More Dirty Prosection Tricks - Faking Amnesty to Steal Incriminating Information

After taking advantage of a Justice Department's Corporate Leniency Program, the shipping firm Stolt-Nielsen believed that the Feds would honor their end of the bargain. That meant there would be no prosecution of, “the company, its directors, officers, or employees for conduct prior to that date.” Instead, four months after the deal was done the Feds tried to back out and use the information they received during the leniency probe for prosecution.

Read the whole convoluted and sleazy story here.

Fortunately the company ended up “winning” - if you consider spending millions of dollars to get the Feds to follow their own agreement a victory:

But Indiana professor Roberts believes that corporations won an important victory in Stolt: "There are now some minimal standards that the government has to live up to, some expectation of due process and fairness."

Liebenberg, Wingfield's attorney, says the case sends a clear message to prosecutors. "By recognizing major contract and due process rights for any corporation that signs a deal," Liebenberg says, "this decision restores certainty to the program. It makes the government live up to the bargain that it strikes."

My question: why did it take a law suit to get the feds to follow the rules?

Criminalizing Failure - Bear Bigs Get Sherman McCoy Treatment

A weak case indeed for the State and so they are giving both defendants the full Sherman McCoy treatment, including a full perp-walk with handcuffs. As is common with white-collar cases, the State plans on winning in the media and using the full resources of the taxpayer to crush the defendants into submission; no trial is planned.

The well-worn playbook for beating up white collar defendants is as follows: (1) toss everything but the kitchen sink into the indictment, not that the State plans on proving it; it’s just a bargaining tactic for the inevitable settlement, (2) details that were so flimsy (and these must be flimsy indeed if they were not included in the indictment) or unrelated to the case will be leaked to the media. It will be no surprise to see out of context email excerpts in the next few weeks related to affairs, high salaries, favoritism, etc., (3) If the defendants are rich or foolhardy enough not to settle, the State will certainly punish them for exercising their right to a trial. At this point both defendants’ careers on Wall Street are over, even if they are found not guilty. If they win they will be broke and unemployable – one way or another, the State always wins.

The Unindicted Co-conspirator Trick Pt. 2

A prosecutor has many tools in his bag of dirty tricks. One we discussed in relation to Enron and AIG was the "unindicted co-conspirator trick” which allows the prosecution to block unfavorable witnesses from testifying for the defense. At the time we concluded, “The unindicted co-conspirator trick was so successful in the Enron, that we’re sure to see it used more frequently in the future.”

That didn’t take very long.

Today the WSJ Blog has a story about the feds using this tactic without even the pretense of justification:

According to a memo, filed today in Texas district court on behalf of the Islamic Society of North America and the North American Islamic Trust — both of which were named as “unindicted co-conspirators and/or joint venturers” in an appendix that was attached to the brief — the government allegedly violated the Fifth Amendment in providing no explanation for its description of them as unindicted co-conspirators. The organizations, rep’d by ACLU lawyers, argue that, under Fifth Circuit law, “no legitimate governmental interest is served by an official public smear of an individual when that individual has not been provided a forum in which to vindicate his rights.”

The relief? They want a Fifth Amendment violation declared by the court, an order expunging their names from any public document filed that identifies them as unindicted co-conspirators and an order enjoining the government from identifying them as unindicted co-conspirators in another context other than that specifically permitted by the court.

"In a free country a government agency should not be able to destroy people without due process. "

Unfortunately,initiating a civil suit in might as well be a guilty sentence for someone who works in the securities industry. Although, the SEC cannot bring criminal charges like the Justice Department, they have just as much discretion to destroy someone. Here is what an innocent man had to say after the fact:

Once the SEC initiated a Wells Notice process against Mr. Leighton it became impossible for John Leighton to work in the securities industry. The SEC drained his life savings by making it unbearably expensive to defend himself. It tried to force him out of the securities industry and put his firm out of business before he had a chance to defend himself. While we are very pleased that truth has prevailed, the sad fact is that John Leighton lost three years of his life defending himself that he can never recover. He lost three years of work that he can never recover. He spent large amounts on defense costs and supporting his family while unemployed that he can never recover. His family has suffered financially and emotionally and can never fully recover from that. His good name has been smeared and he can only hope that this decision will over time restore his name.

Under our current system, you are guilty of SEC charges until you prove yourself innocent. That is wrong.