Former Speaker Hastert Pleads Guilty in Hush-Money Case

This morning, former U.S. House Speaker Dennis Hastert appeared in district court in Chicago and pled guilty to one count of violating bank reporting laws. Hastert’s defense counsel had “indicated two weeks ago that he was planning to plead guilty, though the details of the deal weren’t known at the time and the politician maintained the right to withdraw from the agreement until he entered his formal plea [this] morning.” Jessica Corso, Ex-Speaker Hastert Pleads Guilty to Hush Money Charge, Law 360 (Oct. 28, 2015). Today the deal was revealed: in exchange for his plea, one of the charges against Hastert – making false statements – has been dropped and federal prosecutors have apparently recommended that he serve no more than six months in prison.

As White Collar Alert previously reported, in May Hastert was indicted in connection with his alleged agreement to pay an unknown individual $3.5 million “to compensate for and conceal his prior misconduct” against that unknown person. The indictment does not say what the former representative did that led him to pay the bribe, but it alleges that Hastert first withdrew cash in amounts of $50,000 and then, following questioning by bank representatives, structured his withdraws – reducing his payments to under $10,000 each – to evade the banks’ reporting requirements. He did this at least 106 times over a two-year period. Then, when questioned by the FBI about his conduct, Hastert allegedly lied, informing agents that he had withdrawn the cash and kept it “because he did not feel safe with the banking system.” For this conduct, he was charged with two counts: structuring and making false statements to the FBI.

Hastert pleaded not guilty to both charges but over the last few months his attorneys have been negotiating a plea deal, apparently seeking to avoid a trial that would disclose embarrassing secrets dating back to Hastert’s days as a high-school wrestling coach in Illinois. While the plea deal certainly has its up-sides for Hastert, his future remains uncertain:

  • Possible Disclosure of the Underlying Misconduct: Though the plea deal avoids a trail, some detail regarding Hastert’s misconduct may still come to light. As part of the sentencing process the government and defense counsel will provide the court with relevant information about Hastert’s background and the charged offenses. Furthermore, both parties have the ability to call witnesses at the sentencing hearing, including the individual whom Hastert was bribing. Thus, there is still a possibility that some details regarding the alleged misconduct will be revealed.
  • A Potential Period of Incarceration: While one of the charges against Hastert has been dropped and the government has recommended a sentence of no more than 6 months imprisonment, Hastert faces up to five years’ incarceration and a $250,000 fine. Hastert, however, has numerous arguments in favor of a non-incarceration sentence under the factors set forth in 18 U.S.C. § 3553 (discussed here), including the following:
  • The Collateral Consequences: Regardless of the sentence he serves, like most white collar offenders, the “collateral consequences” of Hastert’s conviction will be harsh and will last the duration of his lifetime. Once powerful and well-liked, Hastert’s name – like many a politician before him – has been completely sullied. Likewise, Hastert’s lucrative lobbying career is almost certainly over: as a convicted felon, Congressmen and Congresswomen will almost certainly refuse to meet with him. United States v. Vigil, 476 F. Supp.2d 1231, 1235 (D.N.M. 2007) (finding variance appropriate where defendant in public corruption case was already collaterally punished by loss of his position, loss of his reputation, and media coverage of his case).

Hastert is set to be sentenced on February 29th. White Collar Alert will be sure to report on the conclusion of Hastert’s case.

More Puritanical Punishment Courtesy of Utah: “White Collar Crime Registry”

This post was co-authored by White Collar Alert contributor, Erin Dougherty.

Yesterday, Utah Governor Gary Herbert signed a new bill into law that creates a “Utah White Collar Crime Offender Registry” (the “Registry”). This Registry – which is the first of its kind relating to white collar crimes – comes upon the heels of news earlier in the week that Utah will now allow firing squads for death penalty cases when the drugs needed for lethal injection aren’t available.

Similar to a sex offender registry, the Registry is expected to be available in about a year and will include a recent photograph of an offender who has been convicted of an enumerated list of felony white collar crimes (i.e. securities fraud, money laundering), a physical description, and any aliases. For a first time offense, a person will be on the Registry for ten years, for the second offense, another ten years, and for the third, on the Registry for life. The Registry does provide for a person to petition a court to be removed from the list if a series of requirements are met: 5 years having passed since the completion of the offender’s sentence, the offender having successfully completed all treatment ordered by the court or the Board of Pardons and Parole relating to the conviction, the offender having not been convicted of any other crime, the offender having paid all restitution ordered by the court, notice having been delivered to the victims and the office that prosecuted the offender, the offender having not been found to be civilly liable in any case in which fraud, misrepresentation, deceit, breach of fiduciary duty, or the misuse or misappropriation of funds is an element.

