The self-described “legal tabloid” blog Above the Law has been busy lately keeping up with its Nationwide Layoff Watch. Among large firms that have fired attorneys in recent months are Cadwalader Wickersham & Taft and Clifford Chance. On Tuesday, ATL revealed that Sonnenschein Nath & Rosenthal had laid off 124 employees, including 37 lawyers. The firm had nearly 700 lawyers before the cuts.
Sonnenschein Chairman Elliot Portnoy told the ATL that the cuts were the result of changes in the needs of clients owing to the “economic downturn,” and were not “performance based.” But in today’s Wall Street Journal, Portnoy is quoted as saying that some “unproductive” litigators were also let go. “We have to take the steps necessary to make sure we are competitive for talent and achieve the profitability our lawyers expect,” he said. In terms of profitability, “A small group of firms are positioning themselves to pull away from the pack. We intend to be in that small group.” The Journal article also notes that industry analysts predict many law firms will have a difficult time achieving even slight revenue growth this year, much less the double-digit increases that were previously common.
Law firms are businesses, and the bottom line matters. In this respect we’re all in the same boat, whether we’re a global behemoth or a boutique. Where we differ, though, is how we reach that bottom line. Most large firms operate exclusively on the basis of the billable hour. This business model encourages maximizing hours worked by younger associates who bill at lower hourly rates but put in enormous numbers of hours. A study done in 2005 found that nearly a quarter of New York law firms required its lawyers to bill a minimum of 2,000 hours per year, and the percentages were even higher in other cities. The result is a profitable revenue stream to the firm, but a significant expense to the client. And, as in-house counsel consultant Rees Morrison points out in his blog entry about the study, bill padding in these circumstances is virtually inevitable.
When partners either can’t keep a cadre of associates busy or aren’t amassing their own billable hours they become “unproductive” and are pushed out. Worse, this business model is extraordinarily dehumanizing and cynical, in my view. That’s why we rarely practice it at our firm. We regularly offer reasonable fixed or flat-fee arrangements that are affordable for the client and fairly compensate us for our efforts.
There has been a lot of discussion in the legal blogosphere about alternatives to the billable hour, especially among corporate counsel faced with pressure to contain and predict legal costs. In his Legal Marketing Blog, Tom Kane described a panel at the Legal Marketing Association’s annual meeting in March led by the chairperson and general counsel of the Association of Corporate Counsel. One of corporate counsels’ complaints was the perceived unwillingness of law firms to discuss alternative fee arrangements. Kane notes that there’s a lot of work out there for medium-sized and smaller law firms because of their lower fee structure and flexibility in pricing. To paraphrase the Chairman of Sonnenschein, we intend to be in that small group. CR
There was a great article in Sunday’s New York Times about how the drop in the crime rate in New York City has affected writers of crime fiction. Crime in all categories is down to record low levels. In 2007 there were only 494 homicides in the city – the fewest on record since reliable statistics became available in 1963. New York City, once the murder capital of the world, is now the third-safest large city in the U.S., after Honolulu and San Antonio.
Some crime writers maintain that the real crime rate has little to do with popular perception, and that the image of New York in the bad old days will never fade. Others have adapted by focusing on terrorism or trying to infuse financial crimes with suspense. But Donald Bain, author of the “Murder, She Wrote” book series, is nostalgic for the grittier days, when the wise guys connected to Vincent “Chin” Gigante would interrupt their sidewalk card game to escort his daughter safely home from the subway. Times have changed, indeed.
When I began my career in 1981 as a young Legal Aid lawyer trying cases in the South Bronx, the crime rate was truly astronomical. Lawlessness was epidemic and affected many facets of daily life in the city. On the other hand, I got lots of experience as a criminal trial lawyer. An often overlooked collateral consequence of the laudably low crime rate today is that young lawyers, be they prosecutors or public defenders, just don’t get to have the same number of courtroom face-offs.
A strong, experienced defense bar helps to preserve our constitutional rights. Seasoned defense lawyers can breathe precious life into the Sixth Amendment’s guarantee of the right to counsel because we are practiced veterans. Novelists can invent crimes, but lawyers can’t invent cross-examination skills. It takes practice, and lots of it.
