Posts Tagged ‘prosecution’

Justice Dept. case against FedEx collapses mid-trial

Big news from federal court in San Francisco: we’ve repeatedly questioned the U.S. Department of Justice’s adventurous decision to charge Federal Express with crimes for, in essence, refusing to snoop into its customers’ packages and business. From our post two years ago:

The federal government has prevailed on a grand jury to indict Federal Express for servicing what it should have known were illicit online pharmacy operations. FedEx says it repeatedly asked the government to supply a list of shippers it considered illicit so that it could cut off service, but that the government refused; the Department of Justice contends that circumstantial evidence should have been enough to alert the package shipment company. …

And last month, quoting Washington Legal Foundation’s Cory Andrews:

“Federal prosecutors have accused FedEx of knowingly shipping illegal drugs in interstate commerce and laundering money by merely doing its job: delivering packages (in this case, from online Internet pharmacies) to their intended recipients and getting paid for the service. …To avoid the very sort of ‘gotcha’ prosecution at issue here, Congress inserted exceptions for common carriers in each of the relevant statutes” authorizing shipment of prescription medications and controlled substances when done in the usual course of business….

Now, this [Associated Press/ABC News]:

A criminal trial nearly two years in the making alleging FedEx knowingly delivered illegal prescription drugs to dealers and addicts ended suddenly Friday when prosecutors moved to dismiss all charges against the shipping giant.

U.S. District Court Judge Charles Breyer, who had been highly critical of the government’s positions as the trial unfolded, granted the motion to dismiss: on Friday he called FedEx “factually innocent” and said the withdrawal of charges was “in the court’s view, entirely consistent with the government’s overarching obligation to seek justice even at the expense of some embarrassment.”

FedEx spokesman Patrick Fitzgerald said in a statement Friday that the company has always been innocent and the case should never have been brought.

“The government should take a very hard look at how they made the tremendously poor decision to file these charges,” he said. “Many companies would not have had the courage or the resources to defend themselves against false charges.”

Many in the field of white-collar legal defense have warned large corporations, particularly those with businesses built upon relationships of public trust, to cut a deal with the federal government rather than try to withstand the full force it can bring to bear in a prosecution. But FedEx, for one, has shown that it is still possible to defy the authorities and win. Mike Koehler at FCPA Professor says that might help lay to rest what has been called the “Arthur Andersen effect” in which indictment is itself seen as tantamount to corporate death.

P.S.: Our friend James Copland of the Manhattan Institute has this observation (via email):

What’s remarkable here is that UPS agreed to a $40 million non-prosecution agreement — and to hire a new corporate officer and an independent auditor looking over their shoulder and reporting to the U.S. Attorney — for the same alleged conduct.

[cross-posted at Cato at Liberty]

More from Jim Copland and Rafael Mangual at Real Clear Markets: “Judge Breyer observed that the government had failed to show any ill intent, and he pointedly noted that prosecutors have not gone after the U.S. Postal Service for the same conduct…. glad FedEx called the government’s bluff and won.”

D.C. Circuit: Don’t second-guess DPAs

Deferred prosecution agreements and their close relatives non-prosecution agreements (DPAs/NPAs) have become a major tool of white-collar prosecution in recent years. Typically, a business defendant in exchange for escape from the costs and perils of trial agrees to some combination of cash payment, non-monetary steps such as a shakeup of its board or manager training, and submission to future oversight by DoJ or other monitors. Not unlike plea bargains in more conventional criminal prosecution, these deals dispense with the high cost of a trial; they also dispense with the need for the government to prove its allegations in the first place. DPAs may also pledge a defendant to future behavior that a court would never have ordered, or conversely fail to include remedies that a court would probably have ordered. And they may be drawn up with the aim of shielding from harm — or, in some other cases, undermining — the interests of third parties, such as customers, employees, or business associates of the targeted defendant, or foreign governments.

So there was a flurry of interest last year when federal district judge Richard Leon in Washington, D.C., declined to approve a waiver, necessary under the Speedy Trial Act, for a DPA settling charges that Fokker Services, a Dutch aerospace company, sold U.S.-origin aircraft systems to foreign governments on the U.S. sanctions list, including Iran, Sudan, and Burma. While acknowledging that under principles of prosecutorial discretion the Department of Justice did not have to charge Fokker at all, Judge Leon said given that it had, the judiciary could appropriately scrutinize whether the penalties were too low.

Now a three-judge panel of the D.C. Circuit has unanimously overruled Judge Leon. It pointed out that under well settled law, charging decisions are entrusted to the DoJ or other executive branch prosecutors, not the judiciary, and that judges may not intervene to insist that additional or more stringent charges be filed – and that is what the pattern in this case amounted to, in the appeals panel’s view.

