The Criminal Lawyer

We apologize to our loyal readers for the unusual delay between posts. We’ve been on trial, and you know how that goes. Trial is all-consuming. And then there’s all the work that piles up in the meantime. And the wife and kids need a token appearance from us once in a while. So the blog just isn’t happening while we’re on trial.

And that’s how it should be, of course.

So yeah, we’ve been on trial since November 2. We keep predicting that it will end soon, but it never does. With any luck, we’ll have closing arguments tomorrow. But we said the same thing yesterday, and on Friday, and on Thursday… And we’re going to have to take Thursday off if the jury’s still not back with a verdict then, because we’re giving our next “Hope for Hopeless Cases” lecture for West Legal Ed Center that day. So yeah, this case could easily last through Friday.

To tide you over until we finally get a chance to blog again, here’s a link to our latest article in Forbes magazine.

Link

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Excerpt:
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Expert View
BEAR STEARNS DEFENSE HOLDS LESSONS FOR EXECS

Going on offense is the best defense in white-collar cases.

It didn’t take long after the housing boom turned bust and trillions of dollars of wealth had gone poof that the public was out for blood. The government needed to “do something” about the mess.

An obvious point of focus were the securities firms Bear Stearns (now a part of JPMorgan Chase) and Lehman Brothers (now a part of Barclays) which blew up in quick succession. From there, it does not take a huge leap of logic to understand how federal prosecutors set their sights on Ralph Cioffi and Matt Tannin, two former managers of Bear hedge funds who were plucked out of obscurity, paraded through a perp walk and unceremoniously read their rights as criminal defendants.

As their Nov. 10 acquittals attest, they didn’t actually commit any crimes. But that didn’t spare them from two years of hell during which they were investigated, indicted, vilified, prosecuted and put on trial. If they’d lost, that would have all been a picnic compared with the 20 years of prison time they would have faced.

If the case teaches us anything, it’s that such ordeals can befall executives–innocent and otherwise. If enough things go wrong on their watch, it’s not all that rare for bosses to find gung-ho prosecutors eager to indict them before all the facts are in.

That leads to the question: What can you do to protect yourself if you fall under the eye of a suspicious prosecutor? Here, the Bear Stearns case is instructive.

Lesson One
You’re on your own. If you ever find yourself on the receiving end of an indictment related to your professional activities, don’t count on your…

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The Supreme Court heard a very important argument this week in the case of Maryland v. Shatzer. It was one of those situations where the oral argument makes a huge difference in the outcome of the case. We read the briefs earlier this month, and remarked to colleagues that both sides’ arguments seemed eminently reasonable. So reasonable that we couldn’t form a strong opinion either way.

But the oral arguments convinced us thoroughly: Both sides are stupid.

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The case involves custodial interrogation, and whether and when it can be started again after someone has asked for a lawyer.

When someone is in custody, and they ask for a lawyer, interrogation is supposed to stop. If the police keep questioning anyway, then the defendant’s answers cannot be used to prove the case against him.

So even if someone confesses to the crime at that point, the confession cannot be used to prove he did it. Even if there is no evidence of duress, and there is every reason to believe that the confession is perfectly reliable, it cannot be used.

The underlying policy is that our criminal justice system puts a greater value on not overriding someone’s free will. We don’t want people to be forced to hang themselves. Getting into someone’s mind, and making them testify against themselves, against their will, is abhorrent to us. It reeks of torture, the Inquisition and Star Chamber.

That explains why custodial interrogation gets the Miranda rights, but there is no similar concern with taking non-testimonial evidence from someone against their will. A breathalyzer, a blood test, a voice exemplar, a vial of spit — we don’t really care whether you want to provide the evidence or not. The evidence exists independently of your free will. But a confession during interrogation is solely a matter of free will.

And confessions are dramatic evidence, to be sure. Once evidence of a confession comes in at trial, it’s nigh impossible for a jury to think the defendant didn’t do it. It’s a game-ending bit of evidence, in most cases.

Police custody, in and of itself, is such an extreme and distressing situation that the law just presumes it to be coercive. If an objectively reasonable person would not have thought he was free to leave, then he’s being compelled to sit there and deal with the cops. There’s compulsion, because the cops can keep questioning you until you break, and confess. Maybe it’s a true confession, and maybe you’re just saying it to make it all stop, but either way your free will was overridden.

And so we have the Miranda rule, which says that defendants must be informed of their right to remain silent and the right to have a lawyer present during any custodial questioning. If someone’s questioned in custody without being given these warnings — even if they’re a respected jurist who already knew them — then his answers cannot be used against him. And if he is given the warnings, and exercises his right to remain silent or his right to counsel, but the police keep questioning him, then his answers cannot be used against him.

If the defendant says he won’t talk without a lawyer present, then allquestioning must cease. This is a per se exclusion, period. The police cannot re-start questioning unless the defendant himself initiates further discussion. Unlike the right to silence, which can be waived down the road after new Mirandawarnings, the right to a lawyer once asserted can never be waived again, no matter how many times the police re-Mirandize him. It can only be waived if the attorney is actually present at the time. That’s the principal rule of Edwards.

(Note that asking for a lawyer here is the same as saying you won’t talk without a lawyer present. Unlike the Sixth Amendment right to counsel, where once you’ve actually been charged with a crime you’re entitled to have a lawyer provided, this is the Fifth Amendment right to counsel. The cops don’t have to get you a lawyer, they just have to stop questioning you until you get one.)

This is a bright-line rule. Our jurisprudence likes bright-line rules here. We don’t want the cops to have to think about what they can and cannot do; we want them to know. We don’t want a balancing test of competing principles, because that means the courts would have to get involved and decide what can and cannot be done. It would have to be decided after the fact, on a case-by-case basis. Without a bright-line rule, the police would probably engage in more improper interrogations than otherwise, because who knows what some judge down the road might think was okay? And who knows whether the case would even get that far?

So bright-line rules here protect defendants’ interests, police interests, and the courts’ interests. And Edwards is nothing if not a bright-line rule.

The problem with bright-line rules is that they are absolute, they have no exceptions, and so unless they are narrowly-tailored they can have absurd results.

And that is why this week the Supreme Court heard the case of Maryland v. Shatzer.

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Six years ago, Michael Shatzer was in state prison, serving a lengthy sentence. Meanwhile, a social worker got a report that Shatzer had (before going to prison, obviously) forced his then-three-year-old son to perform fellatio on him. The social worker told the cops, and an officer came to the prison to talk to Shatzer about it.

Shatzer was taken to an interrogation room, and was given his Miranda rights. Shatzer asked for a lawyer, and the officer ended the interrogation. The officer went away, and Shatzer was taken out of the interrogation room and returned to his regular custody. The investigation was eventually closed.

Nearly three years passed. Shatzer remained in prison.

Now his son was a few years older, and was able to give more details about what had happened to him. The police began a new investigation, which was assigned to a new police officer.

The new officer went to the prison, Shatzer was taken to the interrogation room, and the officer Mirandized him.

This time, Shatzer waived his rights, and agreed to speak with the officer. He flatly denied the allegations that he had forced his son to perform fellatio on him. But he did admit to having masturbated in front of his little boy.

A few days later, the questioning continued. Shatzer was Mirandized again, and he again waived his rights. He took a polygraph test and failed it. Then he started crying and said “I didn’t force him. I didn’t force him.”

At this point, he finally asked for a lawyer, and the questioning ended.

Shatzer was prosecuted for sexually abusing his son. He tried to suppress his statements, on the grounds that he should never have been questioned the second time, under the Edwards rule. He’d asked for a lawyer, and that per se prohibition never evaporated.

The trial court said no, the statements could come in, because the intervening three years constituted a “break in custody” that ended the Edwards prohibition on further questioning. Custody had ended, so the compulsory situation had gone away. The new questioning was a new custodial interrogation justifying a new Miranda warning that was properly waived.

After Shatzer got convicted, the Maryland Court of Appeals reversed. The appellate court held that the passage of time cannot constitute a break in custody. The court held that, if there is a break-in-custody exception to Edwards, it first of all would have to mean something different than the break-in-custody exception for the right to remain silent, and secondly it wouldn’t have existed here anyway when Shatzer had remained in prison the whole time.

The state appealed to the Supreme Court, arguing that the Edwards prohibition must evaporate over time, so that a substantial lapse of time between interrogations would allow the cops to re-Mirandize and try again. The point of Edwards is to prevent the cops from “badgering” a defendant into answering questions without a lawyer, the state said. (At the end of its brief, Maryland even suggested that the bright-line rule ought to be overturned.)

Shatzer’s brief argued that the bright-line rule had to be maintained, to ensure that defendants aren’t coerced into making confessions. If a defendant asks for a lawyer, and all he gets is another reading of his rights, he’s hardly going to expect a second request for a lawyer to be effective, and so he might as well speak. It would undermine the whole point. And if a “break in custody” is all it takes to restart the Edwards rule, then all the cops would have to do is release, rearrest and repeat until the defendant finally gave in.