Yesterday in Chicago, 15 people, including 7 city employees, were charged in a federal indictment alleging corruption and bribery in the city’s Building and Zoning departments. The indictment says the employees took bribes to help building developers avoid seeking variances, receive certificates of occupancy, and pass inspections. Many of these bribes were paid by an “expediter” who became a cooperating witness.
These indictments are the latest in that city’s attempt to rout out corruption in the buildings industry. Last fall, inspectors pleaded guilty to accepting bribes for lifting stop-work orders on buildings that had multiple code violations. In announcing the new indictments, U.S. Attorney Patrick Fitzgerald admitted that the earlier prosecution “did not make enough of an impact.” On learning of the latest indictments, the chairman of the Chicago City Council’s Buildings Committee stated: “I thought we had cleaned this all up. . . . I thought we got rid of these bums.”
When I first went into private practice in the early 1990’s, I represented a New York City buildings inspector in a federal racketeering case who was charged with taking bribes to approve certificates of occupancy for real estate developers. The proof presented at trial was a window into the inner workings of a city governance system so byzantine that the job of “expediter” was created. An expediter is someone who learns what line to stand on in order to get permits approved. In Chicago, federal prosecutors are alleging that an expediter also learns who to bribe in order to get this done.
In New York, the City Council passed a law requiring expediters to register with the Buildings Department. Bureaucratic chaos ensued, with expediters being sent from borough to borough and facing escalating demands for documentation. One expediter said, “My first reaction to all this was, ‘That’s not fair,’ and then I thought, ‘That’s the point.’” He was convinced that the department’s real aim was to eliminate expediters. A deputy commissioner said the department was streamlining the process of filing permit applications so that builders wouldn’t have to hire someone else to help them through the process. “There shouldn’t be a need for expediters,” he said. The year was 1991.
It seems to be a fact of life that wherever there is construction, prosecutors chase city officials who have a bit of power to wield at a point in an approval process, and every few years they indict a few of them to send a message. It’s nice to know there are certain things you can depend on. CR
Maurice “Hank” Greenberg, former CEO of American International Group, may face civil charges from the SEC for what it alleges is his role in attempting to enhance his company’s financials through collusive transactions with General Re Corp. Today’s Wall Street Journal reports that on Friday, the SEC served Greenberg with a so-called Wells notice, which alerts its recipient that the Commission is considering requesting permission from its commissioners to bring a federal enforcement action against him. The previous day, the federal district judge who had presided over the criminal trial of five former Gen Re and AIG executives wrote in his ruling denying the defendants a new trial that there was “an adequate basis for a rational jury to conclude” that the conspiracy of which the defendants were convicted began with a phone call from Greenberg.
Veteran criminal defense attorney Robert Morvillo, who represents Greenberg, continues to assert his client’s innocence. The Journal article quotes from a statement Morvillo released yesterday: “We remain confident of our position on the merits, and we believe that none of the remaining issues are material to AIG’s financial statements. When the commission has had the opportunity to consider all the facts, we believe that they will agree.” When the phone call came to light during the criminal trial in November, Morvillo agreed that his client had initiated the transaction in question with a phone call to one of the defendants, but insisted that Greenberg “believed he was initiating a totally legitimate transaction.”
The recipient of a Wells notice has the right to respond and try to convince the Commission not to proceed with lawsuit. Bob Morvillo has done a brilliant job for Greenberg over the past few years fending off all sorts of investigations and rumored charges. There is no doubt he will continue to wage an aggressive battle against the current threats from the SEC. I know from my own experience with the Commission that their bark is often all they’ve got, and when push comes to shove they shy away from going to war in the courtroom – especially when they face an opponent as skilled and forceful as Morvillo.
Opening statements begin today in the trial of R&B star R. Kelly at the storied Cook County Criminal Courts Building in Chicago. Kelly was indicted on child pornography charges in 2002 in connection with a home movie he allegedly made a decade ago, in which he ostensibly had sex with a girl who some have claimed may have been as young as 13.
There is, however, a major wrinkle in the prosecutor’s case – the supposed victim insists it is not she in the video. Prosecutors say they will introduce testimony from witnesses contradicting the woman’s assertions, and also plan to call a woman who will testify that she and Kelly had sex when she was underage.
