutors, and will reject wiretap applications that would have passed muster in the DA’s office.

Also, federal wiretaps tend to be short and sweet, not often extending beyond the initial 30-day period normally authorized. Renewal of the authority requires another application, and there just isn’t time to jump through all the hoops while the evidence is still coming in. City-initiated wiretaps, on the other hand, can sometimes extend for 18 months or longer, as they lead to more phone lines and additional evidence.

So there is already a cultural divide between federal and city law enforcement when it comes to wiretaps. The feds are traditionally much more cautious and unlikely to request a wiretap,* while NYC law enforcement, though still very cautious, is not nearly so shy.

Now enter the FISA Court.

The Foreign Intelligence Surveillance Court is set up to review applications for warrants to eavesdrop on suspected spies or terrorists. The court must find probable cause that the target of the surveillance is a foreign agent or terrorist, that the wiretap is going to turn up evidence of such activities, and there is no reasonable less-invasive way to get the evidence.

Only the FBI and the DOJ have access to the FISA Court, however. So if the NYPD wants to get a warrant, it needs to submit it to federal scrutiny. That subjects their applications to much lengthier review, as a result, and also makes them more likely to be rejected and not presented to the court in the first place.

The NYPD now believes that its efforts are being thwarted, and accuses the feds of improperly blocking its wire applications.

So on October 27, police commissioner Ray Kelly accused the feds of putting the public at risk by being too nit-picky. He wrote that the feds were “constraining” critical terrorism investigations, and “doing less than is lawfully entitled to protect New York City,” so that “the city is less safe as a result.”

Four days later, attorney general Mike Mukasey wrote back saying that the city’s approach would be counterproductive, because they’d seek warrants that might exceed what the law allows, so that the evidence gathered could be thrown out, thereby making the citizens less safe.

Mukasey seems to see the FISA Court as little more than a rubber stamp. Presumably, if the court was doing its job, a warrant application that didn’t satisfy the law would be rejected by the court itself. But the DOJ appears not to trust the court to do its job, and so would act as a stand-in for the court.

Although the NYPD didn’t make that point, it did respond by putting the blame squarely on the DOJ for taking too long to review applications, and for applying “a self-imposed standard of probable cause which is higher than that required by Supreme Court precedent.”

As a former prosecutor who did quite a lot of wiretaps involving both city and federal authorities, your humble blogger will be very interested to see how this pans out. In the meantime, it looks like the fight is only getting started. Stay tuned.

* This perplexes the New York Times, which has long accused the Bush administration of trying to improperly extend its wiretapping authority and other national security powers. Many insiders, however, blame the administration for trying too hard to appease its opposition by limiting governmental powers and announcing that to the world, thereby only creating opposition where none previously existed. So while the criticism from the left about wiretapping and other legalities may have been undeserved, the administration has no-one to blame but itself.

Will Internet Anonymity Be the Next Federal Crime?

Wednesday, November 19th, 2008


Jury selection began today in what many are calling a landmark trial in the new field of Internet law. As the first case of its kind, U.S. v. Lori Drew could have a far-reaching impact on the future of anonymity on the web.

Lori Drew faces federal counts of Conspiracy and of Accessing Computers Without Authorization. Drew is charged with creating a false Internet identity on the social networking site MySpace, posing as a teenage boy. Prosecutors say she then used that false identity to befriend a depressed 13-year-old girl, a former friend of Drew’s daughter, and then began to harass the girl with hurtful messages. The girl hanged herself after allegedly receiving the messages, including one telling her that “the world would be a better place without you.”

Although Drew is not charged with the girl’s death, U.S. District Judge George Wu ruled last Friday that evidence of the girl’s suicide could be introduced by prosecutors. He stated that any prejudice would not be unfair, because the fact that the girl committed suicide is common knowledge, and jurors would be instructed that Drew is not charged with causing the suicide. Although the events took place in Missouri, the trial is being held in Los Angeles, where the MySpace servers are located.

