Supreme disagreement

Despite the early word on the Roberts' Court -- that everyone was getting along, that there was going to be consensus, and that it was going to be a much different court -- we got back to the old bickering this week. The Court decided three decisions yesterday -- two were 5-4 (the Kansas death penalty case and the right to counsel of one's choice case). In both cases, there were very animated opinions sniping back and forth. And then there was the campaign finance decision, a 6-3 affair but with 6 different opinions for the "winners." Not kidding.

In other very interesting news outside our district, Judge Lewis A. Kaplan (S.D.N.Y.) today ruled, in a must read case, on certain individual defendants’ motions to dismiss an indictment arising from the KPMG tax shelter investigation. (Large pdf here.) The issue was whether the feds properly intimidated KPMG from paying its employees legal fees. Here's Concurring Opinions on what happened:


June 27, 2006
Wild KPMG Fees Decision
posted by Dave Hoffman
Barely one day old, and Gonzalez-Lopez is already making waves in corporate law. To see the connection, however, you’ll have to bear with me for a bit of brush-clearing.
Judge Lewis A. Kaplan (S.D.N.Y.) today ruled on certain individual defendants’ motions to dismiss an indictment arising from the KPMG tax shelter investigation. (Large pdf here.) According to the defendants, their due process rights were violated when the U.S. Attorney pressured their former employer (KPMG) not to advance and reimburse legal fees incurred as individuals defendants. Judge Kaplan found a due process violation, scolded the government, and suggested a new lawsuit against KPMG to recover those legal fees, in which today’s decision would have collateral effect and make the proceedings summary. In short: the decision seems to constitutionalize the right to receive indemnification from your employer.
KPMG had a "longstanding voluntary practice" of paying legal fees where employees required separate counsel in matters arising from the employment relationship, regardless of whether the employee had been charged criminally or civilly with wrongdoing. These arrangements were not memorialized in the partnership agreement governing most of the defendants, nor were there contractual provisions about it. No mention is made in the opinion of the relevant insurance negotiations or provisions.
The background law governing most of the partner-defendants (Delaware) requires neither indemnification nor pre-payment. However, two of the defendants, mere employees residing in California, had a right to indemnification arising out of California statutory law.
Judge Kaplan construed this arrangement as a legal entitlement. At the least, according to Judge Kaplan, the defendants had "every reason to expect that KPMG would pay their legal expenses in connection with the government's investigation." (But this was the sort of expectation, as Judge Kaplan later argued (p.57) that might give rise to a tortuous interference claim). In the alternative, and in a footnote, Judge Kaplan wrote that "arguably" the defendants had a contract "implied in fact from KPMG's uniform past practice and the circumstances of the business." (Fn. 119).
Wow. But how does this contract problem get turned into a Gonzalez-Lopez due process problem? Ah, it turns out that the government has a set of prosecution guidelines to help it determine when to indict a corporation. As a part of those guidelines, the government treated payment of an employee’s legal fees as a blemish on the corporation’s record. And, thus, the U.S. Attorney negotiating with KPMG (itself desperate to avoid indictment) told the Firm that "under the fedaral guidelines misconduct can not be rewarded [by the payment of fees of wrongdoers."]
KPMG got the message. Shortly thereafter, KPMG notified the defendants that their legal fees would be compensated only as long as they cooperated -- they could not take the Fifth, for example. Further, KPMG apparently capitulated to the government's demand by backing away on a recommendation that the defendants obtain counsel.
Judge Kaplan found that this conduct by the government violated the defendants’ right to a fair trial and (I think) to counsel of their choice. In a passage of the opinion I don't really grasp, the court (p. 49) found that the pressure to cooperate exerted by the Thompson memorandum (the relevant prosecutorial guidelines) on KPMG should be subject to "strict scrutiny" because (1) this will be a big trial, requiring "substantial resources"; and (2) the government interfered with the ability of the KPMG defendants “to obtain resources they otherwise would have had." While the government claimed that it only used its guidelines to infer lack of cooperation when the payment of fees was used to impede investigations, the court found that the public perception of such pressure is what matters: "[f]ew if any competent defense attorneys would advise a corporate client at risk of indictment that it should feel free to advance legal fees to individuals in the face of the language of [the guidelines." (p.51) And, under Gonzalez-Lopez, this prejudice creates a per se violation. Judge Kaplan appears to hold that the prosecution guidelines are unconstitutional to the extent that they pressure corporations not to provide indemnification to their employees.
The weirdest part of this interesting decision is the remedy. The court refused to dismiss the indictment (for one, I assume, this would result in an immediate appeal). The government suggested that KPMG be allowed to consider again if it wanted to pay fees, without any threat of retaliation. No go, said the court. Instead, the court said that the defendants must be compensated for all of the expenses they had or would incur. Unfortunately, sovereign immunity bars relief against the government, even though it was the wrong-doer. Instead, the court held that KPMG, a non-party to the proceeding, was obligated to pay. However, the court lacked personal jurisdiction over KPMG. Therefore, the court recommended that the individual defendants sue KPMG. The court would then conduct a “expeditious[]” hearing and provide relief. [There is apparently an arbitration agreement in the partnership agreement which could delay matters, but the court suggested what it thinks of that provision by saying “Assuming that the KPMG Defendants pursue relief against KPMG and that KPMG remains insistent upon its alleged arbitration remedy, the questions whether the arbitration clause properly is so construed and, if so, whether it is void as against public policy [as frustrating the court’s decision] will be addressed . . . .” (fn. 239). Hee.]
To sum up. KPMG, which had no clear contractual obligation to pay these fees, now must do so compelled by a judicial order. The government can not discourage indemnification to criminal defendants as a part of making a decision about the firm's cooprative attitude (or, at least, it can't do so in writing). One possible result of the case: potentially vulnerable firms will draft by-laws or contracts that exclude indemnification absent cooperation, to make clear that the government has the right to demand cooperation from employees.
The prosecutors, scolded by the court as “economical with the truth” (p. 80-81), must be feeling angry. The defendants, 83 pages later, are still going to trial. But the 28 private firms listed in the caption will get paid.

