Temporarily Shut Down for Bar Prep
I won’t be making anymore posts until after I take the Indiana Bar Exam in July (for the first time–I’m a late bloomer). I will, however, still be posting on Twitter as my schedule allows.
Russia: A minority shareholder can be a parent company
The ILO has this interesting summary of a February 20, 2009, decision from the Eighth State Arbitrazh Court of Appeal decision holding that a minority shareholder corporation can be deemed the parent of a corporation whose shareholders have suffered lost profits if the “parent’s” representation on the Board could be said to have lead to that which caused the shareholder’s/investor’s losses derived from the “subsidiary.” This is interesting because, while it applied to a corporation in this case, the lingering question is whether application of its holding, if left to stand, could be expanded to individual minority shareholders. If so, this would obviously have international ramifications given that most corporations in which people and other corporations invest, conduct business internationally and are, therefore, exposed to decisional case law such as this (which expands the scope of criminal liability and exposure). It’s also noteworthy that the action was brought by holders of ADRs.
In short, Farimex (a BVI corporation), which held 25,000 American advance depository receipts (ADRs) representing 0.002% of shares of OJSC VimpelCom, alleged that its long sought introduction to the Ukrainian market was effectively blocked by one of VimpelCom’s minority shareholders, Telenor (a Norwegian Corporation). Because Telenor was represented on VimpelCom’s Board and could be said to have acted to ultimately delay a transaction that introduced VimpelCom into the Ukrainian market, Telenor was deemed a parent and held liable liable for lost profits. For a cogent and detailed analysis, click here for the ILO.
Bambi, Bugs Bunny, and Charlotte from Charlotte’s Web: Fear no hunting Good Limbaugh is here.
This just in from the Washington Times, Second Amendment Enforcers everywhere are enraged that Rush Limbaugh may well have joined the Humane Society’s conspiracy to end men and women’s days of hunting and gathering (the groups were PC in their press release).
You heard it first from Tarkoff’s Legal Secretary: If you’ve been craving venison, grab a rifle and a buck, for the day may be nigh when the Humane Society, buoyed by Rush Limbaugh’s undeniable charisma for animal rights, finally succeeds in elevating animals’ status beyond that of fetuses.
There’s no need to play fast and loose with the term “money laundering” in Great Britain. The Anti-Money Laundering Blog reported on April 20, 2009, that upon seizing a suspect and his van, British law enforcement discovered a washing machine filled with–what else?–cash. Apparently the defendants took Nick Kochan’s “The Washing Machine: How Money Laundering and Terrorist Financing Soils Us,” to heart.
Two Moroccan men and a Polish woman have been charged with money laundering as a result of the incident. Who knew that when Morocco recently enacted its anti-money laundering laws it took the concept so literally.
Consistent with its Action Plan with the EU, Morocco created a “financial Data Processing Unit,” or UTRF, described as being “responsible for processing and spreading data . . . to guarantee coordination among public institutions, administrations, and legal entities.” Looks like they need to add “Kenmore” to their “laundry list.”
The issue is not about iPhones and Blackberrys, the issue is that judges cannot unring a bell with an instruction and the remedy is that when someone violates a court order, they should be held in contempt. Maybe then trials will become more than dog and pony shows.
I am shamefully late chiming in on the “shocking” news of trials from Miami to New Jersey being derailed by jurors using new-fangled gadgets called “iPhones” and “BlackBerrys,” so singular they have their own acronym–PDAs. Smart phones. Hmmmm.
I didn’t even know where to begin on this one. I was disappointed, albeit amused, by suggestions that PDAs be banned from courthouses. Uh–it was not the iPhone that did it, it was the juror. And the news gets worse because guess what? The juror will have the iPhone in the car on the lunch break, in addition to unlimited access to the news and internet at home when he or she isn’t posting tweets from the jury box. Banning iPhones from courthouses is akin to offering a band-aid to someone falling from a 30 story building. Thoughtful, but inadequate.