The case is being closely watched, as Drew is being prosecuted under a law normally used to target computer hackers, and expanding the reach of the law could create criminal liability for many.

The Computer Fraud and Abuse Act prohibits accessing protected computers without authorization. The prosecution seeks to expand the scope of this prohibition, to include violating the terms of service of a website that prohibits people from misrepresenting their identity through false accounts.

Using a false name to register with a website is commonplace. Anonymity is sought for a variety of reasons, most of them socially acceptable. Reasons range from fears of identity theft, protection from predators, avoiding spammers and scammers, and other justifiable concerns in this high-tech age. There are malicious reasons, too, such as concealing the identity of individuals committing crimes online.

The jurors being selected today will be asked to determine whether violating MySpace terms of service, by registering a false user profile, is a federal crime. They may well do so, especially now that they will hear that this particular false profile was allegedly used to harass a young girl to the point where she committed suicide.

Feel free to comment to this post anonymously or under a false name. It does not violate The Criminal Lawyer’s terms of service.

Biggest Plea Bargain Ever: ICC Gets Unilateral Ceasefire in Darfur

Friday, November 14th, 2008


Omar al-Bashir seized power of the Sudan in 1989, and has ruled ever since as the military dictator of one of Africa’s most ruthless regimes. In the Darfur region of western Sudan, a war has raged for about five years, with government troops and proxy fighters committing massive bloodshed against rebel groups as well as civilians and entire villages seen to be sympathetic to the rebels. Despite enormous outcry from the rest of the world, and pressure from the U.N. and powerful nations, al-Bashir has shown no inclination to temper or cease the bloodshed. On the contrary, it appears that his regime has only ramped up the violence in a war that is estimated to have killed hundreds of thousands of human beings through murder, combat, starvation and disease.

But earlier this week, al-Bashir announced a unilateral ceasefire.

He did so, not because of governmental pressure or diplomacy, but because the International Criminal Court’s chief prosecutor, Luis Moreno-Ocampo, asked for al-Bashir to be charged personally with multiple counts of genocide, crimes against humanity and war crimes.

Charges have not been formally brought, but the ICC is expected to go forward soon. If he is formally charged, he will be the only head of state to face ICC criminal proceedings. This would harm his position at home, especially if he were to be prosecuted for genocide, and if the charges were to stick. Despite appearances, al-Bashir is believed to truly fear a conviction under international criminal law.

To avoid that possibility, al-Bashir took advantage of a technicality permitting the U.N. Security Council to defer legal action. China, one of the five Security Council permanent members, is tight with its major oil supplier, and would likely go to bat for Sudan. Russia, another permanent member, has significant economic ties to Sudan, particularly as the supplier of weapons and attack helicopters used by the regime to such deadly effect.

He still needs to get the approval of the United States, Britain and France, however, if he wants to get a deferred prosecution under Article 16 of the Rome Statute (which established the ICC in 2002).

We know what you’re thinking — these three modern, civilized, Western powers would never go along with that. Well, you might be wrong. Letting the ICC prosecute a head of state would be a terrible precedent for the U.S., which routinely declines to be held to “international” standards of conduct. Britain and France are perceived as open to “positive responses” that make the problem go away.

Hence this week’s ceasefire. It’s a “positive response” that might help appease Britain and France. There’s more al-Bashir can do, of course. Sudan’s Minister of Humanitarian Affairs — the person responsible for the aid effort to Darfur — is already indicted on 51 war crime counts. Throwing the minister to the wolves would be another nice gesture.

And if all else fails, he can just terminate Darfur aid, kick out UNAMID (the wholly ineffective joint U.N.-African Union peacekeeping force), and then blame the resulting death and suffering on the West. That could work, too.

So far, however, it looks like he’s taking the plea. The world is watching to see if the ICC will actually be effective in halting the ongoing tragedy.