So far so good, you might think. But the language of the appellate ruling in places might be read to suggest that courts should simply defer to the Justice Department’s judgment and green-light the DPAs it may negotiate, period. And that would be disturbing, since over-lenience is only one of the possible problems with these devices. Noting the rule-of-law concerns that scholars have voiced about DPAs, Michael Greve writes that the new Fokker Services decision “in sharp contrast, oozes with ‘trust your friendly prosecutor’ language” and speaks of dispensing with “seeking a conviction that the prosecution may believe would be difficult to obtain or would have undesirable collateral consequences.” Greve adds: “Inquiring minds might want to know whether the conviction would be ‘difficult to obtain’ for practical reasons — or because the charges are preposterous and brought for reasons bordering on extortion. …No judicial scrutiny means more than boundless prosecutorial discretion. It means mobilizing the courts to create a due process façade for highly suspect bargains.” Let’s hope the ruling isn’t read that way.

[cross-posted from Cato at Liberty; & Scott Greenfield]

Police and prosecution roundup

  • Teacher killed in the crosswalk, with the light. NYPD: “The victim behaved recklessly by crossing the street.” [StreetsBlog]
  • North Carolina not among the 13 states in which legal standards require prosecutors to turn over evidence of innocence that they learn of after a conviction [Radley Balko, AP]
  • Fail to stop daughter’s 20 year old boyfriend from raiding beer in fridge, go to jail [Washington Post on Maryland lawmakers’ enactment of criminal penalties following car-crash injuries for parents who tolerated alcohol consumption]
  • “First, only terrorists had to hand over their phones. Now it’s people involved in traffic accidents, too” [@reuvenim on the proposed New York law discussed here] “In a bid to get around the Fourth Amendment right to privacy, the textalyzer allegedly would… ” [ArsTechnica] But see Scott Greenfield (law “not a particularly effective one” in helping to fix blame, but “just not that big a deal.”)
  • Inmates’ contact with family is revenue source for prison, sky-high phone rates just the start [Scott Greenfield]
  • Federal oversight of local departments enables weak, reform-averse local pols: “Washington Can’t Fix Broken Policing” [Tim Lynch, Cato]

Banking and finance roundup

  • Federal judge refuses to dismiss suit against prosecutor Preet Bharara, FBI agents by hedge funder David Ganek over treatment in now-dismissed Chiasson inside trading case [Peter Henning, New York Times “DealBook”; Business Insider] SEC agrees to return $21.5 million extracted from Ganek’s Level Global Investors [BNA via Ira Stoll]
  • CFPB follies: “Government-Directed Lending Comes to America” [Ike Brannon, Cato] Agency casts its eye on marketplace, otherwise known as peer-to-peer, lending [Thaya Brook Knight, Cato]
  • SEC inspector general sides with agency against allegations of undue sway over ALJs [Reuters, earlier here, here, etc.]
  • Third party liability for crime: “HSBC Sued Over Drug Cartel Murders After Laundering Probe” [Bloomberg]
  • Former Ally Bank CEO: administration extorted race-lending settlement by threatening to derail regulatory approvals [Paul Sperry/New York Post, more]
  • Bellevue, Wash.: $213,000 award to complainant Leticia Lucero “could mean other cases where homeowners argue lenders [cause] emotional distress during negotiations.” [AP/Yakima Herald]

Crime and punishment roundup

  • “Professional Responsibility: Prosecutors Run Amok?” video of panel from Federalist Society Lawyers’ Convention, with Judge Alex Kozinski, John Malcolm, George Terwilliger III, Darpana Sheth, moderated by Justice Keith Blackwell of the Supreme Court of Georgia;
  • Criminal punishment with no showing of mens rea (guilty state of mind) is just fine with a certain faction of progressives and that’s revealing [Scott Greenfield, earlier and generally, new Right on Crime website on criminal intent standards]
  • “Bill Cosby And Eliminating Statutes Of Limitation: A Truly Terrible Idea” [Joe Patrice, Above the Law]
  • An “emerging narrative in law enforcement circles: Cops aren’t shooting people nearly enough” [Radley Balko]
  • Police officer is struck and killed by passing car while attending to scene following alleged drunk driving crash. Can driver charged with original crash also be charged with manslaughter and homicide arising from officer’s death? [Ken Womble, Fault Lines on Long Island case of People v. James Ryan]
  • Labeling sex offenders’ passports? Really, what next? [Lenore Skenazy/New York Post, David Post/Volokh] “Why America Puts 9-Year-Old Kids on the Sex Offender Registry for Life” [same, Reason] “What new mean thing can we do to sex offenders to show how serious we are?” [Radley Balko]
  • “If you ignore levels, and just look at rates of change, crime rates in Canada track those in the United States to an astonishing degree. How can that be?” [Tyler Cowen on forthcoming Barry Latzer book, The Rise and Fall of Violent Crime in America]