I was hoping the digital slap to the criminal justice system would provoke a more meaningful debate, perhaps addressing the 30 story fall instead of a shout-out to Johnson & Johnson. Potentially addressing the realities we all know about how attorneys will, for example, inquire regarding the results of a witness’s lie detector test knowing the answer is inadmissible but, asking the question nonetheless knowing the power of suggestion.
The ultimate downfall of the trial by jury system is that trials are only about the orderly and unbiased presentation of evidence in theory. In practice, trials are about innuendo, disingenuous suggestion, and each side pushing the line as far as it can until the judge tolls the unringing of the bell. It’s frightening that the justice system continues entertaining the delusion that jurors are too stupid to recognize this reality (and so turn to the internet to ascertain the answers to the lingering unanswered questions). Time and again, lawyers’ downfall is the toxic cocktail of ignorance and arrogance.
Here’s a perfect illustration of the problem: During Michael Tarkoff’s money laundering trial, Judge Lenard excluded all evidence establishing that Ismael Arnaiz had legitimate fishing businesses in Venezuela. Consequently, Michael was barred from testifying regarding his personal knowledge of those legitimate businesses (and therefore legitimate income) (as were other attorneys who could corroborate that Michael knew Ismael had legitimate fishing businesses). Assistant United States Attorney Alex Unguerilla asserted in his closing arguments that the money at issue had to be from medicare fraud (and therefore laundered) because Michael could not point to any evidence establishing that Ismael had a single legitimate business. Seriously. That was his closing argument and the biggest issue on appeal, but you would never know from anything you read about the case. Probably because it was an acceptable “misstep” because Judge Lenard admonished the jury to ignore those comments. In that instance, the simple admonishment sufficed, so why not offer the same admonishment to jurors who use iPhones and Blackberrys, to wit:
It has come to the court’s attention that certain jurors have been reading about this case on http://www.the-defendant-is-the-antichrist.com.
That is not evidence but is someone’s opinion. Much like all the testimony you’ve heard here has been opinion evidence, but you shouldn’t listen to that opinion evidence because it’s obviously biased, while the opinion evidence we presented appeared more neutral (even though it really wasn’t).
So ignore the obviously biased opinion evidence and focus on what has been presented to you here, ignoring that which I told you not to consider in making your decision when the people pretending to be unbiased said things they knew they were not supposed to say (a lot of which wasn’t even true).
Follow all these instructions on how to classify evidence and follow the law in deciding the case, and let’s proceed to verdict.
How shocking does evidence before a jury that has not been properly admitted have to be before the criminal justice system will recognize that it cannot unring a bell?
When I read about the PDA debacle occurring in court rooms everywhere, I thought there might finally be a meaningful debate about how trials are conducted and evidence presented. The jurors’/contemnors conduct was no more egregious than Alex Unguerilla’s closing argument–sadly, and most telling, is that the jurors’ conduct shocked the judges, while Alex Unguerilla’s did not. Consequently, the other defendants actually received a meaningful remedy for contemptuous conduct resulting in improper evidence being before the jury. But what about people like Michael?
Giving the system a break for a moment, let’s turn the to jurors themselves, for they, too, took an oath. Federal trials are expensive, traumatizing, and a general nightmare. I am the first to encourage jurors to avoid the invitation to check their brain behind the barrister, for juror duty is a grave undertaking and a responsibility of citizenship. If a man sitting in a towering oak enclave surrounded by men with guns and whispering clerks is not enough to intimidate someone into following the judge’s direct and explicit orders–disobedience from which will (and should) lead to a contempt citation–then certainly the awesomeness of what is at stake–a fellow citizen’s freedom–should be motivation enough to play along with the rules, imperfect as they may be. For people unwilling to do that, my remedy is simple, let them take their iPhone with them to a jail cell for a couple weeks so they can read what the press has to say about them and get a first-hand lesson in untold stories. Alex Anguerilla and other attorneys deserve the same fate, if not worse.
The issue is not about iPhones and Blackberrys, the issue is that judges cannot unring a bell with an instruction and the remedy is that when someone violates a court order, they should be held in contempt. Maybe then trials will become more than dog and pony shows.
