The Criminal Lawyer

On Tuesday, the Fifth Circuit ruled on Jeff Skilling’s appeal from his conviction in the Enron case, upholding the conviction, but sending the case back for re-sentencing. Skilling may be able to raise a Brady issue on remand, as well, so the case doesn’t seem to be over. The opinion is 106 pages long, so we will summarize the ruling and its meaning for you here.

Skilling challenged his conviction, on the grounds that the government’s theory of “honest services” fraud was wrong. The government’s case let the jury decide on three purposes of Skilling’s conspiracy, one of which was to deprive Enron of the honest services of its employees. Because the jury returned a general verdict, if any one of those legal theories was insufficient, then the verdict must be reversed.

Skilling focused on the honest services theory, arguing that it was insufficient because his actions were done to give Enron a higher stock price, so it was in the corporate interest. He didn’t act in secret, and wasn’t self-dealing.

In making this argument, Skilling relied on the Circuit’s previous Enron case, United States v. Brown, 459 F.3d 509. In that case, a loan secured by Nigerian barges was fraudulently booked as revenue. The defendants in that case were specifically ordered by their CFO, Andy Fastow, to carry out the deal. Not only did they believe that Enron had a corporate interest in the scheme, and was a willing beneficiary of it, but their superiors ordered and approved their actions. Furthermore, they were paid more depending on whether they successfully achieved the goal.

The Court held that Skilling’s reliance on Brown was misplaced. The Brown rule absolves low-level employees of liability for honest-services fraud when:

1) the employer creates a particular goal,
2) the employer aligns the employees’ interests with the employer’s interest in achieving that goal, and
3) higher-level management authorizes or orders improper conduct in order to reach the goal.

Here, the first two conditions were met, but the third was not. Condition 1 was met when Enron created a goal of meeting Wall Street earnings projections. Condition 2 was met as Skilling got paid more if Enron met those projections. But condition 3 was not met, as there was no evidence that anyone besides Skilling authorized his conduct. The Board tacitly approved several of the underlying transactions, but never authorized him to engage in fraudulent conduct.

Because the third condition was not met, the Brown rule does not absolve Skilling of his liability. His conviction was therefore upheld.

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With respect to sentencing, Skilling argued that the district court got the Guidelines calculation wrong, and that the sentence is unreasonable under §3553. The Court didn’t get to the §3553 issue, because it held that the Guidelines calculation was indeed incorrect, and a court has to do the Guidelines right before the §3553 factors come into play.

Skilling appealed a §3C1.1 two-level enhancement for obstruction of justice, and a §2F1.1(b)(8)(A) four-level enhancement for jeopardizing a financial institution.

The §3C1.1 enhancement was based on a determination that Skilling perjured himself as to his sale of Enron stock right after he resigned from the company. He’d tried to sell his stock while still CEO, but it would have had to be reported. So he resigned, then tried to sell his stock. But then September 11 happened, and he wasn’t able to sell until September 17. Skilling testified to the SEC that his order to sell on September 17 was due to his concerns over the market’s reaction to 9/11. The judge decided that was perjury.

On appeal, skilling didn’t argue that it wasn’t perjury. Instead, he argued that the court should have suppressed his SEC testimony in the first place, because the SEC misled him as to the fact that the investigation was criminal in nature.

The Circuit, however, pointed out that suppressible evidence can still be used at sentencing, and none of the exceptions to that rule apply here. The Court also found no justification for the original perjury. So the two-level enhancement was proper.

The §2F1.1(b)(8)(A) enhancement was based on the finding that Enron’s retirement plans were “financial institutions” for the purposes of that Guideline. Retirement plans aren’t specifically mentioned in the Guideline’s definition, which enumerates a long list of included entities. Various kinds of pension funds are included, however. And the list does include a catch-all “any similar entity.”