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Both merits briefs seemed eminently reasonable.

But the oral arguments were frankly idiotic. Both sides made absolutely unreasonable claims that could only undermine their arguments.

For example, Chief Justice Roberts let Maryland’s A.G. get three sentences out before cutting to the point: “A break in custody of one day, do you think that should be enough?” Maryland’s response: Yes.

Roberts pressed on: “So what if it’s repeatedly done? You know, you bring him in, you give him his Miranda rights, he says ‘I don’t want to talk,’ you let him go. You bring him in, give him his Miranda rights, he says ‘I don’t want to talk.” You know, just sort of catch-and-release, until he finally breaks down and says ‘all right, I’ll talk.” Maryland’s response: “We would suggest that the break of custody would be the end of the Edwards irrebuttable presumption.”

Shatzer’s position was even worse, if you can believe it.

The Public Defender opened her mouth to speak, and Justice Alito jumped down her throat. Her first words were that the Court couldn’t create any exceptions to the rule. Alito said, hold on, let’s say “someone is taken into custody in Maryland in 1999 and questioned for joy riding, [invokes his right to counsel, is] released from custody, and then in 2009 is taken into custody and questioned for murder in Montana…. Now does the Edwards rule apply to the second interrogation?” The lawyer’s response: “Yes it does, Justice Alito.”

As one might expect, the justices went to town on the lawyers. Scalia, as usual, got in some good laugh lines at their expense. We’ll leave the entire oral argument to your own reading enjoyment (you can read it here), but these opening exchanges sum it up pretty well.

Maryland’s position is idiotic. They want a bright-line rule that any break in custody ends the Edwards prohibition. It would allow precisely the catch-and-release badgering that Roberts suggested. They argued that, during the release period, if the defendant didn’t go out and get a lawyer, then they’ve essentially revoked the request to have an attorney present at any future questioning.

Shatzer’s position is equally idiotic, if not more so. He wants a bright-line rule that any invocation of the right to counsel essentially immunizes a defendant from any further police questioning in any subsequent action anywhere, for the rest of his life, whether or not the police could have even known about his prior invocation of the right. A police officer in Alaska would have to ascertain whether a suspect had ever been interrogated by police anywhere else in the country at any time in the suspect’s life, and whether the suspect had asked for a lawyer then. That’s flatly impossible and unrealistic.

Both of the parties claim that the existing bright-line rule might create absurdities in theory. To prevent them, they each propose reductio ad absurdum rules at the extreme ends of the spectrum, guaranteed to create absurdities in practice. Well done, folks.

(The lawyer for the United States, as amicus, did make an important point — that the whole purpose is to make sure people aren’t being compelled to incriminate themselves against their will — but the rest of his time was eaten up by nonsense about how long a break in custody would count as enough of a break to evaporate an assertion of the right to counsel.)

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So what should the rule actually be? Seriously, this is not rocket surgery here. The answer seems perfectly obvious:

1) If a suspect was in custody, was read his Miranda rights, and invoked his Fifth Amendment right to have a lawyer present during questioning…

4) The state can rebut this presumption with facts that demonstrate, by clear and convincing evidence, that the suspect no longer desired the presence of counsel during questioning. (This will necessarily be extremely rare, though not at all inconceivable.)

The rule could be streamlined even further, by deleting the phrase “there is a rebuttable presumption that” from #3, and deleting #4 altogether.

This rule provides all the protections that defendants, law enforcement and the courts require. At the same time, it avoids the absurdities of the existing bright-line rule, and of the more extreme bright-line rules proposed by the parties in this case.

On our first day as a young Manhattan ADA, we were assigned to the office of the Special Narcotics Prosecutor for NYC. The purpose of Special Narcotics is to investigate and take down large-scale drug trafficking across the city. There were two parts to the office — the Special Investigations Bureau did tons of wiretaps, and was staffed by experienced prosecutors; the Trial Bureaus handled mostly street-level arrests, tons of them, in the hopes that some of those defendants would “flip” and provide information that could lead to a long-term investigation. We were assigned to a trial bureau.

We had competing feelings, at first. On the one hand, we were all gung-ho to do whatever small part we could, and were frankly itching to start trying cases. On the other hand, we were not at all eager to use informants. “Rats,” we believed, were not merely distasteful and disloyal, but were of dubious actual value. We were told in no uncertain terms that, if we weren’t going to use informants, then there was no way we’d ever be able to develop a big case.

(And just to be clear, by “informants” we don’t mean mere witnesses to a crime. We’re talking about defendants who are trying to get a more lenient sentence by helping to convict someone else.)

We spent the next five years in Special Narcotics, and sure enough dealt with more informants than we can count. Then we moved up to the Rackets Bureau of the Manhattan DA’s office, where we continued to develop and use informants for another five years. And though we were no George Smiley, we still got pretty good at it.

And sure enough, what they’d told us back on Day 1 was the truth: We never saw a case of any size that didn’t get started because of an informant. An informant is truly a prerequisite.

But at the same time, our gut feeling on Day 1 had also been correct: The vast majority of potential informants have zero value. We can’t imagine how many NYPD resources and sleepless ADA nights have been wasted dealing with useless informants, drafting and executing worthless search warrants, and running fruitless investigations.

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These days, we’re on the defense side, and we simply don’t represent informants. If a defendant wants to flip, that’s their business, but they can find someone else to represent them. We like to think our job is to keep people out of jail, not to help the prosecution put someone else in jail.

Now that’s just us. There are plenty of decent and honorable defense attorneys who represent informants. We’re not disparaging them in any way. It’s just our own personal preference not to do so ourselves.

And that’s not to say we won’t have clients who cooperate, especially in federal white-collar cases. Cooperation doesn’t need to mean informing on others or trying to get someone else in trouble. There are all kinds of ways for a corporation or executive to cooperate with an investigation without being a rat or a turncoat.

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So did we learn anything in all those years of developing and handling informants? Sure. More than enough to write a book or two, and certainly too much to set down in a blog post. But we don’t mind jotting down a few cautions that might be useful to our readers who might be working with or representing informants. (Defense counsel representing an informant has similar interests to those of the prosecutor — the informant only gets rewarded for results, so allowing him to screw the case is not in the client’s best interest.)

So here are a few things to be wary of:

* If it sounds too good to be true, it isn’t. The more kilos your informant claims to have seen inside that apartment, the more likely it is to house an elderly priest who’ll die of a heart attack when his door gets busted down. A street-level numbers runner who claims to have information about the leaders of an O.C. family is probably little more than a wannabe.

* Desperate people take desperate measures. Plenty of defendants would love dearly to be able to provide useful information, but unfortunately they don’t know any real crooks. At least none that they’re willing to inform on. It’s a sad truth that informants only get rewarded for results, not for efforts. So one frequently comes across the would-be informant who winds up trying to entrap friends and acquaintances into committing crimes. You run a serious risk of being duped yourself, and being party to that entrapment, if you’re not careful.

* Desperate people take even more desperate measures. Forget entrapment. Sometimes the would-be informant outright lies. Now your own integrity is at stake. So if a target letter went out, or an arrest has been made, be especially receptive to vociferous claims of innocence.

* An informant is never reliable. His information may be, on a given day, but he himself never is. He is an informant precisely because he is a criminal who is willing to sell out his friends and family. He is an informant in order to manipulate the system to his benefit. He is just as capable of manipulating you, and rest assured that is precisely what he’s trying to do.

* Watch out for an “informant” who is the actual culprit. Or who is a big fish trying to sell smaller fry.

* Ferret out whether the cops have made any promises on the side. Or worse yet, made payments or benefits to the informant beyond the scope of the deal. It’s a credibility-killer, especially if it comes out for the first time during testimony at trial.

* Nobody wants to make themselves look bad. So informants always, always hold back. Right about the time you think you’ve got the full story out of them, that’s where you need to presume there’s something serious they’ve held back that’s going to cause problems down the line.

* If it’s uncorroborated, presume it ain’t true. The best corroboration is physical evidence, photographs, and other non-testimonial items.

* Informants readily believe that law enforcement needs them, rather than the other way around. It does them no good to believe this. It should go without saying that the prosecutor should shut this attitude down at every opportunity. But the informant’s defense counsel should also make sure to hammer home that the informant is in charge of nothing in this relationship.

Finally, for the law-enforcement folks out there, do not rest your case on the informant. As soon as you can, drop the informant and build your case using other means. Ideally, you want a case where the informant never has to testify at all. Get the informant to introduce an undercover agent. Use the informant to get you started on a pen register or wiretap. Use the informant to launch physical surveillance or whatever. But get that informant out of the case as soon as possible.

That’s enough for one post. Time to stop before this turns into either a rant or a dissertation. We’ve got work to do.