A not so Casablanca courtship between Morocco and the EU
Play it again, Sam.
I doubt this is the kind of script that would have attracted the inimitable Humphrey Bogart and Ingrid Bergman, but there has been a slow, steady courtship between Morocco and the EU over the past few years. Morocco actually has aspirations of potentially joining the EU, if not having a more active participation in its governing process.
The states executed an “Action Plan” solidifying their intentions to one another back in February 25, 2004, with a timeframe of 3-5 years depending upon the speed of compliance with the agreement. Given the EU’s steady stream of money laundering directives, it appears Morocco may have just offered a dowry that will make the EU blush.
It has created a “Financial Data Processing Unit,” or UTRF designed to fight money laundering. Specifically, the UTRF will be “responsible for processing and spreading data . . . to guarantee coordination among public institutions, administrations, and legal entities.” Formally, it will be part of the judicial branch. Given the Moroccan Banks’ sustained growth, even in light of the current financial crisis, one has to wonder if an acronym like UTRF might just mark the beginning of a beautiful friendship.
***Update. See post for 4/23/09 here.
Am I the only one who sees the irony that the prescribed Upjohn warning may be too weak?
The theoretical underpinnings of Upjohn have gone awry in practice.
The WSJ law blog recently reported a couple pivotal rulings excluding statements of corporate directors based upon an alchemistic shortfall with the Upjohn warnings. The problem has become toxic enough that even the ABA is recommending revisions to the warnings (see here and here).
In particular, judges excluded statements made by a Qualcomm Director who mistakenly believed he was represented by Irell & Manella and Laura Pendergast-Holt of R. Allen Stanford, who believed she was being personally represented by Thomas Sjoblom of Proskauer Rose when, inter alia, she provided sworn testimony to the SEC with Mr. Sjoblom faithfully by her side.
Upjohn v. United States, 449 U.S. 383 (1981), requires lawyers representing corporations to advise directors and employees that:
(1) The firm represents the company, not the director; (2) the attorney-client privilege is between the company and the firm; and (3) the company can waive the privilege and release all recollected statements the director made at any time and without any notice to the director.
Theoretically, that sounds reasonable. Most people given the foregoing admonishment, particularly the educated type known to be executives at publicly held companies, would simply retain their own attorney before uttering a single word. But they don’t. Why?
Given the age of increasing corporate indictments, it seems timely to recognize that for every scandal, there will be a fall guy, good or bad. And, sadly, investigations are intended to present those fall guys for public consumption. Some rightly so, others not so much. What’s disturbing, however, is that highly educated people have fallen prey to believing that a corporate attorney represents him or her. In other words, the theoretical underpinnings of Upjohn have gone awry in practice.
The WSJ law blog posits the possibility of elevating Upjohn warnings to Miranda status. I tend to agree with their suggestion and here’s why. Corporate lawyers investigating possible criminal activities could be seen as acting as government agents (kind of like the snitch planted in the jail cell; the lawyer’s simply reporting everything he recalls to someone in a nicer suit (ultimately for the likely preparation and presentation to the government conducting a criminal investigation) and then he’s going to submit a bill for a really nice dinner or two (depending on where everything takes place)).
On a more practical level, simply including the following slide from Foley &Lardner’s power point presentation would easily solidify whose interests the attorney is actually interested in protecting (be sure to note the first bullet point with the smaller font):
As a wise man once told me, “more often than not, it’s what you don’t say that’s more important than what you say.” That’s the problem with warnings–they become technicalities that are easy to exploit.
Though Miranda falls within the penumbra of the Fifth Amendment, it is designed to protect to the right to counsel. Before the SEC, for example, the “target”/”witness” is under subpoena. Ms. Pendergast-Holt, testified before the SEC being ethically advised to provide testimony that was mitigating to the corporation without consideration to also providing her own mitigating evidence (or evidence incriminating the corporation). She had a right to counsel at that critical stage of the investigation, and in preparing her testimony for the SEC, she had the right to know–unequivocally–that the attorney with whom she was preparing and testifying was not there to advise or represent her interests.
