"Whether the U.S. Court of Appeals for the 2nd Circuit’s “right to control” theory of fraud — which treats the deprivation of complete and accurate information bearing on a person’s economic decision as a species of property fraud — states a valid basis for liability under the federal wire fraud statute."

That's the question presented in Ciminelli v. United States, which SCOTUS will hear tomorrow morning. The government's use fraud statutes is out of control; it has criminalized basic breach of contract cases.  As an example, in a recent case in this district, a group of defendants were sentenced to 18 years (!!) under a right to control theory where the alleged fraud was based on a lie on how the defendants would use the product they purchased.  So Ciminelli is a big one, not just for the Second Circuit.

From SCOTUSblog:

This case has similarities with prior corruption disputes selected by the Supreme Court. It involves millions in New York state funds and thus raises federalism concerns: How much flexibility should states have in governance decisions without federal interference? The bidding process may have been unfair to Ciminelli’s competitors, but did the unfairness merit federal intervention? The harm calculation in this case is also unclear: Did Ciminelli intend to cause any loss to Fort Schuyler? There may have been a stronger case that Ciminelli wanted to cause business losses to his competitors by denying them a chance at the Buffalo Billion. Finally, because this is a criminal case, there is the specter of overcriminalization. Was Ciminelli on notice that he was committing a federal crime as opposed to utilizing sharp business practices to edge out competitors?

Deception in the government contracting process is a legitimate threat, and courts face a challenge in determining which forms of deception are serious enough to merit criminal sanctions. Some level of insincerity is expected — when a contractor makes its “best” offer, there is likely some puffery or gamesmanship involved in the negotiations. On the other hand, collusive price-fixing behavior among the contractors bidding for business is both improper and illegal. When are financial penalties sufficient to deter sketchy contractors, and when does federal prison become important in limiting bad behavior?

In Ciminelli’s case, the main wrongdoing appears to be his “sneaking to the front of the line” in the negotiation process. If the Supreme Court continues its trend of narrowing the scope of federal fraud criminalization, it can do so by eliminating the “right to control” theory of fraud. A decision that narrows or nixes that theory could reduce uncertainty among government contractors. Potential contractors would face a reduced risk of prison time when engaging in pre-negotiation talks with government insiders. Less clear is how much such a narrowing decision would benefit Ciminelli. Because the jury instructions and facts give room for having proven tangible economic harm, it is uncertain how much influence the “right to control” language had upon the jury’s decision to convict.

Hope everyone had a great Thanksgiving.

Sorry for the slow blogging

 Gonna take this week off.

I hope all of you have the best Thanksgiving.

I'm thankful for all of you and the great comments, tips, and readers.  And also thankful for the great posts by John Byrne and Michael Caruso.  Such wonderful stuff.

If you are looking for a good read during this Thanksgiving week, check out Rumpole's great posts on Elizabeth Holmes' sentencing here and here.  

Great stuff on why a first-time non-violent offender should not have gotten 11 years.  

Catch up soon.

Crypto Lawsuit Names High Profile Defendants

 

By John R. Byrne

If you've been following the news, you know about the cryptocurrency collapse. Here comes the litigation. A plaintiff has sued Sam Bankman-Fried (the founder and former CEO of FTX, a crypto trading platform) and a host of celebrities, alleging they misled them about the functionality of the FTX platform and/or failed to disclose their compensation for promoting FTX. FTX has filed for bankruptcy. 

You'll recognize the names of some of the defendants: Tom Brady, Gisele Bundchen, Shaq, Larry David, Udonis Haslem, and the Golden State Warriors (yes, the team), among others. The complaint asserts a claim under the Florida Securities and Investor Protection Act, FDUTPA, and civil conspiracy.

The case was assigned to Judge Moore. You can read the complaint here. 

In the meantime, the arena where the Heat play--now FTX Arena--is getting a new name. With the way the Dolphins are playing, maybe Joe Robbie would be nice callback.

Mar-a-lago special master/search case set for oral argument in 11th Circuit on November 22

JUST IN: Appeals court scheules oral arguments in DOJ appeal of Judge Cannon's special master order from Nov. 22 -- in case anyone was naively hoping for a quiet Thanksgiving week. pic.twitter.com/hKrHD5oTY6

— Kyle Cheney (@kyledcheney) November 15, 2022

"DEA’s most corrupt agent: Parties, sex amid ‘unwinnable war’"

 That's the title of the AP's explosive report on DEA agents and federal prosecutors.  The article, by Jim Mustian and Joshua Goodman, is a must-read.