Leonard L. Cavise, a professor at DePaul University’s law school, posits in an article in the New York Times that if the purported victim is at all credible, and the prosecution can’t show she’s been bought off, her testimony can’t fail to cause reasonable doubt. Meanwhile, he continues, Chicago has been made a laughingstock. “It’s as if they said, ‘Let’s spend millions of dollars and six years, shut down an important courtroom, cause a media circus and end up either convicting him of nothing at all or on some charge that has nothing to do with what you really should get him on if he’s guilty: sex with children.”
Indeed, the proceedings are surrounded by much hoopla, with press coverage from all over the world. The Chicago Tribune, which has promised its readers “gavel to gavel” coverage, reports that press from CNN, People Magazine, Agence France-Presse, and the Steve Dahl show will all cozy up together on a courtroom bench to take in the proceedings.
Presiding over the trial is Judge Vincent Gaughan, a tough, no-nonsense jurist who is doing everything he can to ensure that what takes place inside his courtroom will be measured and controlled. While it’s a given that having a fair and impartial judge in any criminal trial is essential, in a high-profile case the need for firm but sensitive control is paramount. The glare of media coverage can subvert the best intentions of even the most experienced judge.
Judge Gaughan seems to have a unique approach. Predictably, he has entered a gag order barring lawyers and court personnel connected with the case from speaking with reporters. Less predictably, he jailed a woman who was in court on her own probation violation after she snapped photos of R. Kelly with her cell phone, and ordered the phone destroyed. And last week during jury selection, he complained about reporters sticking their chewing gum under the courtroom benches, threatening to order DNA testing on the wads of Wrigley’s and bring the culprits to justice.
Joking or not, everyone is on notice to tread – and chew – carefully in Judge Gaughan’s courtroom. CR
Broadway and Fulton Street, May 15, 2008. What lies beneath.New York Attorney General Cuomo has secretly convened a grand jury to investigate allegations of involvement by the New York State police in politically motivated plots to discredit state legislators and other politicians, according to an exclusive story in today’s New York Post. The Post says an unnamed source close to the New York Power Authority identified this secret grand jury as the source of the subpoena served on the Authority’s now-suspended inspector general, Daniel Wiese, a former colonel in the State Police. The article states that in late March, Governor Patterson sent Cuomo a letter authorizing him to conduct the inquiry under New York State Executive Law § 63.3, which allows an attorney general to investigate indictable offenses at the request of the governor.
The subpoena for Wiese’s electronic communications resulted in the revelation that these records had mysteriously gone missing. Then last week, the former State Police security chief for governors Spitzer and Pataki, Gary Berwick, committed suicide. The Post story says the grand jury has issued a subpoena for Berwick’s suicide note.
Cuomo has assembled an impressive team of lawyers and investigators to conduct the inquiry into the so-called Troopergate scandal, headed by former federal prosecutor Sharon McCarthy. The former Deputy Chief of the Criminal Division in the U.S. Attorney’s office in Manhattan, McCarthy gave up a lucrative partnership at Kostelanetz & Fink, a Manhattan law firm specializing in white collar and tax offenses, to take the position.
Since we’re right across the street from the New York AG’s office, I sometimes run into Sharon at Starbucks. Though she is always rushing off to work, she is invariably pleasant. But potential targets of her investigation should not be lulled into complacency by her pleasant demeanor. She is a skilled and tenacious prosecutor, and for her to leave her partnership to head this investigation, she must believe there is some meat on the bones of these allegations. CR
The Fourth Amendment to the U.S. Constitution was incorporated into the Bill of Rights in response to the British Writs of Assistance – search warrants that allowed the British authorities to enter any colonist’s home at any time and for any reason. Resistance to the Writs played a significant role in the lead-up to the American Revolution. When asked to defend the Writs, Boston attorney James Otis, who considered himself a loyal British subject, promptly quit his post as Advocate General of the Admiralty Court and defended a group of colonial merchants who were challenging the legality of the Writs. John Adams later wrote in his autobiography of Otis’s oration against the writs: “Then and there, the child independence was born.”