Some Upjohn scenarios are clearly custodial. A meaningful analysis would most often produce an affirmative answer to the question. Being able to schedule the meeting at a convenient time and place does not voluntariness make. Further complicating the matter is that these investigations are not conducted into criminal matters by law enforcement personnel, but rather by the company firm or in-house counsel, many of whom directors, executives, and high level employees may be accustomed to seeing on the greens or at the local watering hole. It’s only later, as the corporation protects itself and its shareholders that it begins choosing who shall be placed on the silver platter when the government comes knocking.
An analogous concept is recognized in Garrity v. New Jersey, 385 U.S. 493 (1967), where officers subject to IA investigations with criminal exposure must be given specific warnings. There, as in the corporate context, the possibility of losing one’s job for failure to cooperate is enough to warrant extra safeguards. Add to that a director’s fiduciary duty to the corporation and an employee’s desire to keep shoes on his childrens’ feet and dinner on the table and one will find a bevy of loquacious individuals.
Finally, let’s not forget that the Fifth Amendment does not apply to civil proceedings/investigations. (One issue in Stogner v. California, (2003) 539 U.S. 607, was that defendants were being questioned years after the criminal statute of limitations expired and therefore did not/could not assert the Fifth. They were then criminally charged based on their incriminating statements.)
The reality of the issue is so complicated and the waters so murky that, ironically, Upjohn created a baby aspirin to treat a migraine.
Prosecutor: “You look nice. Would you like to serve your country by sticking your head in a toilet so I can see if you’ll drown?”
The WSJ Law Blog is reporting something that, at first glance, is, well, a shocking call for volunteers. The Vilas County Prosecutor in Wisconsin is seeking women who are 5 feet 8 inches tall, weighing 140 lbs., who would be willing to stick their head in a toilet to see if it they’ll drown. Apparently, the victim in the murder was depressed, so maybe they should do a depression screening of the volunteers. It seems that might be probative.
It’s shocking, I suppose, but not really. Why doesn’t the prosecutor just ask Donald Rumsfeld? That’s what he authorized in Abu Ghraib and beyond, so I’m assuming there must be select government evidence on this issue and, since it is government evidence, it will likely show that one cannot drown in a toilet. That would be torture.
Anti-Money Laundering Movement Strong & Steady in EU
Global Witness, an NGO wisely realizing that money is what drives many of the atrocities in Africa, recently published its report: Undue Dilligence (it can be downloaded on the link). Not the type of NGO that worries about stepping on toes, it actually provides the names of banks doing business with corrupt regimes. On the one hand, it would seem that it’s not the banks’ responsibility to ensure the actual practice and implementation of the web of ethics comprising a regime; however, anti money-laundering laws shift the burden to banks and businesses engaging with high risk governments and businesses to verify the source of any monies transacted.
At the same time, the UK Treasury issued the following warning to UK (and essentially, by extension, EU firms) doing business with countries deemed to not have adequate money laundering safeguards in place. That means, law abiding businessmen have a legal obligation to outsmart some very intelligent criminals in verifying funds used to transact business. Meanwhile, be careful to avoid all the politics involved, for where there’s money, there’s power, and where there’s power, there’s politics, and where there’s politics, there are indictments.
None of this is an easy task for a regular businessman trying to make a living and support a family in hard times. Just ask the preeminent Ben Keuhne (albeit his case was on a smaller scale, but it demonstrates impeccable ethics and a reputation beyond reproach won’t necessarily be considered when the government uses 20/20 hindsight to second-guess decisions made). As money is tighter for everyone, the laws are shifting law enforcement costs to the local businessman who is struggling to survive.
These were important topics scheduled for discussion at the G20, so expect more to follow as I get caught up.
Under the heading don’t count your eggs before they hatch, Pakistan is passing anti-money laundering laws. I classify this as akin to a dancer’s curtsy. Pretty meaningless.
Malum Prohibitum ~ White Collar Crime & News 