With respect to “pension funds,” the Guidelines don’t define the term. But a pension requires more than just employee investment for later payout — a pension has definitely determined payouts. Here, the retirement funds didn’t have specific benefits, they were just there as a pool for funding any benefits that might be given. So the Court decided they didn’t count.

With respect to the catch-all, apart from pension funds, the Guideline definition lists classic financial institutions like banks, investment houses, and the like. The Court did not want to expand the definition to declare every corporate retirement plan to be a financial institution.

Because the retirement plans weren’t financial institutions, the four-level enhancement was improper. So Skilling’s sentence was vacated, and the case was remanded for resentencing.

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In addition to these main issues, the Court also rejected Skilling’s other challenges to his trial. Giving a “deliberate ignorance” instruction was at worst harmless error. None of the other jury instructions were problematic. The venue was proper. There was no prosecutorial misconduct.

Interestingly, however, the Court specifically stated that Skilling can raise Brady issues on remand. An FBI interview note showed that Andy Fastow didn’t think he had discussed a certain list with Skilling. This was omitted from the formal “302” report provided to the defense. Skilling claims that Fastow was talking about a list of talking points that Fastow had testified at trial he actually had discussed with Skilling.

The Circuit found this troubling, but the trial court never saw the notes or ruled on this claim, so nothing could be decided on appeal. But the Court instructed that “Skilling must bring this claim to the district court before we can address it.”

Therefore, Skilling might be able to get a new trial! If Skilling can show that there was a Brady violation, this case could be far from over. The government claims that the list in question is unrelated to the case, however, so we’re just going to have to wait and see.

In 1963, the first year of comparable recordkeeping, 91% of murders were solved. In 2007, the number was only 61%.

At the same time, the technological ability to solve murders increased dramatically. Scientific crime scene investigation significantly increases the amount of useful evidence that can be found. Digital crime labs and computerized analysis make it easier to interpret that evidence. And of course, modern DNA techniques enable police to make unbelievably accurate identifications from the smallest particle of hair or fluid. Today’s reality would have been a science fiction fantasy twenty years ago.

So what gives?

For one thing, the kinds of murders have changed. In previous generations, murder was almost always a personal matter. The victim and the killer knew each other, had a relationship. Husbands killed wives. Friends killed friends. Rivals killed each other. To begin a successful investigation, a detective would paint a bull’s-eye on the victim. The closer a suspect was to that bull’s-eye, the more likely they were to be the killer. Cases were solved not so much by technology and physical evidence, as by getting people to talk or confess. Acquaintance homicides were, and still are, often solved because the killer contacted the police or surrendered himself.

But now, a significant number of murders are committed by gang members. Gang members and drug dealers get killed by their own groups, who aren’t likely to talk lest they be killed themselves. They get killed by members of rival gangs, and may not even know their killers. Killers may even kill completely unrelated, innocent people, through mistaken identity or reckless “drive-by” shootings. Witnesses are intimidated by the threat of being killed themselves if they come forward. So relying on people to talk or confess is not as likely to solve these crimes.

For another thing, technology only gets you so far. DNA only identifies someone if you have a sample of their DNA to compare. Gunshot residue only helps if you have the suspect’s fingers in the first place. Fingerprints are harder to find than people think, and even then can only be compared to known fingerprints. In other words, technology helps you confirm that you have the right suspect, but first you have to get that suspect. And getting the suspect in the first place often means an old-fashioned investment of shoe leather — hitting the streets, talking to possible witnesses, and conducting skilled interrogations.

Because of the advances in technology, acquaintance homicides are truly being solved at a greater rate than they were in previous decades. The suspects are known, or easily found, so the DNA and other scientific tests make identifying the killer much more certain. The scientific identification also helps get confessions.

But stranger-to-stranger homicides have increased dramatically. And despite the technological advances, these continue to have a high probability of never being solved. Motive is hard to figure out. The killings are often part of a planned crime, so that less evidence will be left behind for law enforcement to find. And any connection between killer and victim is going to be hard or impossible to identify.