The Fourth Amendment was established to protect citizens against these kinds of general searches. It required that police officers conduct searches only when they had “probable cause, supported by oath or affirmation.” Probable cause means that the officers have reason to believe that a person has committed a crime. Supported by oath or affirmation means that the officers swear under penalty of perjury to the truth of the information upon which their belief was based.
Over the last 40 years, the threshold of what constitutes probable cause has been lowered through a series of Supreme Court decisions. In Terry v. Ohio (1968), the Court held that a police offer can stop and frisk a suspect if the officer has a “reasonable suspicion” that the suspect is armed. This standard was later extended to traffic stops. In Illinois v. Gates (1983), the Court held that a “substantial chance” or “fair probability” of criminal activity was enough to establish probable cause.
But even this eroded Fourth Amendment is apparently not enough for some NYPD police officers. In an article in today’s New York Times, Benjamin Weiser writes that judges’ rulings in suppression hearings – in which defendants can argue that evidence was seized illegally and should therefore be suppressed at trial – show that over the past six years, there have been 20 cases in which judges have found police officers’ testimony to be less than truthful. The language judges have used in their decisions includes “patently incredible,” “riddled with exaggerations,” and “unworthy of belief.”
Moreover, judges rarely ask prosecutors to look into whether the officers had broken the law with their false testimony, and prosecutors rarely notify police authorities. So officers generally face no consequences for their “testilying,” as they themselves refer to the practice.
In a rare instance in which a police officer was convicted of perjury for lying to a grand jury about an arrest he had made for illegal gun possession, he was sentenced to five years’ probation. Prosecutors and investigators looking into police corruption at the time called it an example of what they feared is the most widespread form of police misconduct facing the criminal justice system. “Testilying,” they said, was “rarely prosecuted, often condoned by superiors and an intrinsic part of the police culture. The year was 1993.
As Weiser points out in his article, though the number of cases is small, suppressions are so rare in federal court that one former federal judge has questioned whether these cases indicate that giving false testimony may be a common police tactic. As this judge pointed out, “We don’t have statistics for all the people who are hassled, no gun is found, and they never get into the system.”
I myself cannot remember the last time a judge, federal or state, suppressed a gun in a case in which I was involved. While 20 such rulings in the last six years may not sound like a lot, it represents a sea change.
We are all grateful for lower crime rates, but this worthy goal cannot be pursued by trampling on the Constitution and subverting the individual rights and freedoms on which this country was founded. It is heartening to see federal district judges doing the right thing and ruling against the “testiliars,” though given the long history of the practice, it may be too much to hope that police officers will now get the message and stop. CR
One Broadway, May 8, 2008.
Originally the Wickquasgeck Trail, a Native American path running the length of Manhattan, Broadway begins right here. CR
New York State Attorney General Andrew Cuomo is investigating the possibility that hundreds of lawyers across New York State have been granted what he alleges are illegal pension benefits from school districts and other governmental entities that improperly enrolled non-employees in public pension funds. On Thursday, Cuomo announced settlements with Hodgson Russ of Buffalo and attorney Maureen Harris of Girvin & Ferlazzo of Albany. He said that a criminal and civil investigation into the Girvin firm was continuing.
The situation became public in February, when Newsday published an article stating that a private attorney, Lawrence Reich, was listed as a full-time employee of five school districts even as he was listed as a partner at the law firm Ingerman Smith and the districts were paying his law firm for his services. That arrangement allowed Reich to qualify for a public pension of over $60,000 and health benefits for life. The arrangement had come to light when attorney Janet Wilson, who had become embroiled in a lawsuit against one of the school district when it had declined to renew her contract, told another partner at Reich’s firm that she planned to notify the state employee retirement system about Reich’s arrangement.
According to a deputy attorney general, Harris was one of at least twelve Girvin attorneys who were on the public payroll between 1991 and 2008. The firm was given the discretion to determine how many and which lawyers would be placed on the public payroll and set the salary that each lawyer would receive, regardless of whether that lawyer was doing any work for the school district. Harris’s attorney said she regarded the pension benefit as “pursuant to a longstanding relationship” her firm had with the district.