Update: New York Investigating CDS Brokers

Thursday, November 13th, 2008

Update: New York Investigating CDS Brokers

As we reported yesterday, the New York Attorney General and the Southern District of New York have teamed up to investigate allegations of wrongdoing with respect to credit-default swaps. The AG’s office is now reported to have subpoenaed trading data and communications from several interdealer brokers, small firms that facilitated the swaps and other trades.

A CDS is a form of insurance, though contractual in nature and not regulated. Essentially, the CDS buyer wants to protect a debt investment or asset. In return for fees from the buyer, the CDS seller agrees to make a payment if the underlying debtor defaults or goes bankrupt.

CDS contracts enabled the securitization of subprime mortgages into tranches that could be rated as investment-grade. If underlying asset values dropped, the CDS payment would still net a profit. Presuming, of course, that the CDS seller actually had the wherewithal to make the necessary payment.

Interdealer brokers earned fees from facilitating CDS deals between financial institutions. Buyers and sellers need to keep their bargaining positions secret from each other, which makes direct negotiation difficult. For a fee, an interdealer broker puts buyers and sellers together, while keeping the identities of the parties a secret from each other.

Law enforcement is now investigating whether interdealer brokers were breaking the rules, and disclosing information that they existed for the purpose of keeping secret. Also under investigation is the possibility that interdealer brokers were giving out false information, so as to manipulate CDS prices. These CDS prices in turn had a huge effect on the share values and bond prices of major financial institutions.

Antitrust Division Cuts Flat-Screen Prices, Just in Time for the Holidays

Thursday, November 13th, 2008

Antitrust Division gets guilty pleas in TV price-fixing conspiracy

Three major flat-screen TV and monitor manufacturers have pled guilty to price fixing, in a case brought by the DOJ’s Antitrust Division.

Sharp, LG Display and Chunghwa will pay $585 million in fines, pursuant to their plea. The DOJ alleged that, as a result of the price-fixing conspiracies, consumers paid inflated prices for products with LCD screens. Affected products ranged from flat-screen TVs to computer monitors, laptops, iPods and cell phones.

Division chief Thomas O. Barnett stated that these were international conspiracies that “affected millions of American consumers who use computers, cell phones and numerous other household electronics every day.” Without calculating how much extra the consumers wound up paying, he predicted that this plea would now result in lower prices.

The Wall Street Journal reports that the world’s largest LCD maker, Samsung, had cooperated with the Antitrust Division and was not named in the plea announcement. AAG Barnett declined to comment on whether Samsung had received legal immunity. Federal law provides that the first company to give evidence of a criminal conspiracy can receive immunity. When the investigation first became public in 2006, Samsung stated that it had “pledged its full and continuing cooperation” with law enforcement.

Treasury & Fed Rules Outlaw Internet Gambling

Thursday, November 13th, 2008

Online gambling illegal

Yesterday, the Federal Reserve and the U.S. Treasury promulgated new rules that prohibit the processing of payments related to Internet gambling. By forbidding financial institutions from processing the payments, the government has essentially outlawed online gambling.

What constitutes “online gambling” is left up to state law. A few kinds of betting are still allowed, including government lotteries, horse racing and fantasy sport leagues. College and pro sports books, however, are no longer allowed. The same goes for online poker, roulette, craps, slots and other casino-type gaming.

Internet gambling is believed by many in law enforcement to be important to organized crime. It is a profitable source of revenue in its own right, and is difficult to police. “Street level” bookmakers are also believed to use online sports gambling to facilitate their activities, and to hedge or shift the risks of the street wagers they accept.

The new rule has been opposed by Democratic lawmakers and gambling businesses, as well as by financial institutions that would bear the burden of implementing the rule.

Wave of White-Collar Investigations is Coming

Wednesday, November 12th, 2008


“The nation’s top white-collar criminal defense practices are receiving a steady flow of inquiries from clients embroiled in the ongoing credit crisis,” reports the National Law Journal. This is consistent with reports we have heard within the white-collar defense community.