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So what can be done?

Studies find no correlation between the number of available police officers, or the amount of their budget, and the ability to clear homicide cases. So shoving more officers on the street, or shoveling more money at the problem, is not a solution.

Studies do show, however, that cases get cleared when detectives are ambitious and they are held accountable for the success or failure of their investigations. Cases get cleared more often when the detectives have the necessary time to devote to the investigation, and when they are part of a specialized unit where everybody is focusing on the same kind of crime.

How do you get ambitious detectives? Study after study shows this to be a huge factor. Media attention can help, when there is a lot of pressure to solve a high-profile case. But in urban areas the media is often antagonistic, media praise of police rare, and so is an underdeveloped tool. Better P.R. by the police could improve ambition. Increased internal attention, status and reward for greater clearance rates would help, as well.

Solving stranger or gang-related murders requires witnesses to come forward. They fear retribution, or being punished themselves for their own crimes. Most murders, even stranger murders, are witnessed. So a critical need is to overcome witness fears.

Studies have found that most witnesses were actually involved with the crime. They either took part in some way, they brought the killer and victim together, or they tried to stop the murder from taking place. “Innocent bystanders” only make up 9% of witnesses.

Civic pride is not likely to cause the majority of witnesses to come forward. Gang culture, and the culture of the communities where such gangs flourish, teaches witnesses to do the opposite. Cash rewards sometimes help, but the amounts commonly offered are simply too small to justify the risks a witness would run if he came forward.

Ensured anonymity is a must. But in a judicial system that properly allows the accused to see and confront his accusers, anonymity cannot be ensures. Witnesses know this. Only a real and system-wide practice of concealing the appearance and identity of witnesses to violent crimes is likely to inspire the necessary confidence. And in our legal culture, we as Americans simply value the confrontation rights of the accused more than we value the evidence we might gain by limiting those rights. That’s just the way it is.

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Reducing gangs themselves, and changing the culture in which they flourish, is the long-term solution.

Gangs arise within subcultures where there is little other societal bonding and community for young males, where those young males lack (or do not see) the ability to gain status and women otherwise, and where there is a general lack of control over one’s life. Entertainment media have a huge impact on perceptions of the world. These factors create perverse incentives, so that gang membership and codes of behavior can seem to be the right choice to make.

Common factors of such communities are a lack of value placed on education, a reliance on government or others, a lack of ownership, and a xenophobic relationship with the larger community. Undervalued education minimizes earnings and options in adulthood, as the lack of parental involvement kills schools and a thou-shalt-not-do-better-than-us attitude among peers kills student ambition. Reliance on welfare, the police, programs and others to take care of life’s needs leads to an endemic lack of personal responsibility, which kills family ties and any bond to a larger civic society. Illiteracy, immersion in the skewed reality of television and musical entertainments, and a perception that the rest of society is foreign and irrelevant, further impact perceptions of how the world works.

These problems have often been many generations in the making, and are not susceptible to overnight changes. Policy changes would be required that strengthen the family bond, rather than giving incentives to father children from multiple mothers without requiring any long-term ties and responsibilities. Policy changes would be required that lead community members to see themselves as part of the larger society, and not separate from it, subject to separate rules. Policy changes would be required that create incentives for parental involvement in schools, and pave the way for cultural views of education as the means to success.

OJ Simpson was sentenced today in Clark County District Court, after previously being found guilty of multiple crimes arising out of an armed break-in and theft at a Las Vegas hotel. The details can be found in any news outlet you fancy. But what sentence did he get? The headlines are all over the place.

Some sources say he got 12 years. Many say 15 years. Some say 33 years. Some say 9 years. What gives?

The reason for the confusion is the fact that OJ was sentenced on 10 counts, with many of the sentences running concurrent, and some running consecutive.

Concurrent sentences are served at the same time. So if you get sentenced on two counts, one for 5 years and the other for 6 years, to run concurrent, then you only face 6 years. But if they were to run consecutively, then you’d be serving 11 years.