This investigation is an example of how something that is accepted as perfectly fine on one day becomes flavor-of-the-month fraud the next day because a prosecutor decides so. It is particularly important that anyone defending such an investigation learn all there is to know about when someone can be considered a public employee. Even if the lawyers were wrong about an interpretation of when that status can be confirmed, it may constitute a complete defense if they believed in good faith they were entitled to the benefits. CR
New York City detectives have a long and storied sartorial tradition. Whether chasing a suspect across the rooftop of a Hell’s Kitchen walkup, or standing in front of a bank of microphones to announce that they have cracked a gruesome homicide case, detectives tend to be a tailored lot and to eschew “business casual.”
There was a wonderful article and accompanying video in the Sunday New York Times about this little-examined aspect of life as a detective in New York City. The article describes how the detectives trade tips, share books like Alan Flusser’s “Dressing the Man: Mastering the Art of Permanent Fashion,” and patronize Stewart Altschuler, known as the “Suit Man,” who addresses the detectives’ unique styling challenges. “For their own safety, a lot of our suits are side-vented and big-shouldered,” he says, “in case they have to move around on the ground.” The suits are specially cut to allow room around the waist so that guns, cell phones, radios, and handcuffs don’t show.
NYPD detectives have to deal with the public when they testify at trials, interview witnesses, and notify family members of tragedies. One retired detective commander called his suits “my psychological armor.” Somewhat incongruously, detectives also wear suits when they chase suspects and wrestle them to the ground and handcuff them. “I try to wear my less expensive suits if I am going out to track a bad guy,” another detective said.
One of the things I love about being a criminal defense lawyer is the style. Even when I was a Bronx Legal Aid attorney, I shopped the Barney’s warehouse sale and scoured the racks at Syms for the stray Armani. Now that I’ve reached a certain stage in my professional life, I’m a Paul Stuart guy.
I remember a talk given by Gerry Shargel, one of New York’s best criminal trial lawyers, in which he described entering a courtroom for the first time. He looked at the prosecution table and saw earnest, hardworking young lawyers wearing drab, ill-fitting suits. He looked at the defense table and saw elegance and style. He knew immediately which table he belonged at. I’m with Gerry, and I like that it’s a trait I share with the detectives of the NYPD. CR
The Wall Street Journal reported today that Ben Campbell, the United States Attorney for the Eastern District of New York in Brooklyn, has formed a task force of federal, state, and local agencies to deepen and extend the criminal division’s ongoing probe into various players in the subprime mortgage meltdown. Campbell told the Journal that the “jury is still out” on whether the sudden decline in the value of securities backed by bundles of subprime mortgage instruments is the result of criminal activity or just market forces, but the scope of this invigorated inquiry is broad. They will be looking at whether the crimes of mortgage fraud, securities fraud, insider trading, accounting fraud, and making false statements have been committed. Mortgage banks, brokers, lenders, investment banks, and hedge funds will be under the prosecutor’s microscope.
The newly formed task force had its first meeting on Friday and includes officials and agents from the FBI's financial-institutions fraud unit known as C3; the U.S. Postal Inspection Service, which investigates mail fraud; financial-crimes investigators from the U.S. Secret Service; and investigators and representatives of the New York State Banking Department, the New York City Department of Investigation, and the Federal Deposit Insurance Corportaion, a federal banking regulator.
It remains to be seen whether this inquiry – along with the many investigations being pursued by other local prosecutors and a potential central Justice Department task force –will yield numerous individual criminal prosecutions. But this ramped-up effort is certainly part of an unmistakable trend that potential targets must recognize. Individual mortgage brokers, bankers, closing attorneys, investment bankers, ratings agency executives, and anyone else involved in the subprime deal flow should take note. The inquiry is bound to intensify in the coming months. Given the losses suffered in the subprime debacle, the potential for significant criminal exposure to serious jail time is high. However, there are market-based explanations for much of what has occurred, and complex accounting and disclosure requirements may provide proof that there was a general lack of intent to defraud on the part of individuals involved.