Like Hester Prynne, Utahns who are convicted of white collar offenses will be destined to carry with them the mark of their crimes, notwithstanding the questionable effect it has on protecting the public.

Like Hester Prynne, Utahns who are convicted of white collar offenses will be destined to carry with them the mark of their crimes, notwithstanding the questionable effect it has on protecting the public.

The NY Times deemed the Registry “a scarlet letter of sorts on the state’s financial felons.” The bill’s chief sponsor, however, representative Mike McKell, has defended the law, and described Utah as a “hotbed for financial fraud” where “[m]any people in our state have trusting relationships with those who take their money in multimillion dollar schemes, and many times those particular people have already been convicted of financial crimes.”

Governor Herbert also proclaimed the worth of it, saying: “Whether a criminal wears a white collar or a blue collar, I am a strong supporter of protecting the consumer and the public from fraud and predatory practices ….This bill helps us do that and I’m proud to sign it.” Continue reading

Judge Ambro Joins White Collar Alert in the Choir “Lament[ing]” Third Circuit’s Erwin Decision

Often as criminal defense attorneys we feel like the lone voice calling out against what we perceive to be cases of injustice. But yesterday Third Circuit Judge Ambro – joined by Judges Rendell, Greenaway, and Vanaskie – gave a nod to White Collar Alert and joined in the choir “lament[ing]” the panel decision in United States v. Erwin.

As we previously noted, in August 2014 the Erwin panel issued a controversial opinion regarding a defendant’s decision to appeal an issue that he knowingly and voluntarily waived in his executed plea agreement. They held that raising such an issue is a direct breach of one’s plea agreement “and that the appropriate remedy for [this] breach is specific performance of the agreement’s terms.” In Erwin’s case, that meant that the Government was “excused from its obligation to move for a downward departure.” The Court therefore vacated Erwin’s judgment of sentence and remanded for de novo resentencing, subjecting Erwin to the possibility of up to four additional years of imprisonment.

At the close of 2014, the Third Circuit – over the dissent of Ambro, Rendell, Greenaway, and Vanaskie – issued an order denying Erwin’s petition for rehearing en banc. Then yesterday, an amended order was filed which included a 5-page “Opinion Sur Rehearing,” strongly laying out the grounds for the Judges’ earlier dissent. The decision notes, inter alia, that traditionally “[w]hen a civil litigant, the Government as prosecutor, or a criminal defendant waives an argument, the remedy is to enforce the waiver by not considering the argument, even if it has merit.” Here, however, the panel’s decision “created the new rule that a ‘defendant must accept the risk that . . . enforcing the waiver may not be the only consequence’ of an appeal”: their “attempt to litigate a waived argument [may] open[] the door to a harsher sentence.”

And that’s where White Collar Alert comes in. Judge Ambro noted that “the panel provides no reason for its new remedy, and [therefore he] join[s] the growing chorus of commentators who have lamented this decision.” He cited, among others, my colleague Lathrop Nelson’s concern previously raised on White Collar Alert that the Erwin decision will serve as a huge deterrent for defendants who have legitimate appellate issues. Given this likelihood, and because, as Judge Ambro declared, the opinion runs “counter to how [the Court] ha[s] acted, and … goes against the majority of cases in other circuits,” let’s hope defense counsel promptly files a petition for certiorari.

Commission Proposes Limited, Though Significant, Amendments to Fraud Guidelines

As we previously noted, the U.S. Sentencing Commission has been considering changes to the Sentencing Guidelines for economic crimes. This deliberation over Section 2B1.1 stems, in part, from criticism from practitioners, judges, and scholars suggesting that “the fraud [G]uideline[s] may be fundamentally broken.” Indeed, as my colleague Lathrop Nelson noted just last week, the Section’s focus on monetary loss and the use of numerous enhancements (which are often not an appropriate measure of culpability) have resulted in ever-increasing sentences for first-time offenders.

