NYT Flubs Deferred Prosecution Reporting

In one paragraph it is suggested that a deferred prosecution agreement would have been the best way to deal with Arthur Andersen:

The agreements, government officials say, also avoid the type of companywide havoc seen most acutely in the case of Arthur Andersen, the accounting firm that was shuttered in 2002 after being indicted in the Enron scandal. The firm’s collapse threw 28,000 employees out of work.

What the NYT doesn’t mention is that Arthur Andersen should never have been prosecuted, but by the time their conviction was overturned the firm had collapsed. This was the definition of abusive prosecution, but during the rush to blame following the Enron scandal no one seemed to care. Basically, the DoJ thugs screwed up. According to the Supreme Court’s reversal:

The court found that the instructions were worded in such a way that Andersen could have been convicted without any proof that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents. The opinion, written by Chief Justice William Rehnquist, was also highly skeptical of the government's concept of "corrupt persuasion"—persuading someone to engage in an act with an improper purpose even without knowing an act is unlawful.

So would have a deferred prosecution agreement been a better alternative? No, since AA didn’t do anything wrong in the first place.

The article then suggests that DPAs are get out of jail free cards.

Some lawyers suggest that companies may be willing to take more risks because they know that, if they are caught, the chances of getting a deferred prosecution are good. “Some companies may bear the risk” of legally questionable business practices if they believe they can cut a deal to defer their prosecution indefinitely, Mr. Khanna said.

The general theme of the article is that DPAs are corporate giveaways. Well they are, but not in the sense that the article puts it. DPAs give prosecutors a way to hand something back to their cronies and get credit for “wins” without winning anything. After all, why shut down a perfectly viable business when it’s so much better to extort it?

This is a classic Spitzer-tactic. Make accusations to back the accused into a corner, then cut a deal. The businesses involved can’t risk even a small chance of being shutdown, but that doesn’t matter to the prosecutors who won’t hesitate to claim victory regardless of the outcome. They get away with it because the prosecutors have no intention of following through with the expense of a trial, but the system is so stacked in their favor that they never have to.

Amazingly, the NY Times points out the Ashcroft scandal involving DPAs, but not the obvious conclusion: The biggest winners from DPAs are the prosecutors.

NatWest 3 Plea Could Have Affect on European Online Gambling Operators

We posted earlier about Tony Blair's shameful conduct of allowing his citizens to be snatched and held in the US for gambling crimes. The recent plea bargain of another group of UK citizens in a US court may have implications for upcoming gaming trials. The US has come down hard to force pleas on foreigners; just yesterday Gary Kaplan from BetonSports was denied bail. Gambling911 examines the issue:

"The greater UK business community is up in arms," points out Joe Brennan, Jr. of iMEGA.org. "How the US can unfairly reach into their country (Great Britain) to prosecute their people. This is a pretty big precedent being set."

And many now speculate that the NatWest 3 (plea bargained) and David Carruthers (still awaiting trial in the States) are just the beginning to a long string of arrests that could be coming down the pike.

Immediately following the Carruthers arrests, the online gambling community and those in the entire European business sector, were stunned to learn that a former Chairman of Sportingbet was taken into custody at New York's JFK Airport. Peter Dicks was wanted on an arrest warrant from the state of Louisiana. The warrant charges Mr. Dicks was running a gambling enterprise by computer, a crime under Louisiana law. Yet Dicks was hardly active on the Sportingbet board and was in the US on "unrelated" business.

The Failure of the Corporate Fraud Task Force

An article in The American Lawyer digs into the numbers behind the decline of corporate indictments and finds that the CFTF was mostly PR.

...we found several high-profile acquittals, hung juries and appellate reversals -- and some of those prosecution failures were due specifically to questionable tactics by the Justice Department. In all, 27 of the defendants whose cases we examined, including executives from Adelphia, America Online Inc., PurchasePro.com Inc. and Qwest Communications International Inc., were acquitted at trial. Another 28 cases were dismissed. There were 22 mistrials. And nine convictions were overturned on appeal, including those of such high-profile defendants as Credit Suisse First Boston Corp. banker Frank Quattrone and the Enron "Nigerian Barge" defendants from Merrill Lynch & Co. Inc.

...And while many of the lawyers we interviewed say that the task force's directives did result in more corporations cooperating with the government, defense lawyers and even some federal judges came to believe that that cooperation was won at a high cost: the erosion of such basic defendant's rights as the attorney-client privilege and the right to counsel.

The decline in corporate prosecutions should be celebrated. It seems as if the bureaucrats have move onto other ways to justify their existence.

Free Dennis Kozlowski

Excellent piece in the WSJ from Dan Ackman:

… But even if you believe the worst about Kozlowski and his co-defendant former Tyco CFO Mark Swartz, they were paid according to a contract, and that is not stealing.
…
There is no question that Kozlowski was paid according to the incentive compensation plans that were duly approved by the Tyco board in 1994 and again in 1997. The plans rewarded the CEO and CFO with bonuses based on improvements in company earnings, cash flow and earnings per share. Excessive? That's an understatement. But though the record-keeping was careless, nothing was secret: The contract and the payments were all on the books.