In the comments to the Journal’s law blog post on the new task force, a reader asks, “Who will defend these companies? Most big law firms are conflicted.” Whether or that is the case, small, savvy firms like ours specialize in the representation of individuals. As the Journal blog post points out, the subprime mess has been called “the latest Full Employment Act for Lawyers.” Now we smaller firms may be seeing the “trickle-down” effect of what is becoming an increasingly larger supply side of companies and individuals in trouble. CR
Deborah Jeane Palfrey, the operator of an alleged prostitution service in Washington, D.C., was found dead yesterday, an apparent suicide by hanging. Having been convicted after trial in federal court on charges of racketeering, money laundering, and mail fraud, she was facing a likely sentence of four to six years. Her elderly widowed mother found the body in a storage shed behind her mobile home in Florida.
Members of Washington’s political elite were rumored to have been Palfrey’s clients. Senator David Vitter, a Republican from Louisiana, admitted to utilizing the services provided by Ms. Palfrey’s business. Vitter, who is married and has four children, apologized and said he had committed a “very serious sin.” But neither he, nor any of Palfrey’s other customers, was prosecuted for violating laws against patronizing a prostitute.
Palfrey had been jailed for 18 months in the early 1990s and vowed in a TV interview that she would never go back to prison. She had also spoken about Brandy Britton, one of Palfrey’s former escorts, who hanged herself in June 2007, shortly before her scheduled trial for prostitution. Britton had been a professor at the University of Maryland.
The Palfrey case is only the most recent example of how devastating the antiquated and puritanical laws about sex workers in this country can be to those who work in this business. There is no easy solution to this problem. Efforts at legalization in the Netherlands have apparently led to an increase in human trafficking in underage girls. Other countries, such as Germany, regulate sex work and permit it in specified areas. Here in the U.S., COYOTE (Call Off Your Old Tired Ethics), an organization that acts as a support network for sex workers, is in favor of the decriminalization – as opposed to legalization – of commercial sex among consenting adults.
The cost of criminal enforcement of the laws against commercial sex work is significant. High-profile arrests recently ended the political career of New York Governor Elliot Spitzer, though he has yet to face prosecution for criminal laws he may have violated. An unregulated sex industry provides a fertile ground for other criminal conduct. But lengthy federal sentences for madams and arrests of sex workers and their clients will not solve the problem, and the problem is surely not going away. Only efforts at decriminalization and regulation will help to lead the way toward a safer and less degrading sex industry, and avoid the waste of public dollars spent on futile enforcement efforts. CR
City Hall Park, May 1, 2008.In my April 14 entry, titled “If I had a hammer . . . ,” I wrote that the U.K.’s treasury chief hopes to pass legislation this year allowing the Financial Services Authority to grant whistleblowers who report market manipulation immunity from prosecution. I opined that the FSA should proceed cautiously, since the legislation could prompt individuals who have engaged in wrongdoing to concoct stories about innocent colleagues in order to save their own skins. Now the FSA reports that more than a quarter of the takeovers in the U.K. last year were preceded by suspicious trading, including possible insider trades.
The British financial regulator, facing criticism that it is not as aggressive as our SEC in pursuing market abuse, will apparently increase its oversight of trades consummated prior to the announcement of takeovers. The FSA has announced that it will begin to criminally prosecute more individuals and request imprisonment as punishment. To that end, it has augmented the number of criminal lawyers on its staff by 150 percent. It also intends to utilize all the tools in its investigative arsenal, including “calling suspects and their families and friends after it becomes aware of an abnormal movement in a stock and ‘before recollections have dimmed.’” Finally, the FSA says it will push individuals to report suspicious trades – among rivals and even within their own firm.
In a world that has become increasingly flat, the FSA appears ready to bring down the hammer to combat insider trading. It remains to be seen whether it will emulate our DOJ, which has demonstrated that it is not shy about prosecuting insider trading whose effects span multiple time zones. Most recently, Hafiz Muhammad Zubair Naseem, a Pakistani national who worked for Credit Suisse in Manhattan, was convicted in federal court in Manhattan for tipping a Pakistani banker that TXU, the Texas energy giant, would be taken private. Any white-collar defense lawyer actively practicing against the backdrop of today’s global securities markets may do well to heed the historic midnight cry of Paul Revere: “The British are coming! The British are coming!” CP