With the economy continuing to take hits from the financial sector, there seems to be a growing demand for blame. Billions of dollars in pensions and retirement funds have disappeared, the money supply is crippled by banks refusing to extend credit, and jobs and tax revenue are at stake.

As the public and its elected officials call for punishment, state and federal prosecutors are launching investigations to see whether anyone broke the law. Anyone involved with complex debt instruments, which appear to have been responsible for much of the vanished wealth, ought not to be surprised to find themselves part of a criminal or regulatory investigation.

As we previously reported, Lehman Brothers executives are already being looked at. And of course the Eastern District of New York has already indicted two managers of the Bear Stearns subprime mortgage hedge funds. But that, our sources tell us, is only the tip of the iceberg.

Credit-default swaps, which enabled much of the subprime hedge fund investments, are now the focus of a joint investigation being brought by the New York Attorney General and the Southern District of New York.

The SEC has also begun taking action in investigations that had appeared to be dormant. Of particular interest to the SEC would be whether executives made misleading statements to investors or analysts about the financial health of their funds or institutions.

“Attorneys report hearing from clients,” reports the NLJ, “who are either already in receipt of subpoenas from federal and state investigators, or who are worried about what the mail will bring. Every lawyer interviewed agreed that their clients — including those confident they kept within the law — would be wise to anticipate that the government will cast a very wide net.”

Public Defenders Refusing to Take New Cases

Tuesday, November 11th, 2008

Overworked public defenders

The New York Times reports on a trend of public defenders refusing to take on new cases, on the grounds that their workload is so high that they cannot effectively defend their clients. With budget cuts coming at the same time as caseloads are rising, government-appointed lawyers claim to be reaching “the breaking point.”

Right now, a lot of public defenders are starting to stand up and say, “No more: We can’t ethically handle this many cases,’ ” said David J. Carroll, director of research for the National Legal Aid and Defender Association.

Similarly, many capable attorneys decline to volunteer for indigent-defense panels (representing those for whom the public defender’s office might have a conflict of interest), because the government-funded compensation is too low — in New York only a quarter or less of typical private rates. Fewer volunteers means more work for each.

There may be something to the argument that much of this work is routine, and not particularly time-consuming. But there are only so many hours in the day, and once you get past a certain volume of cases, things are going to have to slide.

For these public defenders, time is a valuable commodity. Most of it goes to priorities like trials, hearings and court appearances, which are huge time sinks. What is left mostly goes to cranking out canned suppression motions and picking up new cases. There isn’t much time for original research, much less a thorough investigation of any given case. Potential witnesses go unidentified, or uninterviewed. Evidence goes undiscovered or unexamined.

Plea bargains, the usual result for most cases, also suffer. Prosecutors make their offers based on what they think a case is worth, which in turn is based on what the prosecutor knows about the case. Unless a defense attorney can present new evidence, or a new way of looking at the evidence, the defense attorney is going to have a hard time changing the prosecutor’s mind. But without time to develop such evidence or new ways of looking at it, the public defender can be left with few tools beyond whining and begging, which are rarely effective. The upshot is that a defendant must settle for a worse deal, because there wasn’t time to negotiate a better one.

It’s not as though prosecutors don’t share the same high caseload, and suffer the same budgetary constraints. Prosecutors also have much more work to do for a given case, as they must investigate and assess the evidence, prepare and present witnesses to grand juries, and prepare and present witnesses at hearings and trial, in addition to making the necessary court appearances, responding to the motions, etc. If both sides are under similar burdens, perhaps the injustices balance out. Or perhaps the injustices are magnified, as time-starved prosecutors similarly miss out on the chance to develop evidence or insights that would better serve the defendant.

The underlying concern is whether defendants’ interests can be adequately protected by public defenders with barely sufficient resources to go through the motions for most cases. Perhaps, and perhaps not.

It is difficult to see, however, how refusing to represent defendants at all can possibly help them. This ploy seems intended to serve nobody’s interests but those of the public defenders themselves.