Strangers in a Strange Land
Recent pronouncements by both the Supreme Court and Congress have significantly expanded the reach and power of the federal money laundering statute. Although traditionally associated with drug dealing, the statute can reach and has reached any illegal activity that generates large sums of cash (eg, insider trading, fraud, embezzlement). These changes in the law afford the government greater flexibility in where it can bring money laundering cases, and make it easier for the government to obtain a conviction for conspiracy to commit money laundering. Rule 18 of the Federal Rules of Criminal Procedure states that "[u]nless a statute of these rules permit otherwise, the government must prosecute an offense in a district where the offense was committed."
In The Courts
National cases of interest to you and your practice.
Lawyers Beware
In the first 3 months of 2005, the SEC filed 18 cases against lawyers. More are clearly coming. Just last month, SEC Chairman William Donaldson warned that the SEC is "firmly committed to both the rules governing attorney conduct, and to the principles that underlie them, and we will enforce them when violated." As if Donaldson's message were too oblique, the SEC's chief litigation counsel put it bluntly: the SEC "has made cases against lawyers a priority."
Corrupt Persuaders
The Supreme Court has now heard oral argument in the late Arthur Andersen's petition to review its conviction under the federal "witness tampering" statute, 18 U.S.C. ' 1512(b)(2). This case is the most recent and infamous manifestation of a decade-long debate about the statute. Now the Court has an opportunity to impose clear rules that would resolve the uncertainty about the scope and mental state required to prove "witness tampering" in federal investigations of all kinds.
Bankruptcy Fraud in the Spotlight?
As we all know, the feds continue to investigate and prosecute fraud in the financing, accounting and operation of businesses. The Second Year Report of the President's Corporate Fraud Task Force declares that over 500 corporate fraud convictions have been obtained to date and that charges have been brought against over 60 corporate CEOs or presidents. However, executives and their counselors would do well to note that the government's will and ability to prosecute high-level management may not lessen just because a business is in extremis.
Written vs. Oral Joint-Defense Agreements
The Joint-Defense Agreement (JDA) has become a fixture in complex white-collar cases and even many purely civil actions. When the government begins an investigation of a company and its employees, it is often advisable and sometimes necessary to secure separate representation for the company, its employees and perhaps other entities or individuals. Independent attorneys owe a duty of loyalty to their individual clients and can provide them with personalized, confidential legal advice that an attorney for the company cannot provide. The company, however, needs to communicate with these represented parties. Employees will speak frankly with company counsel only if they know they are not exposing themselves to prosecution. A company cannot produce documents and engage in frank conversation with the government without such employee cooperation.
Money Laundering Compliance Examinations
The biggest change that financial institutions face is the new, expanded-scope anti-money laundering (AML) regulatory examination and the proliferation of Written Agreements, Memoranda of Understanding, or Cease and Desist Orders issued by bank regulatory agencies should the financial institution be found to be deficient. An analysis of recent regulatory orders including, among others, AmSouth, ABN AMRO, Standard Chartered, Hudson United Bank, and City National Bank, demonstrates that the regulators are focused on multiple issues.