No law today. Let’s have a police procedural for a change. We’re in the mood for some white-collar stuff, so here goes.

Forget about the Madoff case. Most financial crimes are nowhere near as headline-worthy, nor do they involve such massive amounts of other people’s money. But smaller scams are just as likely to get prosecuted, and they’re just as much a felony as the big ones. And though the news may not report it, people get caught and convicted all the time.

And like Al Capone, the smaller scammers aren’t caught by the gun-toting detectives so much as by the green visor-wearing accountants.

It’s usually a case of self-incrimination. Defendants usually create the very evidence that puts them behind bars, in their financial books and records. Of course, most of them aren’t doing it on purpose. They’re not creating blatant records that flatly proclaim “here there be crimes.” Most take pains to avoid creating records of improper doings, and to conceal or camouflage the rest. But it is often those very attempts to hide their activities that wind up calling attention to them.

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Every law enforcement agent knows that, to catch the “bad guys,” you need to follow the money. Who wound up with the cash or the assets? How did the money get from person A to person B, and so on to Mr. X?

One easy way to start is to look at public documents. Lots of records get publicly filed, for anybody to look at, and they can be good leads. Does Mr. X own a house? Pull the deed from the county clerk’s office. There’s going to be information that leads to the mortgage itself, and then Mr. X’s bank records are just a subpoena away. Probate records lead to the estate, which leads to more bank records and real estate records. Does someone have a rap sheet already? Maybe they had to post bond in an earlier case. That’s going to show the source of the lien, and lead to more assets. Dun & Bradstreet and similar records can tell whether someone has a lien against Mr. X — such people are often more than willing to give more information to law enforcement. Heck, even newspapers can be a source of leads to get an investigation started.

Paper begets paper. Or computer data. It is nigh impossible to have dealings of any significance without some record being kept somewhere, in some form.

When following leads, the investigator ought to have an idea of what he’s looking at. What kind of business is this company in? Where are they located? What do they spend money on? The investigator can’t tell whether something is unusual unless he knows what the usual looks like.

Maybe this is a kickback scheme. If I am demanding kickbacks from you, or bribes, or extortion payments so I allow you to keep doing business with me, then maybe I don’t want that money coming directly to me. And maybe you don’t want it coming directly from you. So perhaps I set up a “consulting” company to receive payments from you. Or maybe you set up a “customer” company to make payments to me. Or perhaps we do both. Maybe we have lots of shell companies, or only one. If the investigator figures it out, though, our cautions might turn around to condemn us.

Maybe you pay me with a no-show job. If so, you’d better be careful about who is holding back my payroll checks or delivering them to me. And is my pay typical of my job? A steady, constant paycheck is more typical of an office worker than a blue-collar worker, after all. These are possible tipoffs to an investigator. And paper begets paper.

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So how else do they get the paper, apart from going to public records?

Subpoenas are the main stock-in-trade of the white-collar investigation team. Smart teams won’t subpoena the world, of course, because that just makes for far more work than necessary, while increasing the odds of tipping off Mr. X to the existence of the investigation. Instead, they’ll just limit their subpoenas to what they really need. Narrow requests also make more subpoenas necessary down the road, which keeps open a line of communication.

A shotgun subpoena followed by a narrower one just tips off defense attorneys like us. We see something like that, we have a chat with the client, and figure out what the investigators are probably looking for. We get all that extra time to prepare our defense.

When in doubt, utility bills are a common lead-generator, to figure out how someone is paying for their phone, cable, electricity, etc.

One thing they’ll probably want to see are old tax returns, especially for a business. Tax returns can be a mine of useful information, such as who formed the business, who the officers are, how much they get paid, who their accountant is (always a good person to interrog… ah, interview). And if the tax returns don’t match reality, well that’s another charge for the grand jury to hear, isn’t it?

The company’s accountant often did the tax returns for the owners and officers, too. Investigators can request the accountant’s retained copies of those returns, and find out all kinds of information about assets, mortgages, sources of income, etc.

Canceled checks are a high-want item. They’re one way of seeing who’s paying money to whom.

Bright investigators don’t settle for photocopies, but insist on originals. Critical information could have been whited out before copying. Photocopies are often illegible, and may not include the all-important information on the back of checks showing who deposited it and to what account.

In general, subpoenas are going to be issued to non-targets. There’s little point in asking the suspect to provide the evidence that will hang him. All it does is raise him up. And a savvy defense attorney is going to bring that client in to present the documents to the grand jury — because here in New York, for example, it is far too easy for the prosecutor to slip up and confer total transactional immunity on the client right there in the grand jury. (That’s a topic for a whole nother post.)

No, suspects aren’t usually the ones who get subpoenaed. They get searched.

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Search warrants are a unique chance for the investigators to get all that stuff they never would have gotten from a subpoena. The “second set of books,” rather than the official set they keep for the IRS and other outside eyes. The secret records. (Although these can sometimes be viewed by an undercover posing as a legitimate potential buyer of the business.)

That’s what the investigators are hoping for: a “smoking gun” document of some kind. Original documents with all the info that got whited out in the subpoena response. Records of illicit payments made, cash skimmed, investors gypped. Evidence that customers were told one thing, but reality was something else entirely. It may be buried somewhere in all those boxes of docs and all those hard drives, but they can’t wait to find it.

These records may be as simple as a notebook or a wad of scratch paper. They could be as detailed as anything. Maybe there’s evidence of a cash payroll — which leads to questions of where that cash came from (the bank? really?) on top of issues of tax and benefits evasion. Maybe there’s a little black book recording paid bribes, or extortion payments received.

Search warrants are often a fine way to gain evidence of embezzlement. Maybe those personal expenses were paid for with the business’s money, or with investors’ deposits. A good search warrant team will have agents who know what they’re looking for, others speaking to the subject. Others will be busy talking to witnesses, family members, employees and others at the location, letting them think the cops know exactly what’s going on, so they’d better come clean.

In a suspect’s home, the search team might see pictures of that really nice boat, or expensive collections, or the like. Investigators love to see things like that, especially when the checkbook doesn’t show those expenses. A lifestyle and possessions beyond one’s official means is going to make them poke around for illegitimate sources of cash.

Obviously, the execution of a search warrant means the investigation ain’t a secret any more. So these usually come at the end of an investigation.

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So how about some examples. Let’s say I have ABC company. Law enforcement subpoenaed or seized a bunch of payroll checks. Every week, my company is cutting a few dozen checks to employees. They all look totally legit, until one of the forensic accountants notices that Joe Blow tends to deposit four or five checks at a time, all on the same day. That means he’s probably not getting them each week like a normal employee, but is receiving a bunch of them once a month. That is typical of a no-show job. Joe Blow and I are now just that much closer to getting caught. Thanks, Joe.

Meanwhile, my manufacturing company DEF sends out invoices every month or so to Jack Nimble, charging tens or hundreds of thousands of dollars for all kinds of different products being delivered. Payment is due on receipt, send the check to my headquarters at 1405 Blank Lane, Suite 120. Unfortunately, the forensic accountant noticed that each month’s invoice number is one more than the previous month’s. Do I only have one customer, for all these things I’m selling? And Suite 120 turns out to be a mail drop box number. Suspicious. They’re going to watch that box and I.D. who uses it, and maybe figure out who’s paying for it. And due on receipt? Someone’s standing on the loading dock with a check for a couple hundred grand? No way. And anyway, how come there are no bills of lading, shipping records, or anything else indicating this really happened? This looks like Jack Nimble is paying me some kickbacks through a shell company.

Original checks are a treasure trove. I’m cutting tons of them to small suppliers, nothing more than $9500 or so. Oddly enough, however, they all tend to get cashed at the same check-cashing joint. They’re not deposited to anyone’s accounts. Looks like I’m laundering some money. Investigators are going to check up on these companies to see if they’re legit, maybe subpoena invoices, bills of lading and purchase order forms to see what’s going on.

In a series of predawn raids this morning, the FBI arrested the boss of New York City’s carpenters’ union and nine other men. The 29-count indictment alleges a scam whereby construction contractors paid bribes to union officials, in return for which they were allowed to use cheaper non-union labor. The Genovese crime family is mentioned. (If you’re looking for some light reading, here’s a copy of the 90-page Carpenters Union Indictment.)

Like all federal racketeering indictments, this one looks awful at first glance. It’s 90 freaking pages long! It talks about conspiracies, and schemes, and bribes, and fraud. It says they used code words to conceal the true nature of their actions. Someone said so-and-so would never rat them out, but if he did, “we’d fuckin’ have to kill him.” How in God’s name can one defend a case like that?