So how does OJ’s sentence break down?

First, the concurrent sentences:

Count 1: Conspiracy to Commit a Crime: 1 year
Count 2: Conspiracy to Commit Kidnapping: 1 to 4 years (eligible for parole after 1 year, max of 4)
Count 3: Conspiracy to Commit Robbery: 1 to 4 years
Count 4: Burglary While in Possession of a Deadly Weapon: 2yrs 2 mos to 10 years
Count 5: First Degree Kidnapping with Use of a Deadly Weapon: 5 to 15 years
Count 6: First Degree Kidnapping with Use of a Deadly Weapon: 5 to 15 years
Count 7: Robbery with Use of a Deadly Weapon: 5 to 15 years
Count 8: Robbery with Use of a Deadly Weapon: 5 to 15 years

So the concurrent sentences have a max of 15 years, with eligibility for parole after 5 years.

Next, the consecutive sentences:

Counts 5 to 8 add 1 to 6 years to run concurrently with each other, but consecutive to the rest
Count 9: 1.5 to 6 years consecutive to Count 8
Count 10: 1.5 to 6 years consecutive to Count 9

So add 1 + 1.5 + 1.5 = 4 years to the parole eligibility, for a total of 9
Then add 6 + 6 + 6 = 18 years to the max number, for a total of 33

So OJ is eligible for parole in 9 years, and could conceivably serve a maximum of 33 years.

Hope that clears things up.

The respected journal Science will publish tomorrow a research study that suggests that the threat of punishment can keep people from getting in trouble. Stop the presses!

You’d think that this might have been studied before. But previous studies (focusing on freeloading vs. pro-social behavior) only focused on short-term outcomes. This new study, on the other hand, found in the long term the threat of punishment becomes deeply embedded in people’s subconscious, so that they come to fear getting in trouble.

You’d think this might have been too obvious to require study. But as Karl Sigmund of the University of Vienna explained to LiveScience.com, “the experimental work is extremely important and timely, as many researchers had voices concern whether punishment is not too costly a tool to promote cooperation.”

Clearly punishment isn’t the only tool out there to affect people’s behavior. Socialization, community involvement, and positive inducements are all strong factors. But we’re going to go out on a limb and say that, until something else comes along that satisfies society’s need for deterrence, removal (and, sadly, retribution), punishment’s going to remain part of our toolbox for a long long time.

[The research was performed by a team led by Simon Gächter at the University of Nottingham.]

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.

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.

“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.”

Richard Dieter, executive director of the Death Penalty Information Center, has suggested to the Washington Post that the Supreme Court may be getting ready to review “whether the death penalty is applied in a discriminatory discriminatory way, an issue the Court has not taken up for two decades.”

Dieter drew this conclusion from the Supreme Court’s denial of cert. yesterday in the capital punishment case Walker v. Georgia. As we pointed out recently, the Supreme Court has taken to using denials of cert. for raising questions on capital punishment.

The issue here is how thorough a court’s proportionality review must be, to ensure that a death sentence is not based on arbitrariness or discrimination. Justices Stevens and Thomas concurred with the denial of cert., but gave strongly opposed written opinions.

Stevens, the more liberal of the two, stated that Walker’s case was “troubling,” because it involved a black killer and a white victim. Numerous studies over the years have shown that black defendants are much more likely than whites to be charged with capital crimes, regardless of the race of the victim, but that capital crimes are also much more likely to be charged when the victim is white, regardless of the race of the killer.

Stevens felt that the Georgia Supreme Court wholly ignored its job, and only performed a perfunctory review of proportionality. It merely cited 21 similar death sentences and said that was good enough. The court didn’t describe or compare the facts of those cases, which differed in heinousness.