Happy 4th of July

Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is in an organized conspiracy to oppress, rob, and degrade them, neither persons nor property will be safe.

- Frederick Douglass

During the past year I've transitioned from a neutral trial observer to caring a great deal about the techniques used by the prosecution and the fairness of the trial outcome. To highlight and document the most egregious abuses, in May I formed a non-profit, Civil Rights Action Corporation. The final paperwork has been filed and we are waiting for a ruling.

While this is occurring several projects are in the pipeline which you can follow at www.civilrightsactioncorporation.org . I will continue to update this blog on prediction market related topics - anything related to law will be on the C.R.A.C. blog.

Thank you very much to the directors and everyone else who helped put this together.

Black Trial Goes To Jury

The governements case agaist Black has been called a sham by nearly every one watching the case. How weak is it? Mark Steyn traces the evolution of the prosecutors case:

But, when the government determines to take you out, they'll use what they need to. This is their third line of attack: First is the "conspiracy" they claimed in opening statements. Second is the "ostrich instruction" they fell back on after bungling the "conspiracy" argument - well, even if it all just sorta happened, the defendants shouldn't have let it. And, if neither of those appeal to the jury, the third line is that, hey, they got a lot of money and you didn't.

Justice Denied – The War On Business

The State conducts the trial. The State determines what evidence will be allowed. The State then instructs the jurors how to decide the case, leaving no room for them to determine if a law is just or logical.

Without the discretion of informed juries to reign in abusive prosecutions and unjust laws the jurors are a mere rubber stamp of the structure the State has presented. In other words, the jurors simply agree that the evidence approved by the State meets the standards of the crime set by the State - not a very high bar.

The Enron Pattern Continues

The prosecutions pattern of attacking business should be clear. The State will load up the charges on a near innocent underling with everything from Section 1001 violations to jay walking so the underling is facing 100+ years in prison even if they beat the majority of the charges. Once they have the gun to his face, a sweetheart deal is offered for full cooperation All the patsy has to do is testify that the Boss was fully responsible for any and all crimes committed. Since white-collar prosecutors generally won’t have other evidence, they need an insider to have any case at all.

A witness for the prosecution will have the threat of prison over his head until the end of the trial thereby ensuring his continued cooperation. The quid pro quo is complete when the prosecutors get their man and the witness redeems his get out of jail free card.

How the Prosecutors Get Their Man – Tactic 1: Blocking Exculpatory Evidence

The prosecution can control what the jurors know by blocking potentially exculpatory evidence from being presented. This technique was abused and tragically underreported during the Enron trial when a record number of unindicted co-conspirators were named. The threat of criminal prosecution of the unindicted co-conspirators ensured none would testify for the defense. This prevented most of the witnesses that could clear Skilling and Lay from getting on the stand, making the State’s case a lay-up and the jury clueless as to what they missed.

The technique of blocking exculpatory evidence was used again in the Joseph Nacchio case. The former Quest CEO was accused of insider trading for selling stock while apparently knowing that the finances of the firm were in trouble. Ignoring the fact that CEO’s are NEVER openly bearish on their own stocks, Nacchio had knowledge of secret government projects which, if they came through, would justify the optimistic projections made to investors. In a Kafka like twist, the government declared the contracts too secret to be revealed in court leaving Nacchio without his main defense.

Lord Black Prosecutors “Inept” - Conrad Black Trial

Peter Worthington’s latest column in one quote, “I'm not saying the prosecutors are incompetent, but they don't seem to have anything of substance to show criminal acts."

They should have spent less time posing for glamour shots and more time preparing for the case. Patty Fitz was smart enough not to take this turkey on personally and he didn’t leave the rookies much to work with.

Prosecution Goes Fishing – Conrad Black Trial Update

Patty Fitz Goes Fishing

The prosecution still hasn’t lost hope of finding evidence against Lord Black. They are scraping the bottom of the barrel to find something, which means that their book deals and private practice offers are in jeopardy:

Prosecutors in Conrad Black's trial are about to finally get their hands on 13 boxes of documents from Lord Black's office in Toronto after nearly two years of legal wrangling…the inventory includes: “Musings,” “Barbara Black Sundries 2002-2003,” “Brascan Share Options,” “CIBC Stock Options,” “CIBC Pledge of Shares to Duncree 2004,” “Tax Information 2005,” “Entertaining Hotels etc.” and “Interview Requests 2005.”

Prosecution Struggling

Prosecutor Julie Ruder continues to flounder. Check out this dud that’s supposed to show Lord Black abused his flight privileges:

“Was there any company policy requiring Conrad Black to use company planes for his personal vacations?” Ms. Ruder asked him. Mr. Creasey replied: “No.”