Well, it can certainly be done. There are several potential weak spots in any investigation case, which of course law enforcement tries to shore up as best they can. But a good defense attorney knows where the case is likely to be weakest. If there are wiretaps, he knows how to challenge that evidence. (Check out our CLE course on how to do this here.) If there are conclusions, matters of interpretation, he knows how to undercut them. By making the prosecution work harder to prove its case, by finding flaws and weaknesses, he can advocate for better plea bargains and less punishment — or even stand a chance to fight it at trial.

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This is something we actually have some experience with. The last big case like this involved the roofers’ union. We investigated and prosecuted that case, back in the days before we came over to the side of the angels. That investigation involved something like a year and a half of wiretaps on dozens of phones, “debriefings” of too many individuals to count, analyzing a warehouse-full of seized documents, and a six-month grand jury presentation. That’s just the stuff before anyone got arrested. By the time the case was over, we saw the first New York conviction of a labor union, as well as convictions of all the union leadership and the Genovese guys controlling them. So this case sounds pretty familiar.

In a nutshell, what happens is this: Let’s say you’re a contractor doing some work on a project. It’s a union project, which in this part of the world means you can’t put anybody on the job unless they’re a dues-paying member of a labor union. And your company has to be a union shop, complying with the collective-bargaining agreement. (State laws like prevailing-wage laws and the like actually force this kind of situation.) But you don’t like union workers. Their wages are too high. You have to pay more for their union benefits. The union collective-barganing agreements make you use manpower-intensive, inefficient labor techniques (to maximize union revenue). You have to hire more workers than you’d otherwise need, to comply with the union rules. And to top it all off, in your experience, union workers around here just aren’t as competent or skilled as the non-union guys.

So what do you do? You do what your father did, and what his father did. When you get a union job, one of the union officials meets with you, and you give him an envelope of cash. In return, the union looks the other way, and doesn’t enforce its collective-bargaining agreement with you. You get to higher fewer, cheaper and better workers, and you wind up making more profits off the job. The union bosses get extra cash. And the union guys get to sit in the union hall, wondering why there’s no work today.

And if you don’t pay up? Well, it’s no secret that there might be some people who might take it amiss if you did not do so. Everybody knows this, right? Don’t you watch movies? But did anyone actually say that to you… well, no. Did anyone ever actually threaten you? Not exactly. It’s just something you understood.

So maybe you’re a victim of extortion — pay up and make extra profits or else. Or maybe you’re a willing participant — it’s just the way things are done around here, might as well play along.

-=-=-=-=-

Of course, this whole setup is wholly created by the law itself. In states like New York, the law gives huge power to labor unions, compels union work more often than not, and essentially requires union labor in government contracts. And there is no way to opt out. This is not a right-to-work state. And when the law prohibits the economically-rational decision, basic economics dictates that a black market will arise. And so you get a black market in labor.

It’s costly. The law raises the cost of doing business for the law-abiding, while creating profits for those who flout it. Higher costs mean higher prices and rents for the average Joe. And we pay more taxes to cover the expensive investigations, prosecutions and monitoring of those who would take advantage of the distorted incentives.

It’s not surprising that organized crime always seems to be involved. The mantra of organized labor — thou shalt not compete — just happens to be the mantra of organized crime. O.C. types enforce the lack of competition, and resulting extra costs, in return for a piece. And O.C. types are perfectly placed to take advantage of any black market created by foolish government policies.

So if anyone is ultimately to blame here, we’d say it’s the politicians. The idealists who create rules that would only work if the world didn’t happen to work differently. Rules that create incentives for honest people to do the economically-rational thing. Which creates a market for people — union officials who look the other way, others who protect the arrangement — who can fill that rational need. So long as these foolish laws continue to artificially warp the supply and demand curves for labor around here, we’re going to keep seeing these kinds of cases again and again.

I love reading Scott Greenfield’s blog Simple Justice. He posted a good one the other day called “Another Prosecutor Loses Her Virginity,” about a former prosecutor, Rochelle Berliner, now a defense attorney, who just came to the realization that cops sometimes lie.

Her epiphany was published in Saturday’s New York Times, in an article headlined “Drug Suspect Turns Tables on NYPD With Videotape.” A pair of defendants had actual video evidence that the cops had totally fabricated the entire basis for their arrest, and they gave the video to Rochelle.

”I almost threw up,” she said. ”Because I must’ve prosecuted 1,500, 2,000 drug cases … and all felonies. And I think back, Oh my God, I believed everything everyone told me. Maybe a handful of times did something not sound right to me. I don’t mean to sound overly dramatic but I was like, sick.”

Scott has a typical defender’s take on this.

What is disturbing about Berliner’s exclamation is not that she spent 14 years prosecuting people without having realized that maybe, just maybe, her cops weren’t perfect. That’s to be expected of career prosecutors, who often spend their entire careers with their heads deeply embedded in the cops’ derrière. It tends to give one a poor view of reality. It’s that she spent four years since leaving Special Narcotics as a defense lawyer and yet, not until now, was aware of the fact that cops, sometimes, fabricate crimes out of whole cloth. That’s four years of defendants represented by someone who was certain that they wouldn’t have been arrested if they weren’t guilty.

. . .

Rochelle Berliner now knows better. Welcome to the ranks of criminal defense lawyer, where we don’t have all the answers but we do know that the prosecution doesn’t either. You’re lucky that you’ve joined in the age of pervasive video, or you still wouldn’t believe this possible. Imagine how many times before the age of video Dominican immigrants like the Colon brothers were convicted for crimes that never happened, with someone like you feeling awfully good about it. I can understand why this would make you sick.

So congratulations on losing your virginity. I hope it didn’t hurt too much. I’m sure it didn’t feel very good for Jose and Maximo Colon, and I hope Police Officer Henry Tavarez loses his soon.

We didn’t want to comment on this, at first, because it so happens that we worked with Rochelle for a few years in Special Narcotics, and we knew and liked her. And frankly, she is well-equipped to defend her own self if she so desires.

But Scott’s piece, and a couple of the comments posted to it, kept nagging at us. There are some things we think really ought to be said here. So here’s our two cents’ worth:

First of all, a quick and unnecessary defense of Rochelle. We’ve known a whole array of prosecutors in our time, and Rochelle was one of the good ones. There certainly are prosecutors out there who are so misguided as to believe that their job — we kid you not — is to fight to convict anyone the cops bring in. We once walked out of an interview (with Dade County) where that exact philosophy was espoused. And there are plenty others who just put in their time to do a workmanlike job, without pushing themselves too hard one way or the other. But there are a significant number who truly believe their job is to achieve a just outcome, taking everything into consideration. Rochelle always struck us as being one of the latter.

And yet her bullshit meter seems not to have been working properly for nearly 18 years. What gives?

Speaking for ourselves, we like to think our own B.S. meter was working just fine — at least a lot of the time. We pissed off a lot of cops in our day. And there are some ex-cops who probably still rue the day that they lied to us. But there’s no way our B.S. meter was on all the time. It’s impossible.

We worked with a lot of the same detectives, over and over. You get to know the teams pretty well. They’re almost friends, some of them. You learn which ones are straight arrows, which ones are clowns, which ones are unscrupulous or lazy, and which ones are just along for the ride. You learn that most of them are happily gaming the system to make as much overtime as possible. You also learn that most of them couldn’t care less whether someone gets convicted after the arrest is written up. And hopefully you’re able to listen to each individual with the appropriate level of disbelief.

But when you’ve worked with someone for a while, and gotten to know them, it’s natural to let your guard down. How skeptical are you likely to be of someone who’s been pretty straight with you for as long as you’ve known them? And even if you do retain some skepticism, so what? There has to be a reason to suspect that the facts are not what you’re being told, and most of the time there’s no reason to do so.

Part of this is the randomness of real life. Maybe there’s a little detail that’s not right — or perhaps too right. But that’s life. The truth is rarely ideal. So it’s not easy to tell when any particular glitch in the matrix is a clue to something more sinister.

Part of this is the sheer routineness of drug cases. There are only so many ways these crimes happen, and the facts don’t vary too much from case to case. When the story you just heard happens to fit the pattern of the past thousand cases you’ve handled, it would be strange to be skeptical.

So even with a fully-functioning B.S. meter, there’s no way you’re going to catch everything. You just do the best you can.

The irony is that, the longer one serves, even as one’s knowledge of street reality grows from rookie ignorance to near-expert mastery, one’s ability to sense bullshit decreases dramatically, for all the reasons just mentioned. You’ve known the cops forever, you’ve handled this same kind of case countless times before, and the story just rings true.

This is where we defense attorneys have an obligation.

I’ll give my defender readers a moment to recover. Yes, I actually suggested that we are obliged to do something here.

You okay? Good. Yes, we defense attorneys have an absolute duty to ensure that prosecutors are given all the tools necessary to flush out the bullshit. This isn’t burden-shifting, it’s an imperative of our role.

For street crimes, the only facts an ADA or AUSA has in any given case are those provided by the cops or agents involved. If those facts fit together, there is no reason to believe the truth is otherwise.