The story centers around testimony provided to federal prosecutors by former Miami and Colombia-based agent José Irizarry, who has been portrayed as the DEA’s most corrupt agent. Irizarry spent his final hours of freedom with the AP in his native Puerto Rico confessing his crimes before reporting to federal prison to begin a 12-year sentence for money laundering.

The article takes a wider look at other federal agents and prosecutors who he says turned a blind eye — and sometimes joined in — his flagrant abuses.

Among the AP investigation’s key findings:

1. Irizarry has described to federal investigators — and the AP — how other federal agents, prosecutors, informants and in some cases cartel smugglers all joined on a three-continent joyride known as “Team America” that chose cities for bulk cash pick-ups mostly for partying or to coincide with Real Madrid soccer or Rafael Nadal tennis matches. That included stops along the way in VIP rooms of Caribbean strip joints, Amsterdam’s red-light district and aboard a yacht in Cartagena, Colombia, that launched with plenty of booze, booming music and more than a dozen prostitutes.
2. An ongoing federal investigation has focused on one of Irizarry’s partners who was briefly detained on allegations of sexual assault during a trip to Madrid, Spain, in 2018. The agent’s brother, a Florida wedding photographer, has been jailed since March for civil contempt after he refused to provide testimony to a Grand Jury in Tampa even after being granted immunity.
3. Three current and former federal prosecutors have faced questioning about Irizarry's raucous parties, including one still in a senior role in Miami, another who appeared on TV’s “The Bachelorette” and a former Ohio prosecutor who was confirmed to serve as the U.S. attorney in Cleveland this year before abruptly backing out for unspecified family reasons.
4. Central to the Irizarry investigation are overly cozy relationships developed between agents and informants — strictly forbidden under federal guidelines — and loose controls on the DEA’s undercover drug money laundering operations that few Americans know exist but which generate a huge windfall every year for U.S. law enforcement. Spurred by Irizarry’s crimes, the new DEA Administrator Anne Milgram has ordered an outside review of the agency’s foreign operations.

Chief Judge William Pryor addresses the Federalist Society

He starts at the 24 minute mark here.

Judge Pryor’s speech is getting a lot of press.  Here’s an example from Reuters:

A prominent federal judge on Thursday called the growth of the conservative Federalist Society an "example of the American dream" and mocked criticism by a U.S. senator and others who say the influential legal group has captured the judiciary.

***

Federalist Society leaders advised on the selection of former President Donald Trump's judicial nominees, and many of Trump's appointees were members of the group. But Pryor mocked the notion that the 60,000-member professional organization was working "in the shadows" to reshape the courts.

"Little did I know that millions of American voters, that the past president of the United States and the United States senators only provided camouflage for the real operation," Pryor said.

Pryor singled out claims by Democratic Senator Sheldon Whitehouse of Rhode Island, who sits on the Senate Judiciary Committee, that a network of conservative causes and "dark money" groups are working together to seat judges and justices. Whitehouse could not immediately be reached for comment.

He also took aim at liberal commentators who frequently criticize the Federalist Society. Pryor displayed images that referenced some of those remarks, including one showing the group's logo on the Death Star from "Star Wars."

***

Leonard Leo, a long-time conservative legal activist, while serving as a Federalist Society executive helped compile a list of potential U.S. Supreme Court nominees that Trump drew from during his tenure.

"Are there members of the Federalist Society who are involved in that process? Of course. But with that, so what? That's politics," said Pryor, who was on Trump's Supreme Court lists.

"The idea that this is some kind of monolithic organization is just a myth," he said.

Meantime, Professor Steven Calabresi founded the organization many years ago, but apparently the Federalist Society is telling the good professor not to call himself the founder anymore because of his views.  

Sorry, Not Sorry, Sorry

By Michael Caruso

In the great Larry David movie “Clear History,” he plays a disgraced marketing executive who,  unsurprisingly, at various points in the story, creates drama for which he has to “apologize.” But, in Larry’s view, “Apologies don’t have to be sincere, it’s just the act of the apology itself. All that matters is if you’re acting sincere.”