“Timeline: Federal Erosion of Business Civil Liberties”

Crime and punishment roundup

  • If tempted to idealize the U.K. justice system, be aware it was in a London court that Saudi millionaire beat rape charge by arguing that he “tripped” into sexual congress [New York mag]
  • Dear Reuters: it would be great if you could report the full story behind a perp walk like Martin Shkreli’s [Ken White, Popehat]
  • Better for ten innocents to be imprisoned than one businessperson go free: “The New York Times has come out against the creation of a minimum mens rea element for all federal crimes.” [Scott Greenfield, Scott Shackford] More: Orin Kerr; more Greenfield; Cato podcast on mens rea with Robert Alt.
  • Obama Justice Department’s incursions on mens rea dovetail with its efforts on the responsible corporate officer doctrine [Ilya Shapiro and Randal John Meyer, National Review]
  • Escalating fines and fees, as well as a probation system under an incentive not to work, drag down poorer residents of Biloxi, Miss. [Radley Balko]
  • How federal law came to define “sex trafficking” to include non-coerced adult prostitution [American U. law professor Janie Chuang quoted by Glenn Kessler, Washington Post “Fact Checker”, who also debunks wildly inflated figures from Attorney General Loretta Lynch]
  • If only the late Gary Becker, a towering figure in law and economics, could have been persuaded to give up one of his less happy theories… [Alex Tabarrok]

Public corruption prosecutions: a panel

Nearly everyone agrees with prosecuting public officials (as well as, on occasion, lobbyists and other private actors) for bribery and some other instances in which officials trade, or are asked to trade, a quid pro quo of official action for money or gifts. Defendants in such cases, on the other hand, such as former New York Assembly Speaker Sheldon Silver, often object that they are being menaced with criminal sanctions for politics-as-usual doing of favors and constituent service, with the frequent additional suggestion that prosecution is selective and ginned up by opponents for purposes of criminalizing politics and destroying reputations in the media.

A panel discussion at the recent Federalist Society national lawyers’ convention discussed this issue including the episodes of the Wisconsin John Doe proceedings, Texas Gov. Rick Perry, Virginia Gov. Bob McDonnell, Tom DeLay, lobbyist Kevin Ring, and many others. Panelists included private attorneys Todd Graves (Graves Garrett), Edward Kang (Alston & Bird) and Peter Zeidenberg (Arent Fox), Prof. Eugene Volokh, and as moderator the Hon. Raymond Gruender of the Eighth Circuit. David Lat has a good write-up of the panel at Above the Law.

Related: Ilya Shapiro and Randal John Meyer have some questions about recent prosecutions in New Jersey under its official misconduct statute [Cato].

Law enforcement for profit roundup

  • “Why Morristown officers seized the cars in the first place is unclear.” Maybe because it enabled an officer to pocket $6,000? [Tennessee: Watchdog] Louisiana town getting 87% of its revenue from traffic tickets has 188 people, 5 cop cars [Marshall Project via Balko] For second time, this time in Chicago case, former CEO of red light camera company cops a federal plea [Cyrus Farivar, Ars Technica]
  • Opposition from law enforcement shoots down asset forfeiture reform in California [Scott Shackford/Reason, more] Despite talk of being friendlier to forfeiture reform, Department of Justice fed talking points to reform opponents in California battle [TechDirt] “Most Americans don’t realize it’s this easy for police to take your cash” [Christopher Ingraham, Washington Post “WonkBlog”]
  • Other side of the ledger: how governments pay for claims against law enforcement [Joanna Schwartz, SSRN via TortsProf]
  • Louisville traffic school allows violators to get cases “dismissed without having to pay court costs… and generates revenue to operate the county attorney’s office” [Insurance Journal]
  • Lawsuit alleges private probation companies in Tennessee abusing power, free-marketers should be as worried as anyone else about misalignment of private, public incentives [Radley Balko, earlier]
  • Odd how feds can prevent someone resisting extradition from contesting asset forfeiture [Trevor Burrus/Cato, Ilya Somin on Kim Dotcom case]
  • Insurers often pool funds to support insurance fraud prosecution efforts, but critics say Travis County, Texas prosecutors are needlessly close to a single company [Texas Tribune]