115 Broadway, March 31, 2008.

Monsters of the Street

Perched on the wall of the building next door,

a gargoyle keeps watch over my office. CR

Brother, can you spare a nine?

The Department of Justice released a report last week following up on its 2002 audit of the Drug Enforcement Administration’s efforts to deal with the alarming number of laptop computers and weapons that have gone missing on its agents’ watch. While the report noted that agents are losing fewer laptops than they used to, a whopping 230 of them have gone missing in the last five years, and the DEA has no idea what was on them. As the report stated, “The DEA is unable to provide any assurance that the lost or stolen laptops did not contain sensitive information.”

The really bad news is that, despite supposed efforts at improvement, the pace with which weapons are flying out of the hands of the agents who fight the war against drugs is increasing. The count in the past five years is 82 handguns, 5 shotguns, 2 rifles and 2 submachine guns. Most of the guns were swiped right out of agents’ cars, despite a policy prohibiting agents from leaving weapons in their autos. At this rate, the DEA is losing guns faster than alleged arms dealers I’ve represented can supposedly sell them.

In a response to the DOJ’s report, the drug agency said that all laptops containing sensitive information were encrypted. Now that’s really comforting. Next we'll have the FBI computer crimes squad chasing the hackers who have the DEA laptops. The really good news? More business for us criminal defense lawyers! CR

Federal Hall, 26 Wall Street, March 28, 2008. On this site in 1735, John Peter Zenger was acquitted of libel on the grounds that what he had printed was true. This legal victory led to the establishment of freedom of the press – as shown being practiced here. ER

Like father, like son?

In a hearing yesterday in Brooklyn federal court, Judge Jack Weinstein disqualified Joseph Corrozo Jr. from representing his father, reputed Gambino family consigliere Joseph “Jo-Jo” Corozzo Sr., in a massive racketeering case. Judge Weinstein called Corozzo Jr. “a brilliant attorney” but said he was off the case because he was also representing an informant against Corozzo Sr. Meanwhile, in another part of the courthouse, another judge gave the prosecution a month to answer Corozzo Jr.’s claims that they are using gossip, innuendo, and lies as part of a smear campaign against him in an effort to get him disqualified from representing Dominick “Skinny Dom” Pizzonia. In their motion papers prosecutors claim that Corozzo Jr. is Gambino family “house counsel” and has actually been proposed for “made man” status. They further claim that he helped plan a shooting, stole money from the family, and tried to shake down a restaurant. One of the main witnesses against Corozzo Jr. is a turncoat named Lewis Kasman, who is a reputed liar and cheater, and self-proclaimed “adopted son” of John Gotti.

Yet again the government will not put its cards on the table. Rather than presenting their evidence to a grand jury, obtaining an indictment, and allowing Corozzo Jr. to defend himself, they throw a virtual kitchen sink of prejudicial claims at him in the “Skinny Dom” matter in order to embarrass him, damage his reputation, and get him thrown off the case. Hearings to examine conflicts of interest are routine. Judge Weinstein clearly made the correct decision; you can’t represent a snitch and someone he is testifying against. However, using a lawyer’s family tree to toss him off a case is just plain wrong. I have been in cases with Joe Jr. and found him a capable and hard-working attorney. He does not deserve to be treated like this. CR

Wall Street, March 27, 2008. Waiting for rain. ER

Keep the cat in the bag!

On Monday, Albany County District Attorney P. David Soares asked newly minted New York governor David Paterson to allow evidence regarding the Elliot Spitzer / Joseph Bruno “Troopergate” investigation to be released to the public. Yesterday the governor sent New York Attorney General Andrew Cuomo a letter requesting a “formal advisory opinion” on waivers of executive privilege and the secrecy rules surrounding grand jury presentations.

While the press has focused on the issue of executive waiver, the real story seems to me to be the DA’s request for a “waiver of Grand Jury secrecy” under a specific section of the New York Criminal Procedure Law that deals with motions to quash subpoenas. As I told New York Times reporter Danny Hakim when he called me yesterday for comment, a grand jury is ostensibly a protection for us all. It is a buffer between the unfettered power of the state and an individual citizen’s rights. A prosecutor convenes a grand jury to go after bad guys. If there are no charges, then the grand jury process should not be made public. That’s what the rules say. By the way, it’s nice to have a law professor of the stature of Stephen Gillers say I got it right! CR

Security checkpoint across from office, March 26, 2008.
We feel so much safer . . . CR

March mortgage fraud madness.

On Monday, federal prosecutors in California announced indictments of 19 people for fraud and conspiracy in connection with a phony mortgage bailout and rescue plan. Federal prosecutors claim that sales agents for the ring contacted homeowners through mailings, offering financial assistance to those near foreclosure. Agents steered them into a plan that called for owners to put an “investor” on the home’s title. The homeowner then paid “rent” to the investor in an amount smaller than the original mortgage payment. In reality, the government claims, the investor was an associate or family member of the ringleaders or someone recruited via the Internet. The confusing documentation gave the investor the right to replace the homeowner on the title. Finally, the equity was stripped from the home through a new mortgage. Prosecutors say more indictments are likely as they continue their investigation into brokers, loan officers, and banks that did business with the indicted individuals.

This new spate of indictments, involving mortgage deals in some 22 states, signals how serious the DOJ is about prosecuting the fallout from the subprime mortgage meltdown. Sharon Ormsby, chief of the FBI’s fraud section, says that in the wake of the credit crisis, straw buyers are out and foreclosure scams are in. It certainly seems to me as if the field of potential charges and individuals facing serious criminal exposure will dwarf the opening brackets of the seasonal basketball classic currently in progress. CR

New York Stock Exchange, March 24, 2008. Day is done. ER

Teflon Jobs?

