No bond for old Mafia suspects

Here's the intro from the Sun-Sentinel article on the bond denial in the South Florida Genovese crime family:

A federal judge denied bond Friday to the alleged boss of the Genovese crime family's South Florida operations and three others awaiting trial on charges of extortion, robbery, and money laundering. He will consider bond for another man.U.S. Magistrate Judge Barry Seltzer denied bail for Renaldi ``Ray'' Ruggiero, 72, whom federal prosecutors identified as a Genovese capo or captain, and three of his co-defendants--Joseph Dennis Colasacco, 54, Charles Steinberg, 30, and Mitchell Weissman, 54, said Weissman's attorney John Contini.

Seltzer, prosecutors and attorneys for another defendant, Francis O'Donnell, 47, will continue negotiations for his release on Monday, said Theresa Van Vliet, one of his attorneys. O'Donnell is the head of Coach Industries Group, a financial services company.

Ken Lay is not a convicted criminal

Because he died before his direct appeal was final, Ken Lay's conviction is technically abated, which means that his entire criminal case is treated as though it never existed. (The conviction and sentence of a defendant is vacated when he dies if his appeal is yet to be decided. See Schreiber v. Sharpless, 110 U.S. 76,80 (1884)). My first case at the Federal Defender's office involved this issue, albiet in a different way.

UPDATE -- White Collar Crime Blog has more about the law in the Fifth Circuit:

In a recent Fifth Circuit decision, United States v. Estate of Parsons, 367 F.3d 409 (5th Cir. 2004), the court explained that "the appeal does not just disappear, and the case is not merely dismissed. Instead, everything associated with the case is extinguished, leaving the defendant as if he had never been indicted or convicted." In Parsons, the court vacated a forfeiture order, which means that the government's forfeiture claim against Lay for $43.5 million will be dismissed. The Fifth Circuit explained the rationale for the rule: "The finality principle reasons that the state should not label one as guilty until he has exhausted his opportunity to appeal. The punishment principle asserts that the state should not punish a dead person or his estate." An interesting question is whether one can still describe Lay as having been convicted of a crime, at least in a technical sense, because the law no longer recognizes there having been any criminal case initiated against him.

Bail denied to Miami seven

Magistrate Judge Bandstra denied bond to the suspects charged with plotting to bomb the Sears Tower. Here's the report from Vanessa Blum:


MIAMI - U.S. Magistrate Judge Ted Bandstra on Wednesday denied bond for six of the seven South Florida men arrested last month on charges they planned to bomb the Sears Tower in Chicago and the FBI building in Miami.

Bandstra called the allegations "serious" and said no conditions of release could ensure the safety of the community.

``The charges against each of the defendants are serious charges and constitute counts of violence,'' Bandstra stated, adding that it was ``not relevant that the plans appear to be beyond the abilities of the defendants.''

A lawyer for the plot's alleged ringleader Narseal Batiste called the government's case a "set-up."

"This case is essentially something the government set up to knock it down," said attorney John Wylie.

Happy 4th of July...

... and happy one year birthday to the Southern District of Florida Blog.

We turned one this weekend. This was the first post, urging President Bush to appoint a Floridian to the Supreme Court. I'm shocked that no one listened! But since then, our readership has grown. We're averaging over 175 hits a day during the week. And we've had 32,322 total visits as of this post. Pretty incredible.

And since that first post, our Supreme Court has dramatically changed and the Southern District has continued to get the biggest and best cases in the country. On a personal note, I've started my own firm and have added another child to the Markus clan... It's been a fun year.

Thanks to everyone who reads, emails me with tips, and posts comments.

Miami 7 stuff

The motion to disqualify the FPD was denied. For now, John Wylie is still in the case.

The bond hearing was continued until Wednesday... Here are the details of what happened so far. Looks a little to me like the Government was pre-trying its case because of the bad press it has been getting. I've never seen a bond hearing where the Government shows so many of its cards. Typically the strategy is to show as little as possible because the discovery rules are so restrictive. But here where there have been so many questions about this case, the Government must have figured that it needed to present its case now. The defense gets to present its side on Wedndesday...

Feds arrest alleged South Florida head of Genovese crime family

The AP story here: "Renaldi 'Ray' Ruggiero, whom prosecutors identified as a capo or captain of the family's operations in South Florida, appeared in federal court in Fort Lauderdale Friday morning, along with his co-defendants: Genovese family "soldier" Albert "Chinky" Facchiano, and family associates Joseph Dennis Colasacco, Mitchell Weissman, Francis J. O'Donnell, Clement Santoro and Charles Steinberg."

Motion to disqualify FPD

I just read the Government's motion (filed today by AUSAs Jackie Arango and Richard Getchell) to disqualify the Federal Public Defender's Office from representing Narseal Batiste, the lead defendant in the latest terrorism indictment, due to an actual conflict of interest.* Judge Bandstra will be hearing this motion before the pre-trial detention hearings tomorrow afternoon. Although Scalia's choice of counsel opinion from this week does not apply to appointed counsel cases, it will be interesting to see if the defendant objects if the judge terminates his current counsel. I've heard the PD's office is opposing the motion, which should make for an interesting heairng. More to follow...

*Apparently, the PD's office also represents a potential witness in the case.

UPDATE -- Here's more from the Herald about this witness, nicknamed the Sultan.
ANOTHER UPDATE -- The Daily Business Review has more on the conflict issue here.

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.]