Awful redirect. It’s nice to see Creasey remember something, but is Julie trying to insult the intelligence of the jurors with these silly questions?

The Betting Markets - Short Lord Black Contracts

This chart from FT Predict shows just how weak the case is against Black is. The odds of Conrad Black being convicted of all charges fell 20% in a week - the longer this trial goes on, the more obvious it becomes the prosecution doesn't have a case.

Prosecutors Case Falling Apart in Black Trial – Intrade Conrad Black Betting, Still No Volume

If there were any volume on the Sell side of Intrade’s BLACK.GUILTY.ALL contracts I would recommend shorting it to the ground. Presently there is no Intrade volume so I’ve been selling the Conrad Black BLACK.GUILTY.ALL contracts at ftpredict.com

So far in this trial we’ve learned:
1. The foundation of the prosecutions case, the non-competes, were approved by the board. Forget reasonable doubt, the state hasn't been able to show that any crime was commited.

2. The prosecutions star witness Creasey is a complete buffoon – and their other star witness is an admitted felon. Read the comical description of the clowns the State is putting on the stand. It ends, “It wasn’t that he made himself look like an idiot, but that he made any prosecutors who’d depend on such a witness look like idiots.”

3. There was nothing wrong with Black’s flights since they “…followed Hollinger's long-established policy for using the jet.”

They appeared costly because of the accounting that was used, the Chicago Tribune explains:

Creasey charged Black and Hollinger for the Bora Bora flight according to its operating cost, per flight hour, for the entire year of 2001. Using his methodology, if the plane had cost $5 million to operate in 2001 and had only been used for one hour, the cost of that one flight would have been $5 million, Greenspan noted.

4. “Hell hath no fury like a bureaucrat scorned.” – NBAT

CBC ran an ominous article on Thursday suggesting that Conrad Black should be more humble or else the State might get REALLY mad. Having unaccountable bureaucrats with vendettas determine what is legal based on how pliable the defendant is cannot be healthy for the justice system. Just like the Enron prosecutors, the prosecutors here are likely hoping to use Black’s scalp to get a real job in the private sector when this thing is over.

“Most people joined the staff of the government offices because the salary and the pension offered were higher than what they could expect to earn in other occupations. They did not renounce anything in serving the government. Civil service was for them the most profitable job they could find.” - Mises

Conrad Black Betting

No volume yet on Intrade, but Betus.com has taken over 3,000 bets on the trial – mostly for Black being guilty. Gambling911.com reports: “The company enlisted the aid of legal experts in order to set the odds, and doesn't expect them to change during the trial.”








Peter Worthington nails the main issue of the trial; that what Black did isn’t even a crime. He boldly speculates that Black will walk:

Conrad Black will be found not guilty, as will his four co-defendants, even more so: Ex-Hollinger execs Peter Atkinson, Jack Boultbee and Mark Kipnis.
…
From what has been revealed so far — the main points in both the prosecution and defence cases, and early government witnesses — it seems charges involving racketeering, obstruction, money laundering, mail fraud, etc., are not only unwarranted but wrong.
…
Besides, in the first two weeks of the trial there has been no evidence produced that clearly indicates a crime committed — and never mind the essential “beyond a reasonable doubt.” There’s just nothing.

It wouldn’t be the first time that charge has been leveled against rouge prosecutor and insufferable showboat Patty Fitzgerald.

Good Luck Mr. Black

They have gone after the oil producers (BP, a target because of Browne), the gaming bosses (David Carruthers), and now Conrad Black. Conrad Black, another victim of the war on capitalism, has chosen to fight the charges.

Intrade has posted several contracts with no volume yet:

http://www.intrade.com/news/mainpage.jsp?article=news_107.html

Another Prosecutorial Failure on Wall St

It makes good headlines to go after those rich Wall St guys but the charges almost never stick. These guys have a worse conviction rate than Spitzer.

“Chin held that while federal prosecutors proved that defendant David Finnerty engaged in interpositioning, they failed to prove fraudulent or deceptive conduct within the meaning of the securities laws.…Before Wednesday's ruling, the U.S. Attorney's Office for the Southern District had already dropped charges against seven of the defendants... Chin's decision "is a vindication" of Finnerty."

Finnerty was vindicated but the abusive prosecution already ruined his life. Where is the punishment for these state thugs who “provided no real evidence” of any crime but charged him anyway? Of the 15 traders charged, over half of them have had the charges dropped.

The game for the prosecutors is to make outrageous charges to get some headlines. Overcharge the traders so that they are looking at 120 year sentences if convicted to force the settlement. Since the prosecutors never had a case in the first place they have to rely on threats and bullying people into a settlement. If it falls through – who cares? They already got their headlines and disgraced the people that were charged anyway. Plus it worked for Spitzer.

It won’t be the last time.