It is so rare as to be remarkable for a defense attorney to come to a prosecutor with new facts, or a new way of looking at the facts. But most of the time, whenever it happened to us or we’ve done it ourselves, it was most assuredly worth it.

In any given case, the prosecutor has already made up his or her mind about guilt, innocence, and the appropriate plea, based on the facts provided by the cops. No amount of whining or cajoling or begging is going to change their mind. And yet that is precisely the idiotic strategy used by so many defenders out there. The only way to change someone’s conclusions is to present new facts that change the conclusion.

This isn’t burden-shifting, it’s a defender’s duty. Our job is to protect our clients, period. If the prosecutor is holding all the cards, and is going to make the biggest decision of our client’s life, we need to do what we can to make sure the right decision is made. We have an obligation to extract from our (yes, probably unwilling) client and other witnesses the facts that will make a difference.

And you know what? When a defense attorney came to us with new facts, or a new way of looking at them, we listened. We didn’t listen to the whiners, but we did listen to those who truly advocated, who had something we needed to hear. And more often than not, at least in our experience, such advocacy resulted in a dramatically improved outcome for the defendant. We were known to even dismiss indictments, if the new facts warranted.

* * * * *

We can’t end this without revealing a dirty secret, however. Prosecutors are only human, after all, and even the best are subject to incentives that reduce the likelihood that their bullshit meter is on full power.

Some people just want to be liked, and so they go along with whatever the cops tell them. These people are patsies and pushovers, and tend not to last long as prosecutors.

Some people befriend the cops, and so become not the advocates of the People, but of the officers. They go to bat for their cops — and yes, “their” cops is how they’d phrase it — even against the cops’ own supervisors. Friendship and loyalty are powerful human traits, and it’s the exceptional person who can act in spite of, rather than in keeping with, such emotional forces.

And some people are ambitious. A prosecutor without ambition is something of an oddity, and one is never quite sure about them. Ambitious prosecutors want good cases. They want big cases. They want that one case that makes them feel like they’re actually making a difference, and not just holding back the tide with a teaspoon.

Well, the big cases don’t just land in your lap. They are brought to you. And they are brought to you by the cops. And the cops won’t bring them to you unless they like you, feel like they can work with you, and trust you do prosecute the case the way they’d want it to be prosecuted.

Are the cops going to bring their big cases and investigations to the ADA who’s always giving them a hard time? The ADA who busts their balls over every little glitch? The ADA who doesn’t go to bat for that RDO overtime once in a while? Hardly.

So this is a real, albeit unspoken incentive. (Actually, it’s not unspoken. We were told this plainly and clearly by multiple prosecutors and cops during our time with Special Narcotics. Sometimes as a warning of what to watch out for, but also sometimes as instructions on how to act if we wanted to start getting those juicy investigations.)

So an ambitious prosecutor has an incentive to act in such a way as to increase the chances of bagging the big cases. Does that mean such prosecutors are necessarily turning off their B.S. meters? That they’re consciously avoiding knowledge of the truth, or knowingly deciding not to challenge the story they’re getting. No, not at all.

It’s not a conscious process. It’s a perfectly human, unconscious thing. The decision is probably not passing through the frontal lobes. It just happens that way.

* * * * *

So there are all kinds of reasons — some justifiable, some not — for prosecutors to believe tales told by cops that may not be exactly truthful.

Knowing this to be the case, what should we defense attorneys do about it? Should we throw up our hands and bemoan the injustice of it all? That wouldn’t accomplish anything. Should we fight to change the system, so that it minimizes the inevitable injustices occasioned by its administration by human beings? Of course, and that’s been the role of our jurisprudence since Magna Carta, but it’s hardly useful on a case-by-case basis.

What we need to do is acknowledge that this is a phenomenon that occurs. That there are reasons why it occurs. And then take the necessary action on our own part to minimize the injustice. If we have facts that the prosecutor ought to know, then share them! Better to persuade one lawyer now than to hold on to the facts and seek to persuade twelve random jurors a year from now. If we have a perspective about what the facts mean, then persuade the prosecutor. Don’t whine or plead, just make a rational argument from shared principles. It works often enough.

And if push comes to shove, and you have a fight on your hands, then goddammit fight. But don’t just complain that the system is unfair.

Good defense attorneys like Scott Greenfield get this. Good prosecutors get it, too.

In a lengthy decision today New York’s highest court ruled that police must get a warrant before they can put a GPS tracking device in a suspect’s car. In its ruling today, in the case of People v. Weaver, the New York Court of Appeals went out of its way to distinguish the U.S. Supreme Court’s ruling in U.S. v. Knotts, 460 U.S. 276 (1983).

In Knotts, the Supreme Court had said it was fine for law enforcement to put a rudimentary “beeper” tracking device inside a container of chloroform so that they could track its movements. Of course, technology has progressed since then. In today’s case, state police had slapped a GPS device known as a Q-Ball on Scott Weaver’s car, and left it there for 65 days. The device recorded in exact detail where the car went throughout that time, how fast it was going, essentially performing an uninterrupted physical surveillance.

The New York court said that, although the old technology was just an enhancement of ordinary surveillance, the new technology is just too invasive, and therefore requires a warrant before law enforcement can use it.

In getting there, the court spent a pleasant few pages outlining the evolution of Fourth Amendment law, reminding us that until at least 1928 it only protected searches of material property, and so intangible searches such as wiretaps required no warrant. Brandeis, however, wrote a dissent to that 1928 case that struck a chord, and soon American law had come to agree with him that:

The protection guaranteed by the [4th and 5th] Amendments is much broader in scope [than the protection of property]. The makers of our Constitution undertook to secure conditions favorable to the pursuit of happiness. They recognized the significance of man’s spiritual nature, of his feelings and of his intellect. They knew that only a part of the pain, pleasure and satisfactions of life are to be found in material things. They sought to protect Americans in their beliefs, their thoughts, their emotions and their sensations. They conferred, as against the Government, the right to be let alone — the most comprehensive of rights and the right most valued by civilized men. To protect that right, every unjustifiable intrusion by the Government upon the privacy of the individual, whatever the means employed, must be deemed a violation of the Fourth Amendment. And the use, as evidence in a criminal proceeding, of facts ascertained by such intrusion must be deemed a violation of the Fifth.

Olmstead v. U.S., 277 U.S. 438, 478-479 (1928)(Brandeis, J., dissent). Still, the U.S. Supreme Court didn’t really get around to adopting this view until Katz v. U.S., 389 U.S. 347 (1967):

the underpinnings of Olmstead and Goldman have been so eroded by our subsequent decisions that the ‘trespass’ doctrine there enunciated can no longer be regarded as controlling. The Government’s activities in electronically listening to and recording the petitioner’s words violated the privacy upon which he justifiably relied while using the telephone booth and thus constituted a ’search and seizure’ within the meaning of the Fourth Amendment. The fact that the electronic device employed to achieve that end did not happen to penetrate the wall of the booth can have no constitutional significance.

It looks as if the Court of Appeals wanted to continue the evolution of Fourth Amendment law, at least in New York state cases. The Knotts case had analogized the beeper tracker to a powerful set of binoculars that merely assisted cops see something they were already looking at. But a modern GPS is far more than that. “GPS is a vastly different and exponentially more sophisticated and powerful technology that is easily and cheaply deployed and has virtually unlimited and remarkably precise tracking capability.”

From planting a single device, the court said, the police may now “learn, practically effortlessly… the whole of a person’s progress through the world, into both public and private spatial spheres… over lengthy periods possibly limited only by the need to change the transmitting unit’s batteries.” [That's true. Indeed, when we used to run investigations involving GPS transmitters and eavesdropping bugs placed inside cars, they’d be set up to run off the cars’ batteries, giving them unlimited staying power.] Police can get instantaneous disclosure of indisputably private trips. Knowing where someone went tells you much more: their political affiliation, their religious community, their lovers, their associations, their activities, what they do and who they do them with.

That doesn’t mean the police shouldn’t be allowed to use this tool, but only that the potential invasion of privacy is now so great that it requires court approval before it can happen. And there will of course be exceptions to the warrant requirement, as in a kidnapping or other exigent circumstance.

There was nothing in the record indicating why the police in this case used a GPS, so there was no evidence of an exigent circumstance. It seemed to be little more than “a hunch or curiosity” that caused them to do it.

The court was careful to state that this only applies to New York state law. The U.S. Supreme Court hasn’t ruled on this yet, and neither have most of the Circuits. But the states are free to provide greater individual protections than those established by federal law, which is only a bare minimum rather than an exemplar.

