Featured Expert Contributor — Corporate Governance/Securities Law
Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law
Over a three-year period from 2004 to 2007, Citigroup investment banker Maher Kara disclosed confidential nonpublic information about upcoming mergers and acquisitions to his brother Michael Kara. In turn, Michael disclosed the information to his close friend Bassam Salman, who then indirectly traded in the affected stocks. When Salman was tried on charges of illegal insider trading, the government offered evidence that he knew the information originated with Maher.
The case presented two issues: First, what is the basis of liability when an insider tips information to an outsider? Second, what must the government prove in order to hold a remote tippee liable when the information is passed down a chain from tipper to tippee to a tippee of that tippee and so on? Continue reading
Last term, in the now-infamous Yates case, the U.S. Supreme Court rejected the Department of Justice’s outrageous contention that an undersized Red Grouper thrown overboard by a commercial fisherman in the Gulf of Mexico was a “record, document, or tangible object” under the “anti-shredding” provision of the Sarbanes-Oxley Act. By so doing, the Court prevented a law passed in the wake of corporate accounting scandals at Enron and WorldCom from becoming an all-purpose hammer for prosecutors. Yates quickly became the poster child for the “overcriminalization” phenomenon.
Unfortunately, it appears that DOJ has not learned its lesson. Although the phrase “tangible object” at issue in Yates was overbroad and ambiguous, in other cases the problem of overcriminalization arises when the government seeks to attribute a new, nonobvious meaning to long-understood, perfectly plain statutory language. Nowhere is that problem better epitomized than in the federal government’s utterly bizarre ongoing criminal prosecution of FedEx, which is slated for trial next month in federal court in San Francisco. Continue reading
America’s highest ranking law-enforcement officer, Attorney General of the United States Loretta Lynch, has gotten directly involved in the debate over the proper standard of criminal intent (known in legalese as mens rea) in federal laws. At a March 9 Senate Judiciary Committee oversight hearing, Attorney General Lynch, while generally cautious in her response to Senators’ questions, endorsed the Department of Justice’s use of strict-liability laws to, among other things, “ensure the safety of our food and drugs.” Attorney General Lynch’s statement reflects the federal government’s long-standing belief that criminal prosecution is an appropriate and effective business regulatory tool. The government’s heavy reliance on regulatory crimes is why the Justice Department and other federal agencies oppose such common-sense reforms as a default culpability standard of “willful” or “reckless” for federal laws that lack an intent requirement. Heightened intent standards would complicate regulation-by-prosecution, an outcome the Obama Administration and some elected officials are desperate to prevent. Continue reading
In 1996, a heavily armed team of EPA criminal investigators raided a facility of Louisiana company Trinity Marine Products, Inc. Three years later, the federal government indicted the company and manager of the raided facility, Hubert Vidrine, for illegally storing hazardous waste without a permit. The U.S. Attorney dismissed the indictment in 2003. On February 8, 2016, 20 years after the EPA raid, the U.S. Court of Appeals for the Fifth Circuit has cleared the path for the company to at last pursue Federal Tort Claims Act (FTCA) remedies against the government. As we explained in a WLF Legal Pulse post, Mr. Vidrine, with assistance from WLF attorneys, won a $1.7 million malicious-prosecution claim under the same law in 2011. Continue reading
Fair notice of the law is a basic principle that separates liberal democracies like the United States from more authoritarian governments. Fair notice is an especially critical due-process check against government’s power to criminally prosecute. Government must not only prove that a person did the unlawful act, but also that he intentionally engaged in wrongful conduct or knew the conduct was illegal—that it, that he had a guilty mind. So why, then, is the Obama Administration and other elected representatives opposing reforms to ensure that federal criminal laws include a clear criminal-intent standard?
The idea being advanced seems far from revolutionary or controversial, which may explain why politicians and interest groups of every ideological stripe support it: Federal laws with criminal provisions must require prosecutors to prove that the accused possessed the mens rea, or culpable mental state, to commit a crime. If a law lacks such language, then a default intent provision will apply, such as showing that the defendant acted “willfully” or “recklessly.” Continue reading
Matthew G. Kaiser, Partner, Kaiser, LeGrand & Dillon PLLC
A court case that should be on the radar screen of all business executives and white-collar criminal-defense attorneys in 2016 is United States v. Clay, in which the U.S. Court of Appeals for the Eleventh Circuit heard oral argument on October 2.
The case, about which I authored a Washington Legal Foundation Legal Backgrounder last March, implicates the fundamental question of who decides the meaning of a law—a judge or a jury? The Eleventh Circuit will also implicitly decide whether the government can cast aside more appropriate civil or administrative remedies and prosecute corporate officers operating a business in a complex regulatory environment when their interpretation of a law is objectively reasonable. Continue reading
Larson Frisby, American Bar Association*
Editor’s Note: This is the fifth in a series of six guest commentary posts that will address the six distinct topic areas covered in Washington Legal Foundation’s recently released Timeline: Federal Erosion of Business Civil Liberties. To read the other posts in this series, click here.
For more than a decade, the American Bar Association (ABA) has worked closely with the Washington Legal Foundation and other prominent business and legal groups to reverse or modify federal agency policies that have been eroding the attorney-client privilege and the work product doctrine. As shown by the WLF’s new chart, “Timeline: Federal Erosion of Business Civil Liberties, great progress has been achieved in preserving these important legal protections, but much still needs to be done.
The attorney-client privilege, which protects confidential communications between a client and a lawyer for the purpose of obtaining legal assistance, is a bedrock legal principle of our free society. It enables both individual and corporate clients to communicate with their lawyers in confidence, which is essential to preserving the client’s fundamental right to effective counsel. Continue reading