Thomas, on the other hand, said that Stevens was “simply wrong.” “There is nothing constitutionally defective about the Georgia Supreme Court’s determination. Proportionality review is not constitutionally required in any form.” Georgia has chosen to do some kind of proportionality review, and that’s fine, but the Supreme Court has never required that it do so. If Georgia wants to administer its own additional rule in its own way, that’s up to Georgia.

Thomas, the more conservative of the two, pointed out that the Court already looked at all of the arguments Stevens raised, and rejected them in McCleskey v. Kemp, 481 U.S. 279 (1987).

The fact that these arguments are being raised in written cert. opinions, however, is certainly giving some folks reason to believe that the Court may be interested in looking at them again, should the right case come its way.

Guilt or innocence, one might say, is all in the mind. After all, there are very few crimes that can be committed without the requisite mens rea, or mental state. If we’re going to punish someone, their acts cannot have been mere accident. We want to know that they had some knowledge that their actions could cause harm, and we want that awareness to be sufficiently high as to require punishment.

The standard criminal levels of mens rea are “negligence” (you ought to have known bad things could happen), “recklessness” (you had good reason to believe that bad things would probably happen), “knowledge” (bad things were probably going to happen), and “intent” or “purpose” (you wanted bad things to happen). If your foot kicks someone in the ribs while you’re falling downstairs, you’re not a criminal. But if you kick someone in the ribs because you don’t like them, then society probably wants to punish you.

We cannot know what anyone was thinking when they did something, however. So we rely on jurors to use their common sense to figure out what an accused must have been thinking at the time.

In recent years, however, there have been enormous advances in neuroscience. Brain scans, the software that processes the data, and good science have approached levels that would have been considered science fiction as recently as the Clinton years. Experts in the field can see not only how the brain is put together, but also what an individual brain is doing in real time. Experimental data show which parts of the brain are active when people are thinking certain things, with good detail.

Functional magnetic resonance imaging (fMRI), in particular, can act as a super lie-detector. Instead of measuring someone’s perspiration and heart rate while they answer questions during a polygraph exam, fMRI looks at actual real-time brain activity in areas having to do with logic, making decisions, perhaps even lying. Experimental data of large groups is pretty good at identifying what parts of the brain are associated with different kinds of thinking.

Every brain is slightly different, of course. Brain surgeons have to learn the individual brain they’re operating on before they start cutting. So general group data don’t translate to an individual person 100%. So any lie-detector use for fMRI would have to require some baseline analysis before proceeding to the important questions.

The issue is whether it will be admissible in court. Polygraph tests generally aren’t admissible, because they’re more an art than a science. But fMRI is all science. In addition, brain scans are already widely admissible for the purpose of reducing a sentence because the defendant had damage to his brain. As forensic neuroscience expert Daniell Martell told the New York Times in 2007, brain scans are now de rigeur in capital cases. In Roper v. Simmons, the Supreme Court, ruling that adolescents cannot be executed, allowed brain scan evidence for the purpose of showing adolescent brains really are different.

Outside the United States, brain scans have already begun to be used by the prosecution to show guilt. In India, a woman was recently convicted of murdering her ex-boyfriend with the admission of brainwave-based lie detection. There was other evidence of guilt as well, including the fact that she admitted buying the poison that killed him. But the brainwave analysis was admitted.

There are deeper policy issues here. Is reading someone’s brain activity more like taking a blood sample, or more like taking a statement? The Miranda rule is there, at heart, because we do not want the government to override people’s free will, and force them to incriminate themselves out of their own mouths against their will. That’s why the fruits of a custodial interrogation are presumed inadmissible, unless the defendant first knowingly waives his rights against self-incrimination. And because the DNA in your blood isn’t something you make of your own free will, by taking a blood sample against your will the government has not forced you to incriminate yourself against your will.

So is a brain scan more like a blood sample? Is it simply taking evidence of what is there, without you consciously providing testimony against yourself? Or will it require the knowing waiver of your Fifth and Sixth Amendment rights before it can be applied?

We’re interested in your thoughts. Feel free to comment.