New York isn’t the first to issue a ruling like this. Washington did it in 2003, as did Oregon in 1988. But that’s only two states out of fifty, and their jurisprudence is not quite representative of the rest of the country. Just last Thursday, for example, Wisconsin’s court ruled the opposite way. And the federal Circuit courts that have decided this issue have permitted GPS to be used without a warrant. And this case isn’t going to the Supreme Court, because it’s a state decision under the state constitution. So we wouldn’t go looking for this to become the law of the land any time soon.

This was a far from unanimous decision, as well. Judge Smith wrote for himself and two others that the court drew an artificial and unworkable line between the kinds of technology that are okay to use without a warrant, and the kinds that require a warrant. “The attempt to find in the Constitution a line between ordinary, acceptable means of observation and more efficient, high-tech ones that cannot be used without a warrant seems to me illogical, and doomed to fail.” This appears to ignore the U.S. Supreme Court’s warrant requirement for heat-sensing cameras that reveal marijuana-growing lamps which the police wouldn’t have seen with the naked eye.

But we do get Smith’s point, and it’s a valid one. The majority failed to set forth an actual underlying principle here for where to draw the line. Clearly, high-powered binoculars don’t require a warrant. Surveillance cameras on street corners don’t need a warrant. Unsophisticated “beeper” trackers don’t need a warrant. GPS trackers do need a warrant.

What if the police actually had a surveillance camera on every street corner, and used current software that enabled them to track not only vehicles but faces — would they still need a warrant to use GPS when they’d get the same information without a warrant by using the cameras? If so, why? If not, why not? The court has given no direction here to future technological advances. All it has done is say this particular technology needs a warrant at this particular point in time. That’s not a useful decision.

In a separate dissent, Judge Read argued that the ruling here imposes an unnecessary burden on police, and at the same time “handcuff[s] the Legislature by improperly constitutionalizing a subject more effectively dealt with legislatively than judicially.” Judge Graffeo joined both dissents.

We have to disagree with Read here. Interpreting the Fourth Amendment is so obviously more appropriate to the courts than to the legislature that we have to wonder why she went to the trouble of claiming otherwise.

She’s also wrong in that the ruling really doesn’t handcuff the police — not in real life. Again thinking back (only a couple of years) to when we were doing these kinds of investigations ourselves, we routinely got a warrant for GPS transmitters. It was not exactly a burden. It still isn’t a burden. And if there’s a real emergency, the cops wouldn’t have to get a warrant anyway. They’d just have to be able to articulate it later, which should be easy if there really was an exigent circumstance.

The only burden this ruling puts on cops is to stop them from slapping a GPS on someone just because they feel like it. If they’ve got a good reason to do it, no judge will say they can’t, and they’ll easily get a warrant.

The DOJ got an indictment this week against a Hitachi executive, in the government’s ongoing prosecution of alleged price-fixing in the LCD monitor industry.

We first blogged on this back on November 13th, when Sharp, LG Display and Chunghwa all pled guilty to price fixing, agreeing to pay $585 million in fines. Since then, Chungwha executives also pled guilty during February.

After the Chungwha executive pleas, Hitachi itself agreed in March to plead guilty and pay $31 million in fines.

Breaking from the pattern, however, rather than a Hitachi executive subsequently pleading guilty, the feds went ahead and indicted him.

According to a DOJ press release, Tuesday’s indictment charges a Japanese national, Sakae Someya, who was an executive at Hitachi Displays Ltd. Mr. Someya is accused of taking part in a larger global conspiracy to fix the prices of LCD panels sold to Dell.

Mr. Someya is accused of agreeing to charge set prices for the screens, sharing sales information to ensure everyone was complying with the agreed prices, and trying to keep the arrangement secret. These are Sherman Act charges, with a max of 10 years in prison plus a max fine of the greater of $1 million, double the gain, or double the loss to victims.

We wonder how much of the allegedly criminal conduct is simply normal business practice in Japanese culture. After all, the keiretsu distribution system used by Japanese industry looks very much like price fixing to Western eyes.

It certainly looks to us as though the DOJ’s Antitrust Division is busting through decades of resistance to offshore enforcement of U.S. antitrust rules. Whether it is proper to impose U.S. laws on a very foreign culture… that’s another question entirely. What do you think?

For 16 years, German police have been hunting a fiendish serial killer. Every time they have an unsolved crime, the DNA of an unknown woman has been found at the scene. This phantom killer baffled police with her ability to commit totally unrelated murders without any evidence (apart from traces of her DNA) tying them together.

And when we say “unrelated,” we mean it. The DNA was found on documents at an arson scene, a cop killing, and dozens of other kinds of murders unconnected by geography, motive, means or victim.

Dubbing her “the phantom of Heilbronn,” the cops focused at least 40 investigations in Germany and Austria on identifying this “woman without a face.” When her DNA was found at the scene of a murdered policewoman, a 300,000 (about $375,000) reward was offered for information leading to her arrest.

It turns out, however, that all those unrelated crime scenes DID have something in common, apart from the mystery woman’s DNA. But in all those 16 years, nobody put two and two together.

What did they have in common? The DNA kits used by the cops themselves.

Yup, the swabs used to collect the DNA samples were contaminated. A female worker at the manufacturer apparently wasn’t working under completely sterile conditions, and her DNA was getting on the Q-Tips. As usual, the evidence that made no sense was wrong, and the simplest explanation was the right one.

So the police spent 16 years thinking that her DNA was the DNA of the killer. And instead of focusing on evidence that would have solved these crimes, they followed a wild goose chase that has left nothing but injustice. DNA is the wonder evidence of our time, so when it pointed the way the cops jumped at that conclusion.

Yet another reason why DNA evidence isn’t necessarily as damning as people might think.

The 3rd Circuit is hearing an interesting appeal on whether the government needs to get a warrant before demanding cell site data from phone companies.

Cell sites are those transmitters you see on rooftops and towers, beaming and receiving cell phone communications. Their range varies from a few blocks to a circle twenty miles across, depending on their power and local geography. When a cell phone is being used, it’s communicating with a particular cell site.

Phone company records will show what cell site was being used by a particular phone at any given time. Law enforcement often requests such records, to help narrow down possible locations for an individual using a phone. This can be particularly useful if the individual is in motion, because his signal will be picked up by a series of cell sites, which can be used to map his progress.

This is passive data, as opposed to an active “ping” whereby a signal is sent directly to a particular phone for the purpose of identifying its location.

Most phone companies will not provide real-time cell site data to law enforcement without a court order. So court orders are routinely sought, often in conjunction with pen registers (calling records which show the time and phone number for calls sent and received). 18 U.S.C. § 2703 permits such an order when there are “specific and articulable facts showing that there are reasonable grounds to believe that… the records… are relevant and material to an ongoing criminal investigation.” These are called 2703(d) orders, and are different from eavesdropping warrants requiring probable cause.

In this case, the feds asked for a 2703(d) order, but unusually did not seek real-time cell site info. Instead, they asked for an order permitting them to get historical data. They’d been investigating drug trafficking, and were tracking one subject’s phones already. During the investigation, they identified what they believed to be the phone of their subject’s supplier. Physical surveillance proving difficult, the feds wanted to see historical cell site data, to see if they could figure out how the supplier had moved around.

The magistrate denied that request, holding that a request for real-time data would have been fine, but that historical data is not permitted pursuant to a 2703(d) order.

(As an aside, the investigators learned of the supplier’s number in June 2007, but didn’t apply for the historical data until February 2008. We know the feds take an inordinate amount of time in their wire and pen applications — one reason why they do comparatively few of them — but eight or nine months is astonishing.)

The feds appealed to the district court, arguing that the magistrate’s decision was bizarre. Instead, however, the district court went further than the magistrate had, and ruled that a warrant based on probable cause would be required for such historical records.

Although we are on the defense side, it seems as though both the magistrate and the district court judge got things backwards. Real-time cell site data, one would expect, is significantly more intrusive of privacy than historical data from up to six months ago. Real-time data can be used to locate where a person is now. The law clearly permits this more invasive search to be performed with a mere order. To require a probable cause warrant for the clearly less-invasive search makes little sense.

The ACLU, meanwhile, has stepped in with an amicus brief opposing the government. They basically argue that, yes, a 2703(d) order would have been sufficient, but the magistrate had the discretion to require a probable cause warrant instead. They then argue that, no, a 2703(d) order would not have been sufficient, and in fact a probable cause warrant ought to be required for all cell site information. People don’t know their cell site data is being collected, so they have an expectation of privacy.

We’re frankly not thrilled with the quality of either side’s brief. But the ACLU wins the “silliest syllogism” award for this one: They hypothesize a subject named Bob. Bob is talking on his cell phone as he enters his office, so with real-time cell site info the police now know he’s in his office. Bob is surveilled to his house. Once inside his house, he makes another call. But without the cell-site info, the cops would have no reason to believe the cell phone never left Bob’s office. Riiiight.

This is a case of first impression in the Third Circuit. One could easily see them ruling against the feds, too.

Feds who, by the way, brought this on themselves.