It was these concerns that led the American Bar Association Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes to propose a fundamental rewrite of the Section in Fall 2014. The proposed modifications would reduce the impact of loss on the ultimate sentence, enhance or subtract levels based upon the defendant’s level of culpability and the impact on the victim, and cap sentences for offenders whose conduct was not otherwise serious.

Last week, the Commission responded, publishing several proposed amendments to Section 2B1.1. In the accompanying news release, the Commission stated that they “have not seen a basis for finding the guideline to be broken for most forms of fraud, like identity theft, mortgage fraud, or healthcare, but [that their] review has helped … identify some problem areas where changes may be necessary.” As a result, the Commission did not make the wide-ranging modifications suggested by the ABA Task Force, but did suggest some significant changes, including the following –

  • A change of the ambiguous and seemingly all-inclusive definition of intended loss to: the pecuniary harm “that the defendant purposely sought to inflict” as inferred from all available facts;
  • A slight reduction in the enhancements for the number of victims;
  • The addition of an enhancement where the victim suffered substantial hardship;
  • A revision of the enhancement for use of “sophisticated means,” such that it will only apply if the defendant’s conduct is “sophisticated,” rather than offense as a whole; and
  • A special rule for determining the Guidelines range in fraud on the market cases, which will be based on the defendant’s gain from a fraud, rather than loss, which courts have had difficulty calculating.

The Commission has raised questions regarding, and is specifically seeking input on, several of these proposed amendments. The period in which to submit comments remains open until March 18th. It is anticipated that ABA Task Force, among others, will weigh in. Let’s hope that the ultimate amendments to Section 2B1.1 – even if narrow in scope – help limit what are often “nonsensical,” “hocus-pocus” calculations.   See Leah McGrath Goodman, “Nonsensical Sentences for White Collar Criminals,” Newsweek (June 26, 2014).

Federal Lawsuit Highlights Powerful Civil Forfeiture Tool

This post was co-authored by White Collar Alert contributor, Erin Dougherty.

In a federal complaint filed on Monday, three Philadelphia homeowners whose homes have been targeted for state civil forfeiture have sued the city of Philadelphia, Mayor Michael Nutter, the Philadelphia Police Department, District Attorney Seth Williams, and the Philadelphia District Attorney’s Office. Civil forfeiture, unlike criminal forfeiture which occurs after a person has been found guilty of a crime, can happen before the final adjudication and allows the government to literally sue the property in order to obtain it. Plaintiffs’ lawyers are seeking class action status for the case. The complaint claims the defendants are using this process as a cash cow by:

Using a rigged system of copied ‘form’ legal documents and endless proceedings in a  court run by the prosecutors themselves, Philadelphia’s ‘robo-forfeiture’ program stripped thousands of city residents of over 1,000 residences, 3,200 vehicles and $44 million in cash over an 11-year period, ultimately raking in more than $64 million in revenue outside its appropriated budget.

The District Attorney’s Office has denied the allegations in the lawsuits and previously defended the civil forfeiture program and said that is has transformed drug-ridden communities that had few other means of recourse against dangerous local dealers. On Tuesday, District Attorney Williams released a statement that the District Attorney’s Office “pursues forfeiture as a final disposition judiciously.”

The primary statute for civil forfeiture in the federal white collar criminal context is 18 U.S.C. § 981, which provides extremely broad authority for the government to obtain assets. The assets specified by statute as subject to civil forfeiture include, inter alia, “any property, real or personal, which constitute or is derived from proceeds traceable to a violation” of “any offense constituting ‘specified unlawful activity’ (as defined in section 1956(c)(7) of this title), or a conspiracy to commit such offense.” 18 U.S.C. § 981(a)(1)(C). Pursuant to § 981, “[t]he burden of proof is on the government to establish, by a preponderance of the evidence, that the property is subject to forfeiture. 18 U.S.C. § 983(c)(1). Once the government meets its burden, the burden then shifts to the claimant to establish, by a preponderance of the evidence, that the property is not subject to forfeiture and should not be confiscated. Such a showing requires evidence that the claimant did not know of or consent to the illegal activity. See United States v. Funds from Prudential Securities, 362 F. Supp. 2d 75 (D.D.C. 2005).

The average citizen is usually unaware of how low the burden is for the government to take property in a state or federal civil forfeiture proceeding. As a white collar attorney, it is important to advise your client fully about this possibility in the beginning of your representation. Let’s hope the federal complaint filed on Monday sheds some more light on this powerful tool for prosecutors.