[UPDATE: More at the White Collar Crime Blog.]

New lawyer for Narseal Batiste

Assistant Federal Defender John Wylie is now representing Narseal Batiste, the supposed leader of the terrorist suspects. I've known John Wylie for a long time -- he's a *great* lawyer.

Lawyers for the terror suspects...

Larry Lebowitz of the Miami Herald will be reporting that the lawyers for terror suspects are:

Tony Natale* (Federal Public Defender) for Narseal Batiste (the supposed leader)
Albert Levin for Patrick Abraham
Nathan Clark for Rotschild Augustine
Richard Houlihan for Naudimar Herrera
Gregory Prebish for Burson Augustin

At the hearing, the U.S. Attorney's office objected to the Federal Defender's appointment saying that the office was already representing a witness. Magistrate Judge Patrick White took the parties sidebar and explained that for now the PD's office would be appointed and if a conflict was later proven, both sides could deal with it. The other lawyers on the case are all appointed from the criminal justice act panel.

*Natale is part of the Padilla team. By mentioning Padilla, I've now done what I was complaining about earlier...

Terror indictment

The Sears tower terror case has been indicted in the Southern District of Florida in front of Judge Joan Lenard. Here is the indictment. And here is Judge Lenard's background.

Terror arrests in Miami

Lots of coverage tonight on the alleged terrorists arrested in the Southern District of Florida. Now the question is whether they will be charged and tried here or in some other district...
Also, does is strike you as strange that every article is mentioning that Jose Padilla is awaiting trial in Miami? There is no alleged connection with these arrests and Padilla so why does every single article mention him?

HEAT HEAT HEAT!!

Wow. Unbelievable. We've been waiting for this for so long. So happy for them... especially Zo. When he blocks a shot, it's better than 5 baskets. Wade is beyond words. Shaq delivers on his promise. UD comes up big. Payton's huge shots. Walker's 3rd quarter. Clutch Posey... And how about Riley.

So many great story lines.

Everyone in Miami is dragging a little today from the last 2 months of playoff hoops. But it is such a happy tired feeling... What a great year.

Sorry for rambling.

If the Heat isn't your thing, and you need Southern District news, check out this Padilla report in the Herald (concerning Judge Cooke granting some pre-trial motions for the defense) and a lengthy article about his co-defendant Adham Hassoun in the Daily Business Review.

Abramoff, Kidan get 3 month surrender extension

So reports the AP here. They are in full cooperation mode. I have to imagine that there are a number of nervous congressmen.

Two new state judges

Congrats to two colleagues -- Reemberto Diaz and Barbara Lagoa. Jeb Bush appointed Reemberto to serve as a state trial judge and Barbara to serve as a state appellate judge. I have tried cases with Reemberto Diaz and have had cases with Barbara Lagoa and believe they will make fantastic judges. Below is the Miami Herald squib with the background on both. I wish both of them well. The criminal defense bar will miss Reemberto and the U.S. Attorney's office will miss Barbara Lagoa. Congratulations again to both.

BUSH APPOINTS LAGOA, DIAZ TO BENCH

Gov. Jeb Bush appointed Assistant U.S. Attorney Barbara Lagoa to the Third District Court of Appeal and Miami attorney Reemberto Diaz to the Circuit Court on Friday.

Lagoa, 38, of Coral Gables, will be the first Cuban-American woman to serve on the 11-member appellate court for Miami-Dade and Monroe counties. She fills a vacancy created by the resignation of Judge David Levy.

Prior to joining the U.S. Attorney's Office in 2003, Lagoa was in private practice at the law firm of Greenberg Traurig. She is a graduate of Florida International University with a law degree from Columbia University.

Diaz, 49, of Coral Gables, is filling a vacancy created by the death of Circuit Judge Henry Leyte-Vidal. Diaz is in private practice. He is a graduate of the University of Miami, with a law degree from Nova Southeastern University.