Seriously. They could have simply subpoenaed the historical business records without going to a judge in the first place. Asking permission to do something novel is the best way to create a precedent saying you can’t do it. But subpoenaing already-existing business records from phone companies is strictly routine. If they’d done it that way, we’d wager that the court would even have compelled the phone company to comply, if the need arose.

We’ve written about an upcoming wave of white-collar prosecutions, especially against Wall Street types. But wait, there’s more: the feds are now about to start prosecuting doctors.

The Department of Justice and the Inspector General of the Department of Health and Human Services are about to start prosecuting physicians who receive inappropriate incentives from manufacturers and sellers of pharmaceuticals and medical devices. Doctors who have accepted such incentives face criminal prosecution, as well as civil fines and being barred from participation in Medicare and Medicaid programs. Doctors who have received significant incentives from medical marketers might want to seriously consider consulting a good white-collar defense attorney.

Of course, incentives are a commonplace in medical marketing. And of course the purpose is to somehow influence which drug a doctor intends to prescribe, or what equipment a doctor uses. A wide range of incentives are offered, not just the free pens, prescription pads and trinkets routinely handed out. Expensive equipment can be provided for free or at a deep discount, in return for minimal obligations such as a product recommendation or letting one’s office be used (albeit rarely) as a training facility. In extreme cases, sellers actually pick up the tab for travel to seminars or other expenses, pay “advances on royalties” for helping develop products, or simply pay cash kickbacks.

In the past, it has usually been the manufacturers who got prosecuted for making kickbacks or bribes, often paying millions in fines and undertaking the supervision of monitors. What’s new now is the federal focus on the doctors themselves, on the receiving end.

Many doctors may not think they’re doing anything wrong by accepting incentives from sales folk. After all, it’s the norm. And so what if a doctor got a free trip to the conference, if he continues to make his prescription decisions independently and based on the actual needs of the individual patient?

The government sees this as criminal partly because such payments are opaque. A patient might not be so trusting of a prescription for FancyPharm if he knew his doctor was getting comped by that company. A patient might not have the same confidence in her eye surgeon if she knew that he didn’t actually select and purchase his laser equipment himself, but instead got it for nothing.

Another reason is the perception that medicines and procedures would be improperly prescribed, because the incentives had an undue influence on the doctor’s decisions. Unnecessary expense and harm could result.

The main tool that prosecutors have here is the federal Anti-Kickback Statute (formally known as “the Medicate and Medicaid Patient Protection Act of 1987,” 42 U.S.C § 1320a-7b). It basically provides up to 5 years imprisonment and $25,000 in fines.

The feds are most likely to go after those who allowed marketers to pay for their consulting fees, travel to seminars or other expenses, or who accepted advances or payments, or who accepted large rebates or extreme discounts without proportionate consideration, or otherwise received remuneration that could have influenced their decision making.

Lewis Morris, chief counsel for the Inspector General, told the New York Times last week that “what we need to do is make examples of a couple of doctors, so that their colleagues see that this isn’t worth it.”

When law enforcement says they are going to make examples of people, one might think that this means they will carefully pick and choose their cases, cherry-picking only the most obviously criminal acts with the strongest evidence. However, in real life, that’s not always the case.

Especially in cases like these, where the evidence tends to be more circumstantial (absent clearly incriminating admissions, recordings or emails), and where the conduct is very often in the gray area of culpability, prosecutors may not have many rock-crusher cases in the first place. And they certainly won’t have enough cases at first to do much cherry-picking in any event.

No, they have announced their desire to make examples of people, and we predict they will go after whatever crosses their desk.

Cases are going to come from marketers who got caught trying to bribe someone else, who are then flipped to inform (and wear a wire) against the other doctors they deal with. Those are the easiest cases for law enforcement to initiate. Other cases may come from third-party complaints or referrals, but those are rare in secret one-on-one deals such as those being investigated here.

If any doctors out there think they might have had dealings with a marketer that could get them in trouble, it might be wise to get counsel from a good white-collar defense attorney sooner rather than later.

A couple of weeks ago, we were at a luncheon with some white-collar defense attorneys, listening to a presentation by the acting U.S. Attorney, Lev Dassin. Mr. Dassin let us know that, although he couldn’t spill any particulars, there are a number of ongoing investigations at the Southern District of New York right now, which he expected to provide a lot of work for us later this year.

He also confirmed our impression that there is a lot of political pressure right now, causing prosecutors and law enforcement to focus more assets on white-collar crime. Many see the current economic downturn as the result of Wall Street skullduggery, so law enforcement is being tasked with doing something about it.

Our biggest fear is that people who did nothing illegal may get caught up in the frenzy to blame people for the recession. A federal criminal investigation is a serious matter, and even people who did nothing wrong can wind up in prison because of how they behaved during the investigation.

Still, a lot of white-collar crime is now coming to light these days, because of the hurting economy. Ponzi schemes and other fraudulent investments are being caught out left and right, as investors start trying to pay bills by cashing out their accounts, only to discover that their money isn’t there.

Furthermore, PricewaterhouseCoopers today published a white paper, “Boom Time for White Collar Crime,” predicting that the economy will cause greater numbers of people to commit white-collar crimes, such as embezzlement and fraud.

PwC partner Andrew Gordon told GAAP web that “sales targets seem ever more out of reach, bonuses are under threat, and people’s reputations and livelihoods are at stake. Together, these can be powerful motives for individuals to cross the line.”

The white paper predicts an increase in specific types of fraud: data theft by criminal organizations, “rogue traders” in corporate finance departments, and fraudulent mis-reporting of business numbers to make companies appear better to investors. The paper also sees more Ponzi schemes and fraudulent investment schemes collapsing as investors try to cash out.

So criminals caused a bad economy which is causing more criminals? That sounds a little simplistic.

Of course, the economy didn’t go south because a few Wall Streeters went around defrauding investors. The economy tanked for a lot of reasons, but mostly because lenders stopped believing they’d get paid back. Institutions with the most leverage — financial institutions particularly — got their margins called and couldn’t get new credit, a deadly combination. No amount of government stimulus would change that, without a condition that capital infusions to lenders must turn into loans. The government didn’t make such conditions, so lenders just hoarded their cash to sit out the storm. The credit market, already dying, was pretty much killed. The U.S. Congress and the new Administration have since then acted fairly consistently to prevent lenders from regaining sufficient confidence to start lubricating the economy again. In modern economics, perception is everything — if you are perceived to have liquidity, even if you are at risk, you will have liquidity (see JPMorgan Chase this time last year), but if you are perceived to be at risk even though you aren’t, your liquidity dries up (see Bear Stearns this time last year). Once lenders start perceiving that they will get their money back, things will start picking up. This crisis of confidence was caused, not by white-collar criminals, but by Clinton-era directives to make mortgages to people who can’t pay them, by borrowers and lending agents who cashed in on the resulting laxness, and by an ever growing house of cards that was destined to collapse.

So the economy didn’t go south because of criminals. Similarly, a worse economy doesn’t necessarily translate into more crimes being committed. People who would steal in bad times would have stolen in good times, too. White-collar types aren’t exactly Jean Valjean, stealing a crust of bread so their families don’t starve. No, white-collar crime requires a combination of opportunity and character traits, neither of which correlate with economic pressures.

What is true, however, is that more white-collar prosecutions are going to happen because an under-informed public and its politicians are screaming for blood. Unfortunately, we do not believe that all prosecutors out there understand the complexities and realities of the financial world well enough to accurately sift the guilty from the merely unlucky. Some innocent people are going to get caught in this ever-widening net.

A “Martha Stewart moment” is that unhappy moment during a white-collar investigation when one’s client misleads the investigators. A client who may have escaped prosecution entirely has now practically ensured that she will be prosecuted. If his client must speak with investigators, a good attorney tries to prepare her well, to prevent any Martha Stewart moments from happening.

During the recent SEC investigation of a possible $8 billion fraud at Stanford International Bank, they interviewed Stanford Financial Group’s chief investment executive, Laura Pendergest-Holt (pictured). She was accompanied to the interview by Proskauer Rose partner Thomas Sjoblom, a very good and experienced attorney.

Last Thursday, the investigation went criminal, as Pendergest-Holt was charged with a federal crime. She’s alleged to have had a Martha Stewart moment, lying to the SEC about her knowledge of Stanford’s investments, and about not meeting with other Stanford people to prepare for her meeting with the SEC.

How could that happen, when she had such a good lawyer?

The answer appears to be (first pointed out by Zach Lowe) that Sjoblom wasn’t actually her lawyer. He represented Stanford, not its executive.

This is something that comes up all the time in the white collar world. When a corporation is under investigation, it hires lawyers to protect its interests. The interests of its executives and employees are not always the same — in fact they are rarely the same — and so to avoid potential conflicts of interest they usually get separate counsel.