As David’s readers know, a person’s “acceptance of responsibility” heavily influences the USSG guideline determination. The role of remorse at sentencing and a judge’s ability to accurately gauge a person’s remorse is an area of considerable debate. Professor Susan Blandes has written extensively on this subject. Her research demonstrates that there is currently no evidence that judges can accurately evaluate remorse in a courtroom. Conversely, she’s found evidence that race and other impermissible factors create hurdles to evaluating remorse. 

Moreover, her article notes there is little evidence that remorse is correlated with future law-abiding behavior or other legitimate penal purposes. There is evidence, however, that remorse is often conflated with shame, which correlates with increased future criminality. More research is needed. 

Recently, the phenomenal Havard history professor Jill Lepore wrote a review of a forthcoming book entitled Sorry, Sorry, Sorry: The Case for Good Apologies by Susan McCarthy and Marjorie Ingall. At SorryWatch.com and @SorryWatch, McCarthy and Ingall have been judging the adequacy of apologies and welcoming “suggestions for shaming” since 2012.

In her review, Lepore briefly traces the modern history of the apology. From 1665, she reproduces an apology for an unknown error: “I freely confesse, that I spake many words rashly, foolishly, & unadvisedly, of wch I am ashamed, & repent me of them, & desire all that tooke offence to forgive me.” She references Dave Chappelle, Alex Jones, and others for more recent events. And she offers an interesting contrast between a fictional character’s response to a prior forced apology: “I’m not some weak-kneed f****** crybaby that goes around f****** apologizing all the time,” he said, seething. “I’m done. I am done apologizing” with the actor’s real-life apology for an assault he committed: “You mess up. You own it. You learn from it.” 

Ultimately, Lepore comes to this conclusion about our current state of affairs: “some very angry people very loudly demanding apologies while other very angry people demand the denunciation of the people who are demanding apologies. The fracture widens and hardens—fanatic, schismatic, idiotic. But another way of thinking about what a culture of forced, performed remorse has wrought is not, or not only, that it has elevated wrath and loathing but that it has demeaned sorrow, grief, and consolation. No apology can cover that crime, nor mend that loss.”

Me? I’m sorry for stuff I haven’t even done yet.

Judges still handing out jail sentences in Varsity Blues case even though they may very well get reversed

Yesterday, a former Yale women's soccer coach got 5 months:

Prosecutors said Meredith from 2015 and 2018 accepted $860,000 from Singer in exchange for designating the children of wealthy parents as soccer recruits or attempting to facilitate their admission to New Haven, Connecticut-based Yale by other means.

Separately, Meredith also agreed to accept a $450,000 bribe directly from a California businessman without Singer's involvement to help his daughter gain admission.

But it's not clear that the government's theory of fraud will withstand scrutiny in the First Circuit:

A federal appeals court on Monday questioned whether two wealthy fathers convicted in the first "Varsity Blues" college admissions scandal trial were prejudiced by the introduction of evidence about misconduct by other parents they did not know.

During oral arguments, members of a three-judge panel of the 1st U.S. Circuit Court of Appeals probed what proof existed to establish former casino executive Gamal Aziz and private equity firm founder John Wilson agreed to participate in a sprawling, nationwide conspiracy.

"Maybe there's evidence of a nationwide conspiracy," U.S. Circuit Judge David Barron told a prosecutor. "You still have to prove evidence that these defendants agreed to be in it."

Fifty-three people have pleaded guilty. One parent was acquitted in June, while a coach who was convicted of accepting bribes recently won a new trial.

Prosecutors alleged that Aziz — a former Wynn Resorts Ltd executive also known as Gamal Abdelaziz — in 2018 paid $300,000 to secure his daughter's admission to the University of Southern California as a basketball recruit.

Prosecutors said Wilson paid $220,000 in 2014 to have his son falsely designated a USC water polo recruit and later in 2018 paid another $1 million to try to secure spots for his twin daughters at Stanford and Harvard universities.

Think about that -- 53 people pleaded guilty... that means defense lawyers, prosecutors, and judges went along with a questionable theory of crime simply because it was too risky to fight.  Our system is in trouble.