Was Apple CEO Steven Jobs personally involved in backdating stock options? This question is explored in detail in a highly informative article by Peter Elkind in the current issue of Fortune titled “The Trouble with Steve Jobs.” Apple has acknowledged that Jobs “was aware [of] or recommended the selection of some favorable grant dates. ” But Apple’s investigation concluded that Jobs’s involvement did not amount to misconduct because he “was unaware of the accounting implications.” While Jobs has not been charged by either the SEC or the DOJ, the investigation continues. Former Apple CFO Fred Anderson, who has been charged by the SEC with securities fraud for misleading investors, has publicly stated that Jobs knew all about the accounting implications of backdating options.

Meanwhile, on March 19 in San Francisco, a tearful Stephanie Jensen was packed off to jail. The former Brocade human resources chief was sentenced to four months in federal prison by U.S. District Judge Charles R. Breyer (brother of U.S. Supreme Court Justice Steven Breyer) for her involvement in options backdating. Judge Breyer stated that her sentence should send “a message to individuals who may be confronted with a situation very similar to the one you were confronted with, and that if they don’t say ‘no’ they are going to spend a lifetime regretting the decision they have made.”

This fundamentally unjust situation highlights how inequitable it is to single out individuals as scapegoats to serve as deterrent value for a widespread and largely bygone corporate compensation practice. Options accounting rules were technical, complex, and muddled. Regulatory changes and company restatements have mostly addressed the issues. The government has convicted Jensen and former Brocade CEO Greg Reyes at trial and is 2-0 in the options backdating arena. Let’s hope it exercises fairer and more reasoned judgment going forward. CR

Trinity Church spire, March 24, 2008. CR

Ben, Ben, he’s our man . . .

Yesterday Melvyn Weiss, the legendary founding member of Milberg Weiss, agreed to plead guilty to a criminal conspiracy to pay a share of legal fees to plaintiffs in his firm's shareholder suits. Such payments are considered illegal kickbacks because they might induce plaintiffs to accept a deal that may not be best for their fellow plaintiffs. Under the deal, Weiss faces 18 to 33 months in federal prison. His lawyer, Benjamin Brafman of Brafman & Associates, released a statement saying that he is “hopeful and confident that the Court will recognize Mel Weiss to be one of the true legal giants of his generation and a consummate humanitarian whose contributions to the Bar and the world community have been nothing short of spectacular.”

The prosecution’s case against Weiss must be ironclad and insurmountable. Ben Brafman is one of the toughest and most talented criminal trial lawyers in the country. I should know – I used to be his partner. If he is signing off on this plea deal, nobody could get Mel off the rap. If Ben can't do it , nobody can! CR

40 Wall Street, March 21, 2008

Mangia – fave lunch spot! CR

Who’s on first?

Chad Bray, who covers the beat at 500 Pearl Street for Dow Jones Newswires, reports in the Wall Street Journal that the U.S. Attorney's Office for the Southern District of New York has indicted former KMPG tax partner Robert Pfaff in connection with alleged fraudulent tax-shelter transactions in the U.S. and the Northern Mariana Islands.

Pfaff and two other individuals are scheduled to go on trial in September in what is left of the original, massive KPMG indictment. Judge Lewis Kaplan's dismissal of charges against 13 additional former KPMG executives from the original case is on appeal in the Second Circuit. The theory seems to be that the Second Circuit will reverse Judge Kaplan and reinstate charges against some or all of the original defendants, thus causing the original case to go back to the starting blocks – meaning that the new case involving Pfaff would be tried first.

While this is a possible lineup, other factors may influence who is on deck. Argument in the Circuit is scheduled for March 25. The Court may take its sweet time, and there may very well not be a decision by September. That would mean the current case would proceed first.

As for the new Pfaff indictment, we are not in the land of the “rocket docket.” Any defense lawyer worth his or her salt should manage to get a year's worth of adjournments. CR

Wall Street, March 20, 2008.

They also serve who only stand and allow themselves to be petted. ER

Trinity Church, Broadway and Wall Street, March 20, 2008.

First day of spring. The bits of paper in the flower bed are left over

from the New York Giants ticker-tape parade on February 5. ER

Take two aspirin and call a criminal defense lawyer in the morning.

Scott Harkonen, the former CEO of California biotech firm InterMune Inc., was indicted yesterday for alleged “off-label” marketing of the company's drug Actimmune. The drug was FDA-approved only to treat of a rare form of osteoporosis; prosecutors accuse Harkonen of writing a press release in 2002 claiming the drug could be used to treat idiopathic pulmonary fibrosis. While doctors may prescribe drugs for whatever use they wish, the DOJ has taken the position that it is illegal for companies to promote such off-label use.

The DOJ, FBI, and other governmental agencies have been pursuing investigations of pharma companies and their senior management, and even employees, for alleged off-label marketing of drugs, and there have been some notable settlements. But no company has challenged the government's position at trial, even though the theory of criminal liability in this situation seems to me strained and tortured, and wide open to challenge. CR

Bernie, meet Barry.

Bernard Kerik may not be known for his good judgment in many areas of his personal and professional life. However, he has shown stellar judgment in his choice of Barry Berke, a partner at Kramer Levin, to defend him against federal corruption charges. New York Post reporter Kati Cornell praises Berke for his “wealth of experience in sensitive, high-profile cases.” (Kerik’s previous lawyer, Kenneth Breen, was disqualified by Judge Stephen Robinson because he might be called as a witness.)

Barry and I were colleagues at the Federal Public Defender’s Office in the Southern District of New York back in the early 1990s, and I readily confess to being his good friend. Asked to comment on his new client, Barry was nothing if not sensitive, stating, “We look forward to successfully defending Bernie Kerik and restoring his good name.” CR