If the same law firm represented a corporation and its CIO, somewhere down the line the CIO might decide that it’s in her interest to testify against the company. That would cause a conflict of interest, so the company will usually insist that she get her own lawyer.

If the corporation’s attorneys speak with the CIO, they must make it very clear that they only represent the company, and do not represent the individual. In this case, Sjoblom made it very clear at least twice during the SEC meetings that he was Stanford’s lawyer and not Pendergest-Holt’s. It is not yet known whether he made this clear to Pendergest-Holt (he did not return Lowe’s calls seeking comment, but commenting is probably improper anyway), though it is hard to imagine that he did not do so.

Sjoblom had a bit of a dilemma in that situation, regardless. As Stanford’s lawyer, he probably needed to get information from Pendergest-Holt. And he probably needed to cooperate fully with the investigators. He would have had to make it perfectly clear to her that, as he did not represent her, anything she said to him would not be privileged. (Well, Stanford could assert a privilege perhaps, but Pendergest-Holt could not.)

If Pendergest-Holt reasonably believed that Sjoblom represented her, and then Sjoblom shared her information with Stanford or the SEC, then Sjoblom could well be liable in a civil suit. Again, there is no reason to believe that such is actually the case, and this is only mentioned to stress the challenges presented to the corporation’s attorney in a situation like this.

How does the company’s lawyer get information out of its CIO, then? If the lawyer tells the CIO he doesn’t represent her, and nothing she says is going to be confidential, and in fact he’s obligated to share her information, then she’s not going to want to talk. The solution is simple and cold: the lawyer must inform the CIO that if she doesn’t talk she will be fired.

Given all the warnings that must have been given, alerting her that Sjoblom did not represent her, it is strange to see that she didn’t get her own counsel. Nevertheless, Pendergest-Holt somehow appeared before the SEC without being represented by her own lawyer. She didn’t have someone watching out for her own interests, and now she’s been arrested and charged with a federal crime as a result.

She has lawyers now, of course. She is represented by the firm of Parsons Behle & Latimer in the civil SEC matter, and by Houston’s Dan Cogdell in the criminal matter. Still, we have to wonder why she waited until it was too late before she got her own counsel.

Memo to executives and employees: Get your own lawyers!

We took an unexpected trip out of state until yesterday, and so haven’t had a chance to catch up on the latest in the ongoing saga involving allegations of prosecutorial misconduct in the Sen. Ted Stevens case. When last we left off, District Judge Emmet Sullivan had ordered a status hearing for last Friday, the 13th.

In Friday’s status hearing, Judge Sullivan held four DOJ lawyers in contempt, for failing to turn over 33 documents to the defense. These documents pertained to December’s whistleblower claims of FBI agent Chad Joy, which had raised concerns of prosecutorial misconduct.

The judge had ordered these documents turned over on January 21. At first, the prosecutors said the documents were protected by the work-product doctrine. But then, even though they later determined that the doctrine did not apply, they still didn’t hand them over to the defense. At the hearing, the DOJ couldn’t give a good reason for the non-production, and so the judge held the lawyers in contempt.

The contempt order was imposed against William Welch II, the chief of the Public Integrity Section of the DOJ which had prosecuted Sen. Stevens. Also held in contempt were Brenda Morris, the section’s deputy chief and the lead prosecutor at trial; Patricia Stemler, chief of the Appellate Section of the Criminal Division; and Kevin Driscoll, a trial attorney with the Public Integrity Section. The order against Driscoll was revoked the following day, however, as he had only recently joined the prosecution team, and had not been a party to the relevant pleadings. Judge Sullivan stated that he would not impose sanctions until the case was over.

On Monday, Welch announced that the trial team of Brenda Morris, Nicholas March and Edward Sullivan were off the case, and would have no further role in the litigation of the charges of prosecutorial misconduct. This only makes sense, as they are necessarily witnesses to their own conduct, and will probably need to testify themselves. What is surprising is that the DOJ waited so long to take this simple action.

Welch added that the government will now turn over internal DOJ documents related to agent Joy’s allegations of misconduct, including memos and emails of the trial prosecutors. Again, what is surprising is not that this material is being disclosed, but that it took so long to do so. This notwithstanding Welch’s statement that the DOJ “understands that the interests of the parties and the public will be advanced by a prompt airing of these claims, and that additional delay relating to the whistleblower-status issue does not advance that cause.”

Gang crime is on the rise, the FBI reports. The politicians and prosecutors, however, are focusing on white-collar crime these days. Here’s a look at why this is happening.

Gang crime seems to have increased, ironically, as a result of improved anti-gang law enforcement in the big cities.

According to the 2009 National Gang Threat Assessment, street gangs have started expanding more rapidly from urban centers into suburban and rural areas. This has spurred new membership, as fresh populations are opened to gang recruitment. By the end of last year, about a million people were estimated to belong to gangs within the U.S.

One might think that the burbs lack the same social pressures that drive gang membership. Gangs are products of the inner cities, after all, where kids lack fathers to lead them, involved communities to belong to, competent schools to teach them, and opportunities for money and glory. We expect gangs to arise in the inner cities of single moms, apathetic neighbors, dysfunctional schools, government welfare and hopelessness. Suburbia’s not like that, right?

Well, according to the NGTA, drugs drove the expansion. During the 1980s, the suburbs began to become a profitable new market for drug dealers who had previously focused on the urban market. During the 1990s, the huge profits from suburban drug sales caused the street gangs to physically expand their territory, often resulting in violence as urban gangs clashed with local toughs and with each other in the race to occupy the burbs.

Meanwhile, law enforcement started cracking down on gang and drug crime in the cities. It was getting dangerous to operate in NYC, LA and Chicago. Suburban cops, however, just weren’t as much of a concern. The burbs were also seen as safe places to hide from unsuspecting law enforcement, unused to dealing with a gang element.

The combination of weaker opposition from law enforcement, and higher profits from suburban drug users paying “white boy prices,” was a clarion call for gang expansion. It was an irony that improved law enforcement actually resulted in the spread of gang-related crime.

There were other reasons for the spread of gangs into suburban and rural communities, not detailed by the NGTA report. From the author’s own interviews with drug traffickers in the New York area, gangs sometimes followed inner-city populations that had moved out there first. People on government assistance began moving out to places such as Lancaster, Pennsylvania and various towns Upstate along the Hudson River, because a person on welfare could have a nicer quality of life there. Many of them brought with them the quality of life that they were trying to avoid, unfortunately. And those who were drug users brought their demand with them. And so the dealers followed, the gangs followed, and the forces that spurred gang recruitment never went away.

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Despite the spread of violent crime and drug trafficking, however, the FBI is focusing more on white collar crime. White collar crimes certainly are on the rise lately, especially fraud cases.

“We may not be doing as many drug enterprise operations,” Special Agent in Charge Richard Lambert recently said, “so we can focus more on mortgage fraud and corporate fraud problems.”

In just the past month or so, 3000 new FBI positions have been created to combat white collar crime. On top of those new hires, the Senate Banking Committee is preparing a $110 million fund that would hire 500 new FBI agents, 50 new AUSAs, and 100 new SEC agents.

Bill co-sponsor Chuck Schumer (D-NY) stated in the accompanying press release that “our white collar crime divisions are under-staffed, under-funded, and overwhelmed. When a wave of violent crime sweeps through a city, the immediate response is to beef up the police forces, putting more cops on the beat, extending overtime, and making sure the city returns to safety. Our reaction to the financial crisis and the massive and complex financial fraud investigations that loom should be no different.”

Why the rise in white collar cases? It’s not just the economy, stupid.

Sure, people may be tempted to commit crimes in an economic downturn. But this usually applies to people who are on the bottom rungs of the economy. Wall Street types and CEOs don’t start robbing banks just because their net worth slipped a bit.

Instead, white collar crime goes on all the time. What’s changing now is not the number of crimes being committed, as the number of cases being prosecuted. There’s a difference. As Anne van Heerden, head of forensics at KPMG Switzerland told Swissinfo, “I do not believe that the number of cases is growing, but rather the detection rate is increasing.”

Sophisticated financial crimes have always been sexy for law enforcement. What prosecutor didn’t want to convict the next Ivan Boesky, Andy Fastow or Michael Milken? The problem is, they’re hard to catch. The crimes take place on paper, in back rooms, and on golf courses. Not places frequented by cops or detectives. Evidence is often hard to find, and even harder to comprehend if found.

But the new economic downturn — which many see as the direct result of white collar crime — has led to new political pressure to “do something about it.” (At a function last week, we joked with a prominent judge that our white-collar defense practice was recession-proof, to which the judge responded “yes, but your clients caused the recession.”) Elected officials feel that pressure to “do something,” and they start rewarding successful prosecutions, and funding more of them.

So the word has come down from above that white-collar prosecutions are what the chiefs want. And that’s what they’re getting.

Expect to see more.